Is The Enemy Of My Enemy Really My Friend?

You almost have to feel a little sorry for our friends Yosemite Zas and Bob AIger.  Sure, they’re defying the demographic curves by being white men over 60 that are employed, and they’ve got loving families supporting them as a result.  For those reasons alone, despite how sometimes I am a tad harsh on them with my salutes via DALL-E, I envy them both.

But I’m not on Wall Street, and this week both of their companies attempted to spin their stories of growth in the hopes of at least getting a pat on the back, if not the reward of a increase in stock price.  Didn’t quite work out that way.

As INVESTOPEDIA’s Aaron McDade reported on Tuesday:

Shares of entertainment and media conglomerate The Walt Disney Company (DIS) fell… amid concerns about weakness in its outlook for the fiscal third quarter after the entertainment giant reported a net loss for its second quarter despite returning a surprise profit in its direct-to-consumer entertainment segment. Disney reported $22.08 billion in total revenue, up from last year’s mark of $21.82 billion and in line with estimates compiled by Visible Alpha. However, due to a number of goodwill impairment charges, Disney reported a net loss of $20 million, or 1 cent per share, compared to expectations of $1.96 billion in profit, or $1.09 per share.

This, despite the narrative that was being spun by its CEO:

“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results,” Disney Chief Executive Officer (CEO) Bob Iger said. “We have a number of highly anticipated theatrical releases arriving over the next few months; our television shows are resonating with audiences and critics alike; ESPN continues to break ratings records as we further its evolution into the preeminent digital sports platform; and we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.”

And this morning, the news from Iger’s Burbank neighbor that McDade shared was equally as tepid:

Warner Bros. Discovery (WBD) shares fell in premarket trading Thursday after the entertainment conglomerate’s first-quarter results missed estimates. WBD’s revenue fell 7% year-over-year to $9.96 billion from the $10.7 billion the company reported in the year-ago period, falling short of the $10.25 billion consensus estimate compiled by Visible Alpha. The movie and television producer also reported a larger net loss than expected at $966 million, nearly double the $501.7 million analysts had expected, but narrowed from the $1.07 billion loss registered a year ago. On a per-share basis, WBD posted a loss of 40 cents, slightly smaller than last year’s 44 cents but nearly double analyst estimates of 21 cents.

Again, this despite an attempt to paint a rosier picture, as was shared by THE HOLLYWOOD REPORTER’s Georg Szalai a couple of hours earlier:

Warner Bros. Discovery posted a first-quarter profit of $86 million for its Direct-to-Consumer (DTC) unit, which includes its streaming and premium pay-TV services, compared with a $50 million year-ago profit, after turning a full-year 2023 profit earlier this year.

The company, led by CEO David Zaslav, said Thursday that it ended March with 99.6 million global streaming subscribers, compared with 97.7 million as of the end of 2023 and ahead of Wall Street expectations. 

But analysts often pay far more attention to numbers than they do to words.  And a few that were released by our friend Evan Shapiro of ESNAP earlier this week painted a particularly distressing picture as to how inconsequentially these monoliths’ respective streaming services are actually being received, as well as how challenging their prospects for growth truly are:

The chart above measures total active accounts for each of the streaming services listed – Netflix, Prime, Disney+, and MAX. We get subscriber accounts from the companies, but this new data measures how many of those subs actually use the service each month.

Netflix has 270 million global subscribers. According to this usage data, the average number of subs who used the service any given month in 2023 was 176 million. If Netflix averaged 244 million subs in 2023, that means 68 million Netflix subs did not use it each month. That said, an average of 176 million subscribers did use Netflix each month – 60 million more than the closest competitor, Prime.

The story inside the data is far worse for Disney and Disco Bros. They have both been losing subscribers in the past year, so we will use their current subs as benchmark. A seemingly unhealthy 59% of Disney’s 150 million Disney+ subs do not use the service in an average month. More worrisome, an average of 64% of MAX subscribers do not use the service each month.

And as we are careening into the teeth of upfronts  it’s even more sobering to note how far off the leaderboard the Burbank Ds are in terms of actually being able to achieve material growth from the supposed panacea of ad-supported tiers:

This data – from two different sources both measuring actual subscriptions and usage – shows that Amazon has a surprising lead in total available advertising inventory, despite a huge deficit in total time watched across their platform.

