Jan 6, 2022 • 14M

THB #65: New Year's Resolutions 3

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David Poland
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And now, the 3rd and final New Year’s Resolutions piece becomes #3 of 4. Alphabetical Order has led me to Netflix and 3 full-service studios. Lots to chew on, this 5th day of January. Too much. So Sony and Warner Media/Discovery will wait until tomorrow. And Part 1 and Pt 2 are linked here.

You’ll note that I haven’t offered my personal resolutions. This newsletter is my 2022 resolution. Next year, I hope to be back here with a satchel full of stuff I need to fix.

Netflix: The greatest conception of art and commerce in the history of human kind and assured to be the greatest even after all human life is destroyed on earth and the internet signals reach deep into space to a planet we have never imagined and the life-form there has to learn human language to enjoy the shows and will do so (binging as God intended), but will remain deeply confused by the references to other presenters that will have long been forgotten.



I guess Rich Greenfield’s Christmas card text got stuck in my head.

What do you resolve for the mega-corporation that has everything?

Well, they are well on their way to doing what they must. They launched The Game, when it comes to streaming and consumer-friendly-priced subscription television. And now, 214 million households strong (with the Q4 report just 2 weeks away!), Netflix is again in the business of changing.

In the non-China television universe (of earth), there may be 300 million households that will pay for content in the next number of years. But in spite of the fanciful dreams of Wall St analysts who always look up, the 500 million paid household universe isn’t coming… at least not in a world where that last 200 million households are actually paying for the content. (There could be a time when free access becomes a thing because selling access to even the poorest humans - some would call this colonization - is forever.)

Another 100 million households likely makes Netflix a $40 billion a year revenue company. That guess would reduce the company’s Average Revenue Per Unit (the monthly income per customer) from the current level of $11.70 down to $11.11. Not every country is as rich as America and the countries that are not are (mostly) where the growth opportunities now are. But ARPU is just this year’s adornment. They can shift that narrative.

In the last 7 years, Netflix has grown its revenues 5x. Remarkable. And why Wall Street so loves this stock.

Apple revenues, by comparison, have only grown about 60% in the same period.

But what separates these two businesses moving forward is that Apple can certainly continue it’s growth at the pace at which it has grown. There will be backslides and spurts… but unless they lose their market position, there will be growth.

Netflix really can’t ever expect to double its revenues from the streaming business again (unless China opens), much less quintuple it in 7 years. That particular magic trick just isn’t an option for a mature business.

So… gaming. So.. merchandise. So… better IP.

It sounds like an insult of some kind, but it’s not. Netflix has done what Netflix does about as well as it can be done. No one else will ever do it quite like they do. Others may match the sub count or revenue count. Netflix’s ongoing success does not limit anyone else’s growth. But “better content” is not going to make Netflix bigger. Nor is more content.

Expanding the world market and making more international content to every country is my dream idea of what streaming will offer. And it seems it will. But as great as Squid Game did, for instance, for Netflix in Asia… the next Squid Game will do less well because the market is getting closer to saturated every year, just as America has become a saturated subscription market for Netflix.

I don’t work for Netflix. I don’t work against Netflix. So I don’t know if in some secret corner of their offices, they have conceived of and are working on the entertainment atom bomb. Could be.

But my belief is - and has been, publicly, for at least a decade - that streaming will be the new iteration of television, that people will spend a very similar amount of money each month for access, and that there will be a massive benefit to the public because they will get access not only to what is new, but to deep, massive, worldwide libraries that we have never had access to before, really at any price short of insanely expensive imports.

And I don’t really think that expanding into areas of television that others have mastered over decades - live sports and news, particularly - is in Netflix’s best interest. What they need is to make more profit on what they have mastered and lead with in the segment.

Gaming - not gambling - has always been a mercurial business. Remember when EA was a lock to buy a studio? (Wired, 2005)

In July 2017, Entertainment Arts was at $108 a share. In July 2018, EA was up to $149 a share. In July 2019, $94 a share. July 2020, $140. July 2021, $141. So very stable… as long as there’s a pandemic.

There are bigger companies, but if everything in gaming went great for Netflix, would there really be more than $5 billion a year in revenue for the company, netting half a billion? (Half a billion, by the way, was what Disney wrote off for its failed effort in gaming, in spite of having the strongest IP in the world to work with.)

Netflix’s 2022 resolution should be to do pretty much what they have been doing… just a little less. Steady revenue growth, better profitability. All this other stuff is just experimentation.

And if there is magic in one of those experiments, God bless. But we had 20 years of the first massive paradigm shift, to broadcast television. We had 30 years of the next massive paradigm shift, giving people more content control with cable/VHS/DVD. And now, we are 15 years or so into the current massive paradigm shift, aka the internet.

Netflix, brilliant as the company has been, did not invent the DVD and did not invent streaming. The maximized both opportunities, which were significantly bigger shifts than just them. And if there is another one coming - in 2030 or so - I expect that Netflix will be as good as anyone or better at maximizing the opportunity.

