[Author's note: I made the mistake of editing this after a long travel day. Below is the updated and corrected version.]
PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business. Through in-depth analysis from a network of senior media and tech leaders, Andrew Rosen cuts through what's happening, highlights what it means and suggests where you should go next.
A reminder and an update. A reminder that this week’s schedule will be
Today: Revisit my Predictions for 2022 from last December
Wednesday: A summary of lessons from the Four Trends of Q4 2022, and
Friday: Key trends I’m considering for Q1 2023.
The update: My predictions for 2023 are scheduled to be published in The Information next week, and not this week.
Revisiting PARQOR’s Predictions For 2022
Last year’s predictions were (too) long. So below is the prediction and a brief recap of what actually happened..
Prediction: I think in 2022 the most successful companies in post-”streaming wars” media convergence will be focused on centralizing omnichannel customer relationships around CDPs. They will be focused less on the metaverse.
Media companies owning millions of credit cards was a key theme of Q4 2022, and a much simpler statement of the dynamic I was describing above. Former Disney CEO Bob Chapek tested the metaverse angle with investors and sold investors on “Disney Prime”. But otherwise, it never really played out in public markets. Rather it has played out in private markets, especially for Sony’s Crunchyroll and YouTube creators.
Total words: 1,500
Total time reading: 6 minutes
Investors will cool to the streaming growth stories from ViacomCBS, Warner Bros. Discovery and even Disney.
This prediction was based on a quote from venture capitalist Marc Andreessen arguing for the importance of a computer science degree in senior management. I thought Andreessen was arguing the executives responsible for a streaming service understand the math of a sales conversion funnel, "user intent" and the science of the software is crucial to both growth and competing.
Investors cooled to this story, and not for the reasons Andreessen nor I each suggested (nor for reasons that are entirely clear yet). Rather, they saw greater losses than anticipated after the “pull-forward impact” of the pandemic, and changed their focus to profit.
Paramount Global (formerly ViacomCBS): share price down -37.29% in one year, current market capitalization of $12.45B
Warner Bros. Discovery (formerly Discovery Communications and WarnerMedia division of AT&T): share price down -56.51% in one year, current market capitalization of $26.93B
Disney: share price down -37.92% in one year, current market capitalization of $170.29B
YouTube and Spotify will continue to build out compelling PR stories around growth, and Comcast/NBCU and Discovery will continue to reveal very little
YouTube doubled down on its growth story, revealing $50B in revenues in 2022. It also expanded its partner program to YouTube Shorts and promised 3MM creators in its Partner Program by 2024. But that didn’t help Google’s story which got hit by two headwinds: the emergence of TiKTok and AI as alternative search tools and Apple’s Anti-Tracking Transparency. Spotify, on the other hand, struggled to convince investors that its creator economy podcast strategy was a strong strategy for the future.
Google: share price down -36.56% in one year, current market capitalization of $1.2T
Spotify: share price down -65.35% in one year, current market capitalization of $15.1B
Roku and Amazon will remain leaders in the Smart TV and FAST space despite emerging Smart TV competition.
This remained true in 2022. Roku ended the year with its stock beat up (down -76.69% since December 2021) but reported over 65MM monthly active users, up ~10% year-over-year. Amazon rebranded its free ad-supported TV service (FAST) IMDb TV to FreeVee, but has not shared any numbers, only saying that it had tripled monthly active users over the past two years.
We will hear more stories of emerging Smart TV competitors aggressively pushing their own free streaming services within User Experiences/User Interfaces, and at the expense of competitors.
This played out in the Free Ad Supported TV marketplace. FASTs were the fastest growing streaming tier in 2022 Samsung and LG became players and the model took off. Comcast moved aggressively into the space and partnered with Charter Communications to build an “entertainment ecosystem” powered by its Xfinity platform. Combining both of the companies’ customer bases, Xumo could reach nearly half of the 120 million broadband-connected homes in the U.S.
Because Sinclair has the long-term support of bondholders, odds are they will launch a DTC service that is functional. It is more likely they will continue to have distribution on Comcast and will renew distribution on Charter Spectrum
In April, Sinclair Broadcasting Group reached a distribution deal with Spectrum for the Bally Regional Sports Networks of its Diamond Sports Group subsidiary and other channels. It indeed launched a "functional service with Bally+ Sports in summer 2022. But, Sinclair also refinanced Diamond’s debt and separated its financials from Diamond’s in August. Last week, Diamond announced a new CEO, cementing further independence from Sinclair.
Sinclair: share price down -33.45% in one year, current market capitalization of $1.2B
The PGA and Premier League will market their seasons with Formula One’s playbook from five years ago. They will fall short, both due to the playbook being outdated and Gen Z audiences more likely to be found on TikTok.
The PGA announced its own version of Formula One’s successful “Drive to Survive” series on Netflix. But, for most of the year it found itself distracted by the emergence of the Saudi-basked LIV Golf.
The Premier League has had another quiet season on Peacock, and NBCU continues to keep marquee match-ups exclusive to its TV channels. It does not seems
The optics of the Warner Bros. Discovery merger stumble when CEO David Zaslav and management reveal an obvious discounting of/discomfort with WarnerMedia’s gaming division and growth opportunities in the metaverse.
WBD management have discussed gaming with investors with a light touch and less detail than their predecessors. They also no longer break out the revenues for that division in their reports to investors.
As in 2021, Verizon will end 2022 with the best story about growth and reduced churn from its “aggregator 2.0” model. It may become**the**go-to third-party partner for most streaming services (with T-Mobile a close second)
Freed of the constraints of needing to promote HBO Max, AT&T will rapidly expand its aggregator 2.0 bundles to become a competitor to Verizon and T-Mobile.
