PARQOR Monday AM Briefing #41
The stories and trends in OTT streaming you *need* to know for this morning & the week ahead
Good morning,
First, a reminder that you are receiving this week’s Monday AM Briefing from Substack (and not Mailchimp) because I will be sending all PARQOR mailings from this Substack - parqor.substack.com - for the next two to three months.
Second, I created a coupon 90DAYS on both Substack and Memberful that will give a 33% discount for one year or $33.50/month, to any subscribers wanting to upgrade to Member Mailings.
The 90 day window for the offer expires on May 16. Click below for discounted access to last week’s Member Mailing about “Rethinking the Long-Term Value of Original Content in Streaming”, and all Member Mailings since November 2019.
A Short Essay on The NFL Deal
The best article I read on the newly announced $100B+ in NFL broadcast rights deals was from Kevin Draper of The New York Times, “The Pay TV Model Is Declining. The N.F.L. Is Still Banking on It”. The entire piece is a must-read, but I thought this quote does the best job of summarizing the dynamic that sticks out to me:
“The key is to protect the multiplatform aspects of this deal,” said Sean McManus, the chairman of CBS Sports. “So that if it turns out that streaming is the No. 1 growth element in the deal, we have those rights, and we have the broadcast rights.”
I think this quote implies there are both two uncertainties, and two big certainties.
The two, obvious uncertainties for all parties are:
whether cord-cutting is going to accelerate or slow down by 2029, when the NFL has a one-time right to opt out of the multiplatform rights agreement after the 2029 season; and
whether streaming will capture both cord-cutting NFL fans and a new generation of younger “cord-never” audiences.
#1 is a debate topic with little agreement across the marketplace. So I am avoiding it here.
#2 is interesting to dive into given the numbers for legacy media streaming audiences for the NFL tell a subpar story, to date. Super Bowl LV drew a record streaming audience of 5.7 million, marking year-over-year growth of 68 percent, but that was only 6% of the 91.63MM TV-only viewers.
Contrast CBS’s Super Bowl numbers with Amazon which, according to Amazon’s press release, drew an estimated 11.2 million total viewers for an NFL regular-season game in a December 26th Thursday night match-up between the San Francisco 49ers and the Arizona Cardinal1. That same week Sunday Night Football on NBC drew 14.66 million viewers, and was #1 in prime-time.
Effectively, Amazon demonstrated it can pull NBC Sunday Primetime numbers on a Thursday night on Prime Video, and 2x CBS’s numbers. That is a big part of why they are the NFL’s first exclusive national broadcast package with a digital streaming service.
But we don’t yet know if CBS and Paramount+, NBCU and Peacock, and Fox and Tubi (and “future direct-to-consumer opportunities” at Fox) can draw NBC Sunday Primetime numbers on streaming. CBS has a positive story, above, though relatively unimpressive next to Amazon’s numbers. Peacock is not sharing anything about their sports viewership on Peacock2, and likely will not share data until the Olympics. Fox has no SVOD for sports yet, and seems to be banking on Tubi (33MM+ viewers) to deliver it.
In short, because we don’t know how good streaming services are at capturing existing streaming audiences, we don’t know if streaming will capture both cord-cutting NFL fans and a new generation of younger “cord-never” audiences, regardless of what happens to linear audiences . Even in the case of CBS, which revealed its streaming numbers, it captured for the Super Bowl ~50% of what Amazon was able to capture on a holiday weeknight digitally.3
So, given this, why are the big media companies betting $1B to $2B per year on these deals, despite their still-unproven ability to capture cord-cutters and cord-nevers for sports streaming at scale?
Advertising.
One big certainty in both streaming and linear is demand for NFL advertising inventory remains inelastic (this remains true after a rough 2020). Those audiences are valuable and advertisers will pay a premium to be in front of them ($5B across all networks in 2019)4.
The other big, but new, certainty is all legacy media networks are in the early stages of offering and testing addressable advertising on both linear and digital, enabling these legacy media ad sales teams to extract multiples on standard CPMs across direct sales, scatter sales, and programmatic sales.
