Monday AM Briefing #55
The stories and trends in OTT streaming you *need* to know for this morning & the week ahead
A Short Essay on “Consistently Good” Content & Building International IP From “Scratch”
A conversation with Observer’s Brandon Katz after last week’s Member Mailing #268: Churn & “Consistently Good” Content highlighted an angle I had not considered:
This newsletter made me think of Disney's ongoing push for local language content in Latin America, India, etc. It's been a long time since they had to create "consistently good" content from scratch.
Mando, WV, TFAWS, Loki, etc. are all varying levels of solid/good but they all owe their base attraction and enticing world building elements to the biggest franchises in the world. There isn't a single English language Disney+ original outside their MAJOR brands that is a strong attention draw. Now they have to make local language programming that doesn't rely on their definitive IP nor American nostalgia ala Mighty Ducks/High School Musical.
It’s a great point: with its rollout of Star in European countries and Asia and upcoming August 31, 2021 rollout of Star+ in Latin America, Disney currently lacks (1) an established, popular local IP library that compares to Marvel, Pixar, or Star Wars, and (2) the local language originals that have become the bread-and-butter of Netflix’s content strategy.
Only Disney+ Hotstar has relied on original, local language content at a volume of 17,000 hours a year.
But outside of India and Indonesia, a lack of new local language content has mattered less to Disney’s streaming growth. According to Disney CEO Bob Chapek, the strategy has been more oriented around being “very, very sensitive to the local market needs” with pricing, value (via bundles), and distribution mechanisms:
For a company that's got content around the globe, that's beloved like Disney, there would be a tendency to want to do a one-size-fits-all strategy. We know that doesn't necessarily work everywhere. And that's why we've got different distribution mechanisms across the world in Latin America versus Asia versus the U.S. versus Europe.
That makes for an interesting challenge for Disney in streaming: it relies entirely on both its proprietary library and the library it acquired from Fox to deliver “consistently good” content.1
It would seem to Chapek, “consistently good” local language content matters little to growth. Rather, Disney bets on its content being global, while being “very, very sensitive to the local market needs” with pricing, value (via bundles), and distribution mechanisms will matter more to growth .
This points to a logical question for streaming services with recent international launches and upcoming international launches, like HBO Max: How important is it for a service to deliver “consistently good” content without content libraries that are strong as Disney’s, and without local language content?
Notably, HBO Max’s Latin America launch both mirrors Bob Chapek’s business logic of pricing ($3-$6 price) and local distribution mechanisms (via carriage deals). For local language content, HBO Max has announced it is planning to “internationalize certain DC world characters whom we believe have enormous potential.”
But, there is no timetable attached to that announcement. Even with Spanish language titles like Los Espookys and recently acquired titles like Foodie Love, HBO Max lacks a content library to deliver “consistently good” Spanish language content at launch.
Compare this to Netflix’s strategy in India, which delivers “consistently good” local language content but has yet to figure out a “price-value relationship” with consumers. It has invested over $420MM+ in local language content (I last wrote about Netflix and Disney+ Hotstar in India last October).
Netflix Co-CEO Reed Hastings summed up the India strategy in the Q1 earnings call: they’re “still figuring things out”, running “some pricing experiments” and are “still mostly focused on getting a content fit and getting broader content.”
Together, Disney, HBO and Netflix offer an interesting lens on Brandon’s question about “consistently good content” in international distribution.
Disney’s Bob Chapek’s perspective is that pricing, value and distribution all may matter more to consumers than library. Notably, Disney is implying there is little demand for “consistently good” local language content from Disney in any other country beyond India or Indonesia.
Reed Hasting’s explanations for Netflix highlight the need for “consistently good” local language content, acknowledge that solving for pricing is a challenge, but also ignores the question of whether value also matters to the consumer. It will be interesting to see if Netflix opts to find bundle deals to solve for its pricing challenges in India.
As for HBO Max, its Latin America roadmap is interesting because it faces challenges similar to Netflix’s in India, and challenges similar to Disney’s outside of Disney+ Hotstar (India and Indonesia).
HBO Max does not have as globally recognized a content library (or brand) as Disney’s, it doesn’t offer “consistently good” local language content, nor does it have means of delivering a “price-value relationship” to consumers.
Can it solve for these challenges by focusing on “consistently good” local language content?
The short answer appears to be, no. Netflix’s challenges in India suggest pricing, value, and distribution may matter more to streaming success.
The longer answer is TBD. The rollouts of Disney’s Star+ and HBO Max in Latin America after August 31 will shed light on whether “consistently good” local language is necessary to solve for growth.
Because if this is what audiences need to subscribe or not churn out, HBO Max has a great track record with creating "consistently good" content from scratch. But, if Brandon is right, Disney will be tested.
Must-Read Monday AM Articles
Streamers such as Netflix, Amazon and Disney+ will be forced to allocate between 20-25% of their revenues to support European and French content creation under plans being drawn up by French legislators. There is tighter UK regulation for streamers looming, too.
