Hollywood Studios Don’t Have Enough Scale to Survive the Upcoming Streaming Wars, Says Analyst

In a dystopian view of the coming media wars, financial analyst and investor Richard Greenfield says Hollywood studios don’t have the heft to do battle in a future dominated by streaming. The most important attribute will be the kind of scale that is currently beyond anything a conventional media conglomerate can muster.

Greenfield’s thesis was the high point of the second day of the Asia-Pacific Video Operators Summit (APOS), the high-powered media and entertainment conference organized by consultancy Media Partners Asia. And if Greenfield is right, the conference should probably look for a new name.

Greenfield is a partner and analyst at LightShed Partners, a New York-based research firm, and also a general partner at LightShed Ventures, an early stage venture fund focused on private companies.

He kicked off by revisiting Jeffrey Katzenberg’s 2019 assertion that platforms are king, and content is the king-maker. But Greenfield suggested that Katzenberg was referring to media platforms when he should have been pointing to the giant tech platforms such as Apple, Microsoft, Google and Amazon. (Greenfield’s presentation omitted any mention of Chinese media-tech-entertainment firms such as Tencent and Alibaba, which are also among the world’s largest corporations.)

“The [tech] platforms are crushing everything in their path. They are getting into media far better than the media companies are at becoming [tech] platforms. It is easier for [tech] platforms to add content because of their cash and balance sheets. And they already have direct consumer relationships,” he said.

Apple’s market capitalization today is bigger than Disney, Comcast, Verizon, Netflix, AT&T, T-Mobile, Snapchat and Spotify combined.

Scale will be the predominant characteristic needed for success in the streaming era because consumers are going to require unprecedented quantities of new content in order to keep them engaged. Companies’ need to stop consumers from cutting a subscription at the click of a button, terminating their relationship with a pay-TV provider, or wandering over to ad-supported services such as YouTube, a live streaming channel such as Twitch, or an influencer-driven offering such as Only Fans.

Greenfield’s comments were made on the day that Netflix’s latest subscription gains were deemed disappointing by financial markets and the company committed to spending a jaw-dropping $17 billion on content this year.

“Everything Disney is doing illustrates that the one thing they have learned in the first 12 months of Disney Plus is that the resources to be successful are far, far beyond what they initially anticipated,” said Greenfield. “Everyone is going to have to learn this.”

“The way to win in the streaming wars is to be incredibly focused, put the consumer first and stop worrying about your legacy business, stop worrying about breaking windows,” Greenfield said. Essentially, don’t dabble: double down instead.

Theatrical, home entertainment and pay-TV are all set for further shakeup, according to Greenfield.

“It is not just TV shows that are going to streaming, but so too are new movies. There is no longer going to be a 90-day or 75-day window between when you can watch movies in theaters and at home,” even after the post-COVID rebound that Greenfield anticipates. “Movies other than the top 20 will go direct to streaming or day-and-date with streaming. Even the biggest films are not going to have windows of more than 45 days.”

“The other change that not enough people are talking about is that the second window is not going to be home entertainment. It is going to be SVOD. That’s a fundamental shift,” Greenfield said.

Greenfield held out little hope for linear and cable channel businesses and asserted that the perceived value of pay-TV bundles is misconstrued. “Legacy media executives argue that the bundle is cheaper [than multiple SVOD subscriptions]. But it is a false choice, because all that consumers care about isn’t in the bundle,” said Greenfield, noting that Disney is directing its best shows such as “WandaVision” to the Disney Plus streaming service, not the Disney Channel.

“Only sports is holding the bundle together. The problem is now that sports is coming out of the bundle. From 2023, every Thursday night NFL game is going to be on Amazon Prime exclusively,” said Greenfield.

The analyst described the Amazon-NFL deal as a “watershed moment” as it is the first streamer-sports deal that will pay the rights holder more than $1 billion annually. He offered no timetable for the upcoming transition, and was uncertain whether Apple and Facebook will continue with the kind of tentative sports rights bids they have made in India and other places.

Nevertheless, Greenfield’s advice to the studio conglomerates is simple: merge.

Even though the last two years have been marked by mergers and takeovers, including Disney buying Fox, Comcast buying Sky, AT&T buying Time Warner, Discovery and Scripps, and the reintegration of Viacom and CBS, Greenfield forecast a further wave of media mergers.

Greenfield has previously recommended the merger of NBCUniversal and Warner. Warner’s brands are more attractive than NBCU’s, he says, and HBO Max is a better bet than Peacock, not to mention the operational synergy thanks to Universal’s theme parks. However, even here, scale should be the driver.

“The future of the movie business is going to require a really large SVOD platform,” said Greenfield. “Traditional theatrical will come back, but it will never be the same, as there is so much content available in the home, and there is so much desire by media companies to use premium content as a wedge to drive up their direct-to-consumer businesses.”

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