Venn And Venn It Doesn’t Make Sense To Consolidate

In the aftermath of the still puzzling decision for Paramount+ and SHOWTIME to come together and for all intents and purposes diminish a brand synoymous with quality pay scripted television to an afterthought, the news that cooler heads have seemed to prevail in the Warner Discovery camp was a needed positive sign that even in the most synergy-desperate organizations there are sometimes more good reasons to maintain interdependence than simply fold all of one’s assets under one roof.

As my friend and colleague Rachel Dreyfus points out on her LinkedIn page (booknote it!), the idea of interdependence when enough different market sectors are represented within one’s portfolio has seemed to make sense in healthier industries than media:

WBD decision to maintain Discovery+ as a separate streaming service is a smart growth strategy. Like the hotel & resorts business, assets in a strong “house of brands” deserve nurturing and leveraging of its targeted customer base. Take from #Marriott playbook, with “room” for its 30+
brands (!), each positioned with brand promise and branded customer experience, deeply profiling their needs (so many varieties). Video fans are similarly diverse – let’s see these brands nurtured – #HBO #SHO #paramountplus #Peacock and let decisions be driven by consumer needs.

Strategic Marketing Insights Consultant | Product Innovation | Customer Experience | Corporate Social Responsibility | Media Research


I’ve done enough segmentation research over the years to see game plans that focus on the overlap of Venn diagrams–looking to maximize the sweet spot of concentricity between two different market sectors in order to optimize efficiency of marketing and production toward attracting more people with fewer impressions.  When the circles that make up a Venn diagram are similar in size, that approach makes sense.   But when one dwarfs the other, and when the smaller one represents a passion base with loyalty, the practicality of maintaining distinct identities often is proven to be a more sensible–and, even more often, more successful–path to undertake.

With the announcement earlier this week that discovery+ will continue to exist as a stand-alone service, at a lower price point, while plans for an expanded HBO Max that will integrate that portfolio imto a more diverse and synergistic package, sighs of relief could be heard among those fans of unscripted television.  When FX  first built its brand perception on the backs of several quality original scripted hours, there was a strong desire by upper management to find ways to bring down the overall cost per project by integrating more unscripted shows into the mix.   We did significant research among both our subscribers and those who were more loyal viewers of networks like those in the Discovery family.  We learned that fans of scripted series were more open to considering watching unscripted series, and, indeed, the duplication of our audiences with the likes of FBI FILES and DIRTY JOBS was high, while the inverse was absolutely NOT the case.  By the very definition of the escapist and lean-back attitudes often reflected in unscripted shows, people who embrace those sorts of shows as first choices are far less likely to want to pay more for the chance to watch shows that, at best, are afterthoughts to them.  And, at the time, the Venn diagram hetween Discovery and FX showed Discovery as a much larger circle.  Considering that now the Discovery family includes what were the Scripps and Turner networks as well, I have little doubt that their current research yielded even more conclusive data to support the idea of maintaining separate identities.  And by maintaining the status quo option for the discovery+ subs, there is less likelihood that sticker shock for a conflated service will result in churn.

There’s reason for similar optimism in the Netflix camp, where greater clarity on the controversial–but clearly needed–crackdown on password sharing emerged this week.  While the service will indeed start to crack down on subscribers who share passwords outside their households, they are embracing ways to piss off fewer current subscribers by offering some options for those who are most passionate about the content, as The Washington Post’s Victoria Bissett reported:

Netflix said Wednesday that the password-sharing measures would begin immediately in Canada, New Zealand, Portugal and Spain.

“Today, over 100 million households are sharing accounts — impacting our ability to invest in great new TV and films,” the company said in a statement, using global numbers.

Last year, Netflix carried out trials in Chile, Peru and Costa Rica, which allowed members to create sub-accounts for users living at different addresses for $2 to $3 per month. Now Netflix says it is ready to roll out its new system “more broadly in the coming months.”

Users in the four countries affected by Wednesday’s changes will have to choose a primary location — something Netflix says it will help them to do.

Otherwise, Netflix will offer customers the option of buying up to two extra profiles for people living outside their own household. This will depend on the account holder’s own subscription level. Standard plans will allow one extra member on the account; premium plans will allow two. Basic subscriptions will be excluded completely.

The price for additional profiles will vary by country, with users in Spain paying about $6.44 (5.99 euros) for each additional profile per month. The cost will be $6 in Canada (7.99 Canadian dollars) and in New Zealand, around $5 (7.99 New Zealand dollars). In Portugal, the price is $4.29 (3.99 euros).

