LEARNINGS FROM OTT STREAMING IN 2020, PREDICTIONS FOR 2021 - DECEMBER 2020 - PARQOR.com
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DECEMBER 2020 LEARNINGS FROM OTT STREAMING IN 2020, PREDICTIONS FOR 2021
OVERVIEW 2
LEARNINGS FROM 2020, PREDICTIONS FOR 2021
Four frameworks emerged from weekly PARQOR Member Mailings over 2020
1 THE CURSE OF THE 2 VISIONARY VS. FIDUCIARY 3 PRODUCT CHANNEL FIT
MOGUL EXECUTIVES Digital content distribution has created multiple
channels to which products must adapt and evolve.
The Curse of the Mogul framework helps to identify Strategic decisions involve trade-offs. Visionary
executives articulate these decisions with clarity of The framework identi es companies who
the “right” types of disclosure. It is a reliable red ag
vision and purpose, and are incentivized to execute understand technology and product development
when a CEO talks up content spend and talent on a
their vision. Fiduciary executives are constrained by to optimize their service within and across different
streaming service, but does not disclose how
legacy business models. distribution channels.
investors will be rewarded.
4 THE PARQOR HYPOTHESIS
Not all companies are constructed or equipped to
succeed in streaming.
Success will belong to those business with (1) an
aspirational Brand, (2) Existing user base at scale, (3)
multiple Avenues for monetizing the same IP, (4)
Daily accessibility, and (5) physical and digital retail
Sales channels. (BEADS acronym)
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2020 LEARNINGS
LESSONS OF 2020 4
FRAMEWORK #1: THE CURSE OF THE MOGUL
Media CEOs believe the media industry involves managing intangibles like creative talent and artistic product, and therefore the media industry is not subject to
traditional strategic, nancial or management appraisals. So, media CEOs tend to reward content creators at the expense of shareholder value.
DTC business models have clear metrics like growth and churn, so they invite more disclosure than past legacy media models. The Curse of the Mogul framework helps to identify
the “right” types of disclosure. It is most useful when a CEO talks up content spend and talent but does not disclose how investors will be rewarded..
Legend
150MM global Prime
Minimal Metrics Net ix discloses more
Subscribers global (January
Disclosure in 2020 subscriber metrics than all
2020), no break out for Prime
other streaming services,
Video users
Disclosed Key Metrics including:
in 2020 Streaming revenues N/A • Net membership additions
and losses,
26MM Registered Users 10MM sign-ups in • Average paying
February (Bloomberg) memberships
Revenues N/A
No breakout of TV+ • Regional breakdown of
revenues in Services subscribers
Revenues ($14.5B in Q4)
710,000 subscribers …but still does not disclose
(Kantar estimate, churn, and few analysts are
Variety) buying into its new Two
Minute Viewing Standard
$3.3MM in revenue
(Apptopia)
$0 $800M $1.1B $1.2-1.5B $1.5B $2B $2.3B $6B $7B $10B $14-16B $17B
Content Spend in 2020
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LESSONS OF 2020 5
FRAMEWORK #2: VISIONARY VS. FIDUCIARY EXECUTIVES
A visionary executive has an entrepreneurial vision of where the marketplace is headed, and is incentivized to build a bold strategy around that vision. A duciary
executive is strategically, operationally, and nancially constrained within legacy business models. Visionaries are more agile decision-makers than Fiduciaries.
Visionary executives articulated clear strategic choices in 2020, whereas duciary executives tried to satisfy investors and stakeholders expecting both continued legacy model
performance and growth in streaming.
VISIONARY
Visionary culture laid
out in Co-CEO Reed
Hastings No Rules
Long-term Rules.
reorientation of In 2020, set market
business toward
FIDUCIARY
Betting on highly standards for
streaming (since 2015) streaming metrics
risky and
beginning under now- with Top 10s and
controversial “For the
Chairman Robert Iger Two Minute
fans” pivot to reaches 137.5MM
simultaneous HBO Standard for
Bet on “freemium” subscribers worldwide. viewing.
release as fastest Both STARZ and CBS All Access adopted Max and theatrical
original series production and series release distribution for New streaming- Pivoted TV series
Set the market way to drive scale,
schedules based off of “pause”, or user churn Wonder Woman oriented business strategy after global
Had Nielsen ratings standard for AVOD resulting in 26MM
model further solidi ed
deals in exclusive registered users patterns. 1984 and entire 2021 success of locally-
winners with The with organizational
Both grew by similar licensing deal with within six months theatrical slate. produced shows like
Boys and Borat 2, Both doubled down on shows within the pivot under new CEO
volumes (8.5MM to 9MM) Disney for Lost, of launch. The Queen’s Gambit
but otherwise stuck universe of the most popular content (Star Bob Chapek and new
after Disney+ launch, but Malcom in the Middle, (UK), The Witcher
to conservative Trek on CBS All-Access, Power on Starz). objective of 100+
Had Emmy, social had no major ratings hits. Ally McBeal, and other (Poland), and La
original content original pieces of
and/or critical hits. Casa de Papel
According to Disney, the strategy. content for streaming
Launched a new successes with The (Spain).
