PARQOR Monday AM Briefing #44
The stories and trends in OTT streaming you *need* to know for this morning & the week ahead
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A Short Essay on Two New, Competing Dynamics In The Streaming Marketplace
Last week was an unusual week in the streaming marketplace. If you have been paying attention to the “pull-forward impact” of the pandemic on the streaming marketplace, there were plenty of stories that reflected how that dynamic is playing out at different services.
And, if you have been keeping an eye on the signs of a “content drought” - a shortage of content due to productions impacted by the pandemic - there were plenty of stories that reflected how that dynamic is playing out at different services.
In Friday’s Mic Drop I wrote about how Netflix’s deal with Sony reflects the “pull-forward impact” of the pandemic on both Netflix (slowdown in subscribers growth and STARZ (“forcing it to have an unusually heightened focus on marketing its original series”).
But, it could also be argued both deals are a reflection of Netflix facing a post-pandemic “content drought”, as What’s On Netflix’s Kasey Moore tweeted last week:
Through this lens, big moves like its Sony deal and its Knives Out deal look like solutions for pain points created by a content drought.
So which one is it? Do the deals reflect the “pull-forward impact” of the pandemic, or the signs of a “content drought”?
Any attempt to answer this question makes these two dynamics so interesting. In the case of Netflix, it’s probably a bit of both: they simultaneously face a content drought and slowing subscriber numbers for a “pull forward impact”.
Looking at a service like Paramount+, whose namesake Paramount Studios has sold seven films to multiple streaming services not-named-Paramount+ since the start of the pandemic, answering that question becomes especially interesting. This development means Paramount+ has a library that is both smaller and with fewer blockbusters because its sister company could find better revenue deals elsewhere via an “arms dealer model”.
Paramount also announced last week that Top Gun: Maverick has been moved to the date previously occupied by the seventh Mission: Impossible film, now set for a May 2022 release. That means both movies will take a longer time to make it to Paramount+ because of the studio’s new windowing deal with exhibitors that allows titles to leave theaters after 30 or 45 days, depending on performance.
Paramount+ is left vulnerable by deals that would not have happened but for the “content drought” caused by the pandemic. It also must navigate the “pull forward” impact that as the pandemic wanes: hobbled and/or underperforming services like Peacock and Paramount+ “can no longer count on a rising tide to lift all boats.” This problem was best summed up by Bloomberg’s Tara LaChappelle:
Other less-essential apps, including late arrivers Paramount+ (owned by ViacomCBS Inc.) and Discovery+ (Discovery Inc.)… may struggle to grab or hold the attention of distracted consumers unless they step up their game (this week’s equity offering by ViacomCBS suggests it is getting ready to do so). 1
To rephrase LaChappelle’s point: as summer rapidly approaches, the real problem with the “pull forward impact” is that the window to convert stuck-at-home streaming audiences into subscribers will wane.2 Once those audiences leave the home and head to the beaches this summer, streaming behavior will inevitably decline to a finite number of services.
LaChappelle predicts AVOD tiers help to make up for the lost margins from the subscriber services, and both Peacock and Paramount+ offer those tiers. But all available data from the pandemic is library still matters: blockbuster movies like Wonder Woman 1984, and Hollywood star vehicles like Wandavision, Borat and Coming 2 America have dominated streaming ratings during the pandemic. Bigger, if not blockbuster, content in libraries are proving out to be the best bets to win over streaming audiences.3
The “content drought” dynamic leaves legacy media services like Paramount+ or Peacock with fewer assets to win these audiences over for their paid tiers. With ViacomCBS simultaneously pursuing an arms dealer model alongside its rollout of Paramount+, the service may always face a deficit of blockbusters. That leaves fewer enticing offers for target Paramount+ subscribers.
For Peacock, its sister company Universal gets paid licensing fees by HBO Max for the rights to show new Universal Pictures movies about nine months after they leave theaters. That deal is up in 2022, meaning Peacock could get those assets back. But, if that happens, it will happen after the pandemic window will have closed and at the expense of that licensing revenue. It is not a binary deal or no-deal choice.
