Streaming Content: I Do Not Think You Know What That Word Means

READ MORE: The 10 Myths of Streaming (The Hot Button)

Streaming content, and the companies that provide it, have together had a huge impact on our entertainment, particularly during pandemic-inspired lockdowns. Subscriptions and influence have grown. But what also appears to have emerged, among those in the business of the media and the stock market, is a lot of accepted wisdom about the streaming industry. This is the target that David Poland’s takes on in his blog, The Hot Button, in an article titled “The 10 Myths of Streaming.”

Building a Base

The first myth Poland tackles is, “You Need To Ramp Up Spending Wildly To Attract An Audience.” Not so, says Poland. Numerous TV examples in the past have proved that even failing networks can be turned around by two or three hit shows. “Those shows don’t have to be the most expensive… a half dozen real hits a year will be able to drive any streamer,” he observes.

Read more: Expectation, Expansion and Exclusivity = Record Content Spending

Taking Netflix as the oft-repeated example of peak streaming spending power, Poland points out the global giant is actually “cutting back, not pushing forward on content spending.”

As “everywhere in the world is a cheaper place to produce content than America,” he says the streamer is getting more bang for its buck by producing or buying three or four series from other countries at the cost of one show made in the “Hollywood” system.

“Netflix apparently spent under $3 million an hour for Squid Game,” says Poland. “There is not a Hollywood-made series on the channel that they have [paid] as little for, going all the way back to House of Cards. That gives them three or four shots at a surprise hit like Squid Game as opposed to an all-American homegrown show.”

Read more: The (Unavoidable) Universal Appeal of “Squid Game” Is By Design

Content, or IP, also features further down Poland’s list of myths as he examines the perception that “IP Won’t Fade Like Movie Stars Have Faded.”

“When DVD rose, studios took two tracks aside from selling new content,” he says. “One was trying to resell every piece of library material on a DVD, the new delivery system. The other was to mine every bit of IP they could find a writer or director to embrace.”

He adds: “There was so much money in DVD that agents had figured out how to squeeze that money out of the studios before (and without regard to) the DVD release.”

“Opening is important. But word of mouth is what builds a real success. As of now, there is zero proof that dumping original movies meant for and of high enough quality of wide theatrical release drives and holds subscription numbers any more so than other, much cheaper, original content or library content that still drives a lot of views.”

— David Poland

Mission: Impossible 3, says Poland, saw Tom Cruise take home $60 million “[This] factored in DVD in a big way – and the net from the theatrical release and the initial DVD sell-thru still left Paramount in the red.”

A parallel track was the focus on franchises, epitomized for Poland by Spider-Man in 2002. “We had already been through three Batmen by then. The international theatrical business meant more and more product was going to focus on a piece of IP or concept, rather than a star.”

Poland observes that after the surprise success of Knives Out, “Netflix paid an insane amount for the next two sequels,” and that “the company’s IP game has been seen as weak is that they have previously invested in flailing IP.”

But, he adds, the standard for success of Netflix or on other streamers is not what it once was.

“You are pushing product to a captured audience of paid subscribers who see the internal promotion for shows over and over and over again. Show tourism by viewers is encouraged,” he says. “As a result, IP should work for Netflix, at least in terms of getting sampling over and over.”

Then again, another one of Poland’s “pet peeves” is the myth that “Launching Original Movies On Streaming Pumps Up Sub Numbers.”

“Opening is important,” he says. “But word of mouth is what builds a real success. As of now, there is zero proof that dumping original movies meant for and of high enough quality of wide theatrical release drives and holds subscription numbers any more so than other, much cheaper, original content or library content that still drives a lot of views.”

Money Makes the World Go Around

Another focus for Poland is Disney and the potential for its linear networks, which he reports still make the most money for the company ($30 billion in the past year, according to Disney’s Q1 quarterly report). The myth exploded here is “Disney+ Is The Primary Streaming Key For Disney.”

“Disney+ may be the greatest bait ever… but the real money in the move to streaming for Disney is in the rest of their platforms,” he says. “Disney+ [represents] less than a third of the DTC business that Disney is seeking, first in the United States. And the real ambition is to bring the whole footprint to the rest of the world at what will surely be a lower ARPU, but to as much as [triple] the domestic audience. A worldwide business that generates over $70 billion a year.”

He also suggests looking beyond subscription numbers. (Myth: “Subscriber Figures Are The Key Stat That Matters.”)

