Posts for 'Studios'

Disney reported a $47 million operating profit in its direct-to-consumer (DTC) segment in its fiscal third quarter 2024. The profit comes one quarter earlier than Disney had forecast. The $47 million profit reverses a $517 million loss in the year ago quarter.

While the optics of the profit are indeed positive, in this week’s podcast Colin and I do a deep dive into the profit’s true quality and sustainability. Doing so reveals a fragile picture. First, there are issues about how much of Disney+’s recent subscriber gains are in fact due to the Charter deal, which by some accounts hasn’t been terribly successful in driving active subscribers. Meanwhile, Hulu’s been moving sideways for a while, and there’s no longer transparency about ESPN+’s subscriber count.

Another issue is Disney+’s falling average monthly revenue per paid subscriber which declined further in Q3. It’s noteworthy because Disney’s CFO ascribed it partially to Disney+’s lower-priced ad tier. Yet Hulu actually reported higher average monthly revenue per paid subscriber due to higher ad revenue. So there are some contradictory signals.

Meanwhile, Disney’s aggressive bundling, at deep discounts, may bode well as a longer-term churn-buster, but will almost certainly pressure near-term DTC profitability. Then there’s Disney+’s price increase, which will kick in soon, concurrent with a broad rollout on limiting password sharing. This double whammy is likely to lead to some subscriber losses.

From analyzing the the Q3 financial statement, it’s clear Disney+ and Hulu were still unprofitable in the quarter. It was actually ESPN+ that turned the DTC segment green. But as I detail, further analysis reveals an unusual jump in ESPN+’s quarterly profit level and profit margin vs. a year ago, suggesting Disney may have done a one-time reallocation of expenses from ESPN+ to ESPN that cannot be replicated in future quarters. Speaking of one-time events, Disney may still owe Comcast another $5 billion for the Hulu buyout (it’s not clear if that would hit the DTC line or another).

Finally, and at the risk of piling on, just over the horizon in fiscal ’25 loom big payments for Disney to the NBA for its new rights deal and an earnings drag as the new Venu Sports JV (potentially) ramps up. Note, an early Venu write-off is equally likely.

Add it all up and it’s clear to us that the quality and sustainability of Disney’s first quarterly DTC profit are quite fragile.

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First up on this week’s podcast we discuss Fubo CEO David Gandler’s statement that the company is in a “duel to the death” with Spulu, the new sports JV from Disney, WBD and Fox. He makes a good point that if the 3 companies allow the JV access to their sports networks without requiring the JV to also pay for non-sports networks as companies do with typical pay-TV deals, this would put the JV at a cost advantage compared to pay-TV operators like Fubo.

Next, Variety reported Apple spent $700 million on just 3 movies last year, a bet that Colin and I both believe is far too concentrated for a streaming service that is struggling with high churn and badly needs catalog depth. Finally, both Max and Disney+ are trying to emulate Netflix in cracking down on password sharing and on improving churn. Can they catch up with the clear market leader?

Finally, all the session videos from last week’s VideoNuze CTV Advertising PREVIEW: 2024 virtual are available.

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Matt Damon has provided a “Hollywood 101” class on what ails the industry as he’s made the rounds over the last 2-3 weeks in support for his new movie “Stillwater.” Leave it to a Boston guy to articulate Hollywood’s dilemma authentically and succinctly. But before getting to Damon’s nuggets of wisdom, let me share my own (thanks NYNEX Yellow Pages for the classic “Vanity Cases” ads as a reminder/inspiration).

Last month, in “5 Reasons Going to the Movies is Facing an Irreversible Demise,” one of the reasons I cited was that the quality of streaming TV and movies are going in opposite directions (the former is getting better, albeit inconsistently, and the latter is is in a precipitous nosedive). This reason alone would be enough to sink moviegoing over time. On podcasts this summer I have lamented how, despite the reopening, there isn’t a single movie my wife and I have been motivated to see. That has caused us to improvise and reluctantly do other things with our bits of free time (yes, mostly stream).

