[Author's Note: A reminder that today's Lessons of 2021 mailing is for all members.
The Predictions for 2021 mailing (tomorrow or Wednesday) will be for Members, only.]
With 2021 coming to an end, it is worth looking back on the year for lessons from PARQOR's Five Frameworks and a few new themes that emerged throughout 2021.
I think the biggest – and least discussed – lesson was the pull-forward impact of the pandemic, which I wrote about last Monday in In 2021 "Pull Forward" But "Not Quite There Yet".
Nielsen's most recent The Gauge adds a helpful postscript. The report highlighted how consumer behaviors are evolving away from streaming:
Despite the overall increase in total TV usage during November, the rising tide did not lift all ships evenly. Notably, the time away from school gave students the opportunity to spend more time playing video games (included in the “other” category, which gained a share point) and watching content on Disney+.
So, the pull-forward impact also had knock-on effects like a growth in gaming consumption eating into streaming consumption.
In turn, that change in demand resulted in new bundling strategies emerging from the supply side for reducing churn and driving growth, like aggregator 2.0 bundles of various streaming, gaming, and music apps packaged by mobile phone companies.
We also saw platforms like Amazon and Apple bundle their first-party services, too, in response to this evolving demand.
In short, the pull-forward impact of the pandemic not only changed the trajectory of growth for every streaming service in the U.S., but it also changed the drivers of growth for everyone.
PARQOR's Five Frameworks
There was so much change in the marketplace in 2021. The Five Frameworks offered more value in helping to navigate and understand a flurry of surprising market developments.
The PARQOR Hypothesis
There were two surprising developments that the PARQOR Hypothesis highlighted this year, both relating to Online and Offline Sales Channels.
First, CEO Bob Chapek spoke to integrating customer data from both Streaming and Parks to build better consumer experiences at the JP Morgan Global Technology, Media and Communications Conference in May. But no one else at any other company spoke to that relationship between streaming data and offline experiences.
A merger of NBCUniversal and WarnerMedia could have resulted in that outcome, but Comcast was reported not to have been interested (something I discussed in The AT&T-Discovery Merger's Questionable Bet on Rebundling).
Second, the growth of aggregator 2.0 bundling reflected third parties like mobile companies gaining increasing advantages in owning certain online customer relationships instead of streamers, music services (Apple Music), and gaming (Apple Arcade, Playstation). Third parties seem like an increasingly inevitable necessary condition for streaming growth.
Fiduciary vs. Visionary Executives
There were more Fiduciary executives in the limelight than Visionary executives.
ViacomCBS's Bob Bakish and his team perhaps had the best year of Fiduciary executives, ending 2021 with positive growth stories for both Paramount+ and Pluto TV.
But the dominant story in 2021 was fiduciary executives were looking for the exits. AT&T's John Stankey surprised his own visionary WarnerMedia management with a merger deal with Discovery Chairman David Zaslav in February (who saw a need for an exit). Starz CEO Jeffrey Hirsch is now seeking some form of spin-out of his division.
AMC Networks CEO Josh Sapan stepped down, and new interim CEO Matt Blank reoriented the strategy to producing more content for streaming.
As for visionaries, the continued success of HBO Max reflects the vision of WarnerMedia CEO Jason Kilar and HBO Max Chief Andy Forsell.
There is an interesting debate to be had whether YouTube's executives betting increasingly on creator economy models are more visionary or fiduciary (see below).
The Curse of the Mogul
ViacomCBS CEO Bob Bakish told the UBS Global TMT Virtual Conference earlier this month that it would break out its streaming data and offer "enhanced transparency through new segment disclosure, including a D2C P&L" at its next investor day in early 2022.
That left NBCU and Discovery as the only media companies not offering more transparency around its streaming numbers. Discovery is the only one of those two ending 2021 with a clearer path to a better streaming future than before via Warner Bros. Discovery.
Product Channel Fit
There were two notable Product Channel Fit stories in 2021, and the lesson was they were the exceptions to the rule: most streaming services now have found Product Channel Fit and are iterating their product.
The first was Roku and YouTube's long, ugly standoff. Part of the standoff violated the premise of Product Channel Fit: YouTube wanted Roku to upgrade its hardware so YouTube could deliver 4K over AV1 Codec, which would be the product shaping the channel, and not the channel shaping the product.
The second was WarnerMedia's struggles to upgrade its HBO Max video player across platforms, but especially Apple TV. It is currently leveraging its $100MM December 2020 acquisition of You.i TV to upgrade its HBO Max app for global expansion, and "replace every single connected TV app in the next four or five months".
