Good afternoon from the North Fork of Long Island, wherever you may be. I will be in New York City for the next few weeks, so please let me know if you are around.
Before taking the last week off, I asked people to submit questions about the state of the media business. We’ve done these reader mailbags once a quarter, and this felt like a good time to do it again.
The dominant topic on people’s minds? The streaming wars. And, more specifically, what happens to all of the companies that aren’t as big as Netflix Inc., Walt Disney Co. and Amazon. Disney plans to spend $33 billion on programming next year, more than any other company in the world.
Without further ado...
Which streaming companies do you see merging in the future?
What is the end game for Blackstone, Kevin Mayer and Tom Staggs? Sell to a streamer? Launch a streaming service? Could they buy Starz/Lions Gate?
There are four entertainment companies that are too big to sell: Amazon, Apple, Disney and Netflix. (Unless Apple tries to buy Netflix or Disney, but that seems unlikely.) If we can agree there will be several mass market major streaming services, we can also agree these four will be among them.
You could say the same about WarnerMedia Discovery. HBO Max already generates more sales than any streaming service but Netflix. But, assuming the merger of WarnerMedia and Discovery gets regulatory approval, it’s still not clear whether the company plans to sit tight or keep doing deals.
Then there are the tweeners, NBCUniversal and ViacomCBS. These companies aren’t quite big enough to compete with the five we just mentioned, at least in terms of global spending. They could sit pat and push for Peacock and Paramount+ to capture fifth and sixth place, or they could join forces, as they have in Europe.
Both ViacomCBS and Comcast, which owns NBCUniversal, are family-controlled companies. That complicates any dealmaking.
The next rung down includes AMC Networks and Lions Gate Entertainment, two companies that are minnows relative to everyone else we just mentioned. They have some valuable streaming services and programming assets, but don’t have the scale to even try to compete as a mass-market streaming service. They are selling themselves as more niche-oriented businesses.
These businesses would benefit if Apple decided to copy MGM and buy a studio. But if Apple ever decides to go shopping, Staggs and Mayer will be there waiting as well.
Those two Disney emigres are trying to build an independent studio that can supply TV shows and movies to all these streaming services. While they say they aren’t done buying companies, their long-term plan is either to go public or sell.
If you could ask Ted Sarandos one question (and he had to answer directly and completely), what would it be? You can also substitute David Zaslav, if it's more fun.
Ted Sarandos – How badly would you like to drop the co from your CEO title?
David Zaslav – Will WarnerMedia Discovery remain independent for the foreseeable future, or do you plan to execute another transaction within the next five years?
Should Tim Cook buy Criterion as a premium offering for Apple TV?
What does the 10-year plan for Apple TV+ look like?
Hollywood was skeptical when Apple first announced plans to open a Los Angeles-based studio. Many major technology companies have dabbled in original programming over the past decade, including Facebook, Google, Microsoft and Yahoo. Most of them either shut down their studios, or limited their ambitions. Netflix and Amazon are the only companies to stick it out.
Apple appears poised to join them. The company is already spending billions of dollars a year on programming, and is now doubling its real estate holdings in Culver City. It got a taste of success with “Ted Lasso,” and it wants more.
Apple is investing in media to market its devices. The more time you spend using Apple Music and Apple TV+, the more likely you are to remain (or become) an Apple customer. When the company opened up a new Apple store in Los Angeles, it brought the cast of the sitcom to help.
But Apple has also discovered that these services can be more than marketing. A multi-trillion dollar economy has formed around the devices that Apple and other companies sell, and Apple sees an opportunity to make money from digital media services. Apple’s services business has grown into a $68 billion business – bigger than Netflix and Spotify combined.
This is the source of many claims that Apple is anti-competitive, and regulation would be the one impediment to Apple’s plans. Otherwise, expect it to keep building out a studio. Spending money on entertainment is a rounding error for Apple, a company that generated $365 billion in sales in its most recent fiscal year.
As for The Criterion Collection, that’s a tough one to answer. Apple has avoided buying or licensing catalogs. It believes customers can use other services for old TV shows and movies, and come to its service just for new episodes. It’s more of a premium add-on than a service you can use every night.
Yet if it wants to compete with Netflix and HBO Max to be a service that has something for everyone every night of the week, it will need to add catalog, Criterion or otherwise.
