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To: Glenn Petersen who wrote (1997)10/23/2020 4:54:06 PM
From: Following-Mr.Pink
   of 2018
 
Agreed; I thought earnings were well-managed. It's unfortunate that the growth story couldn't continue to chug along but this is a LT hold for me.

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From: Glenn Petersen10/26/2020 6:59:41 AM
1 Recommendation   of 2018
 
Media executives are finally accepting the decline of cable TV as they plot a new path forward

PUBLISHED SAT, OCT 24 20209:00 AM EDT
UPDATED SUN, OCT 25 202011:08 AM EDT
Alex Sherman @SHERMAN4949
CNBC.com

KEY POINTS

-- At least three large U.S. media companies expect the number of U.S. households that subscribe to a traditional pay-TV bundle to fall to about 50 million in the next five years.

-- At 50 million subscribers, it’s unclear the current pay-TV model can survive without falling further.

-- The jury is still out on if streaming economics will convince investors to breath new life into traditional media companies.

There’s a quiet consensus emerging in the hallways and boardrooms of American media companies.

They expect about 25 million U.S. households to cancel their pay-TV subscriptions over the next five years. This is on top of the 25 million homes that have already cut the cord since 2012. At least three major media companies now expect pay-TV subscriptions to stabilize around 50 million, according to people familiar with the matter, who declined to speak on the record because their company plans are private.

The projected decline in subscribers will mean a drop of about $25 billion in cable subscription revenue plus associated advertising losses for the largest U.S. media companies, including Disney, Comcast’s NBCUniversal, AT&T’s WarnerMedia, ViacomCBS, Fox, Discovery, Sinclair and AMC Networks.

This assumption has created a tectonic shift in the media industry. In the last three months, Disney, NBCUniversal, WarnerMedia and ViacomCBS have all announced major reorganizations. They’ve replaced old leaders, consolidated divisions, laid off tens of thousands of employees, and pivoted to streaming video.

American viewers can now choose among streaming services from most of the major players, including Disney+, WarnerMedia’s HBO Max, NBCUniversal’s Peacock, ViacomCBS’s Paramount+, Discovery+ and AMC+, at prices ranging from free to $15 month. All have launched in the last year or are coming in early 2021.

The plan is simple enough: Hope enough people sign up for subscription streaming services to make up for cable TV subscriber losses.

Why streaming might not save U.S. media

In 2015, Time Warner CEO Jeff Bewkes sat down with his executive team to talk about the future of TNT and TBS, the two flagship Turner entertainment cable networks.

For more than a decade, TNT and TBS ratings had lived off re-runs of hit broadcast shows -- “Seinfeld,” “Friends,” “Family Guy,” “The Office” and so on. Now there was a problem. Netflix, Hulu and Amazon Prime Video had acquired digital rights to the same catalog of re-runs. Instead of having to tune into a cable network at a certain time, viewers could consume entire seasons of shows on demand without suffering through commercial interruptions.

“The streamers simply had superior capabilities,” said Bewkes in an interview. “The basic cable networks didn’t have full video-on-demand. We were reliant on advertising. It’s not that the streamers had superior programming, they had superior technology.”

A year later, Bewkes agreed to sell Time Warner to AT&T for more than $100 billion including debt. The following year, Rupert Murdoch pulled the rip cord, selling the majority of Fox’s assets for more than $70 billion to Comcast and Disney. Both men seemingly came to the same conclusion: The cable bundle had peaked. The longer they waited, the less their assets would be worth.

The cable bundle means that consumers can’t select and pay for cable TV channels a la carte. Instead, they have to buy dozens at a time. Media executives have long referred to it as the golden goose.

Media companies who sell channels into the bundle get paid whether or not anyone is watching. Don’t watch sports? You’re still paying $20 or $30 a month (depending where you live) for sports in a standard cable bundle. Don’t watch reality TV? You’re still paying for Bravo, E!, TLC, HGTV, and so on.

Better yet, every popular cable network has been nearly guaranteed distribution -- and payment -- because if an operator like Comcast decided it didn’t want to pay for ESPN, competitors such as Dish and AT&T’s DirecTV could steal its sports-hungry customers.

“Media companies have had a fabulous distribution system for decades,” said Tom Rutledge, CEO of Charter Communications, the second-largest U.S. cable company. “Every distributor had to carry their product, because if they didn’t carry networks, the competition would. In a direct-to-consumer world, the whole ecosystem is smaller. It doesn’t mean you can’t win, but there will be a lot of losers.”

Some streaming services already have enough library content to thrive in this smaller ecosystem of streaming services.

Disney+, with decades of kid-friendly movies and TV shows plus the Pixar, Star Wars and Marvel franchises, has already surpassed 60 million subscribers, hitting the low range of its 2024 goal in less than a year.

What about the smaller players? Can they compete for new originals against Netflix, Amazon and Apple -- companies with massive balance sheets -- to have the best content going forward?

“The answer is no,” said Bewkes. “These companies are competing against Netflix and Amazon, who have massively more scale for both subscription and advertising at a global level. They’re all going to be collapsed. Only Disney will have enough subscribers and global scale under a distinctive family brand to make it.”

Even Disney will need to keep growing those numbers to make up for impending cable TV losses. Each lost cable customer costs the company about $17.62 each month -- excluding advertising -- according to Kagan estimates. Most of that has to do with ESPN’s value, which commands about $10 per month per subscriber on its own.

Disney charges $6.99 per month for Disney+ and bundles ESPN+, Hulu and Disney+ together for $12.99 per month. And Disney+ doesn’t include advertisements.

At those prices, a one-for-one swap of a cable customer for a streaming customer will mean less money for Disney. This doesn’t even account for potential revenue loss from password sharing. While stealing cable TV is quite difficult, it’s a lot easier to share a password for a streaming service, and it’s more common among younger viewers. In 2019, research firm Magid estimated 35% of millennials share passwords for streaming services.

“It’s just too easy to get the product without paying for it,” said Rutledge.

Moreover, a vicious cycle is settling in that could accelerate cable bundle defections. Distributors like Comcast and Charter no longer care that much whether or not a customer buys traditional pay-TV. The price of a video bundle has gotten so high, there’s little margin for them -- especially compared to broadband internet service.

“You get to that point of financial indifference, then you’re seeing the EBITDA margins go in the right direction and continue to increase,” Comcast CEO Brian Roberts said last month at the Goldman Sachs Communacopia Conference. “That’s one of the big pivots of Comcast the last decade.”

So instead of threatening blackouts to lower rates, pay-TV operators are accepting rate hikes, passing them along to subscribers, and accepting the fact that price-sensitive customers will cancel TV and go to internet only.

Meanwhile, media companies are shifting their best content to their new streaming services. The result for consumers is higher and higher prices for lower and lower quality.

And certain networks, like ESPN, which keep millions of Americans hooked to cable today, may need to pull back on programming costs if too many people cancel. That will only cause more people to cancel. Stabilizing at 50 million (or 55-60 million, as AT&T CEO John Stankey said this week) may be a pipe dream.

“The only thing left holding the bundle together today is sports,” said former AOL CEO Jonathan Miller, who stepped down from the board of AMC Networks in July. “There is nothing any of the networks can do about it. The only question now is how far does it fall and how fast, and is there a bottom. And I don’t know if there’s a bottom.”

Then again: Why streaming might save U.S. media

The best path forward for media companies is if Americans suddenly decide to stop canceling cable. That cash flow can then be redirected to streaming services as the industry’s new global growth engine. There’s at least a chance a combination of live news and sports, combined with inertia and laziness, can keep a diminished bundle alive.

