Monday AM Briefing: The Jason Kilar Farewell Press Tour Preaches Product Channel Fit
I returned to the Hollywood Breaks podcast last Friday (NOTE: I was last on it in August 2021). We had a fun conversation that covers territory about last week's Oscars broadcast that few else seem to have covered: specifically, how Will Smith is both an avatar and a figurehead for the Hollywood-Meets-Creator Economy given his embrace of social media over the past few years (which he discussed in a recent GQ profile from last November).
We dove deep into how “the slap” seemed to reflect Will Smith as someone lost in the limbo between the tightly controlled optics of Hollywood's past and the authenticity- and vulnerability-driven optics of the creator economy, (which I've argued may be Hollywood's future).
If you have been listening to or reading it, now-former WarnerMedia CEO Jason Kilar’s farewell press tour has done an unusually good job of fleshing out the misunderstood details of his tenure. There are three notable interviews in particular:
A quote from the Vulture interview about “the importance of the product, design and technology aspects of a streaming business model” is worth diving a little deeper into. Because, it is as strong a case for the business logic of the Product Channel Fit framework as I have read to date.
It also offers a helpful lens into whether the management structures of streaming services are a “tell” about their ability to survive over the next 24 to 36 months.
The Jason Kilar Farewell Press Tour Preaches Product Channel Fit
Adalian asked Kilar the question I’ve always wanted to ask:
Speaking of innovation, HBO Max took a lot of heat from consumers early on because the interface was often buggy and not always user-friendly. But it’s made massive improvements over its first two years and I would argue it now offers one of the best experiences. Was that a priority for you, and do you think big legacy media companies make a mistake when they don’t pay enough attention to the product part of streaming?
Kilar responded:
I have very strong opinions on this. Let me give you a picture of what WarnerMedia looked like before I joined in early 2020. Technology reported into the finance organization, and HBO Max was three levels below me. The changes that I made within my first 100 days were to have technology report directly into me; to recruit a world-class chief technology officer who had expertise in direct-to-consumer services, including online advertising; and to elevate HBO Max to a direct report to myself. I mention that because my experience is that traditional media companies have underestimated and underinvested in the product, design and technology aspects of streaming. At WarnerMedia, we’ve fundamentally addressed that, and we tried to do it as quickly as humanly possible. But I think it’s fair to say that there’s a number of folks still in this industry that probably fail to appreciate just how important that is, because they don’t come from that world.
Product Channel Fit is one of PARQOR’s Five Frameworks: Channels do not mold to products so instead, products must adapt to channels.
For example, Roku will not customize its platform technology for an app like HBO Max, so HBO Max must evolve its product, design and technology to adapt to Roku. The HBO Max team must do so while evolving the HBO Max product, design and technology across other platforms like Apple TV and iOS, Android TV and Amazon Fire.
[NOTE: There was a good interview diving into how HBO Max tackled product channel fit in Vulture last week: HBO Max Has Definitely Seen Your Tweets, Is Fixing Its Apps.]
The description reads easier than the actual execution, and that is Kilar’s point, above. Kilar has now delivered the architecture for two of the largest streaming platforms, globally: Hulu (44MM U.S. subscribers) and HBO Max (73.8MM global subscribers). If he is arguing for CEOs to prioritize Product Channel Fit strategically and operationally, it is because he has the track record to prove it.
Product Channel Fit & HBO Max's Competition
We have not seen similar successes from other legacy media bets on streaming because they have “underestimated and underinvested in the product, design and technology aspects of streaming”. In other words, they have not prioritized Product Channel Fit strategically or operationally.
Notably, this argument is analogous to venture capitalist Marc Andreessen’s argument that “A good test for how seriously an incumbent is taking software is the percent of the top 100 executives and managers with computer science degrees.” I discussed this perspective in last November’s Is Growth in Streaming Driven More By Content or Software?), where I argued:
Andreessen's point is that the extent to which 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.
Kilar is making this same point, and hammers it home with the three key decisions he made in his first 100 days:
to have technology report directly into the CEO;
to recruit a world-class CTO in Richard Tom, with whom he had worked at Hulu and then Vessel and who had “expertise in direct-to-consumer services”; and
to elevate HBO Max - run by Andy Forssell - to a direct report to the CEO.
In other words, if we are looking at who is likely to fail and who is likely to succeed, Kilar’s lesson from his time at HBO Max is that a company’s operational priority to solve Product Channel Fit (product, design and technology) may be a reliable predictor of its success.
Kilar thinks that most of his competition gets this wrong, and enough of them do so that Kilar told Lucas Shaw he believes there will ultimately only be three major scaled players in streaming.
He certainly seems to have proven that an incumbent legacy media CEO betting its future on streaming must have a software-oriented vision. In turn implies that the CEO must orient his or her business more around product, design and technology, and less around the library.
That has generally not been the case in streaming, to date.
Product Channel Fit & The Future of Streaming
Excluding Kilar and Netflix Co-CEO Reed Hastings, no other legacy media CEO with a streaming service has adopted a software-focused vision, either strategically or operationally. Even Disney+ is the product of former CEO Bob Iger deciding to buy BAMTech and not build a proprietary solution in-house. So it is notable that this argument would seem contrarian. But, at a time when many incumbent legacy media CEOs are betting their legacies and shareholder value on the ability of their streaming app software to scale across platforms, Kilar may be prescient.
