Monday AM Briefing: More on Paramount+'s "Hard Bundles", (Members only: Yuga Labs Acquires CryptoPunks & Meebits IP from Larva Labs)
I wrote a bunch last week about Paramount Global's decision to build "hard bundles". In thinking more about it - because it is a significant tactical move to drive scale - I'm not sold we have a solid definition of what a "hard bundle: is because we don't have the "ins and outs of the deal".
This was a point made to me by former NBCU executive Salil Dalvi in a recent conversation we had for a short video and audio segment we have been testing called "Five Minute Insights". The segment is two former digital media executives discussing topical news stories from an executive's perspective, and highlighting questions and angles you may not be seeing.
We will be launching it on LinkedIn and/or Twitter, soon.
If you would like to see and/or listen to the one we did on Paramount+ this week (~12 minutes long), please respond to this email and I'd be happy to send you the Dropbox link. My only ask in exchange will be for your feedback.
Back to "hard bundles": what do we know about them?
Paramount CEO Bob Bakish has discussed them recently on both the recent Q4 2021 earnings call and at last week's Morgan Stanley Technology, Media & Telecom Conference.
He told investors on the call:
So on the hard bundle side, notably exemplified by Sky and by the Canal+ deal, we announced today, there’s an opportunity to get very quick sub base at a very low subscriber acquisition cost, with minimal churn going forward. So we like that a lot as we begin to build scale.
What is it about a "hard bundle" that gets "very quick sub base at minimal cost"?
The best answer to this question is Comcast bundling Peacock Premium ($4.99) for "all Xfinity Flex customers and Xfinity X1 and video customers who have a subscription to Xfinity Internet or Digital Starter TV, or equivalent, or above". This bundle is also offered by Cox Communications (6.5MM total residential and commercial customers) and Charter Communications (32.1MM total customer relationships).
CEO Brian Roberts told investors on the Q4 2021 earnings call:
We have another 7 million highly engaged bundled subscribers from Xfinity and other top distributors, who use Peacock every single month and currently receive Peacock Premium at no extra cost. We expect strong conversion of this group to paid subscribers over time.
With Comcast's 34.2MM total customer relationships, all three reach over 76MM customers. Roberts is implying hard bundles have delivered a ~10% conversion rate, to date (7MM out of 72.8MM total customer relationships). It seems low with both the Beijing and Tokyo Olympics over the past two years but it is sizeable.
His second statement - an expectation of "strong conversion" over time - also helps to explain the business model of a "hard bundle". Comcast can easily and effectively eat the cost of $4.99 per sub across both Comcast and Cox subscribers because both use its Xfinity X1 software.
If the Cox or Comcast subscriber chooses to upgrade to the ad-free version of Peacock, they will be billed $5 through their Cox or Comcast accounts. That is his expectation.
That seems to be one version of the "hard bundle" - a first-party streaming software (Peacock) is automatically embedded into both the billing and software back-ends of an MVPD (NOTE: Cox also has its own version of Xfinity Flex, Comcast's streaming product for broadband-only subscribers in which Peacock is a default option).
That may be how Paramount+ is structuring its deal with Canal+ and Sky.
A Quick Note on Charter
Charter seems to be more of a lead-generation model. That was my experience in trying to sign up for Peacock Premium through my Charter Spectrum account last night:
Starting at this promotional page
Taken to a login page for Peacock (which also offers free sign-up for Spectrum customers who don't yet have one)
A login page for my Spectrum account
A payment details page hosted by Peacock
In other words, Charter pays for my free three months of Peacock Premium as a broadband customer, but then I pay Peacock directly afterwards (if I choose to).
Why Cox, and not Charter, is Closer to [Canal+/Sky] + Paramount+
The "hard bundle" deal Paramount+ reached with Sky for its Sky Cinema tier - and Canal+ for its future Paramount+ release - seem closest to Comcast's Xfinity model with Cox: meaning, users can access the streaming app at no additional cost, and all billing is run through Cox. There is lower Average Revenue Per User (ARPU) (Cox is paying a wholesale price per subscriber) for Comcast, but otherwise it would appear login would be via the Cox account.
There is a key difference, though: Comcast will capture all data about how the consumer consumes content within its ecosystem including billing information, and within the Cox Xfinity ecosystem will capture all data about the consumer excluding billing information.
