An Investment Hypothesis for MGM Sheds Light On Commerce Models Diller Is Bullish On

parqor IAC

Summary of Newsletter #227

In this week’s PARQOR mailing, I wrote about how “the business logic of IAC’s investment hypothesis for MGM… explains why Diller is so bearish on every legacy media streaming service not owned by Disney.”

Last month, I relied upon a year-plus-old quote from IAC Chairman Barry Diller to make the argument that “Netflix has won” the streaming wars.

Last week, Diller was back with another gem of a quote about the streaming marketplace to The New York Times columnist Ben Smith:

“Disney will remain relevant into the future. All of the rest of them are caddies on a golf course they’ll never play.”

Putting the two and two together of his 2019 quote and this quote, Diller’s take is effectively, “The streaming game is over, Netflix has won, Disney has survived, and everyone else in legacy media will never figure it out.”

Is Diller right this early in legacy media’s efforts to pivot to streaming?

Or is he wrong?

Why does Barry Diller’s perspective matter here?

The first question to answer is actually, “Why does Barry Diller’s perspective matter here?”

The short answer is, Diller is a successful executive with both past extraordinary success in legacy media, and who is finding success in DTC after having taken his lumps in digital media.

Notably, he is not pursuing a streaming strategy in OTT because he has already failed in the OTT space with Vimeo. When Vimeo was acquired, it was almost purely a B2C OTT platform. An acquisition of OTT subscription streaming back-end VHX in 2016 suggested it was going to be a player in the OTT and SVOD space. VHX since has become an integral part of Vimeo’s back-end, but Vimeo has since pivoted to B2B self-serve plans for creative professionals and agencies, SMBs, marketers and larger organizations. Vimeo generated $200MM in revenues in 2019, but at an operating loss of $52MM due to increased losses.

Diller’s extraordinary successes in DTC have been emerging in the past few years. Last month, Match Group was separated from the remaining businesses of IAC, resulting in a “‘new’ IAC emerging with $3.9 billion of cash, no debt, and its opportunistic zeal intact.” On top of that, IAC has a terrific success story in DotDash (formerly About.com), an intent-based media company that is unapologetically a Google parasite. In Q2 2020, Dotdash revenue increased 18% to $44.6 million, the 13th consecutive quarter of double-digit revenue growth. Operating income increased 10% to $7.7 million and Adjusted EBITDA increased 45% to $12.1 million. [NOTE: DotDash is a great success story, and Fast Company had a good profile of the company earlier this year]

That all said, is he right or is he wrong?

There are multiple ways to answer this question, and I have already written a short essay about it for Monday AM Briefing subscribers.

I think one helpful way of answering his question is through the business logic of IAC’s investment hypothesis for MGM. It explains why Diller is so bearish on every legacy media streaming service not owned by Disney.

You can download this week’s PARQOR analysis here for $4.99, or subscribe monthly for $49/month.

About PARQOR

PARQOR Membership mailings highlight particularly valuable and notable connections between:

  1. Macro Level: broader, more directional (macro) trends in the streaming marketplace, and
  2. Micro Level: the subtleties and nuances of the streaming marketplace (e.g., business models, executives, corporate strategies, and operations).

I also highlight connections how changes at the micro level in the marketplace are indicative of broader trends at the Macro level.

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