That said, because Kilar is doing a press tour and not interviewing for a Harvard Business School case study, we lack the economics or business logic of these decisions. The only economic signal Kilar offers us is that they tried to address the product, design and technology aspects of streaming "as quickly as humanly possible".
This implies there are human constraints beyond other legacy media CEOs underestimating and underinvesting in the product, design and technology aspects of streaming. That may be a reference to a competition for existing talent - which is expensive - or that may be a reference to the streaming technology evolving past existing skillsets - which reflects growing execution risk. Neither are immediately quantifiable, but they are market signals which have emerged and may only increase in importance.
Whatever the case, the takeaway should not be that Kilar is right or wrong about the importance of Product Channel Fit in the streaming marketplace. Instead, it should be that understanding the future of streaming means understanding the moving pieces of Product Channel Fit better across streaming services.
It also implies future success in streaming may lie more in Product Channel Fit than content library.
Must-Read Monday AM Articles
* Deadline has AT&T CEO John Stankey's surprisingly honest farewell email to WarnerMedia staff. Deadline's Dade Hayes also broke down Warner Bros. Discovery's new management structure.
* Chip and Joanna Gaines’ Magnolia Network will move under HBO’s purview upon the completion of Discovery’s acquisition of WarnerMedia. Deadline's Nellie Andreeva writes the move "could lead to a Magnolia-branded hub on HBO Max and the Gaines’ dipping their toe in scripted programming."
* Variety has a brutal history of the AT&T acquisition of Time Warner with a surprising (or not-so-surprising) number of on-the-record quotes.
Emerging "Metaverse"-type convergence strategies
*Forrestor just published The State Of The Metaverse, which recommends that business leaders plan for future opportunities — by experimenting with metaverse precursors — while tempering expectations and investments.
* "The metaverse will change the paradigm of content creation"
Aggregator 2.0
* Disney+ subscribers can save up to 25% on their visits most nights between July 8 through September 30, 2022
* Spotify is testing a TikTok-like discovery feed
* A review of Sony's recent announcement of a revamped PlayStation Plus with three different subscription tiers concludes, "The Netflix-ization of video games is already here, and it sucks"
* Plex is trying to become a default aggregator of new releases from streaming apps
Sports & Streaming
* Apple's broadcast of a doubleheader of MLB games every Friday will be free to all viewers. Phillip Swann, The TV Answer Man!, believed the broadcast "delivered an exceptional picture" (despite a 2nd inning crash of the livestream).
* The fee multiple Formula One owner Liberty Media is seeking could end up killing the ad-free broadcast
* SBJ's John Ourand reported "Sinclair and Charter worked out another short-term extension on their negotiations for the Bally Sports RSNs". If the two sides can agree on a deal, "it would give Sinclair a measure of stability in the volatile RSN marketplace".
* CNBC's Alex Sherman reports "Niche sports organizations such as UFC, WWE and Formula One could be alluring acquisition targets for big streaming companies like Disney and Netflix".
Creative Talent & Transparency in Streaming
* Recode dove into the present and future of Instagram Reels. The Financial Times reports that Instagram has cut the amount it pays makers of short videos as it adapts its strategy towards so-called influencers while facing fierce competition from TikTok. ($ - paywalled)
* A summary of the Piper Sandler Taking Stock With Teens survey, Spring 2022 edition.
* Candle Media Founder Kevin Mayer laid out the company's strategy in detail at MipTV.
Original Content & “Genre Wars”
* Disney announced that Dancing with the Stars will exclusively air on Disney+ in the US and Canada starting in the fall. Kareem Daniel, chairman of Disney Media and Entertainment Distribution, said the move will help Disney+ "expand our demographic reach."
* Phil Lord and Chris Miller, directors of “The Mitchells vs. the Machines", argued for Hollywood to take animation more seriously as cinema. Netflix’s Head of Anime says half of global subscribers watch Japanese animation.
* HBO Max International boss Johannes Larcher told the MipTV Conference “When we show up in a country and compete, we actually do very well.” A "new world order" emerged from the MipTV Conference, reports Variety's John Hopewell.
* Streaming Boom Sparks Evolution in German Drama
Comcast’s & ViacomCBS’s Struggles in Streaming
* N/A
AVOD & Connected TV Marketplace
* Nielsen's State of Play report found 46% of respondents feel overwhelmed by trying to keep up with the ever-expanding number of streaming services and the various titles that quickly come and go from the platforms.
* Variety VIP's Gavin Bridges offers data showing that "offering much more content to consumers" has resulted in "the majority of networks see[ing] audience declines". He also wrote about "How Getting Streaming Wrong Cost the TV Industry" ($ - paywalled)
* AMC Networks is developing six new free ad-supported streaming TV (FAST) channels, joining eight channels deployed across six ad-supported platforms
Other
* The latest State of Media & Entertainment on Mobile report from data.ai found nearly half of all consumer spend in apps was from Entertainment & Books apps. It also found that "Global streaming is not a three-way race".
* Redbox Entertainment April 1 disclosed it laid off 150 employees, or 10% of its workforce, due to the ongoing impact of the pandemic, and would delay filing its 2021 annual fiscal report for the period ended Dec. 31, 2021.