THB #120: The Future of The Future
Things I Am Trying Really Hard Not To Write About: Will Smith, Chris Rock, David Zaslav, Netflix (quarterly hysteria coming next Tuesday), Kilar, Box Office, Gossip, Johnny Depp, bad newsletters, Elon Musk, and the endless varieties of failure.
Conversations about CNN+, 2 weeks into its launch, provoked conversation and interesting thoughts for me, not about the new segment’s financial impact on the newly spun-off Warner Bros Discovery, but about how things may continue to come together in these very early days of streaming as a paradigm, aside from (and eventually reflecting on) the one mature business in streaming.
What must CNN+ be and what it should cost and how it fits into the overall plan… all trying to come to a conclusion when the cement is still spinning around in the mixer truck.
Today, I want to discuss what I would like to see as the future of streaming (5 years or so), without just making about my personal preferences.
Consumer behavior has - in every era of the last 5 decades since the original studio system ended and home entertainment really started asserting itself beyond the biggest mass culture platform of television - been fairly simple. People want as much content as they can get for as little as they can get, which has meant anything between $700 a year and $1500 a year throughout this entire era.
This was the state of the art in the early 1980s…
A 36-channel cable box without a remote, a Sony Trintron TV (remote extra), and a top-loading Panasonic VHS.
The cutting edge for the rich was a C-Band antenna that allowed the user to search the globe for unprotected content (aka, most content)… about 20x bigger than the current DirecTV satellite and prohibitively expensive.
Cable was defined by licensed municipalities. You bid for a town or a section of a city and you were handed (almost always) a monopoly for that area. As the owner of that monopoly, you had obligations, including local programming and content of educational significance, etc. But you had control of the only option for people aside from over-the-air content, which was generally 3 networks and a handful of major independent stations and another group of minor independents at the time.
In 1992, Bruce Springsteen sang, "57 Channels (And Nothin' On)" and the cable box kept growing, though the complaint continued, as the number of disappointing channels just kept growing.
In 1997, DVDs became commercially available for the first time. Just 25 years ago. And with it, the shift from a rental-focused market for not-new content to an ownership and on-demand market for the general public.
In about 5 years, DVD was soaring. That magic $10 price point, increased quality, and slim size led to people building collections, pushing away from the rental model that was still the cheapest way to go. At the same time, Netflix was accelerating in a model that could only be driven by the ability to mail DVDs, subscription.
Within the next 5 years, the subscription model and market exhaustion signaled the demise (still shrinking annually) of sell-thru DVD.
Meanwhile, the flat-screen TV premiered at Sears with a $15k price tag in 1997, which came down to $10k in 2000. Over the next 5 years, LCD would match and then surpass Plasma and the price point - except on the high end - came down to the $2000 - $3000 range for a “big screen” with an average size jumping to 40 inches, then 50 inches and onward. (You can now buy a quality 75” screen for $1000 or so.)
YouTube came into existence in 2005. Literally. Didn’t exist before that. They had their 17th birthday in February.
In 2008, both Netflix streaming and Hulu launched for consumers.
Okay… enough of the history reminders… there has been a lot of change and we are still in the ongoing evolution…
What about the future?
We are in the moment of incubation. Nothing is settled. But everyone has now been drawn into the next evolution and are doing a 1000 calculations a minute trying to figure out how to maximize the revenue model. (Not to serve the public as some would lie to you.)
So my question is, what is the maximum/best opportunity for the consumer that will not bring down the entire house of cards on the business side?
The first giant question is, how many options can you offer consumers before you are working against your goal of the maximum number of subscribers AND the maximum revenues?
We are still in the Les Misérables Barricade portion of streaming…
Throw everything on the pile… don’t worry about what comes next… we need to get CNBC and a bunch of newsletters to think we are in charge!
A few days later… “Geez… I didn’t mean to throw great-great-grandma’s chair from the 1600s on there… damn… could have invented something really useful with the money that chair would have brought at auction… oh well… shhh, don’t tell anyone.”
Personally, I tend to hope people are smarter than they seem, based on their actions.
