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Disney, NBCU, Warner, ViacomCBS Pivot Into Whole New (Streaming) World

It was a remarkable week in the entertainment business, as four of Hollywood’s biggest media companies signaled hard turns into their streaming futures.

A string of announcements this past week by Disney, NBCUniversal, WarnerMedia and ViacomCBS push them all further from their broadcast, film and pay-TV roots, and suggest how quickly Hollywood’s embrace of streaming is accelerating amid the pandemic and other changes. And it wasn’t just those big traditional media companies making it a red letter week in the history of entertainment, as the Justice Department, TikTok, Microsoft, Cinemark, and Regal also chimed in.

Together, the shifts represent great news for consumers who want to access more programming, on more platforms, whenever they want (though admittedly at what may soon be premium prices in an increasingly fractured marketplace) .

Theatrical exhibition was already tattered thanks to the pandemic, but the unraveling accelerated further this week. Expect it to get even worse as the pandemic continues to flare up across the country, undermining the, production of new films, the confidence of consumers, and the amount of foot traffic at malls where many theaters are located.

On top of that, more pay-TV customers are cutting the cords, sending household penetration rates drooping to levels not seen in a quarter century .

Broadcast may perk up slightly in the next few months with the elections and the return of live sports, but given the clown show that’s marked Major League Baseball’s return, the uncertainty over college football, and the NFL’s many compromises, it’s unclear how much live sports we’re actually going to get.

As a result, studios are finally internalizing and operationalizing a few realizations:

1) They can’t count on the old theatrical distribution window to magically reappear (WarnerMedia’s oft-changed plans for Christopher Nolan’s Tenet notwithstanding);

2) Their cash-cow cable TV operations are getting skinny fast, so they can’t count on those either; and

3) They have embrace streaming, and on an international scale, much more aggressively and quickly if they want to generate revenue and new audience engagement to replace what they once had with theatrical, pay-TV and broadcast..

LightShed Partners issued a lengthy report on the Disney moves, calling them “three torpedoes that will accelerate legacy media’s collapse.” I’d amend that line slightly, to say the torpedoes are likely to hit below the waterline on the slow-moving ships of theatrical and pay-TV distribution, causing them to take on even more water in coming months.

As the cable bundle breaks and traditional distribution windows get smashed, studios are making explicit the resource shifts from traditional divisions into streaming, hastening the decline of the former, LightShed’s Rich Greenfield, Brandon Ross and Mark Kelley wrote in a post this week.

“Studios really have no choice. Consumer behavior is shifting as more and more movies are going straight to streaming and away from a theatrical release (not to mention the amount of TV content available that is cinematic quality has exploded, competing for movie time spent),” the LightShed analysts wrote.

It’s something of the same issue on the pay-TV side, and even with transactional VOD (and the emerging Premium VOD window) versus adding value and stickiness to a global streaming subscription service, which is the future.

In case you missed any of the week’s news, here’s a breakdown of what happened and their likely impacts::

