When former AMC Networks CEO Josh Sapan stepped down last August (and into an Executive Chairman role), I wrote A Short Essay on The Dolan Family & AMC Networks CEO Josh Sapan's Resignation (NOTE: on Substack archive).
I wondered whether the resignation “was the result of the Dolan family doing the math and realizing that there will be more upside in pivoting back towards what they know best (linear) than in doubling down on what they know least (streaming) at a smaller scale.”
I suggested the departure “may reflect turning points" for both a slowing U.S. streaming marketplace and a linear marketplace flattening out at around 40MM-50MM subscribers.
As we approach next week’s Upfronts (beginning on May 16th), that dynamic of turning points seems to be increasingly at play. The three questions are:
Is this dynamic a real market signal?
If it is, what is it telling us?
If it isn’t, why wouldn’t it be?
1. Is this dynamic a real market signal?
Alex Weprin of The Hollywood Reporter wrote recently that “broadcast TV is expected to play second fiddle” at the upfronts, but:
Companies like A+E, Univision, Fox and AMC Networks are betting that, even as the pay TV bundle keeps slowly and steadily declining, embracing the linear sid of the business can still be lucrative — and help them bridge the gap between the uncertain present and a more sure-footed future.
Weprin honed in on a particular unintended consequence of streaming:
“Discovery pulling some content to go right to their streaming platform is creating an opportunity,” [President of A&E Ad Sales Peter] Olsen says, noting that A+E is moving into food TV in an aggressive way. “So you look for those opportunities, you find those whitespaces and say, you know what, we can nudge our way into this.”
Weprin’s article suggests that there is indeed a dynamic of turning points. A linear marketplace with exciting possibilities” emerging because:
The pay TV bundle can be “lucrative” while live viewing remains flat despite cord-cutting, and
Network “giants exploring the subscription video-on-demand space are actively making their linear channels less valuable”.
2. If it is a real signal, what is it telling us?
If the dynamic of turning points is indeed a real signal, it’s telling us the pay TV bundle can be still “lucrative” despite cord-cutting.
That is effectively the sales pitch of Warner Bros. Discovery. As CEO David Zaslav told investors in the Q1 2022 earnings call, it’s about finding competitive advantage and taking advantage of higher CPMs:
Well, first of all, we've been growing our traditional business. We recognize that 4% of subscribers are down and viewership on the platform is down. But when our competitors are taking content off constantly of that platform, it gives us an opening for us where we're doing a lot of original content on. We're obviously, all original of the CNN. Sports is live and tune in and then we're doing original on food, on home, on Discovery and so, and we see it outside the US. Long-term, there's no question that the business is challenging, but CPMs are increasing, advertisers still are looking for -- they are chasing and chasing for inventory, because it's the most effective inventory in long-form video.
In addition to legacy media streamers getting distracted by their streaming strategies, there is also the problem of streaming services as a one-to-one replacement for the Electronic Programming Guide (EPG) of linear TV. As Randall Rothenberg, Executive Chairman of the IAB, tweeted recently:
I can’t help but think that this phenomenon - many, many multiple services, each one looking very much like your old cable universe, but each one actually a walled content garden, blocking out or strictly limiting access to competitors’ content will have as dramatic an effect on television’s economics as the digital platforms have had. Television will no longer be a single coopetitive platform, where 3-10 media giants inhabit the same ecosystem, competing for fractions of share-points against similar rivals which sit next to them, cheek by jowl, in the same EPG, all of it visible to an audience of 100 million households. Rather, there will be many multiple “televisions,” each one striving to keep its own audience - an audience smaller than historical norms - locked in and blissfully unaware of those other televisions inhabiting other dimensions in different space-time continuums.
Meaning, it’s not just that legacy media companies are creating opportunities for their competition by moving content exclusively to their streaming platforms. It’s also that the user experience of streaming may be a worse experience for viewers than the EPG - every bundle of services is effectively a bundle of walled gardens that don’t communicate with each other. Navigating from discovery+ to AMC+ requires more effort for the average consumer than flipping from AMC to Discovery within an EPG.
That may favor FASTs over other streaming apps, as Rothenberg suggests. But it also arguably favors linear in the long run.
3. If it isn’t a real signal, why wouldn’t it be?
The counterargument that there is not a dynamic of turning points may be found in something Comcast announced for Peacock last week: new episodes of all Bravo shows will be available to stream the day after airing. The press release included this quote from Kelly Campbell, President, Peacock and Direct-to-Consumer, NBCUniversal: “Full fan experiences like this are part of the extraordinary value we offer Peacock customers.”
Discovery and A&E would perceive this move to offer competitive advantage: with less Bravo content on cable, there is opportunity to capture audiences looking for that genre who don’t want to use Peacock. But Campbell’s pitch is that Bravo super-fans may be better served by Peacock like Marvel fans may be better served by Disney+; or, DC fans may be better served by HBO Max; or, fans of Starz’s Power universe may be better served by the Starz OTT app.
