Specialist
Former executive at ViacomCBS Inc (Paramount Global)
Agenda
- OTT (over-the-top) operating environment – industry saturation and subscriber growth trends
- Introduction of ad-supported tiers, pricing model experimentation and potential customer backlash from crackdown on password sharing for Netflix (NASDAQ: NFLX)
- Content spend dynamics and distribution strategies, highlighting broader content spend cutting for players such as Warner Bros Discovery (NASDAQ: WBD) and continued content investment by Amazon Prime (NASDAQ: AMZN)
- Outlook for 2023 and beyond, highlighting potential for Disney (NYSE: DIS) to purchase Hulu outright from Comcast (NASDAQ: CMCSA) and implications of merging it with Disney+ app for a one-stop-shop experience
Questions
1.
Could you share an overview of the video streaming operating environment today, highlighting 2-3 trends or drivers impacting the industry?
2.
It is certainly an interesting matchup seeing Disney pass Netflix in terms of overall subscribers earlier in 2022 across its various streaming platforms – Disney+, ESPN+, Hulu and others. How important is it for Disney to be passing Netflix in subscribers? Additionally, there are the coming offerings from both companies in terms of ad-supported tiers. Could you discuss this head-to-head matchup in terms of the content focus and their respective approaches to their businesses going forward?
3.
Could you comment on the trend of reintroducing ads to streaming, considering Disney+ and Netflix’s moves into ad-supported tiers? Hulu has had ad-supported tiers for a while, and Peacock has this as well. What are your thoughts on Netflix and Disney pushing this forward to jump-start subscriber numbers, which have been slowing in recent years?
4.
You mentioned the targets in terms of subscriber totals for the ad-supported tier, with Netflix noting that goal to be 40 million subscribers by Q3 2023. How achievable is that? Is this actually increasing the overall subscriber count of Netflix by 40 million, or do you expect there will be cannibalisation to some degree of current subscribers who may opt for a cheaper option?
5.
You noted the CPM is rumoured to be around USD 65 for Netflix’s ad-supported tier, which, is quite high vs industry averages, and even more so vs YouTube, for example. What are your thoughts on the company trying to command such a high CPM? Is it reasonable to think its CPMs are so high they aren’t a threat to YouTube’s ad dollar pools? What are the economics of that? What might be Netflix’s justification to command such a higher price?
6.
Regarding the ad structure for Netflix, you highlighted the partnership with Microsoft, which surprised a lot of people. Do you think the company ultimately may need to be a walled garden over the long term to maximise economics, given its scale? How is it approaching ad sales and monetisation?
7.
Given the difference in experience that Disney has in the advertising realm vs Netflix, do you think this shapes its perspective on the AVOD [advertising video-on-demand] service from a CPM and partner standpoint? How might its approach differ, considering it does have this expertise already?
8.
What are your thoughts on Netflix’s decision to crack down on password sharing? As you mentioned, there has been this backlash in LATAM markets where the company has rolled out these features. What is the long-term viability of monetising those users and what can Netflix and other players do to capture more of that audience?
9.
Other players have considered as well the foregone revenue they may have for people who are using the service and engaging, but not necessarily paying for it. Do you think players such as Disney or Warner Bros Discovery are monitoring how Netflix fares in its endeavour and then may look to replicate if it’s successful, or do they think it’s a fool’s errand and not something they can crack down on and therefore aren’t engaging?
10.
What do you think of Amazon Prime’s positioning? You noted one of the major industry trends is the focus on improving margins and cutting back content spend from previously quite elevated levels. However, in contrast to that is Amazon, which has spent USD 750m on The Rings of Power, the new Lord of the Rings spin-off series. How might be Amazon be approaching content spend differently and what effects is that having on Netflix, Disney and other streaming players?
11.
If we’re looking at scripted content, HBO has certainly been a dominant player in that space, but the landscape for it is certainly changing with the April 2022 Warner Bros and Discovery merger. Could you comment on the combined company’s positioning? It certainly seems there’s been a bit of turmoil in terms of leadership change and content spend. What do you think will be the combined strength of the HBO Max platform along with Discovery+?
12.
How are the various streaming players approaching appealing to various audiences? Netflix has a little something for everyone and HBO Max perhaps appeals to one audience vs a broader audience, perhaps coastal US vs broader US. What is the approach that companies are increasingly thinking through for niche content vs larger players? If you’re doing something for everyone, the accompanying content spend could be quite high, but if you’re overly niche then you might be cutting out an audience which might be engaging with your platform.
13.
You highlighted Disney’s option to buy Hulu in its entirety from Comcast by 2024, and that the long-term plans are maybe to merge Hulu and Disney. Do you think it’s the right decision for Disney to buy Hulu outright? If it does go through with that and creates a one-stop-shop platform with Disney+ and Hulu, is there the potential that this may damage its more notable brands such as Marvel, Pixar and Star Wars? Disney+ has done incredibly well with families and kids. Is having more adult content from Hulu in the same spot potentially creating issues with its branding and the success it has in resonating with different audiences, both in the US and overseas?
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