Disney, WarnerMedia and NBCU struggle to balance the value of cable and streaming

America’s Sunisa Lee (gold) celebrates her son on the podium during the medal ceremony of the Artistic Gymnastics Women’s Overall Final during the Tokyo 2020 Olympic Games at the Ariake Gymnastics Center in Tokyo on July 29, 2021 .

Lionel Bionaventure | AFP | fake images

If the biggest challenge for corporate media last year was launching subscription streaming services, this year’s unifying dilemma is figuring out what to put on them.

The tension between balancing video streaming, theatrical release, and linear television is leading to some peculiar choices that are sure to confuse consumers in what is becoming an increasingly confusing landscape.

“The challenge facing all these companies, the central question, is what content goes where, who decides and why.” said Rich Greenfield, a media analyst at LightShed Partners.

Scheduling decisions will ultimately reshape the way the public consumes media. Until now, most media companies have marketed video streaming as a complement to traditional pay TV. That is why many of the products are named with the suffix “more”: Disney +, ViacomCBS’s Paramount +, Discovery +, etc.

In the long run, each streaming platform may become home to all of a media company’s programming. The “benefits” will essentially be eliminated. ESPN + may just be ESPN, with everything ESPN has to offer.

But the world is not there yet. And the results are increasingly confusing for consumers, as new programming is created specifically for streaming services and the best of linear television is yet to be shown on stream.

The streaming maze

In the case of scripted television series, media executives have largely made the decision that streaming services will be home to the highest quality original programming. Disney, AT & T’s WarnerMedia, Comcast’s NBCUniversal, and ViacomCBS are trying to convince Wall Street that they can grow beyond traditional cable television. They are using new hit shows, like “The Mandalorian,” “Mare of Easttown,” and “Yellowstone,” as bait to attract subscribers. Results have varied from service to service, but all of the major new subscription products are growing by millions of customers each quarter.

In the case of films, there is disagreement on a film-by-film level across the different services. Disney put the Pixar movies “Soul” and “Luca” directly on Disney + at no additional charge at launch. For “Jungle Cruise,” “Black Widow” and “Raya and the Last Dragon,” the company decided to make users spend an additional $ 30 to stream the movies before finally making them free with a subscription. NBCUniversal placed “The Boss Baby: Family Business” on its pay tier of “Peacock,” but it only released “F9” in theaters. WarnerMedia decided to put its entire list of 2021 movies directly on HBO Max, but it won’t do so with the highest-grossing movies in 2022.

For news and sports, most media companies have kept their most valuable programming exclusively on traditional cable television. The most watched primetime programming on CNN, MSNBC and ESPN is still locked within the cable package. This has allowed executives to push against the steady but not yet overwhelming increase in pay TV cancellations, keeping alive a highly profitable business that generates billions of dollars each year.

Choice overload

NBCUniversal is meeting the challenge of distributing valuable programming while airing the Olympics. Executives can choose to stream live and prerecorded events on the NBC broadcast channel, NBC cable networks, NBC authenticated apps for cable subscribers, free NBC apps, Peacock’s free tier, and NBC tier. Peacock payment.

The variety of options has led to a complicated ecosystem because NBCUniversal is trying to accomplish several goals at once. The company wants to boost Peacock subscriptions, appease pay-TV distributors who have agreed to many years of rate increases because they were getting unique content, and maintain expensive TV ad fees by attaching commercials to exclusive live programming.

“It is the dilemma of the innovator in action,” said a veteran television executive. “You know the world of linear television is falling apart, but you are trying to stay on the Titanic for as long as possible. At the same time, you are setting up the lifeboats, which are digital and streaming. “

Making the numbers work

Disney will face a major business dilemma next year with “Monday Night Football.” The company secured the rights to air the most perennially-watched cable series on ESPN + in its new television rights deal with the National Soccer League in March. But Disney and ESPN haven’t said anything about when “Monday Night Football” will actually feature on ESPN +.

ESPN is by far the most expensive cable television network. It earned that distinction for being the only way Americans can watch “Monday Night Football” and other popular sporting events. If Disney begins to move previously exclusive programming from ESPN to ESPN +, pay TV distributors will delay future rate increases and millions of consumers will have another reason to cancel cable TV.

Mathematics complicates this calculation. Starting August 13, Disney will charge $ 6.99 per month for ESPN + after a recent price increase. But Disney makes more than $ 9 a month per cable subscriber for ESPN, according to Kagan, the media research arm of S&P Global, in pay-TV distribution rates. When combined with the other ESPN networks, Disney Channel, and ABC, Disney makes more than $ 16 per month.

In other words, for every customer who cancels cable, Disney loses more than $ 16 per month. You’ll have to start charging more for your streaming products to break even, and that doesn’t even count the ad loss associated with your linear programming, which dwarfs digital video ad revenue.

“Nobody is ready to unplug the linear ecosystem, because it generates so much cash,” Greenfield said. “So everyone is balancing how to manage legacy assets with future investments that are negative for free cash flow to show Wall Street that they are trying. Everyone is walking a tightrope. “

News scheduling decisions

NBCUniversal and WarnerMedia announced this month that they will be hiring hundreds of new employees to bolster their news broadcast services.

Rather than simply doubling MSNBC, CNBC, and CNN programming on “Peacock” and “HBO Max,” media companies are adopting a different strategy. CNN is building a subscription news service, CNN +. CNN Chief Digital Officer Andrew Morse said he plans to hire 450 people to develop and market new series and newscasts. NBCUniversal News Group President Cesar Conde announced plans to hire nearly 200 new employees across his news brands, most of whom will be supported by NBC News Now, the company’s flagship broadcast network.

The decision to create separate programming for the broadcast, some of which may duplicate the content of what is already being broadcast on linear TV, can be viewed in different ways.

Skeptically, it could be seen as a waste of resources, full of redundancies, a “moment in time” decision to maintain exclusivity on the cable bundle that may no longer exist in two or three years.

But NBC News executives say the investment recognizes that broadcast audiences are not the same as linear viewers. That should lead to programming decisions that recognize that digital viewers tend to be younger and more diverse.

“We are always thinking of ways to optimize our journalism for each distribution platform,” said Noah Oppenheim, president of NBC News. “How do we engage these new audiences? Sometimes the answers lead to different faces on the screen, different approaches to storytelling, a different lens of the world ”.

It’s unclear if there really is an audience for a full-streaming news network, especially one that requires consumers to pay a monthly subscription fee, like CNN +, which launches in 2022. The notion of programming for a younger audience it’s suspicious, like video news. Broadcasting, whether it’s streaming or traditional television, may simply not be attractive to those under 25 years of age. The decision to invest more in streaming news could lead to a gradual decrease in investment in broadcast or cable productions if total revenues decline.

NBC News Chief Digital Officer Chris Berend said he is confident that further investment in NBC News Now will pay off because you can already see the growth in time spent on the existing product, which launched in 2019. NBC News Now is free. for consumers, backed by advertising. .

“We are incredibly excited about the millions of hours audiences spend with NBC News NOW and how that continues to grow as we continue to invest,” said Berend. “That time invested, which includes more than an hour per visit on some platforms [like YouTube], is a clear indicator that we are satisfying our audience on many platforms, each with its own demographic nuances. “

Disclosure: NBCUniversal is the parent company of CNBC.

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