Best Of Breed

Bob or BOB?

Happy Friday War & Peaceniks! Did you see the dog show?

ICYMI, Winston the French Bulldog won Best In Show at the 2022 National Dog Show. I watched. Winston truly kicked ass. It’s not a surprising victory, though, as the American Kennel Club says French Bulldogs are the second most popular breed of dog. Which, oddly, brings me to the latest Streaming Wars…

For various reasons (which I use the latest data to outline here), all of streaming video (and all forms of streaming media) are at an existential crossroads, surrounded on all sides by moats full of hangry barracuda. When the music stops in the current ad recession, very few key seats will be left in the new era of mass, mainstream media. The media panic of the moment is figuring HOW to be one of those four or five remaining major platforms for the next generation of media bundles.

If not Best in Show, how can they be a BOB: Best Of Breed?

Earlier this week Antenna put out their quarterly Growth Report for Premium Streaming. This week, I dissected why this data, specifically Churn, are the most important metrics that the none of the streamers give us in their earnings reports.

Churn dictates lifetime value - for both subscriptions and advertising revenues. Ergo, the state of a platform’s Churn is an excellent indication of that platform’s current health. The direction that their Churn is headed is a great way to diagnose their future health.

The premium SVOD ecosystem in the US has plateaued (and the world is close behind). All of the various combined SVOD services are not adding new subscribers to the ecosystem, rather they are trading a big pool of subscribers among themselves month to month. Users subscribe, binge, churn before the next bill, subscribe to another service (or no service), and then come back (sometimes) when their fave shows return. Rinse. Repeat. And so on. As I wrote: Serial Churners are the new Channel Changers.

Streaming Wars morphing into Share Wars is one of the roads in Streaming’s 2023 crossroads. The other drives on ad impressions. It is also paved by Churn.

Before the end of 2022 both Disney+ and Netflix will add ads. These changes are obviously significant for the companies themselves. But how Disney and Netflix change, with ads, will change streaming itself. My hyperbole is both intended and, as I hope to demonstrate, merited. These two major business model shifts, will permanently cement the SVOD ecosystem as a mix of subscription and ads. Once upon a time we called this Cable.

The big new difference: Margins are far lower and winning is way more complex. That said, some basics of OG TV will reemerge. How many people watch each show will soon be far less important than how many consumers watch each service, for how long. Yes, it will be important to have Super Bowl moments, and phenomena like Squid Game binge mania. But, in an environment where reach and frequency matter as much as monthly subscribers, being a top five CHANNEL will be a better long term business than having a top five SHOW.

Now, please also remember that this is a global business. The players on the chart above, plus Amazon, must also simultaneously compete regionally with BBC, Reliance, viaplay, Canal+, Televisa and more. Due to its ugly naval gazing Americanism, this is a part of the equation our industry often ignores.

Cultural touchstone moments will be valuable; but constant and repeated use by a large and valuable audience, aka utility, will be a key metric ad buyers use to make large upfront deals. Reliable sources of steady, quality impressions give marketers places to put the money they are taking out of social media. Constant and repeated use of a paid premium product - with or without ads - is also a direct indication of low Churn; and higher subscriber lifetime value. Like Cable before it, almost all ad viewers of this new Premium TV will have ads, thereby making viewer utility and subscriber retention the key KPIs of the new normal. Both are tied to Churn.

It’s for all these reasons that this week I predicted the next move for Bob Iger (best of the Bob breed) would be finishing the Hulu transaction by buying the 30% they don’t own from Comcast. Disney has an agreement to do this in 2024, but after digging deeper into the 3Q Churn and Sub data, I found myself violently agreeing with their activist investor Third Point Captial:

“We urge the company to make every attempt to acquire Comcast’s remaining minority stake prior to the contractual deadline in early 2024. We believe that it would even be prudent for Disney to pay a modest premium.”

Here’s why…

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