Disney, NBCUniversal, ViacomCBS Announcements Push Into Streaming Future

When they get around to writing the history of the Streaming Wars and Hollywood’s grudging embrace of the next era of entertainment, this week should be marked in red letters.

That’s because three of Hollywood’s biggest media companies – Disney, NBCUniversal, and ViacomCBS – took major steps away from their broadcast, film and pay-TV roots to further embrace streaming. And the moves can’t come soon enough.

Theatrical exhibition is in tatters, and it’s only going to get worse as the pandemic drags on, production of new films lags, and the malls where many theaters are located become ghost towns.

Studios can’t count on the same old first distribution window magically reappearing by September (WarnerMedia’s oft-changed plans for Christopher Nolan’s Tenet notwithstanding). They’ll need to adapt business models much more to streaming to generate new kinds of audience relationships and revenue opportunities.

It’s not much better in pay TV, where cord-cutting has accelerated to record levels. Household penetration rates are dropping to levels not seen in a quarter century, which will only further erode the vast sums that media companies had been harvesting for carriage and other fees. Again, that will force studios to look at streaming as the remaining growth opportunity going forward.

Broadcast may perk up slightly with 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 not clear how much live sports we’re actually going to get.

LightShed Partners issued a lengthy report on the Disney moves, calling them “three torpedoes that will accelerate legacy media’s collapse.” That’s a bit melodramatic, but the case they make is solid, as the cable bundle breaks, traditional distribution windows get smashed, and studios make explicit the resource shifts that are moving premium programming quickly from traditional outlets to streaming, hastening the decline of the former. The shifts are building into an avalanche that will spur further shifts in programming, audiences and money. “Just a matter of time,” LightShed’s Rich Greenfield, Brandon Ross and Mark Kelley wrote in a post this week.

The moves themselves will likely continue to transform the industry in coming months. In case you missed the week’s news, here’s the breakdown:

• Disney
  DIS
  finally gave up on a wide theatrical release for its live-action remake of Mulan after several attempts to set a date this summer. Instead, Disney will create its own new distribution window, making the film available to Disney+
  DIS subscribers for an additional $30 next month. That’s a very different strategy than Disney+’s free inclusion last month of the movie version of Broadway hit Hamilton, which 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 have signaled they aren’t interested in cutting deals similar to either Disney’s PVOD approach or a different one that NBCUniversal and AMC previously announced that included some 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. LightShed predicts widespread theater closures and bankruptcies: “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.”
• 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 on pay-TV, this suggests that the Worldwide Leader may not be locked into its traditional footprint for much longer. Will ESPN+ be getting more of the premium live sports content that’s been sitting on a shrinking cable footprint ? Bet on it. And bet on the streaming version having 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.
• Finally, in tandem with the international channels write-down, Disney announced it will launch a general entertainment streaming service overseas to be called Star. That’s 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 cable channels will be getting less of the premium content, hastening their demise.
• Meanwhile, Comcast
  CMCSA
  ’s NBCUniversal announced a sweeping reorganization of its TV operations, designed to reorient them toward streaming. As much as 10 percent of the workforce reportedly faces layoffs, not least among them Entertainment
  ACEL
  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. Regardless of who’s running it, 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. And E! just cancelled a string of expensive entertainment-news shows, which will be replaced by cheaper reality programming.
• Viacom
  VIAB
  CBS used its earnings call to put a little more detail around plans to beef up the anemic CBS All Access to better compete 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 Paramount
  PGRE 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 “ViacomCBS All Access” model, but remember CEO Bob Bakish has repeatedly used international venues to fine-tune his distribution strategies.
• It’s worth mentioning the crazy week TikTok had too, with Microsoft
  MSFT
  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. Though TikTok is known for short-form videos, earlier this year it hired former Disney streaming chief Kevin Mayer as CEO in part to help move the company into areas such as live news and sports, among much else. 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 overwhelmed 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 more, including one for best dramatic series. Apple
  AAPL
  TV+ 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.