Disney, WarnerMedia, NBCU wrestle to balance value of cable and streaming

Sunisa Lee (Gold) from the USA celebrates the podium on July 29, 2021 at the Ariake Gymnastics Center in Tokyo at the award ceremony of the women’s all-around final in artistic gymnastics during the Tokyo 2020 Olympic Games at the Ariake Gymnastics Center in Tokyo.

Lionel Bionaventure | AFP | Getty Images

If the biggest challenge facing the media last year was introducing subscription streaming services, this year’s unifying dilemma is figuring out what to bet on.

The tension between streaming video, theatrical release, and linear television leads to some strange choices that will confuse consumers in an increasingly cluttered landscape.

“The challenge that all these companies face – the key question – is what content goes where, who decides and why?” Said Rich Greenfield, media analyst at LightShed Partners.

Program decisions can change the way the public sees streaming video. So far, most media companies have marketed streaming video as a complement to traditional pay TV. This is the reason why so many products are named with the suffix “plus” – Disney +, Paramount + by ViacomCBS, Discovery +, etc.

In the long run, any streaming platform could become the home for a media company’s entire programming. The “pluses” are essentially cut off. ESPN + can just be ESPN, with everything ESPN has to offer.

But the world is not there yet. And the results are becoming increasingly confusing for consumers as new programs are developed specifically for streaming services and the best of linear television still doesn’t show up in streaming.

The flowing labyrinth

For scripted television series, media executives have largely made the decision that streaming services will be the home for original programming of the highest quality. Disney, AT & T’s WarnerMedia, Comcast’s NBCUniversal, and ViacomCBS are all trying to convince Wall Street that they can grow beyond traditional cable television. They use new hit shows like “The Mandalorian”, “Mare of Easttown” and “Yellowstone” as bait to attract subscribers. Results will vary from service to service, but all major new streaming services are growing by millions of customers every quarter.

In the case of films, there is a film-by-film disagreement between the various services. Disney has added the Pixar films “Soul” and “Luca” to its Disney + service as it was released at no additional charge. For Jungle Cruise, Black Widow, and Raya and the Last Dragon, the company decided to get users to spend an additional $ 30 to stream the movies before finally subscribing to them for free Provide. NBCUniversal placed “The Boss Baby: Family Business” on its paid tier of “Peacock” but only released “F9” in theaters. WarnerMedia has decided to put its entire list of 2021 films directly on HBO Max, but it will not do so for blockbuster films in 2022.

For news and sports, most media companies have kept their most valuable programming exclusively on traditional cable television. The most watched prime time programming on CNN, MSNBC and ESPN is still wrapped up in the cable bundle. This has allowed executives to tackle the steady but not yet overwhelming surge in pay-TV cancellations and keep a highly profitable business alive that makes billions of dollars each year.

Choice overload

NBCUniversal takes on the challenge of distributing valuable programming while broadcasting the Olympic Games. Executives can choose to broadcast live and recorded events on the NBC Broadcast Channel, NBC Cable Networks, NBC Authenticated Apps for Cable Subscribers, NBC Free Apps, Peacock Free Tier, and Peacock Paid Tier.

The variety of choices has created a complicated ecosystem as NBCUniversal seeks to accomplish multiple goals at once. The company plans to boost Peacock subscriptions, appease pay-TV distributors who have agreed to year-long fee increases for receiving unique content, and maintain expensive TV advertising rates by appending commercials to exclusive live programming.

“It’s the innovator’s dilemma in action,” said one veteran television manager. “You know the linear TV world is collapsing, but you’re trying to stay on the Titanic for as long as possible. At the same time, you’re setting up the lifeboats, which are digital and streaming.”

So that the numbers work

Disney is already facing a major streaming dilemma with “Monday Night Football” next year. In March, the company secured the rights to stream the multi-year most-watched cable series on ESPN + as part of its new TV rights agreement with the National Football League. But Disney and ESPN haven’t said anything about when there will actually be Monday Night Football on ESPN +.

ESPN is by far the most expensive network in cable television. It received this award because it was the only way Americans could watch Monday Night Football and other popular sporting events. If Disney begins moving previously exclusive programming from ESPN to ESPN +, pay-TV distributors will push back future tariff increases and millions of consumers will be given another reason to shut down cable television.

The math makes this calculation difficult. Starting August 13th, Disney will charge $ 6.99 per month for ESPN + following a recent price increase. But Disney makes more than $ 9 a month per cable subscriber for ESPN in pay-TV distribution fees, according to Kagan, the media research division of S&P Global. When combined with the other ESPN networks, Disney Channel and ABC, Disney makes more than $ 16 a month.

In other words, for every customer who cancels cable, Disney loses more than $ 16 a month. Will it have to charge more for its streaming products to break even? and that’s not even the advertising loss associated with its linear programming that dwarfs streaming video advertising revenue.

“Nobody is willing to split the linear ecosystem because it makes so much money,” said Greenfield. “So they all balance managing legacy assets with future investments that are free cash flow negative to show Wall Street that they are trying.

Message programming decisions

NBCUniversal and WarnerMedia announced this month that they will be hiring hundreds of new employees to improve their streaming news services.

Rather than simply duplicating MSNBC, CNBC, and CNN programs on Peacock and HBO Max, media companies are adopting a different strategy. CNN is building a subscription news service, CNN +. Andrew Morse, CNN’s chief digital officer, said he plans to hire 450 people to develop and promote new series and newscasts. NBCUniversal News Group chairman Cesar Conde announced plans to hire nearly 200 new employees for his news brands, most of whom will support NBC News Now, the company’s flagship streaming network.

The decision to create separate programs for streaming – some of which may duplicate the content of what is already being broadcast on linear television – can be viewed in different ways.

One could skeptically see it as a waste of resources, filled with redundancies, as a “moment in time” decision to keep the exclusivity in the cable bundle, which may no longer exist in two or three years.

However, NBC News executives say the investment recognizes that streaming audiences are not the same as linear viewers. This should lead to programming choices that recognize that digital viewers tend to be younger and more diverse.

“We’re constantly thinking about how we can optimize our journalism for each distribution platform,” said Noah Oppenheim, president of NBC News. “How do we engage this new audience? Sometimes the answers lead to different faces on the screen, to different approaches to storytelling, to a different perspective on the world.”

It’s unclear if there actually is an audience for a streaming-only news network – especially one that charges consumers a monthly subscription fee, like CNN +, which debuts in 2022. The idea of ​​programming a younger audience is suspect as a video message. Broadcasting, whether streaming or traditional television, may simply not be attractive to those under the age of 25. The decision to invest more in streaming news could result in a gradual decline in investments in broadcast or cable productions as overall revenues shrink.

Chris Berend, NBC News’ chief digital officer, said he was confident that further investments in NBC News Now will pay off as he has already seen the time invested in the existing product, which launched in 2019. NBC News Now is free to consumers and is advertising-supported.

“We’re incredibly excited to see the millions of hours audiences spend on NBC News NOW and how they will grow with our investments,” said Berend. “This time spent, which on some platforms is more than an hour per visit [like YouTube], is a clear indicator that we are satisfying our audiences on many platforms, each with their own demographic nuances. “

Disclosure: NBCUniversal is the parent company of CNBC.

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