March of The Pigs

March of The Pigs

Not all content providers will feed at the trough. Revenue, pricing and business models are likely to change for certain direct-to-consumer content providers as new offerings canvas the market. Disney has the high ground.

Tickers mentioned: AAPL, AMZN, CMCSA, DIS, GOOG, NFLX, T. Two tables included: analysis of each company plus Netflix pricing menu.

Those who charge fat subscription fees will need to get creative with revenue and pricing models as competition heats up for content of all varieties. Content providers who refuse to flex their models may starve at the trough.

Every media company under the sun is competing for our discretionary time. Whether it’s social media, video games, streaming video/audio, news media, print media, legacy cable bundles and more.

Netflix (NFLX): current leader about to get knocked off its perch regardless of the hype around The Irishman and its 34 Golden Globe nominations. We predict that Netflix will become a “prestige” player, producing content similar to “The Irishman” where talented directors can make feature films and episodic content without receiving a steady stream of production notes from Chief Content Officer Ted Sarandos. Prestige content does not generate the mass consumer interest nor revenue generated by mega-budget features such as Disney’s Star Wars series and Avengers feature films.

Can’t you hear Disney (DIS) knocking? The answer is “yes”, especially if your name is Netflix. Disney owns the leading entertainment IP portfolio (legacy Disney animation & live action, Pixar, Marvel, Lucasfilm and FOX Entertainment) as well as the worldwide leader in live sports – ESPN and ESPN+ (live sports being the glue that holds together the legacy cable TV bundle). We are especially bullish on Disney’s ability to package its entertainment IP for episodic television which we wrote about in these pages some weeks ago (baby Yoda notwithstanding).

What approach should content providers take to the “streaming wars”? A willingness to experiment and be flexible with revenue, pricing and in some cases business models (especially for tier II players and below). HBO with its limited budget may find that it may have to reduce prices and/or provide a la carte options and perhaps partner to create a larger content bundle and/or to extend its reach.

Who will win the original content game over the long-term? Our money is on Disney, and perhaps Apple were it to acquire Disney.