Charter actually added 102,000 pay-TV subscribers in the second quarter. But that’s almost certainly an anomaly. Comcast reported a net loss of 477,000 video subscribers (427,000 residential) last quarter. AT&T, which owns DirecTV, reported a net loss of 886,000 video subscribers in the same quarter.

Media companies could team up and decide to recreate the bundle model with their new streaming services. Unlike the cable bundle, a streaming bundle wouldn’t eliminate the “make your own” option, as each service can be purchased a la carte. But investors may not mind if companies take revenue discounts if it means growth.

It’s also possible that Wall Street will give a window to legacy media companies to let them spend billions on streaming content, giving them a greater chance of finding the next “must-see” shows. Activist investor Dan Loeb has already called on Disney to eliminate its annual dividend and use the cash on original content spend for streaming services.

“By reallocating a dividend of a few dollars per share, Disney could more than double its Disney+ original content budget,” Loeb wrote in an October letter to Disney CEO Bob Chapek. “These incremental dollars would, based on our analysis, generate returns that are multiples of the stock’s current dividend yield.”

Netflix has proved that market validation is more important than business fundamentals in terms of growing valuation. Netflix has burned through billions in cash for years, spending borrowed money on content to grab subscribers, and investors haven’t cared.

Maybe media companies won’t have to worry about how to replace revenue from each cable subscriber with a corresponding streaming subscriber. Perhaps simply showing there’s a new growth engine that looks more like Netflix will push investors toward valuing the entire industry higher.

Right now, the market doesn’t seem to think existing media companies are capable of this. Discovery’s enterprise value/EBITDA multiple is 3.5 (7.5 on a blended class share basis). AMC’s multiple is 2.3. Those are terminal values. The average S&P 500 company typically has a multiple between 11 and 15. Netflix is valued at 33.5.

But even if the market is right and media companies can’t stabilize revenues in the shift to streaming, that’s not a death knell. Profit and cash flow could conceivably rise as cable networks are folded and jobs are eliminated. Sometimes industries need a refresh, but it’s not necessarily a funeral.

There’s also the “Underpants Gnome” argument. In a 1998 episode of Comedy Central’s “South Park,” a group of gnomes steal people’s underpants. Their plan is: Phase 1: Collect Underpants, Phase 2: ? and Phase 3: Profit.

A lot will happen between now and 2025. New technologies emerge. Tastes and habits are fickle. Companies acquire other companies. CEOs change.

It’s hard to predict the future. Sometimes fighting to survive turns into actual survival.

The likely endgame

Cable networks continue to be profitable, and recent distribution deals ensure they’re not going anywhere.

Still, some companies probably won’t make it in a streaming world alone. They may need to merge to survive.

Billionaire media magnate John Malone has mused about the consolidation of networks for years, advocating putting together “free radicals” to merge assets. AMC’s “The Walking Dead” may not be enough to keep a streaming service viable, but if joined with Lionsgate’s “Mad Men,” MGM’s “James Bond,” and Discovery’s “Top Chef” and “Deadliest Catch,” such a service may have enough content to remain relevant for a while. Malone has a stake in Discovery and also owns some of Charter -- either of which could act as the vehicle to buy up cheap networks.

The problem is many of these companies may have missed their ideal window to sell. Disney executives looked at the media landscape after its deal for Fox and decided it had no interest in acquiring any existing traditional media company’s content, according to a person familiar with the matter. If a technology company or large media company such as AT&T or Comcast bought a smaller legacy media company today, the acquirer’s shares would likely plummet.

Instead, what’s likely to happen in the next five years is the systematic consolidation and elimination of cable networks. NBCUniversal and ViacomCBS are both considering shuttering networks, though nothing is imminent or particularly close given current distribution deals, according to two people familiar with the matter.

“Media companies can consider consolidating underperforming networks with core channels, hoping to extract additional carriage revenue from a beefier network,” said Kirby Grines, founder and CEO of 43Twenty, a consultancy and marketing firm that provides streaming video strategy advice. “Consumers have loyalty to content and perhaps the companies they transact with. I’m not sure where networks fit into that equation, but it’s somewhere in a meaningless middle.”

ViacomCBS has already identified CBS, MTV, Nickelodeon, Comedy Central, Smithsonian and BET as its tent-pole brands, which show up in the company’s CBS All Access streaming application (soon be renamed Paramount+). Other ViacomCBS networks -- VH1, Logo, PopTV, CMT -- are absent from the streaming platform. That may be a sign they’re at risk of eventual shutdown or rebrand.

Still, most media companies will try to perform a delicate dance, shifting most premium content to streaming while still giving some A-level shows to networks to buoy the bundle for as long as possible.

The forcing function on change will be Wall Street. If valuations keep declining, media companies will have to act.

LightShed’s Greenfield recommends a ripping-off-the-band-aid approach: Divest the networks now.

“Disney should divest its broadcast and cable networks, Comcast should divest the NBCUniversal cable networks, and there’s no reason why AT&T needs to own the Turner networks,” Greenfield said. “Cable networks are structurally broken.”

Divested and merged media companies will lead to more robust streaming services. This is why Disney agreed to buy Fox’s entertainment assets, including “The Simpsons” and movies such as “The Shape of Water” and “Avatar.”

But it may also accelerate the death of cable TV.

“The total bundle is going to shrink,” said Bewkes. “Whether it disappears, I don’t know.”

Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.

cnbc.com

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From: Glenn Petersen10/29/2020 6:05:02 PM
1 Recommendation   of 2018
 
Netflix raises prices on standard and premium plans

PUBLISHED THU, OCT 29 20203:10 PM EDT
UPDATED 20 MIN AGO
Todd Haselton @ROBOTODD
CNBC.com

KEY POINTS

-- Shares of Netflix were up nearly 4% on the price change before settling later in the evening.

-- Netflix on Thursday raised the prices of its standard and premium plans to $13.99 and $17.99 per month, respectively.

-- The entry-level basic plan remains at $8.99 per month, the same price that was introduced last year.

Netflix on Thursday raised the prices of its standard and premium plans to $13.99 and $17.99 per month, respectively. Prior to Thursday, those plans were priced at $12.99 and $15.99, respectively.

Current Netflix customers will see the updated prices on their bill over the next two months, Netflix told CNBC. Customers will get a warning 30 days prior to the change.

The entry-level basic plan remains at $8.99 per month, the same price that was introduced last year. It’s the first increase since Netflix boosted the cost of its service in January 2019. Prior to then, the basic, standard and premium plans were available for $8, $11 and $14, respectively.

On the company’s latest earnings call, chief operating officer Greg Peters hinted that a price increase might be coming. He said if Netflix continues to do a great job investing in original content to deliver more value for users, then Netflix feels like “there is that opportunity to occasionally go back and then ask for members, where we’ve delivered that extra value in those countries, to pay a little bit more.”

Netflix’s standard plan offers up to 1080p quality and allows people to watch on two screens at the same time. Its premium plan includes support for sharper 4K resolutions and HDR and up to 4 screens at the same time. The basic plan supports 480p, about the quality of a DVD.

Shares of Netflix were up more than 4% on the price change before settling later in the evening. Disney shares were also up more than 3% in late trading, building on gains earlier in the day.

cnbc.com

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From: Glenn Petersen11/6/2020 1:41:03 PM
   of 2018
 
Netflix Picks France to Test First Linear Offering

By Elsa Keslassy
Variety
November 6, 2020

Netflix has chosen France to test its first channel offering.

Named Direct, the linear channel — which is only available to subscribers — will air French, international and U.S. feature films and TV series that are available on the streaming service. However, the channel will only be accessible via the service’s web browser, unlike its streaming service, which is found on set-top boxes thanks to distribution deals with French telco groups such as Orange, Canal Plus and SFR.

