But first, a quick note on the events of the past week

OTT streaming

Outline of Newsletter #215

I have a curated a Twitter feed for this newsletter with the twin purposes of (1) curating stories about the OTT streaming marketplace, and (2) gauging sentiment and perspectives on developments in the OTT streaming marketplace.

This past week was the first time, ever, when neither purpose could be reasonably accomplished: almost everything in my feed was related to the murder of George Floyd, and the protests which ensued.

It is all heartbreaking to live through, and it is especially heartbreaking because close friends and colleagues live with the fear that what happened to George Floyd will happen to them, to their children, or their families because of the color of their skin.

Black lives matter. Black culture matters. Black communities matter.

So, needless to say, nothing worth devoting 2,500 words to emerged in my feed last week, and 2,500 words feels onerous in a moment like this.

So, for those of you who still feel like you are in a place to read, I still feel like I am in enough of a place to write. I am going to keep this mailing short, focusing on the Curse of the Mogul theme I like to revisit as a lens on recent market developments.

1. Spotify, Apple TV+, and other OTT platforms dance with The Curse of the Mogul

The Curse of the Mogul argues “CEOs believe the media industry involves managing creative talent and artistic product”, and therefore the media industry “is not subject to appraisal using traditional strategic, financial or management metrics.” For this reason, the “curse” ends up being for shareholders, who often see content creators reap greater returns than they do.

This Curse of the Mogul lens highlights a tension that has been emerging in the streaming marketplace: whether the extraordinary compensation of creative talent in the pursuit of building streaming services is delivering value to shareholders. Spotify, Apple TV+, and HBO Max seem to be trying to thread this needle between spending on creative talent and building out viable DTC platforms, but it is only the two OTT video streaming services that are falling victim to the Curse.

2. Key question: What value does Joe Rogan bring to Spotify?

Podcasts are a win for Spotify, benefitting “the platform as a whole”: the implication from Spotify is that podcasts make their conversion funnel, on-platform, work more effectively, and that drives growth, reduces churn, and generates additional ad revenues. That business logic is part of the bet on Rogan.

But, there are two outstanding red flags: the $100MM cost of Rogan’s contract, and how many of the 190MM Rogan downloads Spotify can convert to Spotify accounts. The latter issue is a funny way to frame an intangible: what percentage of 190MM downloads will follow Rogan to Spotify? Because, according to Spotify’s emerging business logic for podcasts, any growth in podcasts will benefit the platform (which implies, indeed, “Joe Rogan Got Ripped Off”).

I think without that business logic, it is less clear why Rogan is worth $100MM. Meaning, the Curse of the Mogul lens suggests Spotify overpaid for Joe Rogan, and his benefits to the platform seem like he is reaping benefits shareholders will not. But, all evidence suggests otherwise..

3. Key question: What value does expanded library bring Apple TV+ and HBO Max?;

Both Apple TV+ and HBO Max made similar decisions to expand their libraries this past month. The business rationales were similar: to drive better engagement on the platform, their libraries had to be better.

Why does The Curse of the Mogul especially apply to Apple TV+ here? Because it made an overly narrow bet on a too-small portfolio of content from Hollywood talent without any for engaging and retaining users.

Apple has allocated $6-7B for production for Apple TV+, with the rationale that services revenue will continue to grow past its record $13B last quarter.
But, surprisingly, its proposed solution is to bet more on intangibles: Bloomberg reports Apple TV+ is now “acquiring older movies and shows for its TV+ streaming service, aiming to build a back catalog of content that can better stack up against the huge libraries available on Netflix, Hulu and Disney+.”

There are two angles from Curse of the Mogul lens that are helpful here.

First, the open question is whether the intangible, qualitative judgment of an “impressive” library will translate into more subscribers for HBO Max.

Second, both HBO Max and Apple TV+ are OTT streaming services who seem to be stuck in Curse of the Mogul type spending patterns, delivering billions of dollars (!) to content owners for streaming rights, while management from both companies is failing to prove to shareholders that they also understand both how users engage with their platforms, and what their users need from a streaming service.

Conclusion

Ultimately, it is the contrast between HBO Max and Apple TV from Spotify which makes this past week in streaming so notable: the Curse of the Mogul helps to tell us that we have two major OTT streaming services that do not understand how and why their target customers consume content. Moreover, they have poorly defined their sales conversion funnels at the expense of driving new subscribers and/or retaining their customers. They have done all of this despite investing billions in libraries of old and new, original content.

Click here to buy the entire mailing.

Monday AM Subscriber

Free

Curated “earthquakes”, key stories, and blog posts from the previous week which prepare you for your Monday am meetings.

SUBSCRIBE

Membership

$49/month

Analysis that ties the big picture of the streaming marketplace to executive and investment decision-making at streaming companies

Downloadable reports and whitepapers

SUBSCRIBE

Elite

Contact us to learn about our Elite plan, which includes consulting (1-hour meeting per Quarter) and our exclusive off-the-record meetings and presentations with C-suite and senior executives

CONTACT US
Monday AM Subscriber

Free

Curated “earthquakes”, key stories, and blog posts from the previous week which prepare you for your Monday am meetings.

Membership

$49/month

Analysis that ties the big picture of the streaming marketplace to executive and investment decision-making at streaming companies


Downloadable reports and whitepapers


Subscribe annually for $499/year

Elite

Contact Us

Contact us to learn about our Elite plan, which includes consulting (1-hour meeting per Quarter) and our exclusive off-the-record meetings and presentations with C-suite and senior executives