Why does the industry seem to undervalue Hulu so much? Makes a lot of money and has critical successes. But it seems to me it is almost never considered a top service.
Because it is undervalued by its owner.
Hulu has always succeeded despite having one arm tied behind its back. It didn’t invest as much in original programming as its peers because its owners couldn’t agree on the right strategy for the business. Hulu didn’t expand overseas because its owners didn’t want to jeopardize their TV businesses in those territories.
Now its primary owner, Disney, is betting its company’s future on streaming. But it has made Disney+ the top priority, and Hulu is second fiddle. It’s not clear how that changes in the years ahead. Ask five different reporters or executives and they are likely to give you five different answers.
On a personal level, I use Hulu the third-most of any service. So I don’t undervalue it! – Lucas Shaw
The best of Screentime (and other stuff)
The movie business … yikes
The No. 1 movie in the world is “Encanto,” a Disney animated movie that grossed about $40 million over the holiday weekend. “House of Gucci” came in second with about $23 million.
Thanksgiving movie ticket sales are way up from a year ago, but they are still way down from years past. Rich Greenfield estimates ticket sales on Thanksgiving day were down about 45%.
We’re now about two years into the pandemic, and we still have no idea what the theatrical movie business will look like in the future. With cases rising and the threat of a new variant, it seems like we are headed for another winter spike in North America and Europe. If that happens, what do movie studios do with their plans?
Studios can continue to release movies in theaters, and risk leaving money on the table. Even the biggest movies of this year, like “F9,” “Venom: Let There Be Carnage” and “No Time to Die,” grossed far less than pre-pandemic projections.
They can shift releases to some hybrid approach that involves streaming, as Disney and Warner Bros have done with many of their titles. That will impact ticket sales, but boost streaming services in the long run (or so they hope). Warner Bros. is supposed to return to a 45-day window for its movies next year. Will it reconsider?
Or they can delay, as every studio has done with at least a few titles.
There are no great options.
AMC insiders are dumping stock
Executives at the world’s largest movie theater chain have sold more than $70 million in stock this year. The shares have soared more than 1,800% thanks to retail investors who have rushed to the defense of a company that almost had to file for bankruptcy a year ago. Here is the story from Scott Carpenter and Brian Eckhouse:
AMC was struggling financially for years even before the pandemic pummeled the theater business in 2020, causing a sharp drop-off in revenue from which the industry still hasn’t recovered. But in January, fired-up retail traders rushed in, driving up the share price and helping rescue AMC.
Corporate executives frequently sell stock they get as compensation, especially recently with the ascending market. But [CEO Adam] Aron has publicly courted retail investors and touted AMC’s future prospects while selling stock and benefiting from the rally.
Drawing less attention have been sales by other AMC executives and board members. As many as 14 of them have sold stock this year, including General Counsel Kevin Connor and Chief Marketing Officer Stephen Colanero.
A jazz pianist leads the Grammy nominations
Jon Batiste earned the most Grammy nominations of any artist this year with 11. Batiste is known to many as the bandleader on “The Late Show with Stephen Colbert,” but he released a well-regarded solo project “We Are.”
Batiste will compete for the top awards against pop stars such as Olivia Rodrigo, Doja Cat, Billie Eilish and Justin Bieber.
One big star who didn’t get many nominations? Drake. His “Certified Lover Boy” is one of the biggest albums of the year, but it’s not getting much love from critics. It’s also yet to produce a major single.
Here is the top five of our latest Pop Star Power Rankings:
The Netflix-Chappelle update
Netflix settled a dispute with two former employees related to its recent Dave Chappelle comedy special. The employees had filed a complaint with the National Labor Relations Board.
But Chappelle isn’t ready to put the scandal behind him – nor are many of its viewers. He made a surprise visit to his old high school, where at least one student called him a bigot.
Deals, deals, deals
- Netflix bought Scanline, a visual effects studio that worked on “Stranger Things.”
- Kevin Spacey must pay $31 million to the producer of “House of Cards” for breaching his contract.
Correction: It’s the English Premier League, not the English Premiere League.
Weekly Playlist
My viewing list over the holiday week included “King Richard,” “Dune” and “House of Gucci.” I recommend seeing them all, though each one is flawed. They are also all quite long. Please remind directors that most movies don’t need to be much longer than two hours.
I also finally started “Sex Education,” which was unfairly addictive.
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November 29, 2021 at 06:22AM
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