THB #244: Another Way To Look At Streaming

So, I was watching this Bob Chapek interview…

The actual video starts about 3 minutes in.

About 11 minutes in, the discussion turns to the streaming market. He says, “I think that not everybody that is out in the market today will be there ultimately, unless there is some kind of recombination of secondary players in the marketplace that combine to create something greater. Streaming is a critical mass buiness. Scale is really, really important in order to be able to thrive. I think there will fewer than more.”

And what hit me was the concept that what streaming is doing is taking us from the centralized idea of cable, which we have had for 40+ years, and for which, the cable companies went market-by-market and were, essentially, given local monopolies… and more than we realize, simply decentralizing that market.

Imagine a world in which supermarkets became more expensive and irritating than buying item-by-item and suddenly, you “had” to buy each of the 20 things you use every week from 10 different suppliers. Madness, as anyone who gets any one weekly food delivery can attest. Every delivery system has kinks and managing 20 of them is an onerous burden.

Disney and Netflix want to be our post-cable supermarkets. And there is great value in that. But we still can buy bread from a bakery or meat from a butcher while still using the supermarket every week. Some people would buy everything at farmer’s markets. Cool, man. But for most people, do we really want or need more than 2 or 3 supermarkets in the neighborhood?

In today’s streaming market, look at each of the large scale players - Netflix & Disney, increasingly Amazon and Apple… ambitions from Warner Bros Discovery… and the 2 network legacy companies, Paramount+ and Peacock.

For all the new magic tricks that streaming allows, from the consumer side, it is still TV, albeit a much wide-reaching TV. I believe firmly that the spending per household, at least domestically, will not increase much in the transition to and eventual stabolization of streaming.

But now, each of these companies is their own cable company, essentially. Each company has to make the proposition to every single household and convince them to sign up, install the app, charge you directly each month, and yes, program in a way that keeps you happy.

It’s not “à la carte,” as was the dream in years passed. Just yesterday, Universal’s Donna Langley was crowing (deservedly) about the studios Premium Video on Demand model that kicks in 15 or 45 days into a theatrical release and the revenue it has produced. That IS à la carte. I personally don’t think that part of their model is going to remain as strong as it’s been during COVID, that individual sales are an endangered species. On the other hand, if exhibition collapses, maybe. But we haven’t seen numbers from this segment since Trolls 2, so… a lot of guessing…

But I digress…

Where we are right now is much harder than the cable era of the last 4 decades because there are, really, no rules. The battleground is what each company decides it is. It all changes based on what one or two companies might try.

I both agree and disagree with Chapek on scale. If you want to be one of the Big 3 or 4 (that sounds so familiar… hmmm…), you will need massive scale, absolutely.

Netflix has had scale in its way. Disney’s ambitions - not talking about the tracking you like rats in a maze part - are much bigger. Live television - sports, series, events - is somewhere Netflix doesn’t want to go and where Disney is already very strong.

Amazon and Apple are serving higher masters than delivering television… but that doesn’t keep them from creating massive footprints, blocking the ambitions of others simply by doing what is in their best interests.

Can Warner Bros Discovery and Comcast and Paramount Global operate at the larger scale of Disney - more so than Netflix given Disney’s legacy roots - without combining, moving forward? No. True enough. They could, actually… but WBD has years of debt clearance to deal with and neither Comcast or Paramount have shown the will to put themselves in big debt to supercharge the next step.

In a weird way, Disney waiting until 2024 to buy Hulu is as much about not handing Comcast $10 billion (or whatever it ends up being) to make its move comfortably as anything else.

But the thing is, WBD and Comcast and Paramount Global don’t need to be in the same business as Disney and Netflix. If the Big 2 are heading to $20 a month and $25 soon enough, there will certainly be a marketplace for the $5 and $10 streamers. Each company needs to decide what math it wants to operate under. And I believe there will be a much more diverse mix of streamers than many others do.

But… the point of this piece… goes back to the simple angle that I just hadn’t seen before. Streaming is not becoming cable again… it is cable again. It’s basically just a bunch of cable companies endlessly competing for the same markets.

The inability to narrow the focus of the work (and the spending) to making these streamers the best they can be for consumers - which is what the structure of the cable structure allowed - is a major headwind for all of them.

After all these years singing from the same cable hymn book, all of these companies are not only free to fly their freak flags… they have to. Netflix was always its own thing. Disney has made a few specific mistakes, in my opinion, but they have been the best at leveraging their unique package of assets to not only be a “supermarket” in America, but across the globe (which, I keep saying, is where all the profit is going to be).

Comcast’s NBC unit giving network hours back to affiliates in late night and weekends and the rumors of dropping the 10p primetime hour is a major indication that they are getting ready to raise that freak flag… even if no one seems to be able to get a handle on that inside story yet.

Warner Bros Discovery has laid out their plan, whether you like it or not.

And Paramount? Who knows? Some believe in the company. Many just see a lump, sitting there waiting to be purchased.

I have never been a fan of the “streaming wars” moniker. And when it comes to discussions about the popularity of shows, still not a fan. But when I think of it like a game of Stratego…

… maybe I need to rethink embracing that metaphor. It’s about the scale at which you choose to look.

Until tomorrow…