If you can read Spanish, there is a good deep-dive on Netflix’s Latin America strategy. The LA Times wrote about “the Spanish Streaming Wars” in English.
Fast Company argues Steven Spielberg’s Netflix deal is not as groundbreaking as Netflix wants you to think
Univision announced it is planning to roll out a new unified streaming service that will include a new subscription tier on top of an expanded free tier, anchored by the current PrendeTV offering. The new service will combine PrendeTV, Univision Now and Vix ($ - paywalled).
Mixed signals about the emerging, post-pandemic day-and-date theatrical releases are emerging. Cinemark is enthusiastic about the initial results, but marketing departments are leaving consumers confused about where they can watch the movies.
More negative signals emerged about Paramount+: Too Much TV’s Rick Ellis wrote about the operational messes at Paramount+ told to him by existing employees, and both showrunners have now departed ViacomCBS’s big bet on its series adaptation of the hit Microsoft game, Halo.
Rick has been consistent in his critiques of various user interfaces, which makes his Too Much TV newsletter a must-read. The Chicago Tribune’s Nina Metz offered her own critique of interfaces, asking “Why is subpar UI the standard?”
Bernstein media analyst Todd Juenger went lukewarm on the upcoming Discovery-WarnerMedia merger, being most concerned about the dynamic of “the more successful the streaming service becomes in the market – the more pressure is put on the linear networks.”
Advertising revenues are a big part of the bull pitch, and Bloomberg’s Gerry Smith reports, TV networks with reach “have a commodity that’s very valuable” to advertisers, driving up ad dollars.
Variety had a good piece on the bull-bear debate in the investor analyst community about the upcoming Discovery-WarnerMedia merger.
Really interesting discussion about Hulu last week. Nielsen shared May viewing numbers showing Hulu had the most average viewing minutes per day of any major service (130), and about 33% of Hulu’s viewers were between the ages of 18 and 34, the highest percentage in that demo of any service.
The Entertainment Strategy Guy looked at Nielsen data and asked, How Big is Hulu’s Biggest Hit? He concluded its “day-after-linear-TV catalogue is a huge competitive advantage”, but is well behind the competition in Originals. He also used Nielsen data to show how total streaming hours were down 40% in April.
A survey of 1,000 U.S. adults conducted by PwC found that in 2020, 62% of time was spent on subscription-based services versus 32% on ad-supported services .
Showrunner Kenya Barris confirmed in a must-read interview what I suspected back in November: he has negotiated an exit from his $100MM deal with Netflix. I also thought his “Netflix became CBS” line looked poorly through the lens of a data-driven culture like Netflix’s, and also because as Kevin Fallon of The Daily Beast wrote about Netflix’s sexually explicit show Sex/Life, “It’s all boobies, butts, and orgasms.”
Peacock and Amazon finally reached agreement for distribution, which struck me as most notable for this detail: “the distribution agreement will see 15 NBCUniversal apps arrive on Amazon devices as well, including various NBC apps and Telemundo.”
The number of international streaming services surged 32% in the 2017-2020 period to surpass 3,000, according to Distributor Drive’s New Buyers Report (NOTE: no clue who they are, but it’s a helpful data point)
The growing demand for content is driving an uptick in remastering and restoration work, with many film titles getting 4K and high dynamic range (HDR) treatment to take advantage of the latest consumer displays.
Web Smith of 2PM offered a more eCommerce-focused breakdown on Netflix’s recently announced Netflix.Shop push, which I wrote about three weeks ago in Mic Drop #32: Netflix.Shop Solves More for Netflix Than Commerce.
Two of the must-read articles, and read together, last week were Joe Adalian’s “The Hottest Streamer (Right Now)” and Matt Belloni’s email on Netflix’s Next Act: Becoming CBS.
GroupM estimates that the top 25 media companies now control two-thirds of all ad spending, up from just 42% four years ago.
International sports investment firm Kosmos has acquired broadcasting rights in Spain for the ongoing Copa America national team soccer tournament, and will only broadcast games from the South American competition on gaming-focused streaming platform Twitch.
GamesIndustry.biz delivered a deeper dive into Disney’s gaming ambitions, which offers more insights into what I wrote about in Member Mailing #266: Netflix & Verizon Test Bundling Streaming with Gaming.
Six races into the 23-event Formula One season, ESPN ratings are averaging 911,000 viewers, up 50 percent from the 2020 season and 36 percent from 2019, according to data from the sports channel. The root cause: Netflix’s popular "Drive to Survive” docuseries.
The term “consistently good” comes from a Steve Martin quote:”
“It was easy to be great. Every entertainer has a night when everything is clicking. These nights are accidental and statistical: Like lucky cards in poker, you can count on them occurring over time. What was hard was to be good, consistently good, night after night, no matter what the abominable circumstances.”