“Subscriber growth is very important, regardless of the model you are chasing. It is important for revenue, and it will be of even more importance to take advantage of the AVOD business, where you are selling eyeballs to advertisers. [but] the key stat that will matter for streaming after the first three or four years of losses projected by every new streamer is… profit.”

Again, he offers Disney as an example: “In the last quarterly, India aka Disney+ Hotstar [had] 45.9 million subs. But $1.03 ARPU [Average revenue per unit, in this case subscribers].

“This may be the best that Disney or anyone else is going to get out of India,” he continues. “This will not be the last market with this kind of outlying stat. But $570 million a year gross from a market the size of India isn’t making anyone in Burbank giggle with delight. Plus, there is a lot of talk that if Disney loses its cricket franchise (not Jiminy, the sport), that number will crater.”

“The opportunities that Netflix evolved with and built on are not there for other streaming companies, legacy-based or otherwise. Market valuation will never be as high, vs earnings or revenues, as it has been for Netflix. The interest rate will never be as lower than it has been for Netflix through their primary period of building a new content base and library. No one else can ever be the first mover, benefiting from being a breakthrough product in every market as well as with the media.”

— David Poland

Another myth Poland wants to explode is “Amazon and Apple don’t care about making money.”

“They do,” he says. “Look at their financials.

“How many billion a year would Apple or Amazon need to be spending on their consumer-facing streaming businesses to be considered important to those companies? Probably [five times] what either is now spending,” he adds.

Then there are acquisitions (or M&A). The myth here: “Acquisitions Will Fix What Ails Your Platform.”

Though recent moves among the majors — Disney buying Fox assets, Amazon buying MGM — get a nod of approval, Poland is scornful of a Warner Media/Discovery deal.

“The idea of a major studio with a library and IP acquiring a studio with a similar amount of the same, but no separate specific strategic purpose simply makes no sense,” says Poland. “More of something that’s not quite working is not an advantage.”

He’s positively scathing when it comes to the rumors that Netflix might acquire ViacomCBS, Sony or Lionsgate. “None of the three has significant international assets,” he states. “None of them have fungible sports assets (though CBS has rights to the NFL in its narrow context).

“Netflix is a decade into their “build our own library” effort,” he adds. “And now, they are going to abandon that primary focus and spend nine figures on a studio that has its own quirks and issues and culture and content that it hasn’t yet been able to maximize itself? Who is selling this idea?”

Elsewhere in the article, Poland says it’s unlikely anyone will replicate the starred life of Netflix. (Myth: “The Netflix Streaming 3.0/4.0 Model Is Something Others Can Recreate.”)

“The opportunities that Netflix evolved with and built on are not there for other streaming companies, legacy-based or otherwise,” he observes. “Market valuation will never be as high, vs earnings or revenues, as it has been for Netflix. The interest rate will never be as lower than it has been for Netflix through their primary period of building a new content base and library. No one else can ever be the first mover, benefiting from being a breakthrough product in every market as well as with the media.

“Netflix is a unicorn,” he adds. “No one else gets to wear the horn.”

Streamers must succeed by their own standards, or “they will die choking on the standards of others” Poland says (Myth: “Successful/Surviving Streamers Will Play On The Same Ground”).

Global View

It’s fairly evident that international content success does not translate directly into transnational advertising, but Poland digs into the myth of “The World All Looks The Same.”

“One of the clouds hanging over everyone but Netflix and Disney+ is pushing out ad-based streaming (AVOD) to the world. Obviously, there are ads everywhere in the world. But how universal can a Hulu-like package or a Pluto-like package or virtual cable like YouTubeTV be?

Read more: What’s Up With the (Very Fast) Growth of FAST?

“Imagine a worldwide Netflix hit like Lupin playing on AVOD, with not only all the translations and subtitles, but with 14 minutes’ worth of ads every hour from 150 different countries,” adds Poland. “This is a feat that has yet to occur.

“But it’s not just the ads that will be different in pretty much every single country,” he adds. “If these companies want to become core channels in other countries, they need to program locally as well as worldwide.”

Poland wants “the whole of world content to be available to the whole of the world,” but adds, “at some point, there is going to be a lot spent on regional content that doesn’t translate well or at all to other regions, just as there have been American shows that have played well in some countries and not at all in others.”

It’s Poland’s view then, that “at the point in which that reality smashes into the whole of streaming, streamers will have to start to make choices and not service certain countries fully.”

READ MORE: The 10 Myths of Streaming (The Hot Button)

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