In a recent survey, investment firm Jefferies highlighted concerns surrounding the company’s crackdown on password sharing, particularly among the account freeloaders Netflix hopes to convert.

According to lead analyst Andrew Uerkwitz, about 62% of the 380 Netflix password borrowers surveyed said they would stop using Netflix once the crackdown takes effect.

Only 10% of those polled said they would move to create their own account for $9.99 a month, hinting password borrowers don’t see enough value in the platform. The survey also suggested competitors could greatly benefit from Netflix’s crackdown.

Some 35% of respondents said they can replace Netflix with another service, while another 31% added they don’t enjoy the content enough to justify paying for it.

When asked which platforms users would use more frequently if they eliminated Netflix, the top streaming alternatives included Amazon Prime Video (42%), Hulu (35%), and Disney+ (26%).

Sorry, Jeffries, 380 cheapskates saying what they’d prefer to do doesn’t qualify in my book as conclusive research.  A more nuanced view was offered up at the end of Canal’s article:

“The bottom line is there’s a massive amount of password sharing, particularly among affluent people,” Jason Helfstein, head of internet research at Oppenheimer, told Yahoo Finance Live in an interview on Monday.

“We do think a good chunk of [Netflix] subscribers will probably pay more to keep certain members of their household, or let’s say their children who no longer live with them, on their plan,” he continued.

Helfstein, who described the crackdown as a “net positive” in the long term, added Netflix, “would not be doing this if they thought they would end up in a worse revenue situation.”

“This is a company that historically has prided itself on customer service, above all,” Helfstein said.

Think of it this way.  For the price of a a loony or two, Netflix loonies north of our border can maintain status quo.  In the dead of winter, there are fewer options that offer greater value than this in Canada, except perhaps for All Dressed chips.  The smaller Venn diagram’s circle is more likely to add enough incremental monthly revenue for more months than those who say they will opt out–and may indeed do so, only to be lured in at some point if a cool show happens to drop.  And past subscriber behavior vs. intent research bears that out.

Which brings us to the rumblings that arose during the State of The Mouse presser than returning Disney CEO Bob Iger delivered yesterday.  In announcing the streamlining of the company, he not only announced ESPN will become a separate business unit, but he also did not rule out the potential of Disney choosing not to exercise its option to fully acquire Hulu, which previous management had all but indicated was a fait d’accompli.  Which immediately to this overreactive piece on The Wrap from Christofer Hamilton:

Disney markets Hulu in a bundle, which includes Disney+ and ESPN+. According to Parrot Analytics’ demand data, Hulu’s TV catalog was more in demand than any other SVOD catalog in the U.S. market last year. Across total catalog demand, which includes both movies and series, Hulu’s catalog is second only to Netflix. 

The chart shows how Hulu fits into Disney’s streaming strategy. While Disney+ relies more on movies (60.4% of its catalog demand comes from movies), Hulu’s catalog is overwhelmingly based on TV series (76.7%). Together, Disney+ and Hulu’s catalogs make up almost a quarter of the total demand for all content available on SVOD in the U.S. Combined, that’s more than any other service and even above the demand share of Warner Bros. Discovery’s planned combination of HBO Max and Discovery+’s catalog.

Yet again, demand does not necessarily indicate purchase. nor does this “research” factor in the true value–or lack thereof–of the Hulu brand.  If the content is indeed what makes Hulu desirable, were it available as a tiered option via a Disney+ nomenclature would it be any less desirable?   The Disney brand is evolving, as is its audience.  Iger already has full ownership of other brand names (FX?  Touchstone? ) that could easily be offered up as an additional pillar among the Disney+ tentpoles, with the necessary cost savings.  With all due respect to the many Hulugans past and present I respect and admire, is the net worth of a brand that references a horn of plenty truly needed for Iger’s business goals to be met?  What’s the size of that circle versus that of Disney+’s?

By the way, it’s also important to note that “reporter” Hamilton is referenced thusly at article’s end:

Christofer Hamilton is a senior insights analyst at Parrot Analytics, a WrapPRO partner. For more from Parrot Analytics, visit the Data and Analysis Hub.

So much for objective journalism.

But, thankfully, it seems like the braintrust at Warner Discovery and Netflix are choosing to look at real consumption data and deeper qualitative feedback, and not just survey responses and intent, to make difficult decisions, all the more timely considering the raft of more layoffs in the media sector this week (Yahoo!, News Corporation and Disney just joined the party).

Great.  Maybe we’ll all be able to afford some time at a Marriott property after all?

Until next time…




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