These would play into a larger theme of consumers being “better served” on Peacock that has been driving Comcast’s pivot into streaming. As Decider’s Scott Porch tweeted recently:
Despite its struggles with Peacock, to date, Comcast is seeing growth in paid subscribers (nearly 50% growth from 9MM paid subscribers to 13MM in Q1 2022). Comcast and NBCU have a particularly unique vantage point on the streaming market with the scale of Comcast’s Xfinity TV and broadband platforms: 32MM residential customer relationships (excluding 2.5MM business services customers), and another 6MM customer relationships via its Xfinity software deal with Cox.
The implication is if there are indeed competitive risks to Comcast’s linear bundle in betting on Peacock, and there is a dynamic of turning points at play, Comcast and NBCU don’t see them from one of the best seats in the game.
The Takeaway
I recently spoke with a former Viacom colleague who works in advertising at Spectrum and asked him how his business works across OTT and linear. Every time I asked a question or made an assertion about his ad business, his answer was “well, it depends”.
So, returning to the original question, are we witnessing “turning points for both a slowing U.S. streaming marketplace and a linear marketplace with exciting possibilities while flattening out at around 40MM-50MM subscribers?”
Well, it depends: if you’re a smaller network, it may be. If you’re Comcast, it isn’t.
Must-Read Monday AM Articles
* How Netflix’s stumbles are causing rivals to rethink the streaming business
* Deadline’s Dade Hayes delivered a first-hand account of Peacock’s first Newfronts presentation. Peacock announced a bunch of new ad formats, but the most notable one seems to the non-interruptive “frame” format, which comes at a time when Connected TV ad fatigue is real.
* The Harvard Business Review dove into Why Marketers Are Returning to Traditional Advertising
The Vibe Shift
* The sale of nonfungible tokens, or NFTs, fell to a daily average of about 19,000 last week, a 92% decline from a peak of about 225,000 in September, according to the data website NonFungible.
Emerging "Metaverse"-type convergence strategies
* Spotify announced it will become the first music streaming brand to have an official presence within Roblox
* Michael Mignano, co-founder of Anchor and Spotify’s podcasting tech chief for the past three years, submitted his resignation last week
Aggregator 2.0
* Japanese game publisher Square Enix is selling all three of its Western video game studios, which own popular IP such as Tomb Raider, Deus Ex, and Legacy of Kain - to the European game publisher Embracer.
* Riot Games, the developer behind League of Legends and Valorant, continues to bolster its entertainment studio with a handful of key executive hires hailing from Netflix, HBO Max, Paramount and more.
Sports & Streaming
* Bloomberg’s Austin Carr reported on how Formula One Finally Found a Way to Get Americans to Care
Creator Economy, Platforms & Transparency
* YouTube’s Newfronts presentation noted that there was a 207% increase in taxpayers calling themselves creators according to TurboTax, a sign of growth for the creator economy.
* Twitch pitched advertisers at Newfronts on creating closer pairings between Twitch content creators and the brands that sponsor it
* The New York Times dove into Moonbug Entertainment’s success (the Blackstone investment that owns CocoMelon and Blippi).
* Cameo, the celebrity video greetings startup, laid off 87 of its staffers last Wednesday.
* A Yuga Labs land auction resulted in buyers collectively spending about $180 million worth of ETH solely on fees during the sale
Original Content & “Genre Wars”
* What’s On Netflix’s Kasey Moore does the math(s) and finds Netflix Originals now make up a much larger portion of the Netflix library, and Netflix’s US movie library 35%+ since 2015 but is growing again
* Netflix opened an office in Italy and announced an original programming slate
* AMC Networks’ subscription and ad-supported streaming strategy helped to offset a decrease in revenue earned from its traditional cable networks.
* Vivendi’s pay-TV business Canal Plus is working on a potential bid for a minority stake in Starz, as are Roku and Apollo Management ($ - paywalled)
AVOD & Connected TV Marketplace
* MobileDevMemo’s Eric Seufert argues why in-app personalization, not probabilistic attribution, is the future of post-ATT advertising
* VEVO declared itself at Newfronts to be “the largest free ad-supported streaming TV (FAST) network in the world.”
* Amazon released an IMDb-branded app that’s exclusively available to Fire TV owners, which will let you play a series of games designed to help you pick a movie. Techcrunch had a deeper dive into the game experience.
* According to Accenture research, 63% of consumers believe that it is too expensive to pay for all of the subscriptions that they would like to have.
* Tubi plans to utilize Nielsen’s Digital Ad Ratings to expand coverage of streaming devices, including computer, mobile and connected TV.
Other
* MarketingWeek argues “We believe the case against personalisation is significantly stronger than the case for it”
* Wired’s Ax Sharma reports Hollywood’s Fight Against VPNs Turns Ugly
* A consortium led by TCG will make a $263 million strategic investment in Funko, the pop-culture collectibles company. The consortium includes former Disney CEO Bob Iger and The Chernin Group.