Did anyone really think that 15 unproven, unmarketed bite-sized daily shows and a library of documentaries that CNN has played to within an inch of their lives was going to get people to pay money for yet another subscription?
There has to be a bigger idea there! Right?
Following this evolution of streaming is like watching the world’s most repetitive episode of Shark Tank ever. Each streamer comes into the tank with another few billion to spend and The Sharks explain that their self-valuation is out of whack and that there has to be enough money at the end of the tunnel to match or surpass the last great idea.
We all know there is an xx billion dollar market for news (or sports or comedy or procedurals or right-up-to-the-line sexy shows for women or teens-being-extreme shows or cooking). The part that the nasty little consumers make so difficult is causing them to take action… to show a committed interest.
As we have found, even giving them something for nothing isn’t really an effective tool, unless they want your free stuff… in which case, you shouldn’t be giving too much away.
The media, for our part, really doesn’t know what the hell we are talking about in the bigger picture. We have occasional clues. And with all these analytics companies fighting for prominence by having a voice here or there, we still don’t know what we need to know to do a serious analysis of what the choices are.
One small example… what does it mean for Disney when they announce a multi-billion increase in content spending? Disney is, obviously, feeding more content demands and generating more revenue streams than Netflix or pretty much anyone else. If Disney is $2.6 billion annual in for NFL rights, we can draw the lines to their linear networks and potential revenue, but how much are these rights really worth to their domestic streaming platforms and their expanding international platform? I haven’t read anyone with a really clear answer (and none of us civilians know the details of Disney’s rights). It could be that this insanely expensive deal looks cheap in a few years. It could be seen as a millstone around Disney’s neck. This is a massive question that could change the entire industry in real ways and we are all just guessing.
Big Picture… can the companies behind these streamers get their heads around the idea of delivering multiple options that allow consumers in almost every country on the globe to receive as much content as possible for what makes them comfortable as consumers? Because that is the demand they all face - including Netflix - moving forward. Maybe not in the next 2 years… but long view. Maximize the returns while minimizing the spend, leaving your seed on as many square feet of humanity as you can.
What is the magic experience that keeps the average subscriber from reconsidering their menu of premium channels/apps every single month or every few months? This is where Netflix’s first mover advantage is its most powerful. People are used to it and the monthly bill. It has been part of people’s lives as an added cost for a lot of years (in subscription years). But even this advantage has an end date.
People don’t want to program their TVs every month or very few months. They want to watch 30 - 65 hours of content a week and not feel like they are being ripped off and not feel like they are missing out and feel like they love 10 hours or so of that content, week in and week out.
People are, by and large, willing to spend money towards their pleasures so long as they can afford it and they don’t feel ripped off for too many months/years in a row. Remember, the cable bill expanded because it was/is a oligopoly and after some cushy years, the content providers started holding them hostage, demanding a piece of the action for providing the content to keep the gravy train going.
Television, like it or not, is a mostly passive experience. We are all free to steer the boat nowadays. Pick your diet. But in the end, our choices, as a whole, are as predictable and boring as ever.
Roku has been the first great succubus, holding the industry hostage because there is more money there than selling hardware. The hardware is cheap for the consumer, but if you are a Roku user, you are being sold back to the streamers for your savings. They don’t put that on the box.
Roku must be more closely regulated by the FCC because their practices, held away from the awareness of their customers, are bad for consumers. If consumers want more from their streaming future, they deserve better than this… and not just a different company taking 10% (more or less) off the top of the content industry.
Regardless, the first goal of all of these streamers needs to be to be open enough in concept to embrace all possible consumers. There is nothing easy about this. But I have friends who believe that it’s all about technology. And I will always say, if your customer is conscious of your technology, you are not airtight and it is costing you money. I love tech… but I don’t want it driving my choices. I want it supporting my choices. And if it’s tricky, I don’t want to know. (Well, I do. But 95% of people do not.)
Wall Street is crack for a lot of executives. They need to get past that… at least for a while. Build the right mouse trap and, over time, all will follow.
It is not as complicated, in concept, as we tend to think it is. And it’s been a very long time since I have heard about a great vision that failed because of execution. But I hear about companies trying to mirror the past successes of other companies and failing all the time.