streaming app that is Morning Show, Ted average audience of FX per year.
heavily focused Lasso, and Dickinson. scripted series launched
around the power of on Hulu increased 120%
Discovery’s unscripted Achieved ubiquitous over their audience on
IP. distribution for TV+ linear channels and VOD.
app on Smart TVs.
[Net ix and Amazon and Disney Plus] are all scripted series SPECIAL MENTION
and scripted movies, effectively, they built a road and they all have great We should be ready to take bigger risks in high-
sports cars, fantastic and they're beautiful, scripted series and scripted movies. We AMC went against conventional wisdom and growth-potential countries like India or Brazil so that we learn
have a new SUV… our SUV is lled with large fresh content, a huge amount of original more about those markets. Let’s have some wins. But let’s also have
found success in a portfolio of niche genre- some big messy losses where we learn how to succeed better the next
content and it comes at a time when people have been, because of quarantine,
consuming and consuming Net ix and Disney+ and Amazon and what's on these focused apps. It then later added a time. We should always be asking, “If we purchase this show and it
different AVOD and SVOD services and they've been picking at them, and subscription bundle (AMC+) with all ad-free bombs, what will we learn from that?” If there is something big
picking at them, and picking at them. access to networks like AMC and BBC to learn, let’s go ahead and take the bet.
America, an on-demand library, and
Shudder, Sundance Now, and IFC Films
Discovery Communications CEO David Zaslav in Q2 2020 Earnings Call Transcript Unlimited. Net ix Co-CEO Ted Sarandos in No Rules Rules
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LESSONS OF 2020 6
FRAMEWORK #3: PRODUCT CHANNEL FIT
“Products are built to t with channels. Channels do not mold to products.” - Brian Balfour
“The streaming wars” are not about war or zero-sum games. Instead, they are about which companies understand how to drive scale in those channels where product channel t
exists. Net ix has established a “moat” and a market paradigm with “ubiquitous access”.
150MM Prime
Total Subscribers Worldwide
26MM registered users 1.6B devices 12.6MM HBO Max
195MM 137.1MM 17MM 13MM 5MM-5.5MM
Subscribers (paid subscribers N/A) worldwide (est.) (U.S. only)
(Prime Video Users N/A)
OTT Channels
N/A N/A N/A N/A N/A
Stores
Cable Set-Top Box ✔ ✔ ✔
UX/UI Integrations Worldwide 2021 rollout with Sky Worldwide
☒ ☒ ☒
Custom Button on
Remote ☒ ☒ ☒ ☒ ☒
Game Consoles ☒ ☒
Mobile
Partnerships
☒ ☒ ☒ ☒ ☒ ☒
Smart Devices ☒ ☒ ☒ ☒ ☒
In-App Social
Sharing
✔ ✔ ✔ ☒ ☒ ✔ ✔ ☒ ☒
Worldwide (except for
190+ countries and 50+ countries and 2021 rollout in Europe 2021 rollout in Europe
International territories territories
Mainland China, Iran,
North Korea, and Syria). with Sky ☒ 30+ countries
100+ countries
and Latin America ☒
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LESSONS OF 2020 7
FRAMEWORK #4: THE PARQOR HYPOTHESIS
Inspired by IAC’s letter to shareholders about its investment in MGM Resorts from August 2020, the PARQOR hypothesis argues that the streaming services most likely to
succeed must meet a speci c set of conditions (BEADS Acronym below).
Not all companies are equally equipped to succeed in streaming,. The best-positioned offer aspirational brands, something new to consume daily, and a physical retail presence.
The Checklist
(BEADS Acronym) /
Aspirational
Brand
✔ ✔ ☒ ☒ ☒ ☒ ☒ ☒ ☒
Existing user
base at scale
✔ ✔ ✔ ✔ ✔ ✔ ✔ ☒ ☒
Multiple Avenues
to monetizing the ✔ ✔ ✔ ✔ ✔ ☒ ☒ ☒ ☒
same IP
Daily value proposition
(something new for fans
to consume daily)
✔ ✔ ✔ ✔ ✔ ✔ ✔ ☒ ☒
Sales channels
online (digital) and ✔ ✔ ✔ ✔ ☒ ✔ ☒ ☒ ☒
of ine (physical) Physical: Physical: Physical: Physical: Digital, only Physical: Digital, only Digital, only Digital, only
commerce
Total ✔s 5 of 5 5 of 5 4 of 5 4 of 5 3.5 of 5 3 of 5 2.5 of 5 0.5 of 5 0.5 of 5
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2021 PREDICTIONS
PREDICTIONS FOR 2021 FRAMEWORK #1: THE CURSE OF THE MOGUL 9
CURSE OF THE MOGUL-TYPE MOVES WILL NOT DISAPPEAR IN 2021, EVEN THOUGH THEY SHOULD.