The initiative marks Netflix’s first foray into real-time, scheduled programming. The service previously tested the option Shuffle Play, which wasn’t in real time but featured recommended programming to a sample of international users, explained a source at Netflix. The difference this time around is that the test is being localized in one country, rather than a sample of users.

On its website, Netflix said it chose France to test its first linear channel due to the “consumption of traditional TV [in France].” It added that “many viewers like the idea of programming that doesn’t require them to choose what they are going to watch.”

“Whether you are lacking inspiration or whether you are discovering Netflix for the first time, you could let yourself be guided for the first time without having to choose a particular title and let yourself be surprised by the diversity of Netflix’s library,” said the streaming giant.

During lockdown, Netflix subscriptions skyrocketed around the world. The service may be testing the channel to see if it allows it to retain subscribers who may feel fatigued after having binge-watched the titles that were recommended to them through the algorithm. This new linear feature may also appeal to older demographics that make up a significant portion of households in France.

The test channel had a soft launch on Nov. 5 and will be more broadly available in France early December, said Netflix. A key European market for the streaming giant, the SVOD is believed to have around 9 million subscribers in France.

The streaming company opened an office in France in January and vowed to increase its investment in French content. Some of its highest-rated French originals include “Family Business” and “Plan Coeur” (The Hook Up Plan). The company’s original film roster also includes Jean-Pierre Jeunet’s next movie, “Big Bug,” which started shooting last month.

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From: Glenn Petersen11/12/2020 5:10:08 PM
   of 2018
 
Disney Plus blows past expectations for its first year with 73.7 million subscribers

PUBLISHED THU, NOV 12 20204:21 PM EST
UPDATED 34 MIN AGO
Jessica Bursztynsky @JBURSZ

KEY POINTS

-- It’s been exactly a year since Disney+ launched, and the streaming service has far outperformed expectations.

-- Disney announced Thursday that its platform surpassed 73 million subscribers.

-- It’s remarkable growth considering Disney’s goal, at its launch, was to reach 60 million to 90 million subscriptions by 2024.

It’s been exactly a year since Disney+ launched, and the streaming service has far outperformed expectations.

Disney announced Thursday that its platform surpassed 73.7 million subscribers. It’s remarkable growth considering Disney’s goal, at its launch, was to reach 60 million to 90 million subscriptions by 2024.

Just a year in, and Disney+ is quickly creeping up on Netflix, which reported more than 195 million subscribers in its most recent quarter. Disney also joined the streaming wars at roughly the same time as Apple and a few months before Comcast’s NBCUniversal. Apple has yet to release subscription numbers for Apple TV+. NBCUniversal’s Peacock reported nearly 22 million sign-ups as of October, up 12 million from its July report.



It’s worth noting that some of those subscribers arrived at the service through bundles or one-time promotions, but Disney doesn’t break out those numbers. Still, subscribers flocked to Disney right off the bat: 10 million people signed up within the first day. In its first operating quarter, the service secured 26.5 million subscribers.

And it only shot up from there, as the Covid-19 pandemic kept viewers indoors — Disney+ jumped from 33.5 million subscribers in its second quarter to 57.5 million by its third quarter.

The company had its doubters: Some analysts predicted prelaunch that the service wouldn’t reach even 20 million subscribers by the end of 2020. But analysts widely and quickly changed their tune since the service’s launch.

Morgan Stanley on Thursday morning raised its streaming subscription estimates to 230 million by the end of 2025, and MoffettNathanson analysts in October upped their forecast to nearly 160 million subs worldwide by 2024.

“We expect Disney to further lean into streaming, implying higher spend and more original content that moves more quickly to its DTC platforms,” Morgan Stanley analyst Benjamin Swinburne said in a note to investors Thursday.

The strong subscriber numbers come as Disney pushes heavily into its streaming service. The company in October announced that it was restructuring its media and entertainment divisions, centralizing its media businesses into a single organization that will be responsible for content distribution, ad sales and Disney+.

“We are tilting the scale pretty dramatically [toward streaming],” Disney CEO Bob Chapek told CNBC at the time.

Disney’s next step? Proving to investors that it can retain subscribers as well as it can bring them in.

Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.

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From: Glenn Petersen11/16/2020 5:16:48 PM
   of 2018
 
Pluto TV CPO Shampa Banerjee explains why free video is booming

Video services have to get over their U.S.-centric thinking to succeed internationally, Banerjee says.

Janko Roettgers
Protocol
November 16, 2020

ViacomCBS is on track to make $2.5 billion with digital video this year, and a growing part of that revenue stream is Pluto TV, the ad-supported video service the company acquired in early 2019. Pluto ended Q3 with close to 36 million monthly users and video ad dollars more than doubling year-over-year. "It's an amazing asset, and it's growing even faster than we had hoped," said ViacomCBS CEO Bob Bakish during the company's Q3 earnings call earlier this month.

A key part of Pluto's success has been its product design, which mimics the look and feel of cable TV, complete with linear channels and a traditional programming guide. To learn more about what makes Pluto tick, and what the service has in store for 2021, we recently caught up with Pluto TV CPO Shampa Banerjee.

Banerjee joined Pluto in early 2020 from Eros Now, an Indian streaming service that has amassed close to 200 million registered users to date. In our conversation, she talked about the Indian streaming market, her plans to attract new audiences to Pluto, and what it takes to build a global streaming service.

This interview has been edited and condensed for clarity.

Before joining Pluto, you led product for Eros Now, which primarily targets the Indian market. That's also where Disney+ is seeing a lot of growth these days, to the point where one in four Disney+ subscribers is now in India. Why is streaming seeing such a boom in India right now?

Indians love movies. They love entertainment. That's not new. But when I started with Eros in 2014, it was kind of a different world. People would go to work, download their movies, come home and watch offline. We had to give people a download feature. Now, all that has almost gone away. One of the big things that happened: Carrier prices have become very cheap. Jio had a huge role to play in it by making bandwidth so cheap, and they have also upgraded the network. I think that's really part of the reason for the explosive growth.

India is very varied. Every region has its own language. India has 22 official languages. People either watch Hindi, English or they watch their regional languages. Typically, somebody from one state will watch either English or Hindi, and their entertainment in their language, but not something from another region. People watch English entertainment, they watch a lot of Hollywood movies. A lot of the content that you see here in the U.S. is already popular. So the appetite is there.

What lessons did you learn from working for Eros and on a product targeting the Indian market?

One of the things I learned is that in Southeast Asia, people don't want to pay. I grew us from nothing to 150 million subscribers, but they were all freemium. When I left, there were around 23 million paying subscribers around the world in 135 countries. The interesting part was, 80% of our user base came from India, but 80% of our paying user base came from outside of India, primarily from the U.S.

So we were actually looking at a model very similar to Pluto: having linear channels, and we were going to monetize it with advertisements. We were looking at that because [we thought]: These people, they'll never pay us, [but] they want to watch us. Let's monetize it. That's actually what attracted me to Pluto, because it felt like, boom, this is the growth area.

Now that you are in charge of product at Pluto, tell us about its secret sauce.

I think it's partly the familiarity of the interface. The second thing is, someone has done the programming for you. You know, people are lazy. They just want to veg out in front of the TV set. [They] don't know what to watch because there's so much out there to choose. That choice is made for you by Pluto; the linear channels have that choice made for you.

And then our shows, it's familiar content people have seen before. And despite everything, even with Netflix originals, "The Office" and "Friends" were the two most popular shows on Netflix. People want to watch shows that they're familiar with, especially now with COVID. I think it's a safety thing. It's something I know, something I'm in control of. We just got that right.

Does having that familiar, cable-like interface limit what you can do to innovate?