Co-opetition
YouTube was at the core of two co-opetition-driven disputes. The first was with Roku, above.
The second was with Disney over the distribution of Disney's portfolio of linear channels (18) on YouTube TV, which ended last night. Disney's Hulu + Live TV is a competitor to YouTube TV – they are both estimated to have ~4MM subscribers.
That said, it would have been expensive for both YouTube TV (higher churn) and Disney (loss of affiliate fees) had they not reached a co-opetition-type deal.
Additional Themes
A few key themes emerged in Member Mailings this year, which I wrote about in Key Themes from 2021.
Emerging "Metaverse"-type convergence strategies
Irrational investor enthusiasm for the metaverse is only accelerating, and focusing on user intent in emerging metaverse business logic helps us to better understand:
understanding user intent has been the difference between success and extraordinary success in legacy media and streaming (Mic Drop #41: Disney+ Needs Bundles (& Perhaps Personalization) to Scale), and
Metaverse business logic offers more mechanisms to reward, further incentivize and monetize user intent than legacy digital media offerings.
Aggregator 2.0 Bundles
There was growing chatter about “aggregator 2.0” bundles, which bundle streaming with gaming, music, shopping, etc. There are two types of “aggregator 2.0” bundles: those that offer first-party services (Apple) and those that offer third-party services (Verizon)
A third-party bundler has zero marginal costs of marketing multiple services to an existing user base at scale. That leaves it better positioned to help a streaming service scale.
Verizon is increasingly selling investors on the "stickiness" and retention of this strategy. Also, Apple (One Bundle), YouTube (Premium and Music) and Netflix (mobile gaming) all evolved their value propositions towards bundling of services.
Sports & Streaming
2021 was a big year for big, expensive linear and streaming rights deals despite the rise in cord-cutting: NFL (~$110B total), NHL ($2.8B total), and Premier League ($2.7B).
The Premier League deal was notable because ESPN had the better streaming offering, but Comcast had better personal relationships with Premier League executives.
The strength of relationships also seems to be playing out in the future of RSNs, where Sinclair's debt-holders seem to have more patience than MLB, NBA or NHL.
Creative Talent & Transparency in Streaming
Until last month, much of the discussion was about Scarlett Johansson's dispute with Disney over Black Widow revenues, and what streaming meant for the future of transparency with Hollywood talent.
One outcome was the emergence of Hollywood-meets-Creator-Economy models like Blackstone's bet on Hello Sunshine, which reflected challenges around transparency.
But the other was how transparency from Netflix and YouTube has set the market standards against which everyone else measured and evaluated.
Original Content & “Genre Wars”
Starz and AMC Networks continued to find wins with a "genre wars" strategy of targeting particular genres to particular demographics.
AMC Networks needs to rely on genre- and audience-targeting to hit its "beauty of small numbers" objectives. But, Starz sees more upside for its "genre wars" value proposition elsewhere, perhaps even beyond streaming, and Amazon's model proves why that is true.
Comcast’s & ViacomCBS’s Struggles in Streaming
After starting 2021 with similarly problematic stories about streaming, ViacomCBS had a better year than Comcast's NBCUniversal with a successful rebrand and relaunch of Paramount+ (47MM worldwide, up YoY from 18MM), and the continued growth story of Pluto TV (54MM Monthly Active Users).
The differences, though, may lie most in User Experience and User Interface: ViacomCBS is increasingly focused on integrating and upgrading its software for Paramount+, having recently integrated Pluto TV-type live channels.
AVOD & Connected TV Marketplace
Growing advertiser demand for first-party transaction data is struggling to find competitive CTV solutions beyond YouTube, Amazon, and Roku. Legacy media AVODs & FASTs seem nowhere near being able to deliver “Content Fortress”-type outcomes offering first-party data and scale.
Last, We Need to Pay More Attention to YouTube
I realized after writing last week's What YouTube's Transparency Reveals for 2022 & Beyond that I had not put YouTube's success in the creator economy in 2021 in the context of Cobra Kai.
The first two seasons of Cobra Kai were originally successful on YouTube, but then Netflix bought the rights after YouTube Originals opted to pivot to an AVOD model from an SVOD model in late 2020. Since then, as many as 41MM households watched season 3 of the show, and it has become one of YouTube's most popular shows.
In this light, YouTube has replaced its SVOD Originals model not only with an AVOD model, but also a growing pool of 2MM original content creators who are able to scale video views for individual videos into the hundreds of millions.