Specialist
Former EVP at Turner Broadcasting System Inc
Agenda
- SVOD operating environment – coronavirus implications for pace of subscriber growth over next 12-18 months
- Platform-by-platform analysis – content needs, churn profile, subscriber potential and pricing or bundling improvements
- Profitability outlook – terminal streaming margins and incremental cash flow opportunities
- Outlook for 2021 and beyond – industry consolidation and potential winners or losers
Questions
1.
You wrote an essay on... recently entitled..., unpacking all of the secular dynamics that led up to the inflection point streaming now seems to be facing, as well as the future implications for the businesses involved in this market. Could you give an overview of that essay and the main takeaways you had?
2.
You discussed new entrants that are willing to use video to subsidise their activities elsewhere. How should we think about the legacy incumbents fitting into that mould? I know Professor Clayton Christensen talked extensively about incumbents missing out on emerging opportunities just because they’re disruptive, but do you think players such as Disney+ pulling content direct to platform and recent news surrounding Warner Bros’ decision to release films on HBO Max and in theatre simultaneously, do you find that those incumbents that can drive a broader flywheel strategies may be able to pivot aggressively despite the implications for some of their legacy business?
3.
You suggested players were indifferent to the lower streaming revenues but not to margins given they are lower in streaming. How should we think about decision-making on the film side over the last 6-9 months in light of that statement? Do you think the ROI considerations of decisions such as Universal bypassing theatres to distribute Trolls D2C are being legitimately calculated? Are these moves primarily about reaching critical subscriber scale by bringing desired content onto platforms? Is the goal higher margins driven by more attractive rev share agreements in the PVOD model?
4.
I’ve heard that releasing franchise films D2C can’t replicate the buzz and USD 1bn-plus gross receipts that can be achieved at the box office, even if those films are released in a PVOD form. Do you expect negative knock-on implications, at least early on, to ancillary business such as consumer products and theme parks? What other impacts could emerge if there’s a full-fledged move away from releasing franchise films in theatres?
5.
You discussed ViacomCBS trying to find a balance between immediate-term margins from the licensing revenues and the streaming endeavours. How could this become harder to do as pay-TV household numbers decline? Do you think a new stable level of cable subscribers could be found, perhaps based on total US sports viewers? Could those consumers stay on bundles until sports go fully D2C?
6.
Do you think MVPDs [multichannel video programming distributors] could follow Dish Chairman Charlie Ergen’s route and play price arbitrage? Could they drop networks and charge the same price to the consumer to gain a better margin? Might pay-TV operators generally accept price hikes and recognise that churn will increase as they pass those prices on? Do you expect major network drops, or would you say that’s unlikely?
7.
You discussed Disney entering at such a low price point, and that’s how you do the opportunity-cost equation, but presumably the platforms will seek to increase prices. How would you size the streaming wallet and its implications for the average number of platforms per household? Do you think only 2-3 platforms could stick and gradually raise their prices?
8.
You mentioned data analytics company Antenna’s research into streaming platform churn, which found that Netflix had the lowest churn and Apple TV+ the highest. How driven do you think the newer streaming entrants are to achieve Netflix’s churn levels? What would you say is the key factor behind Netflix’s success
here? Could it be the company’s content volume output advantage? Should we expect other players to pursue those volumes? Do you think Netflix will have industry-leading churn in the long term?
9.
What could be the long-term outcome for the players that don’t fit into the virtual bundle? Do you think those companies will become studio-only players that license content to the streaming winners? Do you expect a content arbitrage player such as Lionsgate to be viable long-term without a meaningful distribution asset? Might such players instead shut down production, with licensing out their libraries being the remaining business model?
10.
Do you expect increased aggregate content spend to be driven by a higher average number of shows and films produced, or by higher average costs per show or film? I presume the second scenario would have a more negative impact on the ability to retain creative talent for those networks with small, constrained budgets, given they follow the biggest budgets regarding what they spend on any given series or film.
11.
Would you say that some of the US networks are particularly constrained when trying to execute on international production? I know the HBO brand doesn’t have much affinity in Europe, but what could that mean for studio footprints? Could it be difficult for US networks and streaming platforms to expand globally due to their lack of local language content or low ability to provide that content?
12.
Do you anticipate a one-to-one transition of the USD 70bn linear TV advertising pie to connected TV? Who would you say are the early winners of the CTV opportunity?
13.
Who would you say is leading the way in transitioning the ad revenues to CTV? Do you think it’s streaming TV platforms such as Amazon and Roku or DSPs [demand-side platforms] such as The Trade Desk? I know Peacock has FreeWheel and HBO Max has Xandr. How could negotiations shift as HBO Max and Peacock try to make advertising part of their focus?
14.
What might be driving the length of the negotiations between HBO Max and Roku? It seems there’s been plenty of pressure on the data ownership and the desire for a D2C relationship that comes with HBO Max being a platform, whereas HBO Now is a channel. What else might be causing the protraction of the negotiations?
15.
What are your thoughts on Roku’s long-term strategy and its ability to execute it? What would you say are the goals around network cooperation with The Roku Channel? How much confidence do you think we should place behind a handful of these opportunities for Roku, whether it’s being the reaggregator, or at least being the gatekeeper, where the company has the rev share and advertising opportunities? Are there any areas of the strategy where you’re more sceptical about Roku’s potential execution?
16.
Do you think media players face a long-term challenge from big tech companies such as Facebook, Google and Microsoft? Could it be difficult to viably compete against those companies, given their market caps?
17.
What are you expecting to hear from Disney’s investor day tomorrow?
18.
Do you have any closing remarks on the topics we’ve discussed?
