Monday AM Briefing #60
Monday AM Briefing #60
The stories and trends in OTT streaming you *need* to know for this morning & the week ahead
A Short Essay on Scarlett Johansson v. Disney, Transparency & Incentives
There have been a lot of good takes on the lawsuit filed by Scarlett Johansson about Black Widow’s day-and-date release on Disney+ PVOD. I liked a piece from CNN, in particular:
Notably, there’s language in the complaint about how both executives Robert Iger and Robert Chapek were incentivized to distribute Black Widow on Disney+ PVOD for their “personal benefit”, and without a contractual agreement with Johansson to do so.
It’s a fascinating detail that’s worth diving into briefly.
Because any revenues from PVOD distribution may fall outside of the contract language of “wide theatrical distribution” (the lawsuit seeks to include PVOD within it), Disney may have no legal obligation to disclose anything more than the $60MM figure it has shared with both the public and with Johansson and her reps.
We, as investors and observers, have no idea how the $60MM is calculated. But neither does Johansson and her reps because there is no contract with Disney for PVOD distribution.
Disney has not told us how many Disney+ subscribers downloaded Black Widow - we are left to infer it based on the $29.99 price point (so 2MM est.). But, the $29.99 price point may be inaccurate. An average price may include new sign-ups for Disney+ ($33.98 with Disney+ Hotstar or $35.60 without Hotstar), and may even include Disney+/ESPN+/Hulu bundle sign-ups who bought Black Widow in that $60MM number ($43.98).
So, $60MM more likely reflects a weighted average of different consumers. Or, it simply may be a public-relations-driven, financially engineered figure that has no independent verification outside of Disney’s DTC accounting team, and no legal recourses for confirming it except via a lawsuit.
Is this why Disney didn’t negotiate a lump sum payment with talent so that the outcome is straightforward for everyone, like WarnerMedia did?
I think the answer is simpler: Disney management has a great story about streaming growth in Disney+, but unlike WarnerMedia it has a complex, global business operationally. The risks of latter threatens the former.
As Disney+ and ESPN+ president Michael Paull told Insider about a week-and-a-half ago ($ - paywalled)
When we first architected Disney+, we were thinking about it as a global service.
In the early days, certain companies, when they went global, they just turned their service on, right? And it worked. But they didn't have all the arrangements in place with the CDNs and others to make sure the streaming quality was absolutely excellent. They didn't localize the service — whether it was language or currency or local payment mechanisms — or even localizing marketing activities to make sure that they understood the consumer so they could position the product in an appropriate way.
Where we came in, we were able to do all of those things, but they're hard. Being able to support all of these different currencies and all of these different payment mechanisms and localizing not only the product but all the marketing collateral, subs and dubs, for all of the contents and all of these languages. There's an incredible amount of operational work that had to go into making all of that happen.
The implication is, Disney+ is still navigating the complexity of figuring out its global SVOD and PVOD distribution models.
That’s not an excuse for Disney’s decision to distribute Black Widow on PVOD without a contractual agreement with Scarlett Johannson in place.
Rather, I think the decision reveals management’s paranoia about losing control of the Disney+ narrative. As I told Observer’s Brandon Katz earlier this week in an excellent article on transparency in streaming:
“For every streaming service not named Netflix, streaming is neither the only line item nor a significant line item contributing to Operating Income or EBITDA,” Rosen told Observer. “The risk of disclosing metrics is that it may create additional storylines which confuse investors about the business. Better to have them clear on where the business is headed than to raise more questions.”
Disney+ has an extraordinary good growth story to date (though according to The Information, not much longer?), and Disney needs to tightly manage it.
How Disney reached $60MM of PVOD revenue with Black Widow, globally, is a complicated story that invites more questions from investors and Hollywood talent than Disney is currently ready to answer.
Why risk control over that story by agreeing to contracts that share valuable details with Hollywood talent, and worse, their chatty Hollywood agents?
The upside to Disney’s stock price from a tightly controlled Disney+ growth story is more valuable to Disney management than any individual contractual incentives to drive Disney+’s growth with PVOD distribution.
Johansson’s team may want to amend their complaint.
Must-Read Monday AM Articles
On Comcast’s Q2 earnings call this week, NBCUniversal CEO Jeff Shell reported 20 million active monthly accounts and told investors “net-net, with all this bad luck, we're going to be profitable on the Olympics, which we're very happy with, and we're very happy with the product”.
Krishan Bhatia, NBCUniversal’s president and chief business officer for global advertising and partnerships, foresees a 50[% linear]/50[% digital] allocation 18 months from now, up from a 70[% linear]/30[% digital] allocation.
In several major markets around the world, the TV audience has fallen for The Olympics since 2016, as viewing becomes more fragmented and athletes compete in Japan when audiences are mostly asleep in the United States and Europe.
Alex Sherman of CNBC wrote about the “tension between how to balance streaming video, theatrical release and linear TV is leading to some peculiar choices bound to confuse consumers in what's becoming an increasingly jumbled landscape.”
Alan Wolk argues that Peacock’s shortcomings are a problem: “NBCU, which is admittedly new to the business of user experience (though its parent company, Comcast, is not) seems to have forgotten how important being up front with your customers is.”
Blue-chip brands are beginning to question the long-term value in Olympics sponsorships.
Ryan Faughnder of The Los Angeles Times wrote about why movies like Space Jam are falling fast at the box office.
Jungle Cruise (at least $200 million to make and another $100 million to market) had a rough first weekend, taking in $34 million in North America and $30 million on Disney+ worldwide.
HBO Max announced big additions to its Cartoonito kids and family slate, “WarnerMedia’s biggest commitment to preschool in 100 years”.
Vice dove into the implications of reviews of the new Gossip Girl on HBO Max being mixed to negative.
The Entertainment Strategy Guy had a good piece asking “The NBA Final’s Ratings Were Down. Does It Even Matter”.
Variety VIP’s Kevin Tran digs up a lot of good data to argue that “Ted Lasso is Apple TV+’s biggest hit, but it’s not that big” (subscription required).
TikTok’s newest ad option will allow brands to capitalize on popular content.
Alex Kurtzman, the top producer on CBS Studios’ roster and architect of the studio’s Star Trek universe, just signed a ~$150MM deal keeping him at CBS Studios through 2026. Nicole Sperling interviewed Kurtzman for The New York Times ($ - paywalled).
Universal Pictures and Peacock closed a $400MM+ deal for a new Exorcist trilogy. The cost of the package is so high because “Ms. Langley and her deals maven, Jimmy Horowitz, did not play by Hollywood’s old economic rules”, according to The New York Times.
Discovery’s HGTV has greenlighted 11 new series and ordered three pilots that cover HGTV’s core areas of home renovation, design and real estate while also expanding into cleaning, organization, rentals, mansions and family relationships at home.
Starz succeeded in blocking Disney from launching a streaming service in Brazil under the name “Star Plus.” Starz has filed complaints in Mexico, Brazil and Argentina, arguing that the “Star Plus” name infringes on its trademarks and will cause customer confusion.