But last weekend we did see a movie, “Stillwater;” the first time we had entered a theater since pre-Covid. We saw it in Pittsfield, MA at 8:45pm in one of those luxury theaters with the fold down and heated seats. We got there a little early, plunked ourselves into the middle and waited during the trailers and ads for the audience to fill in. But they never did. Not one other person attended. We sat in a theater all to ourselves and got a “private” screening of “Stillwater” for the princely sum of $10 per ticket.

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Welcome to this week’s edition of Inside the Stream, the podcast where nScreenMedia’s Chief Analyst Colin Dixon and I take listeners inside the world of streaming video.

This week Colin and I parse Disney’s “Black Widow” opening weekend numbers, building on my analysis from yesterday. We agree that it is premature to extrapolate much from “Black Widow” and anyone doing so is on slippery ground. On the one hand, Disney getting 45% of its opening weekend from Disney+ PVOD is very impressive; on the other hand, it is far from definitive proof that streaming’s role will be robust in the first release window going forward.

The backdrop to all of this is of course consumers’ decision-making about whether to stay home and watch any of the myriad streaming originals available in the current “Peak TV” era, or choose to return to the theater. Inevitably, we observe the sizable role that quality plays in this decision-making process. Sadly, streaming TV and movies are going in completely opposite directions on this front, with the former getting relentlessly better and the latter getting relentlessly worse. I believe this alone is a key contributor to consumers choosing to stay home, as I wrote last week in “5 Reasons Going to the Movies is Facing an Irreversible Demise.”

Please let us know what you think!

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Yesterday’s news that Universal Pictures will release certain of its 2022 movies on Peacock no more than four months after their theatrical premiere was just the latest move by the owner of both a studio and a streaming service (in this case Comcast) to accelerate the demise of going to a theater to see a movie.

Universal’s move shouldn’t have surprised anyone. Back in April, 2020, in the early days of the pandemic, Universal decided to release “Trolls World Tour” as a digital rental to mitigate the closure of theaters. That touched off a highly public war of words with AMC Theaters’ head Adam Aron, who threatened to no longer carry Universal’s movies. Aron and NBCU head Jeff Shell ultimately buried the hatchet, signing a new deal that compressed the theatrical window from 90 days to 17. Aron may have gotten the last laugh when AMC’s stock unexpectedly got caught up in the meme frenzy and the company raised over $1.2 billion by issuing new shares over the past few months.

Of course, Universal is following a playbook being run by other cross-owned studios/streaming services. Disney has simultaneously released a number of its movies in theaters and on Disney+, experimenting with the premium rental model. ViacomCBS is compressing the theatrical window for Paramount movies to get them onto Paramount+ as quickly as possible. And of course WarnerMedia set off a firestorm back in December, ’20 when it abruptly announced all of its 2021 Warner Bros.’ slate would be simultaneously released on HBO Max (that decision was reversed for the 2022 slate).

Taken together, it’s pretty clear that studios are delicately, yet aggressively, prioritizing their streaming services over theatrical, irrespective of whatever soothing assurances studio executives continue to offer about the importance of the theater experience to assuage chain owners. But in reality, the studios’ moves are just one of at least 5 reasons why going to the movies is facing an irreversible demise as streaming upends every corner of the media and entertainment industry.

Read the 5 reasons

The Wall Street Journal reported yesterday that the FTC will be the agency to review Amazon’s acquisition of MGM. A review was expected, either by the Justice Department or the FTC. The plot thickener here is that the brand new FTC chair is Lina Khan, a law professor and journalist who was confirmed by the Senate last week in a bipartisan 69-29 vote. Importantly Khan is a critic of Amazon and Big Tech, having written a widely circulated article, “Amazon’s Antitrust Paradox,” in 2017.

The article argues, in a nutshell, that the current approach to antitrust, which is focused on “consumer welfare,” is insufficient to oversee platform-based businesses like Amazon which can use predatory pricing for their overall competitive benefit. Rather, Khan believes that antitrust oversight needs to be driven by gauging the concentration of market structures and competitive process, which she writes is a more traditional approach. Khan shares five factors for how to evaluate the competitive process.

