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What’s to Come in ‘The Streaming Wars’

April 29, 2023
Notes
Transcript

This week I’m joined by Matthew Ball, CEO of Epyllion, former global head of strategy for Amazon Studios, and the author of The Metaverse and “The Streaming Book,” which you can read at that link there. And you should read it if you want to understand how we got where we are in the streaming wars, why it’s early yet in the contest between the companies vying for your attention, and where we’re headed as consolidation occurs. 

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This transcript was generated automatically and may contain errors and omissions. Ironically, the transcription service has particular problems with the word “bulwark,” so you may see it mangled as “Bullard,” “Boulart,” or even “bull word.” Enjoy!
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    Welcome back to the Bulwark Coast Hollywood. My name is Sunny Bunch. I’m culture editor at The Bulwark. And I’m very, very pleased to be joined today by Matthew Ball, the CEO of Opelion, and the former global head of strategy for Amazon Studios as well as the author of the Metiverse and how it will revolutionize everything as well as the streaming book, which is what we’re here to discuss today. Matthew, thanks for being on the show.
  • Speaker 3
    0:00:57

    It’s
  • Speaker 4
    0:00:57

    my pleasure.
  • Speaker 3
    0:00:59

    Alright. So let’s talk about the streaming book because I I I I told you this over DMs as I was gushing that it really is it’s wonderful and it has helped reshape kind of how I think about where the streaming wars are and how they got started. But let’s let’s set the stage for listeners here, how do you define the start of the streaming wars? Because streaming itself, I mean, roughly as old as the mass adoption of the Internet. You know, where do you mark the beginning of actual, you know, quote unquote, conflict or competition really?
  • Speaker 3
    0:01:32

    And why does that delineation matter from trying to figure out where things go from here?
  • Speaker 4
    0:01:38

    So it’s a great question, and it’s really where I focus my thesis in this treatment book. There’s three to four different delineations we can make. One is that period from the end of twenty nineteen to early twenty twenty one where nearly every laggard in the so called streaming wars comes to market. We see peacock, H. B.
  • Speaker 4
    0:01:55

    O. Max, Paramount plus all launch. We see several parties who said they would never offer original content, enter the phrase such as to be or Roku, And of course, we see some of the early exits in Quibi and so forth. Another potential dating point is two thousand and seven to really twenty eleven. Apple TV, the device comes to market, the Roku comes to market, Netflix and Hulu launch, Prime Video launches.
  • Speaker 4
    0:02:21

    And so we see those early disruptors come to market. The other point is the one that you mentioned, which is actually the streaming video itself, the technology, began to be deployed in ninety two, ninety three, ninety four to ninety six. You’d be shocked at how mature it was. This is when we had the first live streaming concerts. The first live to air streaming webcams on ABC, but also the mass rollout of technical standards that enable to anyone to live broadcast.
  • Speaker 4
    0:02:55

    But I’d like to start really in the early two thousands. Why? Because that’s when MLB TV comes to market. The first direct to consumer streaming service with a live broadcast, thousands and ultimately millions of subscribers. We’re leasing tens of thousands of streaming videos every year, and that’s when Netflix’s technical developments begin.
  • Speaker 4
    0:03:15

    They scuttled several plans, they delayed their streaming, released by a few years, but that’s when the preparations began. That timeline that spans truly a quarter century plus is important because it reminds us the pace of technological change in displacement is long, We think of the streaming wars as having begun recently and that they might end or mature soon. But in truth, these waves are long. Cable began in nineteen forty eight. It wasn’t until two thousand and two that it passed broadcast.
  • Speaker 4
    0:03:53

    It wasn’t until two thousand and ten that it had peak penetration, and it wasn’t until two thousand and twelve that it started to decline. Were a quarter century into streaming video until the streaming wars begin, and yet we’re still less than one third of all video time in the United States. One tenth globally. If you understand the scope of streaming as much longer, you recognize that we’re in a battle right now, not the end of the war. And that indeed, we may not even know all of the participants or business models that might come to define
  • Speaker 3
    0:04:30

    it. And and in your book, you lay out three basically stages of competition. There’s access based competition to content based competition to platform based competition. But those are just words that I’m saying. What what do they actually mean to to to the folks who haven’t read the book?
  • Speaker 3
    0:04:46