For platforms like Disney+ and MAX, the lack of user engagement is evident all over. These numbers – monthly active accounts and hours of content per user – are telling diagnostics for a platform’s health. For advertisers, this data shows disengaged, periodic audiences. In a world of commoditized eyeballs, that does not inspire an investment of time or budget.

Hence, with all of this backdrop, this news from THE NEW YORK TIMES’ was that much less shocking that at first blush:

In a rare moment of solidarity, two entertainment giants are teaming up to try to get consumers to stop canceling their streaming services so frequently.

Disney and Warner Bros. Discovery announced on Wednesday that they would start offering a bundle of their Disney+, Hulu and Max streaming services this summer, a sign of how rivals have become more willing to join forces in order to confront an ever-changing media landscape.

The companies said that the bundle would be available to buy on any of the three streaming platform’s websites (Disney owns Disney+ and Hulu; Warner Bros. Discovery owns Max), and that there would be a commercial-free version as well as one featuring ads. The companies did not announce prices or a date when the offering would become available.

And this morning, THE WRAP’s Kayla Cobb gave a pulpit to Zaslav’s partner in streaming crime to attempt to clarify his vision:

JB Perette, the CEO and president of global streaming and games for Warner Bros. Discovery, noted that in the 2010s, the industry “went down in a very dangerous, financial path” of companies trying to create every type of content for every type of consumer.  “At the end of the day, we know where that lead,” Perette said. “We’re now getting back to all being great at what we do and swim in the lanes that we are great at.”  “We can get back to investing in prioritizing our lanes and our key content, they can do theirs. Synthetically, these bundles allow us to do that while still providing the consumer with a very attractive price for the combination of products,” Perette continued. “Even if [the consumers] don’t use a service in one month, they still feel like they get great value, and they might use it the next month.”

Sure sounds like a reasonable expectation.  But the likes of TOO MUCH TELEVISION’s Rick Ellis aren’t buying it for a second.  As he shared in his newsletter last night:

(E)ven the simplest details of the bundle are confusing at this point. One of the big issues with any of these ideas is deciding who handles the billing. In a competitive streaming environment, retaining the billing and contact information for subscribers is key. That direct connection with customers allows media companies to pitch other products and build an overall relationship with subscribers.  It appears that this is not an effort to combine the apps, each one will remain a standalone app, but subscribing to the bundle would involve some overall discounted price. 

And even the most simplistic and incomplete measurements such as the Nielsen Gauge are a reminder of exactly what the gap is between these services and best in class.  Combined, they don’t even equal Netflix, and that includes Hulu, whose presence as a proven content aggregator actually eclipses the combined usage of Disney+ and MAX.

If this all sounds a lot like the effort these companies have been engaging in that is still erroneously being referred to as “Spulu”, you wouldn’t be mistaken.  And all we’ve seen from that so far has been a raft of executive hires, a couple of  Congressional hearings, a lawsuit from an established aggregator and not one single word about the service’s registered name, let alone any details about cost or content.

But it did make for some eye-catching headlines and at least gave Yosemite something else to smile about besides the performance of his newly beloved New York Knicks, currently up 2-0 in a playoff series for a league his networks and platform may no longer be able to afford.    But, personally, Zaslav is on pace to still be able to swing courtside seats (and probably some higher-end drinks as well).  He actually was a tad more self-revealing than he may have wanted to be earlier this week, as NEXT TV’s Daniel Frankel reported:

Warner Bros. Discovery CEO David Zaslav held his cards closely to his vest Monday while speaking at a Milken Institute conference in Beverly Hills, largely sidestepping questions about the ongoing Paramount M&A process, not to mention Warner’s existentially vital TV rights renewal talks with the NBA.

Zaslav, who received a 26% compensation increase to $49.7 million in 2023 as WBD’s stock price rose around 20%, did open up a bit more on the issue of executive pay.  “The majority of compensation should be aligned with the performance of the stock,” he said. “If the stock does well, then the CEO should do really should do much better. And if the stock doesn’t do well, the CEOs should not. I think alignment is critically important.

If that doesn’t make many of you want to hurl something in his direction other than a churro, I don’t know what might.  Especially as it was reported this morning that as he maintains he is still chasing the brass ring of the same NBA that he effectively trashed when he took over the helm in 2022, he now plans still more layoffs to a company already devastated and gutted by his short-sighted mismanagement.

So careful where you choose to sit in future games at MSG, Yosemite.  Someone might be inclined to take your gun, and not just because they’re rooting for the visiting team.

Until next time…


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