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Welcome to this week’s edition of Inside the Stream, the podcast where nScreenMedia’a Chief Analyst Colin Dixon and I take listeners inside the world of streaming video.

After weeks of rumors, Amazon officially announced its acquisition of MGM for $8.45 billion. On this week’s podcast Colin and I explore what the deal means to Amazon and to its Prime members. Colin sees benefits to Amazon beyond bolstering Prime member retention and acquisition, whereas I think these are the deal’s primary rationale.

Nearly five years ago, Jeff Bezos articulated the “flywheel” dynamic of Prime - how video contributes to member acquisition, usage and retention (jump to the 37 minute point in the video interview). I’m guessing that Amazon did extensive consumer research on different parts of the MGM massive catalog to understand how filtering them into Prime could move the membership needle.

While the James Bond franchise has received a lot of attention, the MGM catalog includes 4,000 movies and 17,000 TV show. These, plus the potential spinoffs or as Amazon’s Mike Hopkins put it - “the treasure trove of IP in the deep catalog that we plan to reimagine” - give Amazon a huge amount of programming optionality for years into the future. It will be fun to see how Amazon curates all of this programming into Prime.

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Back on November 13th, the day that Disney+ launched, I wrote, “Disney+ is a Winner.” I went on to describe my first experiences with the new service - the seamless sign-up process, extensive content, impressive UX (modeled mainly on best practices gleaned from other streaming services like Netflix), ability to download content for mobile use, etc.

My main takeaway then was: “Disney+ is a winner. Period. End of story. It will have millions of subscribers by the end of this holiday season, and a multiple of that a year from now. As international markets roll out, the millions will multiply again, many times.” In other words - although I’ll be the first to say that there are no guarantees with anything in life - Disney+, with its ridiculously low $7/mo price (and free for certain Verizon Wireless subscribers) - looked as close to a sure thing as I’d seen in a long, long time.

With Disney’s fiscal first quarter earnings report yesterday, it became official, Disney+ IS a winner. Period. End of Story. Disney reported having 26.5 million subscribers at the quarter’s end, Dec. 28th in the U.S and Canada. Since then Disney+ has gained another 2.1 million subscribers to be at 28.6 million as of this past Monday, Feb. 3rd.

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The biggest piece of news from last week’s Disney+ mega event was certainly the reveal of the service’s rate: just $7/month, or $70/year, and its implications for competitors, most notably Apple TV+.

Back in September, 2017, just after Disney CEO Bob Iger announced Disney was shifting its strategy toward a direct to consumer (DTC) model, and gave a preview of the massive trove of Disney/other content that would be included, I wrote that success for the service would be highly dependent on its price.

Would Disney+ be priced on the lower end of market expectations (I speculated about $10/month) to achieve strong adoption like Netflix has? Or would it be priced on the higher end (say $20-$25/month) in a market “skimming” approach like what HBO Now has followed? Given the money Disney would be foregoing in third-party distribution fees by going DTC, there was huge conflicting pressures on the pricing decision.

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Large corporations’ priorities are testing creative freedom as more shows than ever compete for attention in the “Peak TV” era and video becomes a critical C-level focus. Exhibit A is Apple, which according to a report yesterday from the NY Post, is vexing creators with an abundance of suggestions (or “notes” in industry parlance) on their shows. The notes, which apparently include some from CEO Tim Cook himself, tend to emphasize Apple’s desire to keep shows “family friendly.”

The goal makes perfect sense; nothing is more important to Apple than its brand image. The prospect of seeing an “Apple Original” icon in the opening credits, followed by an opening scene including profanity, violence or nudity, would be a jarring juxtaposition. Yet this is the “Peak TV” world we now live in; with so many shows competing for viewers’ time, those that are most original and creative, and yes, often include attention-grabbing early scenes, stand out (for a point of reference recall that in the first minutes of Netflix’s “House of Cards” pilot, Kevin Spacey’s character puts a wounded dog out of its misery with his own hands).