    And should. You should read this. I’m gonna link to it in the email. You gotta read it to understand what’s going on.
  • Speaker 4
    0:04:51

    Well, thank you. One of the ways that I define the very long period of technological change and disruption needs to understand how the basis of competition changes therein. And it’s partly out of my desire to avoid the classic as distribution or content
  • Speaker 1
    0:05:08

    king.
  • Speaker 4
    0:05:08

    We all know in twenty twenty three the answer is both matter. They matter in different ways at different times, and neither is sufficient for success. What I try to do is highlight that when we have a new medium come to market, What matters differs? The opportunities differ? The timing differs.
  • Speaker 4
    0:05:27

    And so I start with access. Which is to say that every now and then we have a fundamentally new delivery technology emerge, which disrupts the old accessibility and enables new entrants to quickly gain share by cannibalizing the old thing. This was cable to broadcast, It was DVD to VHS. It was streaming to pay TV. In that early era, the access era.
  • Speaker 4
    0:05:56

    Growth comes primarily from educating people as to the benefits of the new modality, cannibalizing time from the old modality There’s bountiful growth opportunities for those few players which participate and competitive intensity is low. Read Hastings often talked about the idea that more important than beating Amazon for a given series was convincing more people that streaming was better than linear TV. But eventually, the difficulties of access technologies, streaming video, live video encoding, app development and distribution, customer acquisition, commodify. Streaming video was terribly hard in two thousand and seven, In twenty twenty three, it’s fair to say that some apps are much better than others, and they’re not all the same, but it’s easy. One of the reasons why it’s easy is We have gone from dozens of engineers at the forefront of streaming video to thousands with that experience.
  • Speaker 4
    0:06:54

    It’s the commodification of access innovations business model insights that leads to the influx of new competitors. That’s why in twenty twenty three, we all talk about how many streaming services there are rather than in two thousand and eight when there were two. When that happens, competition shifts from being a pioneer in an access technology to the purpose of access in the first place, which is to watch content. And so we see a huge focus on what content we have that our competitors don’t. You see a surge in green lights in originals.
  • Speaker 4
    0:07:29

    We see each player start taking back their content building up franchises that allow them to say, we’re the home of x, and our competitors have content that they don’t have x. What we’re starting to encounter now, truly, we’ve been on a multi year path to it, is just as access saturated. Content based competition is starting to mature or over saturated. Having a two hundred and seventyth original doesn’t give you the lift that your fourteenth
  • Speaker 1
    0:08:00

    would.
  • Speaker 4
    0:08:01

    Being a service that says we have a signature series may get you one subscriber for one month. But it’s not building defensibility over the long term. All of the streaming services are now cutting back on their libraries because they’re recognizing that they’re not sufficient for competition, not sufficient for profit. And what we’ve seen over the past century in gaming, in audio, in video, in broadband and video distribution is this last phase, which is platform, which is asking yourself what more can we do with the customer we have? How do we monetize them beyond the sole product?
  • Speaker 4
    0:08:41

    We have. And that’s why you start to see Netflix shifting into gaming, HBO Max shifting into podcasting, you see Disney plus adding a shop tab. And my guess is we’re gonna see far more to come.
  • Speaker 3
    0:08:54

    The the the shift to the platform based competition was was interesting to me because it it kind of and and correct me if I’m wrong here, but it kind of jives with the sense I got from your book the metaverse, which is you basically have you you have sites that are increasing in size and scope and what they do and trying to capture attention for longer periods time. I mean, I, you know, I I just took my family to Disney World. I can envision a future in which we buy tickets to Disney World right on the Disney plus app. You know, that’s a thing that makes some sense to me. But is that I mean, I I’m like, how far are we from that being a reality?
  • Speaker 3
    0:09:32

    I feel like it’s still kind of a long way off to convince consumers that this is how they should access everything within a specific company’s walled garden.
  • Speaker 4
    0:09:43

    Well, so there are a few different things that we should recognize here. One such example is that we’ve been here before. My favorite example is I talk about what happened to pay TV distributors, Xfinity or Charter Spectrum, which is they used to be in the business of access. We’re providing access to video, cable, And then throughout the nineties and early two thousands, content based competition emerged. The differentiation came from what you distributed, not that you distributed video.
  • Speaker 4
    0:10:11

