Daniel Frankel: Well, Friday again. I gotta say, it's a difficult time to fixate on the U.S. technology, media and telecom business. I had a personal flashback, a moment of recollective whiplash if you will, as I read a compelling first-person review of found footage of the Hamas attack, that includes the voice of a mother cheering on her terrorist son over mobile phone to "Kill! Kill! Kill!” No "rushing" or "dragging" that time -- I was sincerely moved. Here in the U.S., the front-runner of the Republican party is obviously ripping pages from Adolf Hitler's campaign playbook, referring to people as "vermin." These aren't so much interesting times as they are disturbing ones. But I suppose it's time to move onto the not-so-visceral and on-topic... another fateful round of TMT earnings reports this week, with Disney revealing that it's going to subsume Hulu into Disney Plus, among other revelations. Now, if you do keyword searches for "Bob" and "Iger," you often come up with a post bylined by "David Bloom." So tell me, does he know what he's doing with the second biggest SVOD in America next to Netflix?
David Bloom: One key term in your question leaps out: Hulu is the No. 2 service in the United States. Disney is a global company, with global ambitions and reach. Hulu is not. Disney Plus added 6.9 million subscribers this quarter, only 500,000 from the United States. So, what’s smarter and quicker: expanding Hulu as a second global service, with the marketing and operational costs that entails? Or merging Hulu -- a name that means nothing outside the United States -- with a brand that does mean something globally, while expanding that brand's range of programming to further drive global growth? Reach is everything when you run an ad-supported business, as Rich Greenfield and the LightShed gang reminded us in a research note this week, and ad-supported is what all the subscription services are now pushing hard. Focus, with a broader range of programming, can help. Also, CEO Bob Iger said Disney will cut $2 billion more in costs, on top of the $5.5 billion he’s already whacked in one year. One way to save a lot of money: merge your streaming services, then drive global expansion for your surviving bell cow. That said, I’m more intrigued by the cross-company bundle that Verizon has just engineered: Netflix and Max, sitting in a tree…k-i-s-s-i-n-g, for $10 a month. I think we’ll see a lot more of this.
Frankel: Yeah, Verizon and T-Mobile have both been really aggressive with bundling streaming services at massive discounts. Verizon was already offering the full $22.99 Netflix Premium tier free for one year for its unlimited wireless users. Sowmyanarayan Sampath, chief executive of Verizon Consumer Group, was quoted earlier this week at the Paley International Council Summit in New York City saying that Verizon sees a 60% - 70% reduction in churn when it bundles subscription streaming.
Bloom: No surprise on the churn number. Wonder what it’ll be like when multiple services from different companies are bundled by a third-party distributor, at a cheaper price than any of them separately? And they say FAST channels feel like cable TV. The real issue here is how much do the media companies want to still control all of their destiny, and customer relationships, in the DTC future, versus actually making money in a stable way from streaming.
Programming Highlight: Stay tuned for Next TV's exclusive fireside chat with MyBundle Co-Founder and CEO Jason Cohen on Nov. 16.
Frankel: I think that dream of DTC autonomy sunk right off the pier that fateful day when John Stankey and David Zaslav hit golf balls together. Zaslav has talked openly about the cost-acquisition and churn benefits of bundling, and now he has guys like Bob Bakish doing it, too. I don't hear anyone talking anymore about the perils of "app disaggregation." Which I think is a mistake. Remember, the goal was to catch and surpass Netflix.
Bloom: Right now, with all the media quarterly earnings calls in hand this week, it’s hard to see where any of the media companies ever catch up with Netflix, barring radical change. Thankfully for the industry, it won’t have a choice about radical change. During the last six months of strikes, the media companies quietly ended hundreds of contracts, axed dozens of shows and planned shows, raised prices steeply, and otherwise began reconfiguring themselves for a different future of higher pric. Zaz and Weeds over at WBD even figured out they could wring out another $30 million tax write-off to pretty up their quarterly results by mothballing yet another finished movie. You know your numbers are pretty ugly when you kill off perfectly solid creative works, enraging yet another group of creative partners, so you can stagger through another quarter. I don’t know, but it sure feels like Zaslav and Wiedenfels are playing for the short haul, just to get through a couple of more quarters before you start doing more deals. But who’s going to want to deals with these dudes when they can kill a finished project for some dubious bookkeeping win?