Paramount+ presumably will capture no billing data from Sky Cinema or Canal+ customers, and will capture very little about how the consumer engages within either Sky or Canal+ software ecosystems. It will only learn about how users engage with Paramount+ content (NOTE: these deals also include extended carriage of ViacomCBS’ portfolio of pay-TV channels and content licensing rights).
This raises two interesting questions as streaming services hit plateaus in growth:
If hard bundles are a trade-off of consumer data (especially payment data) for guaranteed ARPU, is scale so valuable to streaming services that they are increasingly willing to part with consumer data?
Is Paramount a poker-type "tell" that some Wholesale media companies simply do not need all that data? That it is ultimately a useless and expensive exercise for a Wholesale company to try to own and process all consumer data like Netflix does?
I couldn't help but think of the second question after I wrote last Friday's essay. Assuming "Paramount+ is the canary in the coal mine for the acceleration of "hard bundles" as a trend (Disney+ struck similar deals with Sky and Canal+ back in 2019), Wholesale legacy media companies may be telling the marketplace that it may be more expensive for them to own and monetize consumer data than to allow third-parties to own that data.
Yuga Labs (BAYC owner) Acquires CryptoPunks & Meebits IP from Larva Labs
Last month I wrote about Bored Ape Yacht Club, Hello Sunshine, World of Women & New Frontiers for IP. For Members, only, I wrote about the question of:
how BAYC NFT owners and Hello Sunshine get from here - IP rights distributed across tens of thousands of owners- to Disney-like IP.
I also noted that a key challenge will be "solving for how to maximize the value of NFT copyright within existing business deal structures" for IP: meaning, how NFTs fit into existing copyright contracts for comic books or TV series.
That question looms over the news that Yuga Labs - which owns the Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) NFT (nonfungible token) collections - has acquired the intellectual property of CryptoPunks - "a pioneer in the NFT space" - and Meebits from Larva Labs.
[Author's Note: This section will be exclusive to members, only.]
As Mia Sato wrote in The Verge about Bored Ape Yacht Club last month:
NFT purchases come with specific usage rights to the art depicted — the original artist typically retains ownership of the copyright, but buyers can set the NFT as their profile picture, for example. But Bored Apes are different: when you buy an ape, you also get the rights to it. You can put your ape with pink fur and a military-inspired hat on a skate deck, as streetwear brand owner Nicky Diamonds did. Or lend your closed-eyes, pierced-ear ape to a music video.
The question of helping owners to solve for copyright seems core to the explanation from Larva Labs as to why it made a deal with Yuga Labs:
Our personalities and skill sets aren’t well suited to community management, public relations, and the day-to-day management that these kinds of projects require and deserve.
Yuga Labs posted its own explanation of the deal, including what it will bring to day-to-day management:
As a first step, we will soon be granting CryptoPunks and Meebits holders the same commercial rights that BAYC and MAYC owners enjoy. We’re working with our legal teams to draft the new terms and conditions for both collections, and expect to share these with the community soon. By handing over these rights, we’re further aligning CryptoPunks and Meebits with the web3 ethos, and we expect a wide-range of third party developers and community creators to incorporate CryptoPunks and Meebits into their web3 projects. We’ll be building the overall brand right alongside them.
What we don’t plan to do is shoehorn these NFT collections into the ‘club’ model we’ve developed for BAYC. We view BAYC as the center of the universe we are building at Yuga, and CryptoPunks as a historic collection. While we will work to bring additional utility to both the CryptoPunks and Meebits collections, we intend to do so as thoughtful stewards. We’re not in a rush here. We’ll be listening to the community before we decide what comes next.
As I wrote in February, BAYC is a particularly interesting case study of whether NFTs mark "the birth of a new media model". Yuga Labs seems to be admitting the club is not a replicable model, nor is there is no one-size-fits-all model yet.
The granting of commercial rights seems to be a less ambitious objective than Candle Media's rationale for Hello Sunshine's storytelling partnership with World of Women (WoW):
As part of the partnership, Hello Sunshine will build out the World of Women character universe and franchise into entertainment properties including feature films, scripted and unscripted TV series.
Meaning, there is still a disconnect between existing copyright law and the commercial rights attached to an NFT. The Verge's Nilay Patel summed up this disconnect best in his introduction to his interview with Tonya Evans, a law professor who teaches IP law, copyright, and blockchain at Penn State Dickinson Law:
A lot of Web3 ideas seem to run directly into the existing legal system in complicated and sometimes very funny ways. The NFT world seems to have an impressionistic understanding of copyright law. DAOs, well, they aren’t actually recognized as legal entities in most states. So in a very technical sense, they can’t actually do anything in the real world. But all these things still exist, and at some point, the law will have to catch up.