No. We have a certain audience that is attracted to our service. It's a fairly large audience. But there's a lot one can do to get a new audience that did not grow up watching linear TV. At times, I want to watch a linear channel, maybe because I'm lazy. But sometimes, I want to figure out what I want to watch, or [get] recommendations, based on my behavior, versus something that's editorially curated. I think there's a lot one can do, keeping the same format, keeping the same interface, or similar interface.

And then there's advertising. That's a big thing we're working on, the ad experience. You know, we have the data, we have the intelligence. What can we do to keep them watching? Because I watch ads, it can be extremely useful if the right ad is targeted to me.

Other than these product improvements, what else is Pluto focusing on next year?

International is a big focus for us. We'll be going to different countries. That itself has its own nuances, understanding what works. Every region has its own nuance.

We're always very U.S.-centric. We think everyone is like us, with 500 devices. It's not [like that]. [If you are] launching in Latin America, for instance, casting is very important. That's how the family watches. Everyone, mobile is what they have. They have one big screen. That's it. And it may not even be a smart TV. So they buy a casting stick, and that's what they're using. Behaviors outside of the U.S., they're quite different.

Any other trends you're seeing ahead for 2021?

I honestly think AVOD [advertising-based video on demand] is going to become much bigger in 2021. People do like to watch reruns. They do like to watch old shows.

Why do you think people are leaving cable? They're leaving cable because [they ask themselves], "Oh, my God, I'm paying all this money for what? To watch old shows. And if I can watch them for free, why should I be paying for it?"

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From: Glenn Petersen11/28/2020 3:44:37 PM
   of 2018
 
Hollywood’s Obituary, the Sequel. Now Streaming.

Brooks Barnes
New York Times
November 28, 2020



LOS ANGELES — “Hollywood’s like Egypt: full of crumbled pyramids. It’ll never come back. It’ll just keep on crumbling until finally the wind blows the last studio prop across the sands.”

David O. Selznick, the golden era producer, made that glum proclamation in 1951. A new entertainment technology, TV, was emasculating cinema as a cultural force, and film studios had started to fossilize into bottom line-oriented businesses. As Selznick put it, Hollywood had been “grabbed by a little group of bookkeepers and turned into a junk industry.”

Since then, Hollywood has repeatedly written its own obituary. It died when interlopers like Gulf + Western Industries began buying studios in the 1960s. And again when “Star Wars” (1977) and “Superman” (1978) turned movies into toy advertisements. The 1980s (VCRs), the 1990s (the rise of media super-conglomerates), the 2000s (endless fantasy sequels) and the 2010s (Netflix, Netflix, Netflix) each brought new rounds of existential hand-wringing.

Underneath the tumult, however, the essence of the film industry remained intact. Hollywood continued to believe in itself. Sure, we churn out lowest common denominator junk, studio executives would concede over $40 salads at the Polo Lounge. It’s how we make our quarterly numbers. But we can still generate the occasional thunderclap, with ambitious films like “ Get Out” and “ 1917” and “ Black Panther” and “ Once Upon a Time … in Hollywood” arriving on big screens and commanding the culture for months on end.

In one breath: All is lost! Big Tech is going to eat us alive.

In the next: Everyone still loves us. Just look at all those pinwheel-eyed fans buying tickets.

But the moment of crisis in which Hollywood now finds itself is different. In the 110-year history of the American film industry, never has so much upheaval arrived so fast and on so many fronts, leaving many writers, directors, studio executives, agents and other movie workers disoriented and demoralized — wandering in “complete darkness,” as one longtime female producer told me. These are melodramatic people by nature, but talk to enough of them and you will get the strong sense that their fear is real this time.

Have streaming, the coronavirus and other challenges combined to blow away — finally, unequivocally — the last remnants of Hollywood?

“The last nine months have shaken the movie business to its bones,” said Jason Blum, the powerhouse producer whose credits range from “The Purge” series to “BlacKkKlansman.”

The feel of a dismantled film set

Streaming, of course, has been disrupting the entertainment business for some time. Netflix started delivering movies and television shows via the internet in 2007. By 2017, Disney was trying to supercharge its own streaming ambitions by bidding for Rupert Murdoch’s 21st Century Fox, ultimately swallowing most of the company for $71.3 billion in an effort to expand its library of content and gain control of Hulu.

In recent months, however, the shift toward streaming has greatly accelerated. With more than half of the 5,477 theaters in the United States still closed, more than a dozen movies originally destined for big screens have been rerouted to streaming services or online rental platforms. Pixar’s latest adventure, “Soul,” will debut exclusively on Disney+ on Christmas Day. It will compete with “Wonder Woman 1984” (Warner Bros.), which will arrive in theaters and on HBO Max on Dec. 25, a crossing-the-Rubicon moment in the eyes of analysts.

Meantime, the owner of Regal Cinemas, the No. 2 multiplex chain in North America, just took on emergency debt to avoid insolvency. Trying to keep his own company afloat, Adam Aron, the chief executive of AMC Entertainment, the No. 1 chain, quoted Winston Churchill on his most-recent earnings call. (“We shall fight on the beaches!”) And the National Association of Theater Owners has found itself begging for a federal bailout. Deprived of one, the trade group warned, “movie theaters across the country are at risk of going dark for good.”

Without appearing on big screens, are movies even movies? Wrestling with that question alone has pushed Hollywood into a full-blown identity crisis. But the film industry is simultaneously dealing with other challenges. Outrage over the killing of George Floyd by a police officer has forced the movie capital to confront its contribution to racism and inequity. Coronavirus-forced production shutdowns have idled tens of thousands of entertainment workers. The two biggest talent agencies, Creative Artists and William Morris Endeavor, have been hobbled by the shutdown, resulting in a diaspora of agents, some of whom are starting competing firms, a once-unthinkable realignment.

There has been an abrupt changing of the guard in Hollywood’s highest ranks, contributing to the sense of a power vacuum. Nine of the top 20 most powerful people in show business, as ranked a year ago by The Hollywood Reporter, have left their jobs for one reason or another (retirement, scandal, corporate guillotine). They include the No. 1 person, Robert A. Iger, who stepped down as Disney’s chief executive in February, and Ron Meyer (No. 11), whose 25-year Universal career ended in August amid a tawdry extortion plot.

Retrenchments at Warner Bros. have also bruised Hollywood’s psyche. Over the years, as other film studios were lobbed between owners (Universal), downsized (Paramount) or subsumed (20th Century Fox), “Warners” remained virtually untouched, emerging as an emblem of stability and spending. In recent months, however, the studio has been streamlined by an aggressive new owner, AT&T, resulting in the departure of a startling number of executives who had been there for decades. For now, Warner Bros. has 10 movies on its 2022 theatrical release schedule, according to the database IMDbPro. Last year, it released 18.

The black icing on the cake: The shutdown has stripped Hollywood of its internal culture, the otherworldly (some would say silly) rituals that have long served as a magnet for so many. It has been a year without red carpets. There have been no see-and-be-seen power lunches at Chateau Marmont. Zoom is the new awards ballroom.

In a recent phone conversation that felt more like a therapy session, one Warner Bros. executive told me that “the town” felt like a dismantled movie set: The gleaming false fronts had been hauled away to reveal mere mortals wandering around in a mess.

Or perhaps, he continued, speaking on the condition of anonymity to avoid conflict with his employer, the proper metaphor was a movie — perhaps “The Remains of the Day,” the 1993 drama starring Anthony Hopkins as an English butler. As Vincent Canby wrote in his New York Times review, the Merchant Ivory film was about “the last, worn-out gasps of a feudal system that was supposed to have vanished centuries before.”

‘Normal wasn’t good enough’

Not everyone in Hollywood is walking around in a stupor. Some people even seem energized, especially those who have spent their careers wielding jackhammers against the Hollywood status quo. Ava DuVernay, for instance, has been outspoken about the need for studios to remake themselves — to dramatically diversify their upper ranks, which are overwhelmingly white and male, and to prioritize storytelling from a kaleidoscope of voices. Her production company, ARRAY, uses “change is ours to make” as its slogan.