    And we saw a massive shift of profitability outside of those who distributed video and to those who created content.
  • Speaker 1
    0:10:19

    That
  • Speaker 4
    0:10:19

    was concomitant with the rise of Direct TV and Dish, which meant that Xfinity used to have zero or one competitor in their footprint and all of a sudden they had three or four. Shifting margins to the content over. By around twenty twelve, EBITDA margins for video distribution or sub ten percent and often zero. Comcast wasn’t making a dollar on a video subscription. It was all going to NBCUniversal or Fox.
  • Speaker 4
    0:10:44

    And so they shifted to their own platform. This is where you saw double play, triple play, quad play. They didn’t make their money on video. They made it on a home phone, on smart home on broadband, most importantly. And they would often sell it a loss, video service, a or b, to get those other revenue sources.
  • Speaker 4
    0:11:04

    And so we see that over time. It’s no different than where Prime started. Prime started around the idea that video is a platform for the rest of our business. Both video prime, but more importantly e commerce and indeed AWS. It fits within a larger business.
  • Speaker 4
    0:11:22

    When you ask this fundamental question of where are we going with these video services, that four a has already started. When you take a look at Disney in November, they rolled out a shop tab. They have already started targeting the ads that you see on the platform based on the content that you’re watching with the argument that they can better tailor their other services, put another way. If you’re watching a lot of Star Wars, they know you’re likely to buy a ticket to Disneyland, and let me tell you, the ad you’re going to see for Disneyland is not focused on Cars. It’s focused on Star
  • Speaker 1
    0:11:56

    Wars.
  • Speaker 3
    0:11:59

    I will to be fair, now I will probably get a lot of cars ads too because I have a four year old boy. Who gets but but that’s that’s neither here nor there. You you mentioned ads. I wanna jump to ads real quick because this was one of the this is one of the, you know, just personally for me, more distressing elements of of your book and kind of where we are in the streaming wars in general, which is the the turn to ads that all the streamers are making now. The the increased reliance on ads and the the desire to kinda monetize that the data they’re getting in the the information to target viewers.
  • Speaker 3
    0:12:33

    I I mean, I personally hate ads and I will gladly play pay more for ad free services. But they are too valuable to give up on entirely. My my willingness to not pay for ads does not make up for the value of ads, isn’t isn’t that right?
  • Speaker 4
    0:12:46

    On average, that’s the case. Now it depends on the individual. It may be that you would be willing to spend twenty five dollars for Disney plus without ads as opposed to the thirteen that they offer. But for the average person, the price that they are willing to pay to avoid ads is less than the revenue that they would generate by watching them. This is a generally observed fact And the fact of the matter is it’s also a bit of a catch twenty two, which is to say the more individuals who opt for the ad free experience the greater the scarcity of video ads that are available for advertisers, increasing their CPM, and in doing so increasing the business case to convert Sony into an ad supported viewer, which means that the delta between the two tiers goes up.
  • Speaker 4
    0:13:37

    Mhmm. And that’s what we see. Hulu, as an example, has increased its ad free price while maintaining its ad supported price. Disney Plus didn’t do the Netflix model of let’s introduce a cheaper tier for our ad service they said let’s keep the current ad free price, the new ad supported price, and kick up the price for the ad free tier. My guess is we will continue to see Disney increase the ad free price, maintaining the ad supported price, so that they can convince more people to enter that lower tier.
  • Speaker 4
    0:14:15

    Again, there are exceptions to that, but we tend to find that’s how it works. And driving that causality is also another mini catch twenty two, which is the users with the most ability to buy out ad inventory are higher income viewers. Higher income viewers are net actually more valuable to advertisers and therefore force the price up even more. Howard Bauchner:
  • Speaker 3
    0:14:42

    Yeah, like I said, it’s a real problem and I’m not excited for to get worse. For me personally, when that’s, of course, the thing I worry most about. The the key here, the the underlying point of this this whole Saga is unlocking shareholder value. So, you know, you you take that case of Lionsgate. Right?
  • Speaker 3
    0:15:00

    Lionsgate decides that it generates more shareholder value to sell their original series, the continental to peacock, then put it on their their streaming service stars. Right? Sony, decides to become the biggest arms dealer on the block rather than pour money into either the PlayStation based network or, you know, or or what else whatever else they’re working on. And now the studios are starting to get into that act as well. Right?
  • Speaker 3
    0:15:23

