Streamers are failing the stress test | Jinan Copper Canyon Co.,Ltd

June 5, 2023

The Covid pandemic was a once in a lifetime stress test for many sectors. No customers on the streets represents the darkest of times for hospitality, retail and live entertainment.

For streamers, though, ‘Happy Days’. Time on everyone's hands and nothing else to spend their money on. The bump to their subscriber numbers and revenues disguised the fact that the streamers have embarked on a journey where the map was drawn on the basis ‘we gotta get out of here, [the unravelling operator bundling business] and go over there, [to challenge in the DTC market where pioneers like Netflix are eating our lunch], we’ll figure it out.’

Except they haven't. The news ranges from Mixed: Netflix growth is slowed, it has had to launch an ad tier and its debt is mountainous. To Bad: Viaplay is in a mess and has ousted its CEO. The Chairman said "The outlook for the markets in which we are operating has shifted considerably and at a very rapid pace, and the execution of cost savings programmes has not been mitigating the effects from these conditions to a sufficient extent. The impact of the macroeconomic headwinds on the business require that we execute differently on our strategy." He doesn't say what the new strategy will be. To terminal: Salto.

A significant downturn in the macroeconomic outlook seems likely to lead to consolidation and, possibly, the re-emergence of some kind bundling as households refuse to pay for multiple subs, or – worse -, churn in and out almost monthly, throwing forecasting and content budgeting into chaos. Advertising is also in a downturn so, while ad tiers might help, they are not the solution.

Who will be the hunters and who will be the prey? Disney has most to lose from not making it in streaming. It has the mother of all brands and deep pockets, but that doesn't insulate it from the money shredding machine that is streaming: its latest numbers posted $400 million in quarterly losses and 4 million subscriber losses. And the numbers would have been worse without a price hike – and it can't go there again too soon. But Disney has to be all in; even if it has to partner up, the Mouse will have its DTC day.

Among the global streamers Paramount+ is the most out in the cold. Under its new name, the company has maintained the same strategy as Viacom had in recent years: turn up a day late and a dollar short. Then there's WBD's HBO Max, sorry Max – why not drop the best-known brand in quality TV when you’re going direct? No, me neither; Also late and also with suspect firepower for the fight. Will they get together to ‘double’ their strength? I wouldn't bet against it. I would bet against it working.

Then there are the known unknowables: the A games; Amazon and Apple. Both are very hard to second guess because: they’re quite secretive, they have enough money to choose to lose unconscionable amounts of it, and they have different motivations to the purer media plays above.

Being a ‘member of Amazon Prime’ means several different things, but they are all good for Mr Bezos. The big question is whether it will relentlessly expand its ‘live’ and sports franchises. If it does, we can only hope it upgrades its UI from its current virtually unusable state. Definitely a hunter and not the hunted.

And Apple? No idea. A recent survey from JustWatch put them losing users and falling behind the aforementioned Paramount+ with a streaming share of only 6 per cent. Apple has gone hot on TV and then cold again before (though it never actually launched and spent a few billions before). It was determined to get away from being a desirable device maker and become a services play; TV, banking, news etc. But the market seems to keep saying ‘we love your devices and will pay absolutely nuts prices from them. But we don't want to other stuff, thanks.’ Apple might just decide to quietly exit TV but, given its impact, that isn't going to help the market much.