Two big developments over the past week are worth taking a moment to consider next to each other:
The Stock market drop, which disproportionately impacts media companies (as The Ankler Richard Rushfeld dove into last week in 2022: The Disappearance of Hollywood as We Know It).
MrBeast's $456,000 Squid Game in Real Life! hit 100MM+ views in less than one week, and less than 150MM+ views in two weeks.
In terms of growth, alone, both developments pose two difficult questions for legacy media bets on streaming:
What are the wins that may help drive stock price back up?
Will those wins even matter?
What are the wins that may help drive stock price back up?
This question can seem completely unfair or completely reasonable at this moment in time.
It's unfair because stock markets go up and they go down.
But, it's also reasonable given the stock drops from prices as of November 5th. In that time, the S&P is down 📉-3.5% in that time and the NASDAQ 📉-3.8%.
All companies I write about – excluding Comcast – have seen drops at or greater than 4%
Amazon 📉-4%
AMC Networks 📉-23%
AT&T 📉 -7%
Comcast 📉-4%
CuriosityStream 📉-30%
Disney 📉 -17%
Discovery 📉 -7%
Google 📉-4%
IAC (for reference) 📉-13%
Lionsgate 📉-11%
Netflix 📉 -7%
Spotify📉-21%
ViacomCBS 📉 -15%
Apple is the only company to have seen a rise in price, 📈+7% since November 5th.
Notably, investors have punished future merger partners AT&T and Discovery, and Netflix by the same percentage (-7%), and have punished Amazon and Comcast the least (-4%).
One way to look at these outcomes is through the lens of the streaming multiple, the promised, Netflix-like multiple from Wall Street as a reward for successful streaming strategies.
Meaning, either this is a setback and stock prices will return, or we are witnessing the streaming multiple being applied in the opposite direction for media companies. The implication would be investors are now punishing media companies for not having done enough in streaming (this was the argument Rushfeld made on Friday), especially after streaming growth seems to have plateaued.
Not only are investors punishing these companies in stock price, they are punishing them at multiples to other stocks: in the cases of Disney and ViacomCBS, they saw 4x the decline of Amazon, Comcast, and Google.
The path back up to pre-market drop prices is steeper for pure-play media companies than it is for any other company.
Will those wins even matter?
Both Netflix and HBO Max (AT&T) have had positive streaming stories in 2021, and Discovery has a strong financial outline for Warner Bros. Discovery.
As for everyone else, it is a big question as to how they may recapture lost ground in stock price, or if they even can.
That's why I highlight the recent success of both Netflix and YouTube Influencer MrBeast with Squid Game. Netflix saw 142MM accounts watch at least two minutes within its first 28 days, and MrBeast has seen similar views (150MM+) in three weeks.
I liked this tweet from former Quibi executive Brandon Lisy summarizing the significance of the accomplishment:
The best media take of 2020 is “why did Netflix pay all that money and take all that time to make ‘Squid Game’ when they could have just made Mr Beast’s ‘Squid Game’?”
It's brilliantly framed, highlighting both the common misunderstanding of Netflix's business model (the budget for the series was $21.4MM, whereas The Crown and Stranger Things have budgets at around 60% of that figure per episode), and the broader lack of understanding of MrBeast's business model on YouTube.
MrBeast came up with the idea in November and executed it within less than a month. By comparison, the original Squid Game took 12 years to get from idea to execution.
MrBeast says he reinvests 100% of what he makes on his channel, and he obsesses over the types of content YouTube's algorithm rewards. His channel has ~84MM subscribers, 4x ViacomCBS's current global reach for its streaming services.
Legacy media executives looking to recapture the path to the streaming multiple for their stock price are now competing with the economics of MrBeast's production model, and YouTube's growing scale (especially on 120MM Connected TVs in the U.S., alone).
Moreover, they're competing with the optics of faster turnaround and success at scale shared transparently with the world (other than HBO MAx and Disney, no other legacy media companies offer granular transparency into their streaming numbers).
In this light, the objective of the streaming multiple now feels further and further away from legacy media companies.
Conclusion
Could Netflix have made Squid Game with Mr. Beast, instead?
Of course not.
Instead, the point is that the economics and distribution for both Netflix and YouTube creators to produce a global hit –even if completely different–are exponentially better than any legacy media company.
The percentage drops last week may reflect investors wising up to that reality, thereby making the path back to the streaming multiple improving stock price that much more difficult.
Must-Read Monday AM Articles
* Gita Jackson of Vice argues Mr. Beast’s Squid Game Ripoff Is Exactly the Kind of Video YouTube Rewards
* The success of MrBeast’s Squid Game is its own dystopia
Emerging "Metaverse"-type convergence strategies
* Mike Shields asks, "Why isn't Disney Building the Metaverse?"
Aggregator 2.0
* Business Insider listed the top media targets and buyers in 2022
* Spotify has removed the work of hundreds of comedians, including John Mulaney, Jim Gaffigan and Kevin Hart, amid a new fight over royalty payments for copyright on jokes they wrote when they are played on radio and digital service providers.
Sports & Streaming
* Sinclair reached a multi-year deal with the NHL, which gives them rights to offer an in-market direct-to-consumer streaming service for 12 NHL teams.
* Patrick Crakes, strategic media consultant and former senior Fox executive, argues "As we close the first chapter of the digital media evolution, the future looks like a bundle but not one dependent upon video."
* Comcast and Disney announced today the companies have renewed their content carriage agreement, and Comcast will distribute the ACC Network to its Xfinity customer.
* The FT reports Discovery in talks with BT Sport to hijack sale to DAZN
* Monumental Sports and Entertainment founder and CEO Ted Leonsis says folding RSNs into a larger sports and entertainment portfolio could—at least in some markets–solve for RSN distribution challenges.
Creative Talent & Transparency in Streaming
* What is the number-one movie of 2021? We may never know
Original Content & “Genre Wars”
* The Entertainment Strategy Guy highlights how both Apple TV+ and IMDb TV aren't doing as poorly as he had originally assumed.
* Genius Brands International has struck a $25m deal to acquire German kids company Your Family Entertainment (YFE) and has hired a former Disney exec to oversee the expansion of Kartoon Channel
* Ed Power of the Telegraph argues Netflix’s Red Notice has turned the ‘event movie’ into a non-event ($ - paywalled)
* Netflix, Disney + or Amazon Prime Video will have to invest in French films that will first be released in theaters (en français in Le Parisien).
* Sony/Marvel’s Spider-Man: No Way Home is activating mega presales in international box office markets
Comcast’s & ViacomCBS’s Struggles in Streaming
* ViacomCBS Networks International has joined forces with Scandinavia’s leading streaming company NENT Group to launch a new Pluto TV service across Sweden, Denmark and Norway in 2022.
* Kelly Day is exiting ViacomCBS to join Amazon as VP of Prime Video International, a newly created role overseeing the ecommerce giant’s streaming video business in global markets.
AVOD & Connected TV Marketplace
* Variety's Cynthia Littleton laid out how the "sudden chill in the regulatory climate" from the Biden Administration's anti-trust efforts are impacting the broader legacy media marketplace.
* David Bloom asks why Hulu wasn't included in the Disney-Comcast deal (above)
Other
* FT Alphaville asks what Waystar Royco – the company in HBO's Succession –true valuation?
* Fast Company dove into The Chernin Group's investment strategy going forward.