Frankel: So, as a guy who has observed the publicly traded fates of media companies for decades, where do you think all of this is headed? Warner Bros. Discovery stock traded at $10.77 a share exactly one year ago, when DTC EBITDA losses were still sky-high. Three-hundred and sixty-five shelved movies and TV shows later, the stock is at just over 10 bucks a share. Sure, Barbie was hit (although I must admit I finally saw it over the weekend and it flew right over, or below, my patriarchal head). But what else about the Warner Bros. motion picture business gets you excited? More "Harry Potter"? Another "Superman?" The media networks business is circling the drain. And as we've talked about here before, even if Turner re-ups NBA rights, they probably won't buy as much basketball ... and what they do get will have much finer margins on it. And streaming is going backwards. What are we doing here besides cutting EBITDA losses on streaming?
Bloom: The simple answer is, look what happened to another formerly dominant media distribution business, i.e., newspapers. They’ve been managed for decline the past three decades, mined for remaining profits by private equity (Alden, notably) or kept afloat by public-minded or bullhorn-buying billionaires (Benioff, Bezos, Laurene Powell Jobs, Murdoch). Now it’s happening in film and TV, as with AT&T’s DirecTV spinoff to Apollo, or for us cynics, Discovery's leveraged buyout of WarnerMedia. It’s going to be more of that, over and over, the next couple of decades. Some people (especially investment bankers) will make money, a lot of other people will lose jobs, and the media-first companies will shrink. Disney is smart to dramatically beef up its parks and resorts, especially given this weekend's hideous theatrical debut for the latest Marvel movie. The parks generate nearly half Disney's revenues and Amazon, Apple and Netflix don't compete there. But like the old newspaper families, the smaller studios will need to convert their shrinking assets into fungible cash, soon. Meanwhile, welcome back, all you wonderful actors, writers, and everyone else sidelined by strikes the past six months. Hope you have jobs waiting for you.
Remember when:Marvel dominated the global box office? Investors worried Netflix did not have a franchise like Marvel?The interconnected Film and TV content from Marvel was a positive?Marvel made movies that people wanted to see? pic.twitter.com/0hnhBbCjniNovember 12, 2023
Frankel: So is the "MCU," "DCU" and the rest of this decade-and-a-half comic-book cinematic orgy finally over? Have Gen Z moviegoers finally gotten their fill of American cities being plundered by well known actors in funny suits, playing roles that have become entirely too self-referential? Beyond the outright bombing this past weekend by The Marvels -- grossing less than $50 million in North America, it's the biggest Marvel Cinemeatic Universe turkey since 2007 -- other superhero movies including Shazam and Flash have also underperformed this year in ways that have been conspicuous for a genre that's been very reliable for the past 15 years. Sure, there have been global hits -- Antman and the Wasp, Guardians of the Galaxy 3 and Spider-Man: Across the Spider-Verse did pretty global numbers. But I felt zero cultural buzz coming from the sweet-smelling, smokey den of my long-superhero-obsessed collegiate older son. (Who I'll call "Shaggy," not so much for his love of Warner's latest "Scooby-Doo" movie -- also scuttled by Zaz and Weeds to save a buck! -- but for his strong cravings for Scooby Snax when he emerges from said smokey den.) Now, granted, culling all my wisdom, I called "game over" on the superhero genre back in 2011 ... so I'll leave it to you on this one.
Bloom: Bob Iger has already signaled that Disney is in full-court reconsideration mode for all their franchises, though it’ll take a while for the changes to become obvious to outsiders. The production pipelines are just too long. Soon enough, though, we’ll see way fewer Marvel and Star Wars streaming series, and maybe longer intervals between movies in those universes. Pixar will need to consider its mammoth production costs. The apparent audience fatigue afflicting too many formerly sturdy franchises makes (to bring this all home) the integration of more Hulu shows into Disney Plus all the more immediately necessary. Turns out there’s some value to “generalized entertainment content” after all, despite Iger’s previous pronouncements.