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On Disney’s earnings call earlier this week, CEO Bob Iger was asked about the company’s video app strategy - would it be interested in launching one big “aggregated” app housing all of its content, or will it continue to pursue multiple apps with each targeting particular audience segments?

It’s an interesting question because it goes to the heart of whether consumers prefer a big basket of content at one price (the way the pay-TV industry’s multichannel bundle has been effectively offered) or more discrete content services that consumers individually choose to pay for (as has emerged with streaming video and music services, plus a wide variety of other apps)?

I believe Iger’s explanation of Disney’s app strategy was right on the mark:

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I’m pleased to present the 410th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.

Our first topic this week is data from a new Vimeo report showing that 60% of people who sign up for a free trial with an OTT service convert to become a paying subscriber (with an app, the rate jumps to 72%). As Colin and I discuss, these rates seem incredibly high, especially in the context of “freemium” service conversion rates which are often less than 10%. Granted, it’s not a pure apples-to-apples comparison, but still, the Vimeo data makes a compelling case for OTT services to offer free trials.

We then switch gears to discuss the Oscars which notched its lowest-ever broadcast audience this past Sunday night, with 26.5 million viewers. We explore the range of issues affecting the Oscars, some of which relate to the divergence between box office hits and award winners while some are more about changing viewers’ behaviors and fragmentation. The Oscars ratings reflect an industry in the midst of a huge change.

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I’m pleased to present the 391st edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia (apologies in advance, my audio quality is low).

We cover 4 different items this week starting with the news that 4 major studios have joined with Disney’s cloud-based venture, now renamed “Movies Anywhere.” The move validates Disney’s prior decision not to join UltraViolet and presents an exciting consumer value proposition incorporating multiple online stores and spanning key devices.

Colin then shares highlights of new global research from Ericsson Consumer Labs. No surprise, the report showed a big shift in viewing from linear to on-demand and also much higher satisfaction scores for on demand video services vs. traditional TV.  The report comes just ahead of the Q3 earnings season which is likely to show an uptick in cord-cutting.

We then turn to a report from CNBC that Amazon is making moves in video advertising. Colin and I believe this would make a ton of sense from multiple perspectives.

Reminder that next Thursday, October 19th we’ll be hosting a webinar on streaming sports, hosted by Akamai. Join us!

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Though it won’t launch until late 2019, anticipation for Disney’s entertainment-focused OTT service further increased last week when CEO Bob Iger said at the Bank of America investor conference that the Marvel and Star Wars films would be a part of the service. Whether they too would move over from Netflix was a key unanswered question when Disney initially announced the OTT plan last month.

Iger also detailed everything that’s intended to be included in the service: the entire output of the Disney studio plus Pixar and Marvel, 4-5 original live-action movies exclusively for OTT, a library of 400-500 films, 4-5 original Disney-branded TV series and 3-4 TV movies per year, 7,000 episodes of Disney branded TV, including recent seasons of Disney Channel programming (though not in-season episodes) and thousands of shorts.

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I’m pleased to present the 383rd edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

On today’s podcast, Colin and I discuss how Disney’s blundered 2012 content deal with Netflix has now come home to roost. Even though Disney’s content was only activated on Netflix last year, this week Disney announced it won’t renew the Netflix deal and will instead launch its own entertainment-focused SVOD service - but not until it’s able to in 2019.

Colin and I agree that 2019 is a lifetime away given how fast the video world is moving. Importantly, the competitive environment for kids programming is already very crowded and will only intensify over the next 2 years as others’ investments accelerate. While Disney’s content is the gold standard, for many reasons we discuss, the company success in SVOD is far from assured.

Disney painting itself into a corner is a textbook example of the consequences of prioritizing short-term gains over long-term strategic flexibility. Though the original Netflix deal was done in 2012, its ramifications will reverberate for years to come.