    Warner’s licenses its content to other streamers and keeping instead of keeping everything on an HBO Max or Max, whatever we’re calling that. Disney is doing kind of the same thing. Are we gonna see something in at least in the short and medium term here? Are we seeing something like a reversion to the norm when it comes to library rights as opposed to original programming, which, you know, makes more sense to wall off
  • Speaker 4
    0:15:45

    on your own. Well, I think part of what you’re describing is exactly that phase from content to platform competition. Which is to say we understand how you thrive in the content era. You make your best content. You make it exclusive to you.
  • Speaker 4
    0:16:00

    But in the case of stars, they were finding out that they could not out monetize their competitors, even their best content, vertically integrated into Lionsgate with their own originals, coming in house was actually not the best way to monetize their customers. And by that, I don’t mean customers of stars. I mean, customers of the John Wick franchise. That forced them into a platform of building an audience in the theater sending it to third party services through the John Wick franchise and Continental. This is a reflection of the maturation of the space.
  • Speaker 4
    0:16:37

    We’re seeing the same thing with Warner Bros. They’re saying we have fans of Batman. There’s a limit to how much we can monetize them on HBO Mac. And so let’s take a back catalog of the Dark Knight and sell it to Netflix. Keep in mind, Dark Knight’s a great movie.
  • Speaker 4
    0:16:53

    That’s from two thousand and eight. It’s sixteen years old
  • Speaker 1
    0:16:56

    now.
  • Speaker 4
    0:16:58

    At the same time, I do think we have to differentiate between types of licensing decisions that are happening in twenty twenty three. Some are happening because of debt. WarnerMedia has few options other than to license its content. For every dollar in equity they have, they have four and a half dollars in debt. It’s funny you make the point of increasing shareholder value.
  • Speaker 4
    0:17:22

    The truth of the matter is, Warner growth discovery does not work for shareholders. It works for bondholders. And that’s the fact of the matter of saying eighty percent of the company is owned by debtors. And that’s driving a lot of licensing decisions. In the case of Starz, we’re seeing licensing because they cannot monetize nearly as effectively.
  • Speaker 4
    0:17:41

    I use this quote from Jeff Hertz. He says that selling the continental was seven to eight times more valuable to shareholders. That’s remarkable. When have you ever heard an IP owner say, there’s a seven hundred percent increase if we don’t vertically integrate. Normally, you would say if we’re both content and distribution, that’s more valuable.
  • Speaker 4
    0:18:03

    There’s another two categories of licensing decisions that we’re seeing. One are those for whom may have significant extra capacity that they cannot economically fulfill. The Walt Disney Company used to make twenty five films per year, Iger took them down to twelve under his franchise strategy. They then acquired Fox can make another twenty five movies per year, but they only make fifteen. So you have a studio that can make fifty films per year, has a back catalog infrastructure differentiated capabilities for fifty films per year but only makes twenty.
  • Speaker 4
    0:18:37

    And so they’re sitting there saying we have excess capacity that our streaming service can’t absorb. And we believe we can monetize by specifically making content which does not fit our model, but we can sell to our competitors. That’s separate from whether or not that’s strategically good. It may be that they empower Netflix more than the revenues they get, but that’s a model. And then there’s a fourth strategy.
  • Speaker 4
    0:19:05

    Which is when these services recognize that much of the library they own is just off pieced. Twentieth Century Fox has, I believe, in excess of forty percent of all Oscar nominated best pictures. Many of which are silent films, but some of which are just Hitchcock. Those are not a great fit for Disney Plus. I think we can argue that Disney Plus may get viewership But it’s hard to argue that Disney plus customers are going to pay more to Disney plus to have celebrated sixties films from the Fox catalog.
  • Speaker 4
    0:19:40

    And so Disney is making the decision that we’re sitting on something with value, which we cannot get value from. That customers would like, and frankly, our talent partners would like to see generating revenue, and so they’re licensing those. Those are four very different situations. The first two come from literal financial stress or suboptimal performance, the latter two are more about incremental revenues. And so that’s relevant as well.
  • Speaker 4
    0:20:09