“I see this as a time of opportunity,” Ms. DuVernay told me. “Sometimes you have to take it down to the studs and build something new.”

She continued: “It’s not going to go back to the way it was, nor do we want it to. We want to move forward. I hear people saying that they can’t wait for Hollywood to get back to normal. Well, I really resist that. Normal wasn’t good enough. All of this change in such a short amount of time really lays bare how shaky the ground was to begin with.”

Ms. DuVernay, whose film and television credits include “Selma,” “Queen Sugar” and “When They See Us,” grew more pointed. “Some folks are scared, and I have sympathy,” she said. “But it’s mostly the folks who are clinging to the idea that Hollywood is theirs and it was built in their likeness, and they will do anything to cling to it, even if that means destroying it.”

She concluded by rolling her eyes at the Chicken Littles who fret that moviegoing is over.

“Talk about dramatic,” she said. “Theaters aren’t going anywhere, at least not all of them.”

In fact, multiplexes may get a post-pandemic bump. Because so many studios have pushed back their biggest movies, next summer’s theatrical release calendar looks like a blockbuster heaven: “Black Widow,” “Fast & Furious 9,” “The Conjuring: The Devil Made Me Do It,” “Ghostbusters: Afterlife,” “Minions: The Rise of Gru,” “Top Gun: Maverick,” Marvel’s “Shang-Chi and the Legend of the Ten Rings,” “Hotel Transylvania 4,” “Venom: Let There Be Carnage.” (To name a few.) With any luck, studio chiefs say, the newly vaccinated masses will come out in droves, in part because they won’t take the theatrical experience for granted anymore.

In Japan, where cinemas are fully operating again (the country’s response to the coronavirus has kept cases and deaths low), more than 3.4 million people turned out last month to see an animated movie, “Demon Slayer: Mugen Train,” on its opening weekend. One Tokyo theater scheduled a jaw-dropping 42 screenings in one day to meet demand.

Popcorn for everyone!

“There’s a reason that the Roaring Twenties followed the 1918 pandemic,” J.J. Abrams, the Bad Robot Productions chairman, said by phone. “We have a pent-up, desperate need to see each other — to socialize and have communal experiences. And there is nothing that I can think of that is more exciting than being in a theater with people you don’t know, who don’t necessarily like the same sports teams or pray to the same god or eat the same food. But you’re screaming together, laughing together, crying together. It’s a social necessity.”

Streaming services and theaters will settle into coexistence, he predicted.


“I think going to a theater is like going to church and watching a movie at home is like praying at home,” Mr. Abrams said. “It’s not that you can’t do it. But the experience is wholly different.”

Over? Hollywood? C’mon. “I’m working on and excited about and hopeful about a number of theatrical projects,” Mr. Abrams said.

His most-recent film, “Star Wars: The Rise of Skywalker,” took in more than $1 billion at the global box office. It was one of nine movies to reach that threshold last year, with “Avengers: Endgame” collecting nearly $3 billion. All told, ticket sales stood at $42.2 billion, with weakness in North America ($11.4 billion) offset by an increase overseas ($30.8 billion).

The hoary tradition of exhibiting movies on big screens, which dates to the 1890s, may have vast challenges — not the least of which is a 78 percent plunge in domestic ticket sales for the year to date. But a business of its scale, as Mr. Abrams and others will tell you, does not vanish forever in the span of a few self-quarantining months.

‘People change their habits’

But what happens in 2022, once the thrill of mingling together has burned off, studios have worked through their blockbuster backlogs and streaming services are stronger than ever?

Will young people — trained during the pandemic to expect instant access to new movies like “Hamilton” and “Borat Subsequent Moviefilm” — get into the habit of going to the movies like their parents and grandparents did? Generation Z forms a crucial audience: About 33 percent of moviegoers in the United States and Canada last year were under the age of 24, according to the Motion Picture Association.

Most young people will have gone a full year without visiting a cinema by the time vaccines are expected to be widely deployed.

“Yes, there is pent-up demand to see movies in a theater,” said Peter Chernin, whose Hollywood career has spanned four decades. “But people change their habits.”

Mr. Chernin, who oversaw the release of theatrical megamovies like “Titanic” and “Avatar” while running Mr. Murdoch’s empire from 1996 to 2009, has already voted with his feet. Last year, he aligned his Chernin Entertainment with Netflix, where he has more than 70 movies in development. The films in which he specializes — high-quality dramas like “ Hidden Figures” and “ Ford v Ferrari” — are a dying breed in theaters. It’s too hard to make money when marketing campaigns start at $30 million.

But the audience has also shifted. Sorry, film snobs: Most people seem fine with watching these films in their living rooms (sometimes, shudder, on their smartphones).

“Cinema as an art form is not going to die,” said Michael Shamberg, the producing force behind films like “Erin Brockovich,” “The Big Chill” and, rather appropriately, “Contagion.” “But the tradition of cinema that we all grew up on, falling in love with movies in a theater, is over. Cinema needs to be redefined so that it doesn’t matter where you see it. A lot of people, sadly, don’t seem to be ready to admit that.”

In other words, the art may live on, but the myth of big screens as the be-all and end-all is being dismantled in a fundamental and perhaps irreversible manner. Because of the pandemic, the film academy has decided for the first time to allow streaming films to skip a theatrical release entirely and still remain eligible for the Academy Awards, nudging the Oscars closer to the Emmys. (The academy deemed the move “temporary,” but some people, including Ms. DuVernay, one of the organization’s 54 governors, think it will be hard to backtrack .)

Imagine what that means to Hollywood’s sense of self. Since always, the film industry has swaggered into every room it has ever entered — Spielberg on line one, Scorsese on line two. Nothing less than “ensuring film’s legacy as the great art form of our time” is one of the stated goals of the soon-to-open Academy Museum of Motion Pictures in Los Angeles.

Mr. Abrams, as much a television wunderkind as a movie one, described the difference between small screens and big ones by summarizing something he once heard on National Public Radio. Television, he explained, is the child and the audience is the parent. It’s smaller than you. You can control it by changing the channel. With movies, the roles are reversed. You are the small one. You’re supposed to look up at them.

Exactly how does that work in the streaming age?

No wonder Hollywood has been experiencing, as the trade newsletter The Ankler recently put it, “a heart attack wrapped inside a nervous breakdown.”

Next week, the Oscar race will kick into high gear with the wide release of David Fincher’s “Mank.” Set mostly in the 1930s and filmed in black and white, the film focuses on Hollywood’s romantic heyday — back when pictures were pictures — by telling a story about the creation of “Citizen Kane.” (The Australian actor Toby Leonard Moore plays David O. Selznick.)

Critics have been transported. “Time-machine splendor,” wrote Owen Gleiberman in Variety. “A tale of Old Hollywood that’s more steeped in Old Hollywood — its glamour and sleaze, its layer-cake hierarchies, its corruption and glory — than just about any movie you’ve seen.”

You can find “Mank” on Netflix.

By Brooks Barnes

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From: Glenn Petersen12/2/2020 10:06:36 AM
   of 2018
 
Another streaming entrant:

Discovery to launch streaming service in January starting at $4.99 per month, Verizon customers get year free

PUBLISHED WED, DEC 2 20209:17 AM EST
UPDATED 27 MIN AGO
Michelle Gao @MICHGAO
CNBC.com

KEY POINTS

-- Discovery will launch its streaming service, Discovery+, in Jan. 2021.

-- The service will include a $4.99 per month ad-supported tier and a $6.99 per month ad-free tier.