1 2 3 4 5
Prediction: In 2021, Net ix Prediction: Modest AVOD and Prediction: In February, Apple Prediction: Pluto TV’s Prediction: IMDb TV will be a
still will be the only service SVOD growth forces Discovery TV+ again will revisits its free international growth out- the streaming growth story
self-reporting viewing and into a deeper partnership with trial offer. The service is not scales and nancially for Amazon, and not Prime
engagement metrics. Amazon Channels, or an ready for monthly outperforms Paramount+. Video. Amazon investor
acquisition by a third-party subscriptions, yet, and likely messaging will emphasize
which increasingly values suffers from high churn and/or IMDb TV alongside Amazon’s
unscripted content, like Disney’s pause. It creates a high-class
rapidly growing ad business
Hulu (Note: Hulu’s VP of national problem for ViacomCBS and
ad sales just joined Discovery). ~40% YoY).
its streaming business in Q4
Apple hedges by adding a 2021. ViacomCBS will likely
cheap Apple One tier with double down on PlutoTV, Amazon becomes more
discovery+ is the most Curse of
iCloud and Apple TV+, only,
The Mogul launch of 2020: there and quietly pivot to more transparent with IMDb TV,
and extending the free trial for
is a compelling unscripted-only tactical value propositions of and starts evolving away
new device owners.
streaming business to be built Showtime and Paramount+. from Curse of the Mogul
with Discovery’s IP, but not with territory.
discovery+ as is.
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PREDICTIONS FOR 2021 FRAMEWORK #2: VISIONARY VS. FIDUCIARY EXECUTIVES 10
RISKIEST VISIONARY BETS TACTICALLY SAVVIEST BETS EXECUTIVES WHO NEED MORE
“Genre Wars”
OPERATIONAL AGILITY IN 2021
• Net ix’s basic bet is it can build towards Disney’s ecosystem model by starting
with pure-play streaming and discovering franchise IP
• Net ix’s pivot to international and local language content under new head of
TV Bela Bajaria will drive continued, and better-than-expected, growth. • Starz grows well past 20MM subscribers with emphasis on • Jamie Elricht and Zack van Amburg of Apple TV have real critical
more content to African-American and Female audiences. and creative wins under their belt, but need scale. Apple’s culture
• Bigger budget, Hollywood-produced content will be more miss than hit, both
as result of poor product channel t and pandemic-related production delays. for software and ecosystem development is too methodical and
Investors say little due to international growth and lower production costs. iterative for scaling a streaming business, leaving TV+ in high-
pro le limbo in 2021.
• Can Net ix repeat Zeitgeist success of UK’s The Queen’s Gambit with a title
from a non-English speaking country? Yes.
• AMC Networks’ contrarian bet on ve, separate genre-
focused apps triples AMC’s streaming audience to 15MM
with success with its “genre wars” strategy.
• Disney’s basic bet is it can build towards Net ix’s pure-play streaming model by • Discovery will hunt for product channel t across the board in order
starting with an ecosystem and franchise IP. to attract subs. But, early signs will tell Discovery its existing linear
• The execution risk for 100+ originals per year feels ambitious for Disney, and will customers want or need discovery+.
“show its seams” by May (it has already with confusion over The Mandalorian
• At least two high pro le Discovery cooking talents will make
Season 3).
Substack-esque moves towards monetizing their brand outside of
• Despite optics of pivot to streaming, Theme Parks will be Disney priority • A solid business for Disney DTCI in 2021, outperforms the Discovery ecosystem.
because it makes up 40% of Operating Income (CEO Bob Chapek ran theme predictions given Disney+ bundle growth driving Hulu and
parks before ascension). • Discovery will buy more Free-To-Air channels in international markets
ESPN+ growth.
as an obvious but never-discussed hedge for its streaming strategy.
• With its bold bets on Star and Star+, investors take notice of content licensing • FX and 20th Century Studios-focused clarity of value
costs going up and reacting negatively. proposition (Hulu = timely vs. Disney+ = timelessness)
emerges for both audiences and advertisers.
• HBO Max outperforms expectations with a solid content slate, but
struggles with a learning curve for direct marketing HBO Max.