    Yeah.
  • Speaker 3
    0:20:09

    I you know, you you mentioned something being good for Disney plus versus, you know, not making sense and and selling it off. You know, I I you could make I mean, I think you could make a case that something like the Hitchcock stuff would be good on Hulu. But one of the things one of the things you talk about in in the book is the the again, this is the move to platform based competition, the consolidation of these these apps into one. I just if if I can if I can talk about my own my own thinking and experience here. My my the way I always kind of looked at the streaming wars was you’re going to have more options.
  • Speaker 3
    0:20:48

    You’ll be able to get this but not this. And maybe the cost comes down, but it probably won’t, whatever. And you kind of see that in the Disney plus bundle. Right? You have Disney Hulu ESPN plus.
  • Speaker 3
    0:20:58

    You can get either of them separately or all of them together for a discount. That is not what Disney is doing around the world. Like, Disney Disney has one app for for all that stuff in other parts of the world. And it also seems to be what they are trying to get away from here. It’s what HBO Max is trying to get away from.
  • Speaker 3
    0:21:15

    Right? Warner Bros. Discovery is trying to get away from that with HBO Max. They want everybody on this new app max instead of on HBO Max and Discovery and elsewhere. I I I I wonder look, I I’ll put it this way.
  • Speaker 3
    0:21:29

    From my perspective, as somebody who looks at what customers do and how they behave, I wonder if this is creating more brand confusion in the short term that is absolutely necessary and also if it’s something that they even
  • Speaker 1
    0:21:41

    want.
  • Speaker 4
    0:21:43

    It’s a good question. Look at the end of the day, this is primarily driven by the fact that the thing that destroys all services is churn. It’s very challenging to have the same customer across four different services when they therefore have to evaluate each of them independently might constantly cycle in and out of them and struggle to understand their core relationship. That’s not to say that jumbling them all together into a singular offering is suddenly crisp and clear and valuable. But there’s an understanding or rather an observation that it is easier for the consumer and likely financially advantageous.
  • Speaker 4
    0:22:21

    Let me give you a good example. You’re right to say that Disney seems to be collapsing its SKUs or its services internationally and increasingly inclined domestically. But let’s keep in mind, Disney plus itself is probably four different streaming services in the United States. It’s Disney Kids, It’s Disney preteen, it’s Disney General Entertainment, and it’s Nat Geo. Those could all be separate services.
  • Speaker 4
    0:22:50

    And there are many homes in the United States which would pay eight for one, five for another, five for another, ten for another. Their decision to sell all of them for thirteen dollars is therefore harming the monetization, probably a family like yours and a family like mine. But it leads to more subscribers overall and more importantly significantly less churn. And that’s how the math tends to run out. When you look internationally, it’s in fact five services or six because they’re also blending Hulu in and they’re also blending ESPN plus.
  • Speaker 4
    0:23:26

    Not in a bundle, pay one, get three services in the same app.
  • Speaker 3
    0:23:32

    Right. Right. The the we haven’t really talked about churn at all, and it is it is an immensely difficult topic for these for these companies. But one one one stat that I read recently that jumped out at me. I think it was during maybe maybe it was during the Discovery HBO the Warner Bros.
  • Speaker 3
    0:23:51

    Discovery shareholder meeting was that as much as fifty percent of churn is simply based on people’s credit cards expiring and then them not signing back up. I mean, I I’m I’m curious from from your perspective as as a strategist, how much of how much of churn is incidental versus strategic on the basis on the on the part of the customer to say, we don’t want this anymore. We want something else. We’re getting that.
  • Speaker 4
    0:24:16

    Oh, I mean, a I’m not familiar with the statistic that you’re looking at. It’s certainly different from my understanding. In the streaming book I published online, all of the churn that I’m doing is called active churn. That’s a decision of rather than credit card exp expirations. We should also note that many strategies have emerged to proactively address that, and it’s partly a question of the streaming service themselves.
  • Speaker 4
    0:24:40

    One of the reasons why you’re asked for your credit card expiration is it reduces fraud, which is to say the more points of information that vendor asks from you the better job they can do in ensuring that the transaction is legitimate. But in particular, they ask for your aspiration so that they can say, Sunny in three months, your credit card’s gonna expire. Can you change that? And it is certainly true that a number of services that have had customers for years, never asked at the time, never prompted for it to be added. And therefore, when those three to four years passed, do lose that customer.
  • Speaker 4
    0:25:16