-- Discovery is partnering with Verizon to give 55 million customers up to 12 months of Discovery+ for free, depending on their plan.

Discovery is the latest media company to jump into the ever more crowded streaming wars.

It will launch its streaming service Discovery+ in Jan. 2021, sources told CNBC’s David Faber. The service will include a $4.99 per month ad-supported tier and a $6.99 per month ad-free tier.

The lower $4.99 tier costs the same as NBCUniversal-owned Peacock’s premium tier with ads. The ad-free $6.99 tier is on par with what Disney+ costs. Both offerings are much less expensive than WarnerMedia’s HBO Max, which costs $14.99 a month, and Netflix, which raised its standard plan to $13.99 a month in Oct.

Discovery is also partnering with Verizon, which will give 55 million customers up to 12 months of Discovery+ for free, depending on their plan.

Partnerships will be key to Discovery’s success.

The company owns networks like the Discovery Channel, famous for its annual Shark Week, as well as home improvement channel HGTV and Food Network, among others.

But it is smaller and lesser known than its competitors which just launched their streaming services in the past year. In just one year, Disney+ has amassed 73.7 million subscribers, far exceeding the company’s expectations for 60 to 90 million subscribers by 2024. NBCUniversal’s Peacock, which launched this summer, has reached nearly 22 million sign-ups already. WarnerMedia reported more than 38 million domestic subscribers for HBO and HBOMax in October.

In early 2021, Paramount+ from ViacomCBS will also launch.

Discovery will hope its programming and partnerships can set its service apart as it joins a crowded field of competitors with leaders pulling away from the rest of the pack.

Discovery is expected to reveal more details on its streaming service during an event at noon ET Wednesday.

Disclosure: NBCUniversal is the parent company of CNBC.

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From: Glenn Petersen12/6/2020 11:42:47 AM
   of 2018
 
Inside AT&T’s WarnerMedia as it dismantles the old Time Warner to battle Netflix

PUBLISHED FRI, DEC 4 20205:00 PM EST
UPDATED FRI, DEC 4 20206:06 PM EST
Alex Sherman @SHERMAN4949
CNBC.com
KEY POINTS

-- CNBC spoke with more than a dozen former and current WarnerMedia executives to gauge how John Stankey and Jason Kilar are progressing with HBO Max.

-- Many executives expressed concerns about rushed decision making and the disintegration of Time Warner’s creative culture.

-- While HBO Max’s launch has been bumpy, Stankey has proved to be out in front of big media reorganizations.

In December 2018, John Stankey sat down with HBO CEO Richard Plepler and his leadership team.

Stankey, the AT&T veteran running WarnerMedia at the time, was meeting with division heads to hear ideas on how to combat the threat from Netflix and the secular decline of cable television. This was the first time Stankey had heard from Plepler’s full team about their plan.

HBO was the crown jewel of Time Warner, which AT&T had recently acquired for $100 billion with debt. It took two years and a legal battle with the Trump administration to close the deal. It was the biggest media acquisition since the last time Time Warner was acquired in 2000, when America Online paid $162 billion. All that effort and money was a bit confounding to people. Why did a telephone company need to own a premium content business?

Stankey was the driving force behind the acquisition, and the clear favorite to take over as the next CEO of AT&T. Its success or failure would hinge on HBO, which already had more than 30 million subscribers and a sterling reputation in Hollywood and with consumers.

According to five people familiar with the meeting, Plepler laid out a simple path forward:

First, give HBO more money to spend on content.

Second, augment the Cinemax premium TV channel with more family-friendly original, library, and licensed children’s programming.

Third, sell HBO and Cinemax together for a couple dollars more than HBO — around $17 per month.

Fourth, hammer out a deal with Comcast, the largest U.S. cable company, allowing the broadband distributor to sell HBO Go directly to broadband-only customers.

Finally, and most importantly, don’t blow HBO up.

Plepler’s team estimated this plan would guarantee $7.5 billion in annual revenue plus future upside depending on the success of the new content.

Stankey heard them out. Then, he ignored their advice. Stankey had bigger ambitions for streaming video. Less than three months later, Plepler announced he was leaving WarnerMedia.

Instead, Stankey decided to use HBO as the centerpiece for a new mission: Build a true Netflix competitor, dubbed HBO Max. When Stankey took over as AT&T’s CEO this year, he passed that goal to new WarnerMedia CEO Jason Kilar, who previously launched Hulu. HBO Max launched in May.

Along the way, Stankey has dismantled the old Time Warner, spurring dozens of executives from all parts of the company to depart. He is attempting to funnel all of the company’s resources from cable, film, and HBO into HBO Max, as he told CNBC last year.

Disney, Comcast’s NBCUniversal and ViacomCBS are all going through similar changes now to prepare for a world where subscription streaming services overtake cable as the world’s primary form of television consumption. Stankey — the MBA-buzzword, deep-voiced phone guy — was ahead of the trend.

Still, his vision has irritated some veteran WarnerMedia executives, who question Stankey’s knowledge of media and feel ignored The execution of his mission, which Kilar has overseen since May, has so far been marred by strategic confusion and culture clashes, according to more than a dozen high-ranking WarnerMedia employees, about half of whom have left the company in the past six months.

For now, investors don’t like what they see. AT&T is trading near a 10-year low. Meanwhile Verizon, AT&T’s closest competitor, is trading near an all-time high. The most glaring difference between the two companies? Verizon didn’t spend $170 billion buying Time Warner and DirecTV in the past five years.

This is the story of the transition from Time Warner to WarnerMedia, and the bumps that have happened along the way.

Netflix envy
Alhough Stankey was new to media, he suffered the same disease as every other media executive: Netflix envy.

He thought Plepler was aiming too low. Plepler’s plan to generate $7.5 billion in annual revenue was 12% more than HBO’s eventual 2019 revenue. But it was a far cry from the $20 billion Netflix generated.

Stankey told Plepler he wanted a direct-to-consumer solution that could get to at least 60 million subscribers in five years, according to people familiar with the matter. HBO subscriptions had fallen from about 37.5 million in 2017 to 34.5 million in 2019. Over the same time, Netflix global subscriptions jumped 50%, from 111 million to 167 million.

If Stankey could convince investors that HBO Max would mirror Netflix’s growth trajectory, he might be able to capture a higher trading multiple for AT&T. This is the holy grail for media companies this decade — convincing Wall Street that streaming growth will make up for the decline of legacy businesses like cable TV and movie theater viewing. It’s also a strategy supported by AT&T’s most notable investor, activist hedge fund Elliott Management, which last year bet $3.2 billion that divesting non-core assets and focusing on streaming could lead to a surge in AT&T shares.

Stankey thought Plepler was attached to a fading distribution model — a wholesale approach where companies like Comcast and Amazon could sell HBO programming along with other linear networks or streaming services. Stankey viewed these companies as competitors more than partners. The battle would be keeping viewers in the AT&T ecosystem instead of Apple’s or Amazon’s or Comcast’s.

This difference in approach showed up last month, when WarnerMedia struck a deal to put HBO Max on Amazon Fire TV. As a condition of that agreement, HBO is pulling its content off Amazon’s Channels interface next year, people familiar with the matter told CNBC. Several WarnerMedia executives who worked on the deal blamed Plepler for previously giving Amazon too much control over HBO programming, making the new Fire TV agreement much harder to complete.

Stankey initially wanted to keep Plepler at HBO, but the relationship started to fray around the end of 2018, said people familiar with the matter. Stankey set up an L.A. meeting with Casey Bloys, then president of HBO programming, without inviting or notifying Plepler. Plepler felt disrespected and told Stankey as much. Stankey saw Plepler as stoking an unnecessary turf war.

Around the same time, Stankey held a meeting with senior executives at the Time Warner Center boardroom in New York.