All four legacy media companies are building towards offering advertisers more sophisticated, addressable, and national advertising solutions across linear, connected TV, and digital video by 2029 (you can read about Disney’s recent presentation of its plans, NBCU’s recent partnership with Charter, and ViacomCBS’s recent test with DirecTV).5 Basically, the bet is a move from the “spray and pray” of traditional advertising can be replaced with ads served to particular consumers based on geography, purchasing history or other data points.
In the case of Amazon, it is not “spray and pray” but rather to be able to serve addressable ads to Amazon Prime viewers based on first-party Amazon data for 126MM+ U.S. members (est. - there are 150MM total worldwide), and across 50MM+ active users of Fire TV devices.
The problem with the “spray and pray” of traditional advertising was the effective CPM (eCPM): an advertiser would have paid $20 CPM but could have only reached 10% of the audience, resulting in a $200 eCPM. Addressable advertising allows them to reach that 10% at a higher CPM than $20, but lower than an eCPM of $200.
That means, in theory, smaller audiences don’t necessarily translate into lower ad revenues for networks (though they do run the risk of lower retransmission consent fees, which is a whole other problem).
In this light of advertising, the $105B+ bet by all networks reads like a bold bet on the upside of addressable advertising across national TV and streaming, which is higher CPMs and eCPMs. Or better yet, it seems to be framing an interesting horse race between Amazon, whose ad revenue has grown 64% year-over-year with sophisticated targeting based on its first-party data, versus the cross-platform addressable TV capabilities of legacy media companies, which remain in their early stages after a brutal 2020.
What will be more valuable to NFL advertisers in 2029: a bet on addressable advertising on national TV, connected TV and digital video? Or a bet on the hyper-targeting of audiences within Amazon based on Amazon’s invaluable first party data?
Because whether cord-cutting is going to accelerate or slow down by 2029, the ability of legacy media companies to deliver addressable advertising solutions that advertisers will want seems to be the determinative question driving their definition of success of the NFL deal. If they prefer Amazon, advertisers will be less likely to buy advertising on the legacy media companies to target NFL audiences.
In this light, it may be no accident as to why NBCU’s Peacock remains in a standoff with Amazon over distribution.
Keeping advertisers on board with addressable advertising seems to be more important to legacy media companies than whether streaming solutions can capture cord-cutters and cord-nevers.
Must-Read Monday AM Articles
Other must-read articles on the deal came from Alex Sherman at CNBC.com, and Anna Nicolau at The Financial Times ($ - paywalled). There is also a good summary of Wall Street analyst reactions to the deal at The Hollywood Reporter.
Variety VIP’s Gavin Bridge has a good breakdown of primetime streaming audiences after NBCSN, the second-biggest cable sports net in 2020, announced it was closing. It has some relevant data re prime time audiences, above.
Smart TVs are a big source of ad fraud ($12B!) in addressable advertising.
Nickelodeon shared with AdWeek its upfront presentation about the Nickelodeon “multiverse” that encompasses rapidly growing engagement on a variety of digital platforms.
For Disney CEO Bob Chapek, he can tout that a 35% bump in price from the previous contract will get Disney “a lot more football for its money, including two Super Bowls, six more regular season games and a playoff game”. Chapek framed Disney’s movie release strategy for this summer: “We’ll make the call probably at the last minute on how these films come to market, whether it’s ‘Black Widow’ or any other title”.
Julia Alexander wrote in Musings on Mouse about why last week’s NHL deal is a big bet on the Disney+/Hulu/ESPN+ bundle.
Vanity Fair reviewed The Falcon and The Winter Soldier’s approach to storytelling seems to reflect “how difficult it is to serve the diverse Marvel fans”, and director Kari Skogland told The Hollywood Reporter about the creative process for the show.
Netflix co-founder Marc Randolph told Fox Business why he thinks “all of the other streaming companies” not named Netflix should be scared by Disney’s impressive initial success. Nielsen SVOD ratings for the week of 2/15/21 to 2/21/21 show Netflix dominating top 10s for original and acquired streaming programs, but Disney+ owns 7 out of 10 spots in the original and acquired movie rankings.
