3–2–1nsight: Media Consolidation — 4.28
This week’s 3 Stories:
AT&T is giving up on media and merging TimeWarner (HBO Max) with Discovery Networks — WSJ
Despite growing subscribers substantially faster because of same-day theatrical and streaming releases wasn’t enough for AT&T to continue to stomach the costs that it would take to make a formidable contender in the streaming space. AT&T realizes they didn’t have the firepower to create enough in-demand content to be a viable player in the space and still pay their dividend and invest in 5G. So they’re now spinning off WarnerMedia to be merged with Discovery and headed by established media executive David Zaslav, rather than ex-Hulu renegade CEO Jason Kilar. Ted Sarandos is probably licking his chops.
Amazon buys MGM for $8.5B — Bloomberg
Not to be outdone by John Stankey’s press coverage, Amazon purchased MGM a week later. Comcast was also in the running to purchase MGM to help bulk up and take on the new TimeWarner Discovery merger, but could only pay $6.5B. Amazon’s purchase is smart because of MGM’s vast library of franchises and content, and the ability to make hit franchises (Rocky, Stargate, Handmaiden’s Tale, Robocop, Legally Blonde, etc.) something Amazon has been craving to make their streaming video service more mainstream. The trickiest franchise though, James Bond, which is still owned by the Broccoli family (that’s right), and likes to get pretty deep in the weeds (see that).
As we continue to talk about streaming, let’s not forget how hard it remains. Lionsgate, thru their Starz service, now has more streaming subscribers than television subscribers, but still saw a 16% drop in overall revenue. Revenue from Lionsgate’s STARZ streaming service was up 154% to $23.6 million in the quarter, but it’s still just a fraction of the $365 million Starz cable channels brought in for the quarter. Let this be a reminder to everyone in the streaming space, unit economics matter, churn is very real, and $9 dollars a month for content is very hard to convince (lots of those streaming sign-ups have come from Starz giving users $25 for 6-month promos, hoping users forget they’ve subscribed and don’t churn).
This week’s 2 Takeaways
Now that content libraries are getting merged Tech is merging media formats for stickier experiences
We can see that the tech giant’s now trying to consume even more attention from their bases are mixing media formats to create loyalty and stickiness. Apple has launched its new true-crime podcast, the Line, which was made by the team that brought Serial to the masses, with an on-screen docuseries integration with Apple TV+. Amazon has brought back Jeff Blackburn (who left Amazon 5 months ago) to run its new global media unit that will feature MGM Content, Amazon Studios projects, Amazon Prime Video, Wondery, and IMDB TV. And finally, Netflix is trying to expand into gaming, as it continues to fight off competitors (Not just Disney+, HBO Max, etc. but you’ll often hear Reed Hastings talk about how sleep and Fortnite keep him up at night more so than other video streaming competitors) and to win new subscribers.
The only way to battle the new media giants is thru beefing up
As tech and streaming giants fight amongst themselves, it means that the smaller players are pawns to be purchased by these companies, or they need to acquire one another themselves in order to build enough scale to compete for consumer’s attention. So we’ve seen this month, news about Buzzfeed considering buying Complex as they consider going public via SPAC. Not to be outdone, Axel Springer is about to buy Axios (who was about to merge with the Athletic) and give Jim VandeHei his second check (Axel Springer launched Politico Europe in 2014) in order to add more content to their library and more editorial to their offerings. Since Axel Springer is now about to close in on Axios, the Athletic is trying to sell to the New York Times (which hasn’t had a sports desk since they’ve shifted to focusing on paid subscribers) but continues to make more than ⅓ of all its revenue from non-news subscriptions.
Driving to this 1nsight
With all the consolidation that is will and is currently happening, new giants will start strategizing to control the consumer demand curve.
Big tech will continue trying to purchase media companies, but as this continues to happen, it’ll raise more scrutiny under the Biden administration. And at a certain point, each of the players will have as much content as they need, which will then shift the chessboard to drive demand in order to gain more consumers, but most importantly consumption time. Apple knows the more time you spend on your iPhone is a win for Apple because it means you’ll be more likely to purchase something that requires their app store, or use Apple Pay, or upgrade your Apple device. Amazon wants to remind you that everything you want or need, physically and digitally, happens better thru Amazon, esp. If you’re a Prime member. More media consolidation is going to happen for the rest of 2021–2022. But don’t get distracted by those stories, instead, watch how Big Tech is going to use those content libraries and new tactics to drive consumer demand and keep you locked in.