An outside consultant, Peter Cairo, who had spent the last few months interviewing 65 WarnerMedia executives, presented a number of problems with Time Warner’s siloed approach. Many of the senior leaders in attendance thought the presentation was doctored to support Stankey’s view that the company’s leadership was standing in the way of progress. Cairo, who had a history of working with Time Warner’s leadership team, told the group HBO was particularly resistant to working with other parts of the company.

Several veteran executives, including Bernadette Aulestia, head of HBO’s global distribution and Donna Speciale, president of WarnerMedia’s ad sales, spoke up to defend Time Warner’s history of success while questioning the way AT&T was handling staff morale.

The meeting ended tersely with Stankey cutting off dialogue early, three of the people said.

When the presentation ended, Plepler held a private meeting with Stankey. Soon after, Plepler revealed to a small group of people he was leaving HBO. He made his departure public in Feb. 2019.

Both Plepler and Stankey declined to comment for this story. A WarnerMedia spokesperson added, “As CEO of WarnerMedia and now CEO of AT&T, John Stankey has made it a habit to visit with talented employees throughout the company. That’s what good leaders do and is a common practice at well-run companies.”

HBO Max: Bumpy start

HBO Max launched in May at a cost of $14.99 a month — the same as HBO — and an ambitious tagline: “ Where HBO meets so much more.” It combines 31 new originals with library programming, including DC Comics content, from cable networks like CNN, TNT, Adult Swim, and the Warner Bros. studio. Stankey also licensed popular TV series including “South Park,” “The West Wing” and “The Bachelor.”

AT&T’s grand plan is to pair HBO Max with its wireless service — AT&T customers with premium plans already get HBO Max for free today. Wireless service has become a commodity in most markets, with AT&T, Verizon and T-Mobile all offering similar speeds and pricing plans. HBO Max is meant to help AT&T stand out from the pack and reduce churn while giving the wireless company viewership data for marketing and targeted advertising.

Since taking over, Kilar has accelerated Stankey’s burn-it-down strategy to boost HBO Max. As part of the restructuring, WarnerMedia has conducted several rounds of layoffs, including more than 1,000 employees in November. Kilar has even dismissed employees Stankey brought in, including Bob Greenblatt, who took over as chairman of WarnerMedia entertainment in March 2019.

He ended Conan O’Brien’s late night show on TBS and moved it over to HBO Max exclusively. He’s making the blockbuster Warner Bros. film “Wonder Woman 1984” available on HBO Max the same day it hits theaters on Dec. 25. This week, he announced every Warner Bros. movie slated for release in 2021, including “Dune,” “Matrix 4,” Lin-Manuel Miranda’s “In the Heights,” and “The Sopranos” prequel “The Many Saints of Newark,” will launch on HBO Max at the same time they’re released in theaters.

In an interview, Kilar told CNBC that killing the decades-old theatrical window, where movies got exclusive runs in theaters before coming to home video platforms, would make customers happy, even if it hurt the movie theater industry.

“The best way to find success in business, and certainly with the Internet, is to start with the customer,” Kilar said. “If we start our days and end our days focused on the customer, we’re going to lead the industry.”

Almost all of the executives who spoke to CNBC — including several still at WarnerMedia — felt the HBO Max experiment isn’t going particularly well so far. Only 8.6 million people have signed up to activate the service since it launched in May. Compare this to Disney, which has signed up 73.7 million people for Disney+ in less than a year.

“Jason’s belief is — wrongly — if any piece of content available anywhere other than HBO Max, it cheapens HBO Max,” said one recently departed executive. “Jason is forgoing billions in revenue by turning his back on licensing to preserve content for HBO.”

By pricing HBO Max the same as HBO, Stankey seemed to assume HBO users would simply switch to HBO Max over time. But the transition has been slow, as pay TV and streaming distributors — once HBO’s needed partners — have little incentive to market HBO Max to the millions of people who already get HBO.

“The risk here is that they end up pouring all of their Warner Bros. Studios content into HBO Max only for it to continue to be a premium service that serves only the top third of households,” said MoffettNathanson analyst Craig Moffett. “There’s a real risk that 1+1+1=1 here, and that all that will be left of Warner Media when they are finished is an HBO division that is more or less the same size as it was when they started.”

One problem is HBO Max has no tent-pole original series to jumpstart subscribers, like Disney+ has with “The Mandalorian.” That’s partly because, after the delay from the battle with the U.S. government, Stankey wanted to get the service out fast, according to people familiar with the matter. The coronavirus pandemic lockdowns in 2020 also delayed the creation and filming of new material.

The rushed launch has also affected distribution. WarnerMedia held out on a streaming distribution deal with Amazon for months to get friendlier terms and still hasn’t reached a deal with Roku. Kilar’s decision to release the 2021 Warner Bros. slate of movies on HBO Max concurrently with theater distribution could put more pressure on Roku to reach a deal. (Spokespeople at WarnerMedia and Roku declined to comment.)

Then there’s the confusing branding around HBO Max, which initially joined a plethora of similarly named services, including HBO, HBO Go, and HBO Now. Although WarnerMedia finally got around to retiring HBO Go and changing HBO Now to simply ‘HBO’ in June, several employees in charge of marketing and branding acknowledged the changes should have come much sooner, before HBO Max ever launched.

Kilar may also roll out separate streaming products, such as a CNN-related product and a free entertainment service featuring content from TNT and TBS, The Information reported.

There’s even been talk internally of changing the name of HBO Max — either internationally only or globally — once it rolls out worldwide in 2021, according to three people familiar with the matter. Executives have batted around several names with “Warner” as the title brand, rather than “HBO” — which makes even more sense if the service builds brand equity around having films the day they hit theaters. A WarnerMedia spokesperson said that a name change isn’t being actively considered at this time.

Passing on divestments

Elliott, which sold $150 million in AT&T shares at a loss last month, has pushed Stankey to divest assets. Still, CNBC has learned AT&T recently passed on a couple deals that could have brought in billions of dollars for the debt-laden company.

Just as Kilar was taking over WarnerMedia in May, DraftKings floated the idea of acquiring Bleacher Report from AT&T. The Bleacher Report executive team was privately hoping Stankey and the board would approve a deal, because it was clear AT&T’s focus would be on HBO Max, according to people familiar with the matter. But AT&T never seriously considered the sale, these people say. A DraftKings spokesman declined to comment. Since then, a number of high ranking Bleacher Report executives have left WarnerMedia, including CEO Howard Mittman.

Kilar also decided to keep Warner Brothers Interactive Entertainment, the company’s video gaming unit, after AT&T fielded bidders earlier this year.

“Any chart about gaming usage is up and to the right,” said Kilar. “It’s one of the most impressive trends in U.S. consumer behavior in the last 20 years. When we take a look at the next 5, 10 or 15 years with WarnerMedia, I’m very excited with the role gaming will play in our future.”

DirecTV dread

Most of the WarnerMedia executives CNBC spoke with for this story agreed that Stankey and Kilar’s bolder strategy makes more sense than Plepler’s more conservative alternative.

But many of the same executives, who still own a lot of AT&T stock, are scared that Time Warner’s path will mirror DirecTV’s.

In the years after acquiring DirecTV, Stankey eliminated most of the company’s top leaders, changed the satellite TV strategy to digital-first, and ended marketing campaigns touting the advantages of legacy technology.

The results have not been good.

AT&T ended the third quarter with about 17 million legacy TV subscribers (both DirecTV and U-Verse), down more than 16% from a year earlier. While all pay-TV distributors have lost customers in recent years, AT&T has lost the most — about 8 million video subscribers since early 2017. For comparison, Comcast has lost about 3 million residential video customers over the same period, dropping from 22.5 million to 19.2 million.