• A smart bet on a freemium rollout has bene tted unusually
• AT&T CEO John Stankey will spend big to win back some unhappy talent • Disney+/Hulu/ESPN+ bundle helps to drive domestic sign- from the “free” element and from Comcast’s X1 platforms, so
and agents, and WarnerMedia CEO Jason Kilar’s bet on “For the fans” will ups. paid subscribers numbers will underwhelm investors (…if the
have unusually high-pro le successes, but WarnerMedia’s business will metric is reported at all).
feel its Hollywood failures well after 2021.
• Glut of AVOD inventory demand will boost Peacock ARPU of $6
• WarnerMedia executives get cold feet with HBO Max AVOD launch to $7 by at least $1 by Q2.
• Promotional Apple TV+ bundle continues to perform well
because of execution risk to HBO brand and risk of dilutive effect to HBO
enough that CBS teams up with Apple for NFL Sunday • The Of ce disappears from Nielsen Top 10 for SVOD by
brand.
Afternoon Packages, and maybe one more. February 2021.
• So, WarnerMedia will pivot toward an AVOD from CNN and another with
content from TBS, TNT and Warner Bros. lm library.
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fiPREDICTIONS FOR 2021 FRAMEWORK #3: PRODUCT CHANNEL FIT 11
CONNECTED TV ADVERTISING IS GOING TO STRUGGLE WITH AN INFLUX OF DEMAND
1 2 3 4
ELIMINATION OF THIRD PARTY ECOSYSTEMS & “PRIVATE CONNECTED TV AD TECH AND AVOD AND SVOD COMPETE
COOKIES REDUCES AVAILABLE GARDENS” > OPEN WEB INTEROPERABILITY BECOMES FOR AUDIENCES ON THE
CHANNELS MAKE OR BREAK FOR OTT APPS SAME PLATFORMS
All streaming apps require Without the open web, With 1.3B connected TV devices worldwide, AVOD and SVOD have emerged as
growth and scale, but the death streaming apps will need to the key questions are which systems “win” both complementary models (e.g.,
out (see below), and how ad buyers can buy Peacock’s freemium model) and as
of cookies means fewer options increasingly rely on social across them. competitive models.
for targeting and personalized media platforms and
ads on the open web. connected TV platforms. Odds are there will be too many options for At some point in 2021, the limits on
buyers, and components of ad-supported connected TV ad tech and a limited
models will start to fray number of Connected TV platforms will
cap available supply to meet growing
demand for inventory.
Ecosystems like AT&T, Global CTV Market (Largest Platforms) This will result in dynamics that will
Comcast, and Disney will (via Strategy Analytics) erode ROI for both AVOD and SVOD
have a distinctive leg up with models, and result in some
existing user bases at scale 1. 4. externalities, including increased
demand for the return of third-party
and marketing to them
cookies.
consistently, at mostly, but 2. 5.
not always, zero marginal
costs.
3. 6.PREDICTIONS FOR 2021 FRAMEWORK #4: PARQOR HYPOTHESIS 12
TO COMPETE WITH THE POWER WITH 15+ ANNOUNCED BETS ON FRANCHISE IP, AN
OF THE DISNEY ECOSYSTEM, EVOLVING AND GROWING TENSION BETWEEN OWNING IP
COMCAST, AT&T AND SIX FLAGS VERSUS LICENSING IP COMPLICATES NETFLIX’S STRATEGY
REALIZE THEY HAVE THE
MOVING PIECES FOR POST-
OWNED IP LICENSED IP (EXAMPLES)
PANDEMIC WIN-WIN
COLLABORATIONS (OR
MORE…), THEME
PARKS
IP
Market Cap: ~$235B
EVENTS IP
IP
THEME
PARKS
Market Cap:
~$2.9B
Market Cap: ~$210BGET IN TOUCH 13
PARQOR CONNECTS THE DOTS TO HELP YOU UNLOCK YOUR COMPETITIVE EDGE
OTT is rapidly reshaping Media and Entertainment, daily, and no market segment is being left untouched.
• PARQOR’s market analyses of OTT streaming connect the dots between macro trends on one hand, and,
strategic, operational, and nancial consequences for individual companies and the industry as a whole,
on the other hand.
• PARQOR’s Member Mailings are designed to be continuing business education for C-Suite Executives,
Strategic Consultants, Portfolio Investors, Hedge Funds, and Private Equity Investors.
• PARQOR also offers consulting services on how to apply the Four Frameworks to business strategy and
investment hypotheses.
GET IN TOUCH:
Andrew A. Rosen parqor.com
andrew@parqor.com New York, NY
• Thank you to Tavish Zausner-Mannes of EMC Research and Salil Dalvi of SDSO Media/Tech Ventures for their contributions to and invaluable feedback for this presentation
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