PARQOR Monday AM Briefing #43
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 next month on May 16. Click below for discounted access to last week’s Member Mailing, “The PARQOR Hypothesis Predicts Streaming in 2025”, and all educational resources on the Five Frameworks.
A Short Essay on “Genre Wars” & AMC’s "Boutique" Streaming Plan
This week a public relations blitz in The Hollywood Reporter from AMC Networks offered new insight into what I have defined as “the genre wars”:
…one way to think about product channel fit in streaming is to think of the “streaming wars” more as ‘the genre wars”, which are more like focused, zero-sum conflicts around specific content genres than broader head-to-head, zero-sum conflicts between platforms for the same audience.
Two articles last week - one an interview with CEO Josh Sapan, and the other an overview of the strategy and Wall Street’s positive take on it- dove into the company’s strategy.
The term “genre wars” isn’t used1, but the logic of the term is omnipresent in both, and flesh out some new angles which Sapan and management had not discussed in previous earnings calls.
1. The portfolio strategy is an offshoot of earlier cable TV successes
Sapan makes an interesting analogy of Netflix, Disney+ and other larger streamers as “department stores”, and AMC’s portfolio of niche streaming services as “specialty boutiques that, if you were a fan of something, you would find your way to.”
The analogy sets up an important point:
We had seen this in our earlier cable TV linear lives, that one can start targeted, or niche, offerings that can actually become bigger and more vital than one expects, if you can hit a cultural nerve. And so we set out to do that with those first two that we started [Sundance Now and Shudder].
I had always assumed that the “genre wars” strategy was driven by bets on existing brands (IFC) and under-served genres (horror and the Shudder app). But Sapan’s point, if true, is that AMC’s existing and longstanding approach to content production and curation - producing shows that hit “a cultural nerve” - has always been about niche genres. Streaming enables AMC to leverage that longstanding strength to produce more niche content, and that strength will drive paying subscribers, at scale, across six apps.
So, for example, we shouldn’t focus on AMC Networks making a bet on a horror app with Shudder. Rather, we should focus on AMC Networks being unusually strong at figuring out which horror movies and shows fans of the genre will watch, and leveraging Shudder year-round to reach those audiences with that content.
I have always been focused on AMC betting on genre-focused apps, but really AMC’s strength is about leveraging its genre-focused production processes.
2. The production economics are better
Sapan makes a point about the economics of AMC’s content production processes worth highlighting:
You have said that niche streamers don’t necessarily need expensive original hit shows like your broader-based rivals. Is that a key part of the financial benefits of your approach?
It is, frankly, less expensive. You're not competing in multiple categories to get everyone. Each thing is not a moonshot.
AMC believes it can deliver AMC Networks quality content at lower production costs. I had not seen that before. This strikes me as an unusual risk for them to take given streaming demands a greater scale of original content productions across multiple genres, and there is little evidence that they have evolved their linear production model for lower production costs, and more productions than linear TV would require.
This is also implicitly a point about marketing. As I wrote for subscribers last month in “Member Mailing #253: AMC Networks, Starz & "Genre Wars" Strategies”:
Effectively, the “genre wars” model allows AMC to cost-efficiently acquire and retain audiences. A focus on genre also reduces churn and [Subscriber Acquisition Cost (SAC)] by helping to form “communities” around the content.
Sapan notably doesn’t mention “community” (or SAC) here - it was something COO Ed Carroll mentioned in last quarter’s earnings call:
Services represent not only a destination for the viewers, but they tend what we're seeing to form a community around the content.
Putting point #1 and Point #2 together, we can infer that AMC Networks’ streaming model is about mapping unusual strengths in niche content production to digital distribution models, and cost-effectively building communities around that niche content within apps.
3. But… there are weaknesses
Can they accomplish both?
We are in an era of cord-cutting where many expect total households to drop another 30% from 80MM to 55MM. Almost 100% of AMC Networks’ Operating Income comes from Domestic linear advertising and distribution revenues. Cord-cutting threatens both sources of revenue, and a growing reliance on subscription-only streaming revenues also threatens advertising revenues.2
How will AMC solve for that?
The overview article touches upon AMC’s projections (20MM-25MM) for 2025. That implies projected annual revenues ($1B-$1.25B at the current ARPU of $4.17) that are one-third of its current linear business ($3B in 2020). But, the overview does not touch upon something analysts raised in the Q4 earnings call: “the quarterly volatility in subscription fees”, or a high level of subscriber churn per quarter.
Which leaves us with a big question: there may indeed be audiences and communities for these apps and these genres of content, but what does it mean for AMC Networks to be betting on a portfolio of streaming services with “volatile” churn while 100% of its current operational income faces inevitable decline?
These two articles offer an unusually good insight into why niche strategies make sense, despite operating at a fraction of the scale of every other legacy media company. But the economics of a niche streaming strategy at AMC Networks in this moment of cord-cutting reflects more risks than Sapan lets on.