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By now we’re all familiar with the 3 big announcements Disney made yesterday: 1) a plan to launch its own entertainment-focused SVOD service, in turn sunsetting in 2019 its Netflix licensing deal for Disney/Pixar content, 2) a plan to launch an ESPN OTT service and 3) spending $1.58 billion to buy another 42% of BAMTech and take control of that business.

Focusing on Disney’s entertainment SVOD service it looks pretty clear now that by signing the original December, 2012 licensing deal with Netflix, Disney blew a big strategic opportunity to get in front of the trend toward direct-to-consumer online distribution.

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In an interview at Lionsgate’s first investor day, Liberty Media chairman John Malone praised Netflix as having a “nirvana business model” while calling out traditional pay-TV distributors for being “asleep at the switch” as their legacy “toll gate” video business models were disrupted. Malone highlighted Netflix’s direct-to-consumer, global scale and complete control as key benefits.

However, Malone wasn’t all doom and gloom about traditional pay-TV distributors, which he sees as morphing from being “video delivery businesses” to “connectivity businesses.” Malone thinks this change in mindset will lead to distributors breaking with tradition and offering premium networks such as Starz in combination with broadband, as opposed to being available only on top of multichannel bundles. But he would not provide any timetable for when this shift might occur.

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If you have kids that love to gorge themselves on Disney, Pixar and Marvel movies, then today's news that Disney Movies Anywhere (DMA) has been integrated with Google Play, allowing Android users full access to their purchased movies, is a huge win.

Since February, when Disney Movies Anywhere launched, movies have only been viewable on the web, in iTunes and on iOS devices. Given the close Disney-Apple relationship, it made a ton of sense for Disney to launch DMA with iTunes. However, there's a big mobile world beyond Apple devices, with comScore reporting Android accounted for 51.5% of smartphones in July '14 and IDC recently reporting that iPad market share has dropped to less than 23%. Getting beyond Apple was clearly an imperative for DMA.

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I'm pleased to present the 244th edition of the VideoNuze podcast with my weekly partner Colin Dixon of nScreenMedia.

Netflix kicked up a lot of dust earlier this week, when it announced the sequel of "Crouching Tiger, Hidden Dragon," produced by The Weinstein Company, will be available simultaneously as part of Netflix monthly subscriptions and in IMAX theaters when it premieres in August, 2015. The so-called "day-and-date" strategy prompted two of the three big U.S. IMAX chains, Regal and Cinemark, to declare they won't show "Crouching Tiger" on their screens.

The core issue here is whether a meaningful percentage of Netflix subscribers will opt to watch the movie as part of their subscription, thereby cannibalizing potential theater sales. Colin and I agree this risk is high, mainly because a family of four would pay at least $60-$80 just for tickets to see the movie in IMAX, a stark premium over their $8 Netflix subscription.

Admittedly, IMAX is a very unique experience, but with the quality of today's HDTVs and home theater, for many, watching at home is quite stellar. As such, theater owners seem well justified in boycotting the movie to preserve their long-term value proposition.

The "Crouching Tiger" move raises a host of other questions Colin and I also dig into: Will it have a positive impact on piracy? Is Netflix signaling a serious push beyond TV into movies (see also its 4-movie Adam Sandler deal this week)? And, is Netflix shifting toward a more exclusive content strategy?

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In a key test case of whether standalone SVOD services can succeed, even when well-branded and targeting appealing audiences, Sesame Workshop has unveiled its own service today, dubbed "Sesame GO." The ad-free service carries a $3.99/month or $29.99/year fee and includes the newest full-length episodes of Sesame Street, a catalog of Sesame Classics and two seasons of Pinky Dinky Doo.

Sesame GO uses Kaltura's MediaGO, a "Netflix-like" OTT solution for content and service providers to quickly launch SVOD services.

At first blush, Sesame GO's ad-free, child-centric UI, featuring popular content, would seem like a pretty strong bet. However, Sesame GO is entering an increasingly competitive landscape for online kids content created partly by Sesame's own licensing practices.

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