But until then, I expect more hatch tightening than wild spending.

Viacom/Paramount: When I came to Los Angeles in the late 80s, Paramount was the studio I loved above all. It was the studio of Simpson/Bruckheimer, of 48 Hrs, of Beverly Hills Cop. I actually had a decent job waiting for me when I arrived, on the Paramount lot. The Writer’s Strike ended that. But then I had incredible access to top execs at the studio… that I had no idea what to do with. Young overly-ambitious idiot. I should have just asked for an assistant job. No. My early memories on the lot were Eddie Murphy and his crew, Arsenio, ET, Wandering though Trek prop rooms and set unattended. Later, it was Mike Myers & Co. dancing through the “London” street for the first Austin Powers. Lots of friends on the lot, through a couple generations of leadership. One of my most-missed weekly events… the Friday night RUTH Vitale screenings. Some of my favorite people. Some of my best memories.


In spite of having some of the smartest people in the industry in and out of the executive hallways of the company, the magic of the go-go 70s of Robert Evans and the singular exec breeding ground of the early 80s have never quite come back to 5555 Melrose. Sumner Redstone bought the place in 1994. Dolgen and Lansing were The Adults in the Room for his first decade. And then, the first disaster for the Sumner era… Brad Grey. There were some highlights. But he never really got the studio running like studio. Paramount acquired (ha) DreamWorks in his second year and essentially let DreamWorks take over. He paid a fortune (they managed to hide $900m of the price in a faux library licensing deal that they paid out in full 5 years later) and DreamWorks was out 3 years later, as soon as the contract allowed, having eaten the Paramount field like very smart locusts. I liked a lot of the execs that filled the void that followed. Some of the smartest in town. But they were always playing from behind. And 3 generations of execs later, they still are.

Meanwhile, separated CBS/Showtime was going along nicely, albeit as the leader in creating content for older Americans. But then #MeToo took down the strongest exec on either lot, Les Moonves. He had it coming. But any hope there was for the reunited Viacom to explode (in a good way) was lost and the company tightened right back up.

Viacom is the most mocked of all the now-independent major content companies in the game. But much of that is approach, not the assets.

This leads us to Brian Robbins. Is he the answer? Is he the visionary that will give Paramount a strong voice that can actually connect with audiences?

I have no idea.

Paramount+ is getting better. But it’s a step-by-step thing.

Even if Paw Patrol landed Robbins the gig, Yellowstone is much more instructive. This property is the crown jewel of the moment. The outlet for the current season is The Paramount Network. The first 3 seasons are running on Peacock. Or you can buy any of the 4 seasons for $19.95 a pop.

Watching Season 4 of Yellowstone on Paramount Network has been interesting. I binged the first 3 seasons on Peacock because I loved the first episodes of 1883 on Paramount+, which was my entry into the entire series. No commercials as I binged those 3 seasons, because I have paid for no commercials on Peacock. I have also paid for no commercials on Paramount+… but none of Yellowstone is on Paramount+. (The 1936 movie of the same name is there.) Nor is there any guidance to find it.

I taped the series on YouTubeTV, but can’t avoid commercials there or on Paramount Network’s app (which requires access via YouTubeTV). But the commercials on the Paramount Network app are only Paramount shows, where as YouTubeTV’s commercial playout is their normal mix.

This mess was created by a changing strategy at the studio. But for now, it is a mess… with the most important current property Viacom has. If an interested audience has to jump through hoops to watch, there is a serious problem.

Similarly, the South Park situation. Parker & Stone just signed a $900 million six-year deal with Viacom. It’s terms were reported to be “six more cycles of South Park and 14 made-for-streaming movies.” So there have now been 2 hour-long COVID-focused shows. Are they one movie? Are they a limited series? Is this Part 1 and Part 2? Will there be more on this theme or is this it?

There is more and more appealing content on Paramount+. Buy why is there a Paramount Network app and a CBS app and a CBS Sports app? Aren’t these all the same brand? And what of Showtime OTT? Why?

The biggest positive in the eyes of a lot of people is PlutoTV. The free ad-driven platform is looking at a billion in ad revenues. It’s impressive. It will likely be part of the long-term series of surviving options on streaming. Is it really enough to make Viacom movie-star hot?

As for the movie studio, they and COVID have backed their way into what might be a solid year. Scream, Jackass, Sonic, Top Gun, Mission: Impossible, Scorsese. There are still some titles that have been sold off to Netflix. And there are a couple interesting non-IPs in The Lost City and Run & Gun.

There are some more tentpoles waiting in 2023.

But there still hasn’t been any signature from RobbinsLand. And everyone is assuming this a temporary opportunity for a loyal soldier.

Viacom’s 2022 resolution should be shit or get off the pot. This has been the same resolution they should have had for a long time now.

Until tomorrow…