REVEALING INSIGHTS
PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business.
PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business.
Scarcity is the linear distribution model’s historical moat. The linear model enabled multichannel video programming distributors (MVPDs) to aggregate millions of households locally, regionally and later nationally.
As I wrote last year, scarcity as a value proposition poses a problem for investors and advertisers in 2023: “the technological, operational and financial structures required to create scarcity don’t seem to have an obvious business logic to them. The role of a gatekeeper in media outside of Amazon’s and YouTube’s business models is no longer clear.
Newfronts and Upfronts will take place in May as broadcast and linear viewership decline. Most projections estimate Upfronts revenues will be flat year over year. Other projections foresee demand in the scatter market — where advertisers buy TV inventory in real time — remaining soft. Procter & Gamble told investors last year that it is “actively shifting” its spending away from linear non-targeted TV into programmatic and digital spend. That should point to a boost in CTV spend instead of linear. Ad spends grow between 10% and 27% in 2023.
The streaming market faces a “misalignment” issue before Upfronts, driven by three key factors. First, linear networks still sell linear inventory without effective ad targeting solutions. Second, tech companies are disrupting the linear distribution model and redefining “premium content.” Third, major advertisers such as P&G are moving spending away from Upfronts and towards programmatic and real-time advertising.
Two PARQOR essays (in February and in March) answering the question, “Why Don’t We See More Crunchyrolls?”. Both essays used the same insight: because media companies have millions of credit cards on file, they should be able to figure out additional direct to consumer models. So why is that not happening? Why aren’t there more companies imitating Sony by building a “flywheel” around a streaming service through mergers and acquisitions? Crunchyroll has become a growth machine for Sony.
Returning Disney CEO Robert Iger has dismissed that flywheel approach. His successor and predecessor Bob Chapek tried to build “Disney Prime”, an incentives-driven model across the Disney ecosystem and upon Disney+. But if one subscribes to the Crunchyroll model, Chapek was building the foundation of a new business model. At the same time, Iger may be implying that Disney’s value proposition in streaming is more niche. Therefore, any flywheels that hyper-serve that fandom are better than a model that aims to entertain everyone.
WWE CEO Nick Khan flipped the script on this point last week, as I wrote in Monday’s essay. He argues WWE content seems necessary for the Peacock ecosystem to work the way NBCUniversal intends it to. WWE audience engagement ties together NBCU’s $22.5 billion in overall content spend, and $3 billion on Peacock. This pitch flipped any perception that NBCUniversal may be subsidizing the WWE.
I asked in December’s opinion column:
“Who is the “someone else” with the next exciting, premium-quality story to tell at extraordinary scale? The math of blockbuster hits (1%) tells us there should be as many as 20,000 creators in MrBeast’s league. But it’s not clear there are even 2,000.”
A recent letter to creators from new YouTube CEO Neal Mohan changed my mind. First, it still seems difficult to name 2,000 creators in the same league as Jimmy Donaldson aka MrBeast. YouTube’s blog often highlights creators who have recently reached 1 million subscribers. But, it’s not clear whether those creators are closer to MrBeast (141 million subscribers).
Second, Mohan’s letter focused on how “YouTube offers the biggest creative canvas of any platform”. Mohan announced YouTube is expanding the number of formats it serves: Shorts, podcasts, and PrimeTime Channels. It also noted, “TV was our fastest growing screen last year, and we’re seeing growth and momentum internationally.” YouTube reaches 135 million monthly connected TV users in the U.S. It has begun to dominate Nielsen’s The Gauge, a monthly measure of total TV and streaming consumption in the U.S.
Third, users are also watching creator content on Meta’s Facebook and Instagram, and Snapchat and TikTok. This implies tech companies may offer more content that both users and advertisers are comfortable considering as “premium” content.
Last, Robert Iger’s distinction between “undifferentiated” general entertainment and Disney’s core franchises and brands also plays into the picture here. I argued that distinction is a challenge to Disney management to recognize the threat of free ad-supported TV services (FASTs). Meaning, “premium content” as the linear ad market defines it is increasingly on FASTs.
PARQOR is the first third-party newsletter published on The Information Newsletter Network.
Andrew is the author of Medium Shift, a monthly column on The Information tracking the transformations underway in the media business. He delivers unique analysis about the ”streaming wars”. He focuses on the driving assumptions, the internal analysis, the goals for driving enterprise value, and the risk/ reward calculation. PARQOR started in February 2016 as a free weekly newsletter about the digital video marketplace.
He is a former Viacom executive who worked closely with senior and c-suite executives across MTV Networks and BET Networks divisions between 2005 and 2016. Andrew has been writing about digital video and streaming video since 2015.
He is an independent, sometimes contrarian, writer who applies a blend of factual evidence and analysis to deliver tangible, actionable business insights for his readers.