The “pull forward impact” raises the question of how much more time management at both companies is willing to devote to these services to win over new audiences, especially given the closing window of opportunity. NBCU management seems to be ok with openly reconsidering their plans for Peacock, but ViacomCBS appears to be ok with aggressively pushing Paramount+ despite growing obstacles, both from the market and from “arms dealer” business decisions it is making.
Where these two dynamics get especially interesting is when we look at legacy media’s competition in the streaming space from platforms, like Roku. Because for Roku both dynamics are win-win, as this line in an engadget piece from two weeks ago reveals:
Rosenberg believes, ultimately, that Roku is positioning itself as the best alternative to the big streaming networks, rather than as their rival. “Consumers will have a finite appetite for the number of services they’re going to subscribe to,” he said, “but it’s certainly not going to sate the consumer’s TV appetite.” “So where’s the consumer going to get all of the rest of the content that they’re going to view?” he added. It’s in that space, filling in the gaps people won’t be getting from the rest of their streaming diet, that Roku hopes is gold. And certainly, it’s going to be an interesting year watching if consumers respond positively.
Roku dominates the U.S. CTV marketplace. Reading Rosenberg’s quote, one has to wonder whether the companies most likely to both survive and win from the “pull-forward impact” of the pandemic and the “content drought” are the platforms like Roku and Fire TV.
Because they seem to be the only platforms with immunity to these two market trends while still in the early days of investing in original content for their AVOD services (The Roku Channel, IMDb TV). Their only need is more ambitious legacy media apps willing to share some percentage of ad and subscriber revenue, and spend more marketing dollars, to simply brave the marketplace.
Must-Read Monday AM Articles
ViacomCBS made some notable moves in streaming last week: it purchased WarnerMedia’s Chilevisión from AT&T, and it revealed on a corporate-PR-produced YouTube interview with Tom Ryan, President & CEO of Streaming, that it will add Pluto TV’s linear TV feeds to Paramount+. Notably, the move would make Paramount+ and Peacock more similar in their feature sets.
With blockbusters increasingly important to streaming services, Brandon Katz of Observer asked “Do Any Upcoming Blockbusters Have a Shot at Grossing $1 Billion?”
The most must-read articles last week were actually must-listen podcast interviews with Apple CEO Tim Cook on the Sway podcast, Netflix Co-CEO Ted Sarandos on the SmartLess podcast and WarnerMedia CEO Jason Kilar on Vox’s Recode Media podcast. I liked them because they give an unusual sense of the long road ahead.
The most interesting thing from the Tim Cook interview is how he describes Apple TV+ as:“It is not a hobby. It is not a dip your toe in.” So it’s notable that Apple hired Jessie Henderson, former executive vice president of feature films for WarnerMedia’s HBO Max streaming, to ramp up the programming selection ($ - paywall).
In his interview, Kilar suggested that CNN will move beyond its linear pay TV channel.
AMC Networks expanded the responsibilities to its streaming video management team.
It was a notable week for Roku and the broader AVOD marketplace. Digiday reported that Roku is pitching agency executives on sponsoring videos that will promote programming available across its connected TV platform. Too Much TV’s Rick Ellis writes, “it might be a good deal for advertisers, but it will just be more clutter for viewers.” Roku is anticipating “a surge of spending” post-pandemic.
One advantage for Roku is distribution via cheaper Smart TVs. But, users are increasingly complaining that both the hardware sucks and the software is lagging.
Roku released data that approximately 25.5% of 2019 traditional linear TV tournament viewers on Roku devices streamed a channel carrying tournament games during games, and about 58% of viewers who watched it on traditional TV in 2019 on Roku didn’t return in 2021.
Dave Morgan, founder of SimulMedia, argues “The linear TV viewing shift to streaming will take many years.” One big obstacle is identifying users across-platforms, and “The expected elimination of CTV’s predominant identifier has companies working to wean themselves away from the IP address.”
Mike Shields observers that Google has yet to make the power move in Connected TV advertising it seems optimally positioned to make.
Last, Nielsen and TV Networks are in a standoff over how to count viewers during the pandemic.
I removed LaChappelle’s inclusion of HBO Max in this list because I disagree with the premise that it belongs there.