Neither happened. Verizon rolled out +play but it doesn’t seem to have become a user or marketing “win”. WBD opted out of the HBO Max bundle with AT&T in retaliation for some “questionable accounting tactics” and then reached a new agreement later this past summer.
1. After betting on the “Hollywood” aspect of “Hollywood-meets-Creator-Economy”, Kevin Mayer and Tom Staggs will find growth by investing in a portfolio of YouTube and/or Spotify creators.
2. After Disney’s generous streaming compensation deals with both Scarlett Johansson and Emma Stone back in September, we will hear more about these types of “keep the Hollywood talent happy” deals in streaming, and fewer deals like Hollywood stars seeking Hello Sunshine-type outcomes.
Neither happened. If there were more of the second, there was zero publicity.
1. AMC Networks stumbles in its pivot to streaming because libraries are hard to build and competition is emerging from other platforms. But, the Dolan family still won’t sell.
1. AMC Networks ended up being a “canary in a cord-cutting coalmine”, and now faces an uncertain future. There is the sense that Dolans could sell, but because AMC Networks owns comparatively little original IP.
2. ViacomCBS will not sell, and more likely will be a buyer of Starz (which it previously tried to buy for $5.5B in 2019) because Starz boosts its success stories with valuable target audiences sooner than additional content spend.
2. The future of Starz is in limbo, and Lionsgate plans to complete the separation of Starz from Lionsgate studios by the end of its fiscal second quarter next September.
Paramount has not been interested in acquisitions, but it did hold discussions with Comcast about a sale. Comcast is rumored to be too concerned over regulatory concerns to proceed.
3. Disney will raise investor sentiment with an international success on a new, European-produced series on its Star platform, which it will also succeed on Hulu when Disney brings it to the U.S. for additional distribution.
3. If there were stories about Disney's European-produced series impacting stock price, I don’t remember seeing them.
ViacomCBS will be fine (see above), but Comcast management will remain slow-moving, if not paralyzed, around solving for Peacock’s challenges given the unnecessary complexity of its consumer-facing user experience
Paramount rode out the year and nearly doubled its Paramount+ subscriber base by growing its international subscriber base from 25.5MM in Q3 2021 to 46MM in Q3 2022. It is losing money on streaming ($1.2B, to date) but Pluto TV now reaches 72MM monthly active users.
As for Peacock, it has grown slowly and has gotten a boost from the World Cup, growing to 18MM subscribers from 15MM in the past three months. But it does not seem to be a must-have for consumers.
We will see more YouTube creators reach audiences closer to the scale of MrBeast, and a growing percentage of Connected TV viewing of Gen Z audiences will drive YouTube’s continued dominance of Smart TV consumption in the U.S.
We didn’t hear much about the first — the top 0.1% earning YouTube creators remains a mystery that requires investigating. Perhaps YouTube’s biggest milestone was its emergence at the top of Nielsen’s The Gauge, and surpassing Netflix, as the most used streaming service in the second half of 2022.
Must-Read Monday AM Articles
* On Friday, I wrote about an exchange I had with former WarnerMedia CEO Jason Kilar last week about the creator economy and the future of streaming.
The Vibe Shift
* Research company Omdia projects pay-TV revenues and subscriber numbers will continue to exceed those for online services in Central and Eastern Europe over the next five years
The 200 vs. The 10 Million
* Disney launched its ad-supported tier and revealed that over 100 advertisers bought inventory for its debut, bookending a buzzy year in streaming advertising. It has rules: No alcohol commercials, no political spots and no ads from competitors.
Aggregator 2.0 & Bundles
* N/A
Sports & Streaming
* FOX Corporation CFO Steve Tomsic believes the Tubi model doesn’t support big, high-profile live rights
Creator Economy, Platforms & Transparency
* YouTube stars Rhett and Link have a creator economy business Mythical Entertainment, and are exploring selling a stake in the business. It has held talks with companies including Spotify, the connected TV giant Roku, and Candle Media, the company run by the former Walt Disney Company executives Kevin Mayer and Tom Staggs.
* An interview with Sarah Ali, the Senior Director of Product Management at YouTube, who is leading the Shorts team to encourage creator and viewer participation to make the platform the go-to app for short-form content.
* Cameo Kids service will let parents and loved ones purchase videos for kids at $25 or $30 a pop. At launch, the lineup includes animated Moonbug Entertainment stars including JJ, Cody, Cece and Nina from “CoComelon,” one of the world’s top preschool entertainment franchises, and Blippi from “Blippi Wonders.”
* Andy Signore, Founder of YouTube Channel ScreenJunkies, has gone on a counter-offensive against the #MeToo movement
* Snapchat’s new augmented reality feature is letting creators make money
Original Content & “Genre Wars”
* I thought Parrot Analytics' Julia Alexander did an unusually good job walking through "Disney’s CEO drama" with The Verge's Nilay Patel (transcript)
* Warner Bros. Discovery CEO David Zaslav is unhappy with the way that Netflix deals are structured after the second season of "The Sandman" was renewed
* Comic book creator Mark Millar has quietly been working on a new series – six characters in six different countries, and the concept is described as “Willy Wonka with superpowers" – that he hopes will tap into the global audience of Netflix.
AVOD & Connected TV Marketplace
* GroupM updated and downgraded its global forecast for 2023.
* Horowitz Research found that digital antenna use is on the rise, with 18% of TV content viewers reporting owning such a device.
* A good summary of MoffettNathanson's increasingly negative Pay TV projections
Other
* Epic Games CEO Tim Sweeney is on a mission to take down Apple's monopoly control.
* Is a "dramatic change of course ahead" in the works for Disney? (free - registration required)