Monday AM Briefing: Why The End of "Peak TV" May Bring "Jurassic Park"-type Chaos
In a recent Zoom interview, a reader pushed back on the “post-streaming wars” sales hook of PARQOR, arguing instead that we’re in the second chapter of “the streaming wars”.
I told him that I didn’t think the perspective is wrong, I simply disagreed with it: I always believed it was difficult if not impossible for legacy media streaming services to replicate Netflix’s technology, scale and product-channel fit. Only Disney has come closest (and, no, it does not have 221MM subscribers as it is triple-counting its Disney+ bundle subscribers).
If there is a competition with winners and losers in streaming, it is something I have labeled the “genre wars”. These are more like focused conflicts around specific content genres than broader head-to-head conflicts between platforms for the same audience (here is a “genre wars” essay from last March on the Substack archive). For example, Starz has found success in focusing on genres targeted to female and black audiences, while AMC Networks has found success with a suite of apps that included horror-focused Shudder.
On the one hand, his point is fair: the “streaming wars” is a relatively recent term and most audiences reading about it are still on a learning curve. So I’ll be the first to admit that claiming there is a foreseeable, near-term end to the “streaming wars” may seem a head-scratcher to most.
On the other hand, I believe we are witnessing the moment that “the streaming wars” label truly no longer applies to this marketplace.
I wonder if the label “Jurassic Park” may be more appropriate. Because this isn’t about streaming services winning or losing, this is more about (1) the survival of media companies (the “dinosaurs”) as their key sources of revenue (linear, theatrical) are drying up, and (2) the impact on the ecosystem when those “dinosaurs” go from predictable to unpredictable actors.
(1) Survival
Survival is the theme of the “Jurassic Park” movies: how will dinosaurs survive if they have been engineered not to reproduce, and how will the idealistic human visitors survive when pitted against those genetically engineered dinosaurs?
Witnessing the dynamic streaming wars, we’ve all been like Dr. Alan Grant (played by Sam Neill) and Dr. Ellie Sattler (played by Laura Dern) in "Jurassic Park" when they first see a cloned dinosaurs and fauna with a mix of shock and awe. We’ve never seen businesses with trillion dollar valuations offer streaming services as a free add-on. Or those businesses fight head-to-head with smaller legacy media companies with multi-billion dollar market caps that are able to compete with advertising and sports rights.
Nor have we ever seen a pureplay streaming service (Netflix) in business or public markets that has scaled to hundreds of millions of subscribers (and multiples more free ones via password-sharing) with market-leading streaming technology.
But, looming in the background is a big question: which of these "dinosaur" companies will survive?
Last week at the Code Conference, former Disney CEO Robert Iger elegantly summed up the stakes for survival: “Linear TV and satellite is marching towards a great precipice and it will be pushed off,” and he predicted a “world of hurt” coming for both models, “I can’t tell you when, but it goes away”. As for the movie business he described it as far from dead, he described it as “smaller” and “Competition, choice... it replaces moviegoing.”
The point is not that Iger is the expert here. But he is an expert, and he’s had some of the best seats in the marketplace for linear, theatrical and streaming over the past four decades, including the best seat as CEO of Disney. And, he thinks that linear and satellite distribution models are about to disappear.
That prediction echoes the perspective of The Chernin Group founder Peter Chernin on technology disruption (which I wrote about two weeks ago, and shared by former Disney Direct-to-Consumer and International Chairman Kevin Mayer and former WarnerMedia CEO). Content will aggregate at two extremes: the big blockbuster hits and niche products, and “What’s gone, and gone forever, is the bland middle”.
(2) Impact on the ecosystem
It’s odd to think of cable networks serving over 70MM linear and satellite homes as “the bland middle” or soon to march off a precipice, especially after this year’s Super Bowl averaged 99.2MM viewers on NBC or NCIS averaging almost 11MM viewers per episode on CBS in 2021-22. But, streaming increasingly “makes up a significant portion of the audience for a number of shows” that are not captured in Nielsen’s final seven-day ratings for the 2021-2022 season. With the exception of NFL football, almost all shows are down year-over-year, including one down by -57% (“Transplant” on NBC).
The theatrical model ($21B globally in 2021) is not immune to “the law of the jungle”, either: distributor Cineworld is preparing to file for bankruptcy. It told investors, “despite a gradual recovery in attendance since reopening theaters last year, recent admissions have lagged below expectations due to a limited film slate”. Its competitor, AMC, has survived in large part because it managed to raise more than $2.2 billion of equity from irrationally enthusiastic, meme-stock trading retail investors to stay afloat.
Last month, Chairman of FX Networks John Landgraf told the Television Critics Association press tour that “2022 will be the high watermark” of scripted TV output, or “Peak TV”. There were 559 scripted shows produced last year, and 357 scripted series across broadcast cable and streaming that have launched through the month of June (according to FX Research, up 16% from last year).