  • Disney finally gave up on a wide theatrical release for the Mulan remake, after several attempts to set a date in this pandemic-idled summer. Instead, Disney will create a new distribution window, making the film available only to Disney+ subscribers for an additional $30 beginning next month. That’s a very different approach to how Disney+ handled Hamilton, which was available free to D+ subscribers and helped drive a huge upswing in signups. admittedly cost far less to make than the $200 million Mulan. Somewhere between the two approaches is probably a likely strategy for many future Disney releases.
  • Cinemark and Regal signaled they aren’t interested in cutting deals similar to either Disney’s PVOD approach or the deal between NBCUniversal and AMC that includes revenue sharing in exchange for shorter exclusive windows. That’s certainly a brave stand for the No. 2 and 3 theater chains in the United States, but perhaps not a sustainable one. Cinemark CEO Mark Zoradi said an “aggressive shortened theatrical window could have an adverse impact on the mid-to-tail end of a film’s life.” So could widespread theater closures, bankruptcies, and lingering customer concern about theater safety. And widespread theater closures and bankruptcies are exactly what LightShed predicts among huge audience discomfort with going to theaters to watch old movies: “Movie-going will not disappear, but there will not be enough demand (nor supply of content) to support 40,000+ screens in the US. We continue to expect most exhibition chains to file for bankruptcy in the coming 12-24 months, which will lead to a significant shrinkage of their footprint.bankruptcy within 12 to 24 months.”
  • A federal judge lifted, at the U.S. Department of Justice’s request, the so-called 1948 Paramount Decrees, which prevented studios from owning theaters or engaging in anti-competitive behaviors such as block booking. Lifting the decrees clears the way for traditional media companies to buy back into exhibition, which is possible. More interesting is the potential for Amazon or Apple to buy some theaters, convert underutilized space into Apple Stores or Whole Foods, Genius Bars or Amazon pickup sites, and maybe create spaces for esports tourneys, location-based VR experiences and more. If theater chains head into bankruptcy, they’ll have opportunities cheaply acquire and transform some of retail’s most underutilized spaces.
  • Speaking of sports, Disney executives during their earnings call suggested they’d be “open to any and all options in terms of how we may be able to get our (ESPN) programs to our consumers.” Given that ESPN long was the single most lucrative property in cable TV, this suggests that the Worldwide Leader may not be locked into its traditional footprint for much longer. Will ESPN+ be getting more premium live sports content that was locked on a shrinking cable footprint? Bet on it. And bet on the streaming service featuring a lot more sports betting information too.
  • Disney wrote off $5 billion worth of value in its international linear channels. This was a pretty dramatic, if underreported, move that says how little Disney thinks of the worth of its traditional cable properties even overseas. The company’s 10-Q filing expects those channels to be “negatively impact(ed)” by the shift to streaming. As in, impacted a lot.
  • In tandem with the international channels write-down, Disney said it will launch a general entertainment streaming service overseas to be called Star. It already owns a streaming service in India called Hotstar, so this makes sense from a branding standpoint. And the launch of a single service represents a very different strategy from Disney’s three-headed U.S. monster (Disney+, ESPN+, Hulu with FX). Regardless of what programming ends up on Star, the pay-TV channels will be getting less premium content, hastening their demise.
  • Meanwhile, Comcast’s NBCUniversal announced a sweeping reorganization of its TV operations, designed to reorient operations toward streaming. As much as 10 percent of the workforce reportedly faces layoffs, not least among them EntertainmentACEL chairman Paul Telegdy, architect of reality hits such as The Voice but also subject to allegations of a wide range of crummy behavior. Lots of dust still needs to settle, most particularly regarding who will head Peacock, NBCU’s new streaming service with a hybrid business model. Regardless of who’s running the new bird, NBCU executives made it clear, the just-launched streaming service will be getting more resources, and legacy linear networks will be getting less. NBCU is already experimenting with cost-cutting approaches like running summer competition show Cannonball on both NBC and USA. That doesn’t feel like a win for viewers, but saves money and fills up the programming grid. As another example of the shifts, E! just cancelled a string of expensive entertainment-news shows, and replaced them with cheaper reality programming.
  • WarnerMedia’s new boss, former Hulu and Vessel CEO Jason Kilar, took less than three months to announce his own sweeping reorganization, elevating the recently launched HBO Max, pointing it toward a global footprint, and announcing layoffs and the departures of two top executives with long TV roots. Kevin Reilly, who came from Fox, and Robert Greenblatt, who came from NBC, are both leaving, as is Keith Cocozz, who headed corporate marketing and communications. The reorganization streamlines all production and programming across film, pay-TV, premium cable and streaming under one person, Warner Bros. Chair and CEO Ann Sarnoff. HBO Max GM Andy Forssell has been elevated, made responsible for the international rollout, and will report directly to Kilar. That Kilar might want to remake WarnerMedia isn’t a big surprise. But these are big changes, hastened by the problems with film and pay-TV, and perhaps by HBO Max’s underwhelming debut amid lots of brand confusion. The service also still hasn’t concluded carriage deals with Amazon and Roku. That meant HBO Max isn’t available on popular streaming devices in an estimated 80 million U.S. households. Kilar said in a staff email the changes will help WarnerMedia accelerate its global expansion while simplifying and consolidating the org chart and international operations. He called it “our leaning into this great moment of change,” during “one of the greatest opportunities in the history of media” to reach hundreds of millions of customers simultaneously across streaming. It’s highly possible that Kilar, a digital pioneer, may actually understand how important this present moment is, and with an intensity of focus that executives from older media businesses may lack.
  • ViacomCBS put more detail around plans to beef up CBS All Access globally. Executives said the service will launch early next year in three regions, with local originals, first-run programming from both Showtime and CBS All Access, first-run and classic ParamountPGRE films and series from several Viacom networks. Viacom already had added 70 shows from its vaults to the U.S. version of AllAccess a couple of weeks ago. It’s not yet clear whether the company will reshape U.S. operations on the international “super service” model, but CEO Bob Bakish has repeatedly used international venues to fine-tune distribution strategies he then brought here.
  • It’s worth mentioning TikTok’s crazy week too. The hugely popular short-form video service was suddenly in play, with Microsoft trying to buy its U.S. and three other territories for a reported $30 billion, while President Trump issued a problematically vague executive order that may keep TikTok or WeChat from doing business with U.S. companies in 45 days. The order also may impact their giant parent organizations, ByteDance and Tencent, which have lots of other U.S. investments in music, gaming and entertainment. TikTok may be focused on short-form videos now, but it hired former Disney streaming chief Kevin Mayer as CEO earlier this year in part to help move the company into areas such as live news and sports. What “TikSoft” might look like in six months or a year could be a lot more like YouTube or even the subscription streamers.
  • And though this news happened at the back end of last week, streaming services absolutely swamped the Emmy nominations. Netflix grabbed a whopping 160 nominations, far more than No. 2 HBO and more than the four broadcast networks combined. Disney+’s The Mandalorian grabbed 15 nominations by itself, including one for best dramatic series. AppleTV+ received 16 nominations, including five acting nominations for The Morning Show. Awards counting is always dicey business, but the breadth of nominations across streaming services suggests where the quality projects are heading these days. The eyeballs are certainly following.