    Because they didn’t even know the credit card was going to expire. But it’s relatively rare. One of the reasons why I would say that is we can see what has happened over time. Since twenty nineteen, the average ten year for a customer has gone from thirty three months to a given service to seventeen months. What that means, of course, is that your time to monetize that customer who you might have spent a hundred dollars to acquire has effectively halved.
  • Speaker 4
    0:25:49

    The number of customers who have canceled three plus services in the last twenty four months has gone from less than six to more than one in four. And it goes up in perpetuity. The quest, the answer of just old credit cards is not sufficient.
  • Speaker 3
    0:26:10

    Yeah. Yeah. I mean, that that is certainly my understanding from just people I talked to are like, yeah, I do Netflix for a month or two, and then I, you know, then I do HBO Max for a month or two. Apparently, I’ve had a subscription to Apple TV plus this whole time. I didn’t even know.
  • Speaker 3
    0:26:23

    It’s it’s It is it is very very interesting. One thing I wanna ask here is about the the kind of stand alone smaller mid level studios. Right? Does is there a future or something like a company like Lions Gate without a a winning streaming service or a company like Columbia Sony Pictures without a, you know, Playstation backed video service. Is is there a is there a place in the future for arms dealer type studios to exist?
  • Speaker 3
    0:26:56

    Or will those all get wrapped up into the the dominant platform based victors?
  • Speaker 4
    0:27:05

    I don’t think that the right question is, is there a place for them? There certainly is. If you can make outstanding content, certainly with franchises that you own, that can be a great business and perpetuity. Sony for example has a fleet of different Spider Man series that are now set up at Amazon. They have all of the PlayStation properties that are being built, they’re making into the Spider Verse, a theatrical film, that business can continue.
  • Speaker 4
    0:27:35

    We can debate whether or not the markup might go from x to point a x or if in fact the greater scarcity might mean that they’ll increase what they’re charging third party streaming services over time. There’s a variety of different theses for that. When you take a look at a company like Lionsgate, they’ve announced that they’re making highlight television series now. We know that there are more Hunger Games adaptations coming. They obviously have John Wick.
  • Speaker 4
    0:27:59

    That can endure. The question is is it a growth business? And the question is, is the company better put to use through acquisition? And do we eventually see one of these parties buy Lionsgate because they can do a better job internally? That’s not yet No.
  • Speaker 4
    0:28:18

    Okay. But but there’s no evidence to suggest that you can’t be a thriving independent media company. It just forces you a little bit more towards how effective has your last two or three years of development, but
  • Speaker 3
    0:28:31

    Mhmm. Mhmm. I mean, it’s it’s more unstable. Is is is the the problem. The there there was a there was a very interesting data point in in your streaming book about how people actually watch.
  • Speaker 3
    0:28:48

    How people are actually watching. What I mean is, like, what they actually watch on What does it mean? What does it mean for Netflix and for everybody else that sign ups in a bit in initial viewings mostly happen on laptops and phones and then shift decisively toward TV viewing by month six. I mean, is this a is does this change what sort of content they create? Or is it just a is it just kind of an interesting
  • Speaker 4
    0:29:10

    thing. Well, so there’s two different insights here, and I think it’s important to separate between them. It’s natural that most customers are required on a mobile device rather than a television. We’ve all tried to log in or pay for something on our television It’s a particularly cumbersome experience even worse if you’re using the dreadful Apple TV remote. It’s just easier to hit subscribe on an iPhone.
  • Speaker 4
    0:29:33

    Yep. And so you’ll see that the vast majority of sign ups happen on a mobile device, but most consumption does not happen on a mobile device. What’s more interesting is that customer tenure is strongly correlated with what percentage of your viewing happens on the television. That is to say that in month one, you will spend more of your watch time on mobile devices than in month six and in month twelve. Over time, you concentrate viewing to the television screen.
  • Speaker 4
    0:30:04

    There are a few different drivers for that. Number one is we find consistently that the best content is watched on the television. And so naturally, as you become more engaged with more series, you might have started stranger things on your iPad in bed, but you get really into it and you wanna watch the finale in the next season on the screen where you’re going to enjoy it The second is not causal, it’s correlated, which is if the big screen is the best screen to watch, then naturally, the customers who churn are more likely to be watching on a mobile device because they’re not as engaged in the content, if you know what I mean. And so we see through a mixture of changing habit and selection bias, centricity around the big screen. And a last point is to recognize that the shows that make a difference that actually leads Sonny or Matt to say, well, I can’t cancel, tend to be the big sci fi epics.
  • Speaker 4
    0:31:08