His rationale? “I don’t see new major purveyors of programming entering the scene as they have been continuously over the past decade or more. And in fact, there are some prior purveyors of of television programming that are kind of exiting the scenes.”
Throw in a declining movie slate - 792 came out in 2019, 403 came out in 2021 and fewer are slated to come out in 2022 - and a decline of both scripted TV and movie productions seems inevitable. Iger’s metaphor of linear TV's march towards a great precipice and Cinemark’s bankruptcy both imply some inevitable chaotic event or series of chaotic events upending the natural order of the media marketplace as we know it.
And this chaotic decline coming in part because of the inefficiently enormous choices on content spend that legacy media companies have made in streaming.
When & how will chaos emerge?
As I wrote two weeks ago, the recent conversations I have had with studio executives - mostly around the post-production markets and specifically the visual effects (VFX) marketplace (NOTE: Defector had a good piece on this marketplace) - have revealed that they are trying to imagine what this event or series of events look like.
These executives are much like the savvy scientists in Jurassic Park who questioned the cloning science before it ultimately failed and resulted in those scientists becoming dinosaur prey. They implicitly agree with Bob Iger that the inevitable enormous imbalances to the production ecosystem can only lead to media companies being forced to behave unpredictably, if not dying off.
That take raises the question of whether and how a post-production marketplace can quickly adapt to an accelerated trend away from Peak TV demand, especially after having spent the past three years adapting to an unprecedented glut of production.
From the perspective of studios, that is a question of resource and vendor selection: can existing and preferred post-production vendors survive in a marketplace?
Survival is very much the mindset of the post-production marketplace. What if a studio like Disney or Warner Bros. decides to cut back its theatrical releases by one movie (à la Batgirl): who gets impacted by that in the short-term and what are the longer term consequences?
What moves, if any, should they make in the short-term (M&A, hedge fund and/or Private Equity investment) to prepare for this inevitable chaos? No one I have spoken to has any good answers yet because there are simply too many moving pieces and a wide range of outcomes on the table.
This dynamic is why I don't believe the “streaming wars" label applies anymore. The broader media marketplace is increasingly more focused on the survival among dinosaurs, what the imbalances in the ecosystem look like when they start disappearing, and how they will all navigate the chaos that will inevitably ensue. That reads more like "Jurassic Park".
Must-Read Monday AM Articles
* David Bloom of Next TV “Moneyball is definitely the future for streaming services”, as CEOs, investors and others start looking at those new stats to see how well money is being spent in the Streaming Wars
* nScreenMedia’s Colin Dixon asked, “Are big SVOD hits necessary for growth?”
The Vibe Shift
* “From paring back its real-estate footprint, to limiting corporate swag, to controlling cloud-computing costs and hiring more junior staff”, Netflix is taking a range of steps to reduce spending.
* Roblox announced it is moving into online ads to serve its 5MM subscribers
The 200 vs. The 10 Million
* In Q4, Walmart plans to roll out the alpha of a new sponsored video unit to let sellers promote items based on consumer searches
Aggregator 2.0 & Bundles
* N/A
Sports & Streaming
* Is Amazon ready for the NFL? Meanwhile, networks are taking a “wait-and-see approach to ‘Thursday Night Football’”
* Nine key innovations changing the sports media industry this decade, according to former NBA executives John Kosner and Ed Desser
* Disney CEO Bob Chapek has rejected calls by activist investor Dan Loeb to sell or spin off the ESPN sports television network, and Loeb backed off his demand.
Creator Economy, Platforms & Transparency
* Two of Twitch’s biggest stars no longer see the benefit of Twitch exclusivity in an era where Twitch is offering less money; and, also, Twitch is eliminating Host Mode - which allowed streamers to promote other channels - leaving streamers and viewers “baffled”
* Brand lift studies are now measuring influencer marketing
* Karat Financial is sponsoring a creator economy version of Shark Tank
Original Content & “Genre Wars”
* What’s on Netflix’s Kasey Moore writes, as more analytics companies come online and Netflix becomes more transparent, predicting shows’ fates is getting easier.
* Some clarity on what will happen next month when a deal for a spinout of Starz is expected to be announced
AVOD & Connected TV Marketplace
* Warner Bros. Discovery CFO Gunnar Wiedenfels spoke to the Bank of America Media, Communications and Entertainment conference and shed some marginal light on its streaming and FAST plans
* A deeper look at “the apparently enormous impact ATT has had on big ad companies like Alphabet, Meta, and Snap.”
* Walmart and Amazon have quietly removed dozens of listings for an Android-powered streaming device over concerns that the hardware allowed customers to stream pirated television signals.
Other
* A bunch of interviews with Disney CEO Bob Chapek around D23, in order of must-read: Deadline (for Disney+ Prime vision), Variety, The New York Times, and The Hollywood Reporter
* A good analysis of how Netflix and Disney are navigating the supply and demand curves of the streaming marketplace differently