Monday AM Briefing: Amazon, Google & Netflix's Incremental Big Swings In Sports Media
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Each fiscal quarter, The Medium identifies three or four new trends that have momentum and seem poised to play out at a larger scale in 2023. These key trends pinpoint dynamic and constantly evolving developments in the media marketplace that are emerging from incremental shifts or fundamental changes. The bi-weekly mailings analyze these trends as developments emerge in real-time.
Read the three key trends The Medium will be focused on in Q4 2023. This essay focuses on all three.
A week of headlines about in-market experiments from YouTube, Netflix, and Amazon promised exciting new futures for their media businesses. We are iteratively headed in the direction of post-wholesale, consumer first, retail first media business models. But, the incrementalism of these experiments also feels risky, like the future promised by these experiments not only is not here but may not get here. In particular, they may not justify the billions in current and future sports rights deals.
In a four-minute video, YouTube Creator Liaison Rene Ritchie announced a long list of new features and design updates to the interface and platform. YouTube also announced a package for advertisers called “Spotlight Moments”. These leverage AI to automatically identify the most popular YouTube videos related to a specific cultural moment — like Halloween, or a sporting event, for example, and the advertiser can serve ads across videos referencing the topic or event across a branded YouTube channel with videos curated into dynamically updated playlists.
The experiments from Netflix and Amazon are bigger, more expensive and higher stakes.
Key Takeaway
Amazon's and Google's experiments in sports streaming create uncertainty around technology’s ability to not only redefine traditional TV broadcasting, but match its creativity. That may be what makes Netflix’s push into gaming seem unsettling: It is now looking at Hollywood’s definition of creativity in its rearview mirror.
Total words: 1,400
Total time reading: 6 minutes
Amazon revealed more details about the NFL game it will broadcast on its Black Friday event in November, including interactive ads and more consumer packaged goods advertisers. Netflix revealed more about its plans for sports in its Q3 earnings call, and a Wall Street Journal article last Monday revealed the inner workings and debates around its experiment in gaming.
I liked The Rebooting’s Brian Morrissey recent description of the media industry as having “long struggled to square its heritage in creativity with the cold mathematical framework of technology.” Evident in all of these experiments are the cold logic and math of technology trying to solve both for creativity after the linear model. Netflix’s experiments are solving for what comes after the streaming model.
For all the exciting possibilities presented by these experiments, they also present disconnects between the cold logic and math of technology and creativity. The word “experiment” also suggests an uncertainty of whether they actually have identified solutions, much less viable business models for the future.
The Stakes for Amazon
Next in Media author Mike Shields framed the stakes for Amazon's bet on a Black Friday NFL game: “If the most powerful commerce company on the planet - not to mention the one with the greatest pool of first-party data that can be used for ads- can’t use those strengths to its advantage in TV advertising - then what are we doing here?”
The logic of the question also applies to YouTube and Netflix: If neither can figure out how to use some of the best first party data to improve their respective products, then “what are we doing here?”
The question reflects the challenge of writing about this moment in the media marketplace. Experiments are exciting because they point a potential way forward out of this chaos of legacy media failures and technology company innovations. But their failures are signals that core assumptions are still wrong.
Shields wrote:
Amazon needs to show that it has the power to reinvent TV advertising. This may be through interactivity - or it may be through superior targeting or attribution. It has to be something.
Amazon is certainly trying. The Information reported Amazon is “approaching brands that already buy search ads on its e-commerce website with an unusual pitch: if you buy streaming TV ads, we’ll make them for you.” It is a bet on wooing small merchants to digital video advertising, but “ streaming video ads are typically pricier than search ads.” The economics may not favor smaller buyers in the long term, despite Amazon subsidies in the short term.
The Stakes for Netflix
Netflix has proven Executive Chairman and co-founder Reed Hastings’ vision of streaming over the Internet. It also has proven IAC Chairman Barry Diller’s frequent refrain over the past five years that it “has already won the “streaming wars”.
The Wall Street Journal reported it is pushing well past that vision into the uncertainty of the videogame industry, “taking advantage of the studios it has acquired in the past two years to create more titles based on popular Netflix movies and TV shows.” The article added “Inside Netflix, backers of its game foray point to a heightened urgency to attract and retain customers, especially since the company last year saw its first decline in subscribers in over a decade.” But, the looming question is whether games are what consumers need from Netflix.
If not games, then what? Sarandos told investors: “We are in the sports business, but we're in the part of the sports business that we bring the most value to, which is the drama of sport.” He also shared that Netflix is “investing heavily in increasing our live capabilities” so that “the liveness can be part of the creative storytelling” and Netflix can deliver “that at a big scale.”
He was referring to “The Netflix Cup”, which will bring together four Formula One drivers and four PGA Tour players to compete in a golf tournament and will be streamed live from Wynn Golf Club near the Las Vegas strip on November 14. But, with the NBA looking for creative ways to double the value of its next cycle of media rights— well past the $2.6 billion per year it receives from Disney’s ESPN and Warner Bros. Discovery’s TNT—Netflix could be in play for those, too.
NFL In The Background
I wonder whether these experiments invite so many questions because of the NFL’s deals with Amazon and YouTube. Both have success stories, to date. The three Thursday Night Football broadcasts on Amazon, to date, rank as the most-watched since Amazon acquired rights. The three surpass all of last season’s games, the most-watched of which was the Chargers-Chiefs opener at 13.03 million. TNF is now averaging 13.6 million viewers for the season, up 26% from last year (10.80M) and up 23% from 2021 (11.03M).