    Some shows scaled down okay to a four inch or eight inch screen, but the big epics tend not to. And if those are your driving choice, your Game of Thrones, your House of the Dragon, your and delorean, then, yeah, it makes sense that they’re concentrated on the big TV.
  • Speaker 3
    0:31:25

    One one last kind of big area that we we haven’t really discussed at all is gaming. I mean, Netflix is making a big push into gaming. They’re they’re trying to get things there. You you, I think, mentioned in the streaming book the possibility of you know, I I don’t playing Hogwarts legacy on on the the new Max app or something like that at some point in the future. What is what is the what does the future of gaming look like in in in the context of the streaming
  • Speaker 1
    0:31:55

    wars?
  • Speaker 4
    0:31:57

    So one of the points that I try to make when I’m using the gaming example just as as a start is if I’ve been successful in the book and we talked about this a little bit upfront, we recognize that the streaming wars are much longer than we typically think. That they’re thirty years in. And we can appreciate that every video wave has actually been more than a half century. That means that while we might think that the battlefield is set, we know who’s playing, who’s likely to win, and who’s likely to lose. We might be underestimating who might enter.
  • Speaker 4
    0:32:30

    Microsoft was actually one of the first entrants to the streaming wars. In twenty twelve, they’ve established Xbox Entertainment Studios, hired the president of CBS, Nancy Tell him to build up slate. Many of those shows have actually seen the light of day. Halo on Paramount plus started with Xbox studios. Humans on AMC started with Xbox studios.
  • Speaker 4
    0:32:50

    And actually years before any other streaming service did live broadcast. Xbox was doing live broadcast of Miss Teen USA in twenty fourteen. They struggled with that business early on. Xbox and Microsoft were weaker at the time than they are now. Microsoft is now the second most valuable company on Earth sitting on a hundred and fifty billion in cash.
  • Speaker 4
    0:33:15

    They might reenter, and there’s a good argument as to why they can’t. They have fifty five million Xbox owners, they have a hundred and twenty five million members of the Xbox Live subscription service. They have their own content bundle. They’re spending more on original content than almost all streamers are today through their portfolio, and they now own many of the biggest franchises globally. Apple rebooted their video strategy four times.
  • Speaker 4
    0:33:40

    Prime Video has gone through its own growing pains. And I make the point that if you say the streaming wars are a quarter century in, Microsoft could choose to return. It could do that through a Roku acquisition or Netflix acquisition. I also make the point that Sony has been an arms dealer even if they had early aspirations of entering the streamers. But like Microsoft, they have now a hundred and fifty million consumer streaming devices in the home.
  • Speaker 4
    0:34:09

    They have one of the most valuable catalogs globally. And in fact, in Eastern Europe, they are adding streaming video to their Playstation subscription subscription. And so we may find that these players have largely skipped the nastiest parts of the streaming wars. While the battlefield thinned their competitors loaded up on debt, scoop up a Lionsgate, scoop up a Paramount, merge with the Netflix, and use that as a way to return. Whether or not that happens or not is kind of besides the point, it’s the fact that they could do that, and they could do that starting with scale of a hundred million plus.
  • Speaker 4
    0:34:46

    That tells you this is a longer battle than we thought. Mhmm. When it comes to this broader question of gaming, we can see the short term elements. Obviously, this IP is resonating. It’s notable that most of the major gaming companies actually have larger and far more profitable monthly subscription services than all of the big Hollywood companies today.
  • Speaker 4
    0:35:06

    And whereas we debate the future profitability video and whether it could ever match the past, no one debates that the future of gaming isn’t going to be bigger, bigger, and more profitable.
  • Speaker 3
    0:35:19

    Alright. Well, that was everything I wanted to ask. I wanna chew up too much more of your time here. I always like to close these interviews by asking if there’s anything I should have asked. If you think there’s anything folks know about streaming more?
  • Speaker 3
    0:35:29

