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Streaming video no longer impresses investors: What’s next?


Temuera Moron plays Boba Fett in the movie “The Mandalorian.”

Source: Disney

Over the past two decades, entertainment and media companies have tried to convince Wall Street that their streaming video strategy is strong enough to compete with traditional pay-TV channels.

This was the thesis: Directly taking more money from consumers than collecting fees through wholesale pay-TV models will ultimately be better than bundle cable TV. If not, it is at least sufficient to sustain.

This thesis was successful for a time. The rise of streaming video was accelerated by the pandemic. People were looking for entertainment alternatives while trapped in their homes. Quart after quarter between 2020-2021. Netflix, Disney, AT&T‘s WarnerMedia, NBCUniversal’Peacock ViacomCBSParamount+ and other streaming services show consistent growth. CNBC has charted.

Disney almost doubled its share price from $79 per share during the pandemic to $155 at the start of 2022. Netflix gained 71% between its March low and the beginning of the year, continuing its torrid pace.

But after Netflix forecast first quarter subscriber additions that missed analyst estimatesInvestors seem to be less interested in streaming or have cooled their enthusiasm.

Netflix has now reached 222 million subscribers worldwide. The company is expecting just 2.5m net additions for the first quarter. This follows an 8.3 million increase in subscribers during the fourth quarter. Netflix shares fell 37% this month (CHK at CLOSE) alone. Disney’s January decline was 13% and it reports its February earnings. (CHK)

It seems strange that investors would be scared by a low quarterly Netflix forecast. However, a slowing Netflix growth rate could mean that the global addressable streaming market for Netflix is much smaller than originally expected.

Rich Greenfield, LightShed analyst told CNBC he still believesThis number can be described as “six, seven or eight hundred million subscribers”. However, it is possible for the actual number to be significantly lower.

This would change the value proposition for the streaming industry. Netflix could focus on raising pricesInvestors can reduce content spending by cutting back treat it more like a value stock. Future subscriber growth could be more important than free cash flow.

Cutting content spending will likely lead to slower subscriber growth, particularly as more competitors increase their content spend and reach globally in order to expand their customer base. Peacock, NBCUniversal’s Peacock, announced that it will double its content spending to $3 billion in 2022 and $5 Billion by 2020. “over the next couple of years.”Jason Kilar, WarnerMedia’s Jason Kilar reports that HBO Max will be expanded internationally by WarnerMedia in 2022. told CNBC this week. HBO Max currently exists in 46 countries, while Netflix is available in more than 190.

“If content spending is slowing down when the rest of the world is increasing, there is a risk that you will have fewer hits.” said Michael NathansonMoffettNathanson equity analyst –

Reed Hastings, Netflix’s Co-CEO speaks at the 2021 Milken Institute Global Conference. It was held in Beverly Hills (California), U.S.A., October 18, 2021.

David Swanson | Reuters

In late 2020, Disney dramatically bumpedThe company projects that Disney+ will have between 230 and 260 millions subscribers globally by 2024. (The previous range was 60-90 million.

It’s possible that Disney may not be able to reach its new target, given Netflix’s first quarter subscribers forecast. That could push investors to further sour on streaming — making NBCUniversal’s decision to live with billions of dollars in near-term losses from PeacockIt is much more difficult to strategize.

Possibilities for solutions

Media companies have spent the pandemic reorganizing their companiesStreaming is more popular than traditional pay TV. continues to hemorrhage subscribers. All industry stakeholders should work together to continue the story of growth. There are four options.

Multiple services can be bundled together. Bundling is the simplest way to revive growth. Many media executives privately stated they were shocked that bundling is the simplest way to restart growth. Google, Apple AmazonThey have not shown any interest to develop a cable-like streaming service that includes a bundle with streaming services, which can be purchased at a discounted price.

Bob Iger (ex-Disney CEO) said, “Everybody is trying,” said about bundlingIn a New York Times interview with Kara Swisher. “I doubt they will all succeed,” he said.

Bob Iger, Chairman and CEO of The Walt Disney Company.

Katie Kramer | CNBC

It seems inevitableSome streaming service providers will partner together and provide products at a discounted price. The bundled deals can grow in size once this happens, and include more services.

Bundling streaming services with other benefits One other idea is to have companies such as Comcast or Disney offer Amazon Prime-like service that includes streaming subscriptions and offers from other companies such as discounted tickets to the theme parks and merchandise.

A Disney Prime service with discounts for Disney World could reduce streaming churn. This would be a benefit to an company that still trades largely on streaming numbers. A person close to the situation claims that Disney had considered the idea, however, they decided streaming video wasn’t connected enough to buying toys or going to the theme parks.

Bundle streaming and third-party product. Another option is to go further outside the box and bundle streaming subscriptions into larger packages. This could include third-party products. Digital distribution allows you to bundle TV with other TVs. This is because TV is typically sold as a single package. Streaming services could bundle with digital mediaOder DoordashOder Stitch FixOr any other monthly subscription.

Gaming. Media companies are last but not least can follow Netflix’s leadand shift the investor narrative towards gaming. After Microsoft, this became a little more challenging. agreed to buy Activision Blizzard this month for $69 billionA sizable acquisition by a legacy media firm like Comcast, Disney or Yahoo would be a great way to build a strong gaming presence. Acquisition Take-Two Interactive (which itself is trying to bulk up after agreeing to buy Zynga for $12.7 billion)Oder Electronic ArtsThere are two options. It is not clear if Comcast or Disney will follow this path.

Iger stated, “I don’t believe there are synergies in buying entertainment companies.” said of why media hasn’t bought large gaming companies.

The first phase is finished. Phase one is over.

If everything else fails, there’s always the metaverse.

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