Must-Read Monday AM Articles
The big news last week was Netflix spending $450MM for the rights to Knives Out 2 and 3. I’m going to write about it for Members tomorrow, but those wondering about the price tag should check out these two articles on how Netflix’s software encourages global consumption: one from The Economist on Netflix content and European culture ($ - paywalled) and the other on the power of Netflix’s dubbing has created “a surge in demand” for voiceover artists from Bloomberg.
Other big Netflix news: Bridgerton’s breakout star Rege-Jean Page will not appear on the show’s upcoming second season. The interviews are about his character having a one-season arc; but, with Shonda Rhimes on a $100MM deal, I can’t help but wonder whether Page’s agent tried to milk more out of Netflix for its new star, and hit a wall given the original size of Rhimes’ deal.
Netflix also announced it will launch 40 new anime titles this year.
Another big headline last week was the aftermath of the surprise rise and fall of the stock prices of Discovery Communications and ViacomCBS, and what remains of Archegos Capital. Tara LaChappelle of Bloomberg provocatively asked, “Do Paramount+ and Discovery+ have what it takes to thrive in a Netflix world, or did investors just get a preview of their fate”
Official data from WarnerMedia about the performance of Zack Snyder’s Justice League has yet to be released, but Bloomberg reported Apptopia data showed an 8.9% jump in users launching the HBO Max mobile app, but Scott Mendelson of Forbes dove into the question of whether this data, and other data, is good or bad.
WarnerMedia also announced that Warner Bros. and DC Films' upcoming slate is moving forward without Ava DuVernay's New Gods and James Wan's Aquaman spinoff, The Trench. DuVernay’s project was killed in part because its villain, Darkseid, also appeared as a villain in Zack Snyder's Justice League and “there was a desire to have space between the latter and any new appearances”.
T-Mobile announced it was pivoting its T-Vision virtual MVPD (vMVPD), effectively killing its vMVPD offering built off of its $325MM acquisition of Layer 3, and making YouTube TV its premium live TV service, and Philo as its new base live TV service. The new strategy aims to help customers “navigate the increasingly complex streaming world.”
Alan Wolk argues at TVREV that the move is “TV’s Stalingrad, the moment the tide turned inexorably in the opposite direction” away from the legacy bundle. Ben Munson at FierceVideo argued the deal will be Philo’s gain.
On a different topic, I haven’t written much about creator culture or “the creator economy”, largely because it’s a niche marketplace that doesn’t offer much transparency. But a few pieces emerged over the past two weeks that offer helpful transparency: this Taylor Lorenz interview with TikTok star Addison Rae in The New York Times, and this Sam Lessin interview with YouTube star and entrepreneur Mr. Beast in The Information ($ - paywalled).
Two other reads on the Creator Economy as a business: a profile of Gumroad’s Sahil Lavingia and his bet on the creator economy, and ANTENNA Data Co-Founder and CEO Rameez Tase predicting an emerging class of Super Creators who will have leverage over the aggregator platforms.
Variety has a story on how news divisions of legacy media streamers are taking advantage of this moment of shifting audience behaviors from linear to streaming to experiment with new formats.
Tubefilter released some good data on product channel fit on social media for streaming services: it found a 116% uptick in minutes streamed via social media among the Top 10 SVOD platforms through January with 932 million minutes, compared with 432 million minutes in February 2020.
Disney released its new trailer for Black Widow, now being released in July 2021 (below). The Wall Street Journal reported cinema owners’ seek to secure better terms from Disney, such as a higher share of box-office revenue or a chance to show Black Widow exclusively, “but their ability to fight the studio might be undercut by their need to lure moviegoers back to multiplexes after a year of closures and limited capacities”.
London-based research firm Omdia found Disney+ accounted for 50% of all SVOD subs in India in 2020.
Univision launched its new AVOD PrendeTV, and reported higher Q4 advertising revenues from political spending, despite a near-$40MM loss on operating income.
NBCU’s deal with the WWE has an interesting development: the New York Post reports that “NBCUniversal is quietly scrubbing racist, risqué scenes from classic WWE matches before it adds the wrestling network’s massive trove of old footage to its new Peacock streaming service.”
A big theme from last week you probably missed was innovation in the sports media world: smartphone app Buzzer, founded by a former director of Live Content at Twitter, secured live rights to National Hockey League games and the PGA Tour. Buzzer will show users “live look-ins”—short snippets of live game action—for 99 cents apiece. Also, Dapper Labs, which constructed the Flow blockchain for the NBA’s Top Shot non-fungible tokens (NFTs) and the subsequent marketplace, had a fundraising round that raised $305 million.
Last, earlier this month Amazon Amazon Studios COO Albert Cheng told the Interactive Advertising Bureau that the era of “T-commerce” — the sale of goods directly through TV screens — is here. But QVC, the original TV commerce channel, is “more relevant now than ever”.
Can someone please introduce me to the author, Georg Szalai?
Sapan says they will partner with FAST/AVOD services, which makes me think they’ll do something similar to Lionsgate’s deal with AMC+ around Mad Men, which put the AVOD version on IMDb TV.