Head of ad sales for WarnerMedia JP Colaco spoke to AdAge about WarnerMedia’s ad strategy six months after starting the role, and why 2021 will be “the year of addressability”. HBO Max is excused from AT&T customers’ mobile data caps, while competing services like Netflix and Disney Plus will use up your data.
Zack Snyder’s Justice League debuted on HBO Max last week (NOTE: I loved it!). I liked Sonny Bunch’s review of the movie. Owen Gleiberman has a good piece on whether Snyder will be invited to direct a sequel. Sarah Whitten of CNBC argues the movie “may not do much to move the needle on subscription sign-ups across the board, unless they are drawn to other HBO Max content.”
Snyder told Entertainment Weekly his plans for sequels and he had been pitching Warners to do an Atom movie for Chinese markets based on the Ryan Choi character in the movie.
Apple TV’s Ted Lasso won two WGA Awards last night. Its creators are already thinking about how to extend the show past its planned three seasons (free - registration required). One article argues, “I love ‘Ted Lasso,’ but man do I hate Apple TV Plus”. Another article, from Observer’s Brandon Katz, half-cheekily, half-seriously dove into the idea of Apple buying Disney for Apple TV.
The Motion Pictures Association’s annual theme report shared data that subscriptions to streaming services surpassed one billion, reaching 1.1 billion globally. But streaming is still taking second place among markets to cable television. Scott Mendelson of Forbes asked does this scale “usher in a new normal or is it at least partially a temporary disruption in the entertainment ecosystem?”
A bunch of UX news: Spideo studied how Netflix is experimenting things while their brand becomes more and more articulated with Super-aggregators and traditional TV Networks.” Netflix also recently has begun prompting some of its users to verify their identity through a text message to crack down on password-sharing ($ - paywalled). Amazon is updating its Prime Video app to include a new feature: the ability to play episodes of a show on shuffle, which makes it easier for people who just want to watch a sitcom without having to actually pick an episode.
Benedict Evans wrote about how software may have disrupted TV and cinema’s business models, but at some point, every company has become “a software company, and the important questions are somewhere else.”
Shondaland executives told SXSW said the company is enjoying its newfound freedom at Netflix, especially after the success of Bridgerton, and is eyeing more ways to explore stories in ways that don’t rely on the TV drama medium.
Actress Jennifer Garner shared on Instagram that her family comedy Yes Day is on track to be seen by 53 million households in the first four weeks of its release, oputting it on track to be the streaming giant’s second-biggest Kids & Family release behind this past season’s The Christmas Chronicles: Part 2,
The WSJ dove into how the advertising ‘Triopoly’ of Google, Facebook and Amazon now collect more than half of all ad dollars spent in the U.S. ($ - paywalled). CNBC dove into the market impact of Snapchat paying $1 million a day to creators of popular short videos.
CB Insights has a good, free download about the livestreaming marketplace worldwide, and its implications for the future of e-commerce.
Anheuser-Busch and Panay Films will launch “Not A Sports Show,” a six-episode series that features host and comedian Lil Rel Howery chatting with athletes on free streaming-video service, Ficto. The move is because “consumers are growing wary of the commercials”.
The Biden Administration’s efforts at a stimulus may offer a “tailwind” of a stimulus of up to $20B for telecom providers, too,
This piece argues Australia’s attempts at local content regulations on streamin services “ignores complex realities of how the TV business and its funding have changed”, and will have unintended consequences.
Last, Roku hired another ex-Quibi employee, and acquired This Old House Ventures, the company behind the 42-year-old home-improvement television brand.
This game delivered the highest digital average-minute audience ever
But, NBCU has shared data via Nielsen and Adobe Analytics: https://www.sportspromedia.com/news/premier-league-nbc-2019-20-season-viewing-figures
CBS All-Access that was six years old by that point.
2020 was lower due to COVID and fan reaction to the league’s social justice efforts.
Fox is experimenting with addressable TV