    Anything else I I failed to ask? What what should folks know about? Well,
  • Speaker 4
    0:35:34

    that’s a good question. Let me put it back to you. What’s the thing you’re least certain about when we look at the state of the streaming wars in two thousand and
  • Speaker 1
    0:35:42

    thirty.
  • Speaker 3
    0:35:44

    In two thousand and thirty, I mean, I My my again, my big question here is is is how does consolidation work for the actual consumer. I mean, are we if we’re moving back towards something like the cable bundle where you you end up just getting like, I’m gonna get a package that’s Netflix and Disney plus and Macs, and it’s gonna cost me, you know, sixty bucks a year or sixty bucks a month. And that basically gets me back to what I was watching before. I don’t know. I mean, I’m I I I tend to look at all of this from the consumer side of things and what makes their life, my life easier and better.
  • Speaker 3
    0:36:24

    And that’s that’s always my my first question. Well,
  • Speaker 4
    0:36:28

    I think this is an easy one, actually. There are all these questions of consolidation, and I think it’s important to delineate between three different types of consolidation that we’ve seen. One is service level consolidation. If you go back to WarnerMedia at the time AT and T acquired it, they had ten plus streaming services. Cinemax, HVOMAX, TNT, and TBS were both prepping one.
  • Speaker 4
    0:36:51

    There was criterion, film struck w b archive, why was film struck criterion and w b archive separate?
  • Speaker 1
    0:36:59

    Mhmm.
  • Speaker 4
    0:37:01

    They slowly started consolidating all of them. I mentioned earlier that we have Disney plus Whereas we could have a kids version, a preteen version, a general entertainment and a net geo service. So we already have these many networks collapsing. Peacock is itself NBC plus USA plus Bravo, and that’s what the future looked like a decade ago. The second element of consolidation is corporate Fox and Disney are now together.
  • Speaker 4
    0:37:29

    Discovery and HBO are now together. And so we do have the reformulation at the corporate layer plus the sister brand layer. The third element of consolidation is happening at the aggregator layer. We know that Amazon and Apple have tried before to replicate the old HBO Showtime Stars Bundle. By offering a discount to rival services, to package together.
  • Speaker 4
    0:37:54

    I don’t doubt that that will eventually happen. But even if it doesn’t financially, they are still experientially lumped together. If you get Showtime and Starz and MGM plus from Prime Video, yes, you’re gonna see three different line items on your Prime bill, but you’re getting them from a single app. Those three elements are returning us to the cable that we knew eleven often hated in twenty ten. But the more important point, And this is where I think a lot of analysis is flawed is everyone says streaming was supposed to be better than pay TV how come it’s more separated and more expensive.
  • Speaker 4
    0:38:37

    And this is to conflate two very different things. We have disrupted business models, we have disrupted delivery, and we have disrupted the hegemanning of, you know, Viacom and NBCUniversal in Disney in twenty ten, but we have not at all disrupted the cost of production. We spend far more making content on an episode by episode basis than ever before, and we make more of it than ever before. There is no way for television to be cheaper if you haven’t actually affected the cost side and instead have seen it worsen. We can talk about whether or not cutbacks and more financial controls at Disney and Warner Bros.
  • Speaker 4
    0:39:22

    Discovery will help. But it’s notable that back in twenty ten, these companies were making forty percent profit margins. They’re now losing tens of percent. And so we’re complaining about the cost of television even though no one’s making money from it. And so if you have that dynamic, we should not expect the consolidation is going to alleviate our wallet.
  • Speaker 4
    0:39:46

    And that’s what’s important. This is incidentally why everyone is so excited about growing UGC about generative AI about virtual production is we’re finally starting to see a way not just to change which pipe and app in company brand name we push video through, but actually how we made the video in the first place.
  • Speaker 3
    0:40:05

    Yeah. Yeah. I mean, it’s again, you you guys gotta read this book, this the streaming book. I’ll I’ll link to it in the email. It is it is fascinating.
  • Speaker 3
    0:40:15

    I could have we could have done this for another hour probably. But I I’m gonna I’m gonna let Matt go here. Thank you for being on the show. I really appreciate it. My pleasure.
  • Speaker 3
    0:40:25

    I look forward to doing it again. And my name is Sunny Bunch from Culture Editor at the Bulwark, and I will be back next week with another of the Boerco’s Hollywood. We’ll see you guys