The digital product has been a non-starter. Last quarter, the company reported an anemic 683,000 customers for AT&T Now — the new name for DirecTV Now. That’s a drop of 40% from last year.

AT&T is currently in late-stage sale talks with private equity firms to sell a minority stake in the company’s pay-TV distribution business for a valuation that could be less than $15 billion, people familiar with the matter told CNBC.

Some of this decline may be a strategic choice. Stankey has purposefully steered AT&T’s business away from DirecTV, realizing that selling a bundle of linear channels — even digitally — isn’t the future of television. It’s possible DirecTV will serve as template of what not to do, even though Stankey has refused to call the DirecTV deal a mistake.

‘Culture eats strategy for breakfast’

Even if Stankey can learn from the strategic errors AT&T with DirecTV, many former executives feel the damage to HBO’s internal culture is irreparable.

HBO has churned out critically acclaimed material for nearly two decades. Series like “The Sopranos,” “Sex and the City,” and “Game of Thrones” are credited with sparking a new golden age of television and supplanting movies as the most prestigious form of video storytelling.

This run of success has convinced many of the world’s most popular and glorified creators to work at HBO.

“Culture eats strategy for breakfast,” Plepler would frequently say to co-workers, quoting legendary management consultant Peter Drucker, according to people familiar with the matter.

Some employees fear Stankey and Kilar don’t appreciate how long it took to build those relationships. Several noted that Kilar and his deputy Andy Forssell have technology backgrounds that don’t always mix with the established creative culture.

Kilar said any employees harboring that concern shouldn’t be worried.

“I don’t define culture,” Kilar said. “You’re talking about a culture that ultimately goes back 97 years.” (Warner Bros. was founded in 1923.) “That’s not going to change because a few individuals are no longer present. Culture is the decisions we make when no one else is looking. If you think that’s going away, you’re not giving enough credit to culture.”

Kilar has retained some key HBO executives from the past two decades, including Bloys, who is now in charge of HBO Max content. Meredith Gertler, a 16-year HBO veteran, is executive vice president of content strategy. Amy Gravitt, who joined HBO in 2004, heads up comedy programming. Nina Rosenstein remains an executive vice president of programming after more than two decades with the company.

But former executives point to Stankey’s push to add advertising to HBO Max, slated for the second quarter of 2021, as potentially ruinous, according to people familiar with the plans. Would brands have been comfortable associating with “Game of Thrones” beheadings or rape scenes in “The Sopranos”? HBO never wanted to find out and risk having to compromise its content to keep advertisers happy.

“If HBO stood for anything, it was making a product for the customer, not the advertiser,” said one former HBO executive. “It’s not as though John is unpleasant. He doesn’t throw stuff. He just knows much less about television than he thinks and won’t be debated.”

Both present and past employees are optimistic that Bloys and his team can keep churning out original programming hits for HBO Max. Bloys is moving beyond the classic HBO tropes and trying to turn series that revolve around DC Comics characters or reboots like “Gossip Girl” into hits.

Still, many of those people predict AT&T will eventually sell off WarnerMedia, either in pieces or together, because legacy media assets will continue to weigh on AT&T’s stock rather than help it. Several said AT&T’s board will ultimately balk at giving Kilar the money he needs to compete with Netflix, Amazon and Disney.

‘Why put the two companies together?’

The day after AT&T announced its deal for Time Warner in 2016, then-CEO Randall Stephenson appeared on CNBC to explain the deal’s logic.

“Why put the two companies together?” Stephenson said. “The world of distribution and content is converging, and we need to move fast, and if we want to do something truly unique, begin to curate content differently, begin to format content different for these mobile environments — this is all about mobility. Think DirecTV Now, the new product we’re bringing to market. What can you do with Time Warner content really fast and very uniquely for our customers? Can you begin to integrate social into that content? Can you give the capability to...I’m watching content, I want to clip it, I want to send it via social media to my friends. Can we iterate on that quickly, and can we give a unique experience to our customers?”

Whatever Stephenson was talking about in that answer, it hasn’t happened. There’s a sense — even among top executives still at the company — that AT&T’s WarnerMedia transformation is about making lemonade from assets in danger of becoming lemons.

But no one forced AT&T to buy Time Warner in the first place. The same can be said for DirecTV. Stephenson and Stankey made those decisions.

It will take at least a year or two more to judge HBO Max as a success or failure. In that time, WarnerMedia could develop a culture and a product that breed loyal employees and make the gripes of the old-timers seem petty and irrelevant.

To borrow a line from “The Sopranos,” ”‘Remember when’ is the lowest form of conversation.”

Then again, it’s concerning to hear the same anxieties from so many WarnerMedia executives. To use a different “Sopranos” line, “One thing you can never say is that you haven’t been told.”

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From: Glenn Petersen12/11/2020 9:29:10 AM
   of 2018
 
Disney+ emerges as an early winner of streaming wars, expects up to 260 million subscribers by 2024

PUBLISHED FRI, DEC 11 20209:14 AM EST
UPDATED FRI, DEC 11 20209:14 AM EST
Jessica Bursztynsky
CNBC.com
KEY POINTS

-- Disney hiked its five-year streaming subscriber estimates on Thursday, expecting Disney+ to continue to post remarkable growth.

-- The company now forecasts 230 million to 260 million subscribers to Disney+ by 2024.

-- Upon its launch 13 months ago, Disney said it expected the platform to reach 60 million to 90 million subscriptions by 2024.

Disney said on Thursday evening it’s forecasting Disney+ will have 230 million to 260 million subscribers by 2024. It shows the rapid growth of Disney+ and that Disney is emerging as one of the early winners of the streaming wars.

Disney shares were up more than 8% in the premarket.

When Disney+ launched 13 months ago, Disney said it expected the platform to reach 60 million to 90 million subscriptions by 2024. Then the streaming platform quickly took off. As of Thursday evening, it had already closed in on the high-end of that projection, with 86.8 million Disney+ subscribers.

It’s an impressive goal, especially since competition in the space has only increased. Apple TV+, Netflix, AT&T’s HBO Max, Comcast’s Peacock, ViacomCBS’s Paramount+ and AMC Networks’ AMC Plus are all competing for eyeballs. Discovery CEO David Zaslav, who recently announced Discovery’s premium service Discovery+, recently told CNBC the winners and losers of the streaming wars will emerge in the next 12 to 24 months.

Here’s a quick rundown of Disney+’s rapid growth: Ten million people signed up within the first day, with a total of 26.5 million subscribers in its first operating quarter. Disney+ jumped from 33.5 million subscribers in its second quarter to 57.5 million by its third quarter. By the fourth quarter, the company said it surpassed 73.7 million subscribers.

Some of those subscribers arrived at the service through bundles or one-time promotions, like a partnership with Verizon that offered one year of Disney+ to customers, though Disney doesn’t break out those numbers.

By comparison, Netflix reported 195.15 million subscribers in the third quarter. Earlier this week, AT&T CEO John Stankey said there are now 12.6 million HBO Max subscribers.

Disney has invested heavily into its direct-to-consumer business, as the Covid-19 pandemic continues to keep millions of people at home and in need of entertainment. The company will continue to push into original content, with new shows and movies likely being able to bring in even more subscribers.

CEO Bob Chapek said at Disney’s investor day Thursday of the roughly 100 projects that were announced, about 80% will go directly to Disney+. Disney will allow users to opt-in for more mature content, which will enable older audiences to watch titles like “Atlanta” and “Modern Family.” That could also helps attract more subscribers.

As it expands content, Disney said it plans to increase the cost of the service to $7.99, up $1.

Disney added that it expects its family of streaming services, which includes Disney+, Hulu and ESPN+, to hit 300 million to 350 million total subscriptions by fiscal 2024.

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