Larva Labs may have felt unable to solve for the emerging problem of creators of avatar projects starting to look "more like media companies rather than digital artists". But neither Yuga Labs nor Hello Sunshine seem to yet have answers for this emerging problem, either, because the disconnects between existing copyright law and the "commercial rights" of NFTs are "impressionistic" - if not more many-headed - than the most fervent believers in NFTs otherwise may assume.
In some ways this feels like a multivariable version of the early days of creators on Vine and YouTube. Back then, creator success could be rewarded with sponsorships and ad revenues for more low-brow content that was the antithesis of the premium content legacy media sold for market-high CPMs.
The key difference, then, is that a creator had a standard contract with a sponsor or a platform to get paid. Now, with NFTs, standard rights contracts in legacy media simply have no precedent for the type of commercial rights attached to an NFT. For all the language in these bets about monetizing IP, the reality may be bets like CryptoPunks, MeeBits and WoW need better legal teams than development teams.
It's no accident that Yuga Labs wrote in its announcement:
We’re working with our legal teams to draft the new terms and conditions for both collections, and expect to share these with the community soon.
These emerging NFT collection marketplaces risk remaining stuck in neutral until or unless the legal rights around NFTs become more familiar for more legacy-media-type plays. This is not an intractable or unsolvable problem. But it also is one that requires more than just contract law.
Must-Read Monday AM Articles
* The Verge has a good breakdown of Apple's position in the emerging NFT economy
Emerging "Metaverse"-type convergence strategies
* Genvid Entertainment and Skybound Entertainment announced The Walking Dead: Last Mile, a "part game, part interactive television show" launching this summer as a Facebook Gaming and Facebook Watch exclusive.
* Interest in NFTs and the Metaverse appears to be sharply declining, "at least according to Google search trends, which have been seeing deep downward turns for both terms."
Aggregator 2.0
* Newly appointed Luminary CEO Rishi Malhotra told Hot Pod's Jacob Kastrenakes “the model is working from a revenue basis” and that the service’s subscriber numbers continue to grow.
* Verizon's PlusPlay "could be a mortal blow for the battered cable TV business, while fixing some of DTC’s most intractable and annoying customer headaches."
Sports & Streaming
* The FT had a good piece on Disney's sports betting push in bid to revitalise ESPN ($ = paywalled)
* Sports Business Journal's John Ourand offered an insider's look into the NBA's deal with Sinclair, and "a dozen conditions into its contract that, perversely, could benefit the league if Diamond’s direct-to-consumer ambitions — and financial standing — falter".
* Charter and Sinclair have reportedly reached a one-month extension on negotiations for a new carriage deal
Creative Talent & Transparency in Streaming
* N/A
Original Content & “Genre Wars”
* Netflix unveiled its 2022 slate of 25 French Originals and said it will invest more than €200 million ($220 million) in 2022 in France.
* Vulture's Joe Adalian asked if Amazon Prime Video's broadcast of the 57th annual Academy of Country Music Awards last week opens the door to streaming Awards Shows?
* David Eilenberg, most recently chief creative officer at ITV America, will become head of Roku Originals for the company
Comcast’s & ViacomCBS’s Struggles in Streaming
* N/A
AVOD & Connected TV Marketplace
* Charter CEO Tom Rutledge predicts "There’s more damage to come" in pay-TV and cord-cutting
* Roku CEO Anthony Wood anticipates the smart TV market will eventually shake out to a handful of players controlling the platforms.
* Mike Shields imagined how Google could capture the CTV space
Other
* Deadline's Dade Hayes speculated on soon-to-be Warner Bros. Discovery CEO David Zaslav's executive team and corporate structure
* MobileDevMemo's Eric Seufert offered three potential explanations as to why CPMs increased following App Tracking Transparency - this should not have happened if advertisers were reaching less relevant, or fewer relevant, users
* Former employees at YouTube Kids told the WSJ YouTube has done a good job of turning the children’s platform into a safer place, but staff "were divided on the best way to build a product specifically for children"
* What's On Netflix's Kasey Moore found a good Reddit thread of Netflix users who cancelled their accounts after the price hike