Data measurement firm Antenna reported YouTube has signed up 1.3 Million subscribers for NFL Sunday Ticket through October 1. That is an 8% jump over the 1.2 million DirecTV signed up last year. But YouTube-parent Google is paying over $2 billion per year for the next seven years. The Wakeup’s Sean McNulty did some back-of-the-napkin math with $400 to $500 average revenue per user, YouTube will generate between $500 million and $600 million in subscription revenues in the 2023-24 season, or around 25% of the total cost.
McNulty doesn’t mention the x-factor here: How much of the cost will YouTube be able to recoup through ad revenues?
In some ways he does not need to: Sunday Ticket redistributes local team broadcasts nationally, and so the majority of the ad inventory is not YouTube’s to monetize. But in another way, YouTube monetizes its subscribers through deeper engagement. If Sunday Ticket creates additional sign-ups to its virtual cable distribution service YouTube TV and/or drives additional engagement with NFL content across the YouTube ecosystem, its “Spotlight Moments” innovation suggests advertisers will pay a premium for that. But how will we know if they are? And, if they are, will they be contributing as much as 10% of YouTube's $30 billion in annual advertising revenue?
Connecting the dots with big swings
Sports broadcasts may not offer the type of creativity that the marketplace associates with a Netflix original TV show or director Martin Scorcese’s new movie, “Killers of the Flower Moon”. But, they are a form of creative storytelling that has been evolved by decades of TV and cable producers. Google and Amazon are leveraging their big checkbooks and taking big swings at reimagining both this storytelling and the monetization through the “cold mathematical framework of technology”.
Similarly, Netflix seems to be coyly proving with “The Netflix Cup” that it can deliver a livestreaming event that complements its behind-the-scenes shows “Drive to Survive” (Formula One) and “Full Swing” (PGA Tour). It seems like a future NBA deal is on their radar, but the end product may look a lot more like “The Netflix Cup” than a traditional sports broadcast because those shows are for what Netflix subscribers pay a monthly subscription fee.
Ultimately, new generations of consumers are shaping the future of the sports media business through their incremental responses to these experiments. That incrementalism contrasts with both the scale of these multi-billion dollar deals and the existential needs of these sports leagues to persist at their current scale. The incrementalism creates more questions than it answers. It creates uncertainty around technology’s ability to not only redefine traditional TV broadcasting, but match its creativity. That may be what makes Netflix’s push into gaming seem unsettling in this context: It is a technology company that has succeeded in streaming and is now beginning to look at Hollywood’s definition of creativity in its rearview mirror.
What lies ahead may look more like Amazon’s AI-driven features for TNF, and less like Monday Night Football. The creativity and the business behind it feel both amazingly different and also uncomfortably fragile.
Must-Read Monday AM Articles
The demand for “premium content” is being redefined by creators, tech companies and 10 million emerging advertisers.
* Apple seems focused on sports that can deliver on three standards: exclusive, global, and premium.
* As Amazon gears up to run ads on its Prime Video streaming service early next year, company executives are asking advertisers to commit to spending significant amounts of money on the service in 2024.
* Logan Paul and KSI co-headlined the “Prime Card” creator boxing event which drew 1.3 million pay-per-view purchases
* Snap's own goals for growth keep shrinking, according to a letter sent by CEO Evan Spiegel to employees about the company’s big-picture strategy
* Sports media veterans John Kosner and Ed Desser argued "college administrators consider these key changes that would create more media value for the key driver, football".
* A24 is behind some of Hollywood’s biggest hits and critical darlings. It has designs on becoming media’s answer to LVMH
* An argument against the "fan service" model of Disney+ Star Wars and Marvel shows.
* Taylor Swift’s Eras Tour concert film snared $31 million during its second weekend in theaters, the most of any concert film at the domestic box office.
* Netflix’s multi-year deal with Skydance Animation, which shifted over from Apple TV+, “helps complement the work that we’re doing” with original animated fare, according to Co-CEO Ted Sarandos.
In the shift from wholesale to retail models, there are many business models that delight consumers but no single, dominant one.
* TikTok has landed Disney as its latest big-name publishing partner for its premium ad product, Pulse Premiere.
* Netflix rolled out a handful of new offerings for marketers at Advertising Week.
* MoffettNathanson's Michael Nathanson argues that, by raising the price of the ad-free basic tier, Netflix is further incentivizing new and existing members to sign up for its lower priced ad-supported plan.
* Xumo's Stream Box could be the Trojan Horse that ultimately extends Big Cable's control of the connected living room.
* Milk Street founder Chris Kimball argued on the People vs Algorithms podcast: "Stay aligned with your core and do things that are unique that nobody else can offer and screw the algorithm because you're just going to end up doing what everybody else does."
* Disney revealed ESPN's financials for the first-time in an 8-K filing
* Eric Seufert asked and answered at Mobile Dev Memo, "Can Disney be a gaming company again?" ($ - paywalled)
* Entrepreneur Dylan Collins asked and answered "Where are the investment opportunities in the kids digital media space?"
AI-meets-the-creator-economy business models are emerging.
* The National Basketball Association's NBA App is tipping off the 2023-24 season with original content, AI-led personalization features and a new feed of must-see moments.
* Google’s designers are updating the YouTube interface to make it easier to avoid.
* Spotify is launching a dedicated in-app Merch Hub that provides personalized merch recommendations based on your listening habits