There Is No Streaming Struggle (undefined:NFLX)

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Streaming and media knowledgeable Dan Rayburn shares why buyers ought to solely care in regards to the Warner Bros/Netflix/Paramount deal if it occurs (0:40). NFL and NFLX; streaming and sports activities (11:00). Acceptable metrics to make use of on this house (18:40). Model and income: Apple, Google, Amazon, Disney, Netflix (27:40). What’s TV? (45:00)

Transcript

Rena Sherbill: Dan Rayburn, an knowledgeable if there ever was one within the streaming house, within the media house, which encompasses so many issues proper now. Dan has been on a number of occasions earlier than, he is been writing on, or we have been having his writing provided on Looking for Alpha for fairly a while. He runs his personal weblog, streamingmediablog. He makes copious media appearances on varied mainstream networks. Dan, welcome to the present.

In case you would begin us off. What do you’re feeling like is high of thoughts? Netflix (NFLX) is clearly within the headlines a bunch, vis-a-vis Warner Brothers (WBD), vis-a-vis the dance with Paramount (PSKY), vis-a-vis sports activities. What’s high of thoughts for you or what are the few issues that you just’re interested by?

Dan Rayburn: There positive is so much. Netflix is at all times high of thoughts and simply thanks for having me once more. We might do a podcast each single day primarily based on the information that’s put out within the trade simply round sports activities streaming, not to mention all the opposite varieties of streaming enterprise fashions on the market, bundling offers, pricing offers.

Sports activities is at all times an attention-grabbing one, particularly as a result of we have within the final couple quarters, some new offers between Main League Baseball, Apple, naturally with the Components One deal.

Very attention-grabbing the truth that the NFL is admittedly leveraging the streaming companies of their world attain to develop their footprint versus the place the video games at all times had been, which had been broadcasters, particularly on Christmas when it has a number of the highest viewing home windows on the market.

All three video games are going to be completely on Netflix and Prime Video, besides in native markets for groups. I might say additionally for buyers, specializing in the financials and what the numbers truly present.

And that may be laborious to do when there’s a lot hypothesis about what is going to occur with WBD, Paramount, Netflix. It appears to vary day by day. It is unimaginable what number of headlines are flawed.

I am continually mentioning on LinkedIn. I am unable to imagine how many individuals are reporting the deal’s already achieved. Or they are saying phrases like Netflix has acquired WBD.

Like, what? How will you even create a graphic like that? It is thoughts boggling to me. So for buyers, you additionally simply have to know what info is actual and separate details from opinions.

Rena Sherbill Let’s get into the speculative deal between Warner Brothers and any individual. Perhaps it is gonna be Paramount, perhaps it is gonna be Netflix.

Actually some issues which have developed because the preliminary cope with Netflix and Warner Brothers has occurred with these hostile provides from Paramount. However as you stated, lots of hypothesis.

You will not be a betting man, however you are an knowledgeable within the area. You have been round a very long time, 30 plus years maybe, I feel. What would you say could occur and what would you say given the varied situations, what would you anticipate buyers ought to bear in mind given the varied situations and prospects?

Dan Rayburn: I feel buyers ought to solely care in regards to the deal if it occurs. Not what might, ought to, would possibly, would perhaps occur as a result of there’s too many various situations there. I might have a look at what the details are of the offers and there is two of them being mentioned proper now. Sure, they proceed to vary to some extent. They could change once more primarily based on what is obtainable.

We already see the place the cash is coming from on the Paramount Sky Dan aspect. We see the place Netflix has gotten the cash. They’ve put out some regulatory filings already.

I feel in the event you’re an investor, what it’s important to take into consideration is what’s the influence to customers? And I discover it fascinating that you’ve some massive unions and others which have come out into the market and stated that if Netflix acquires the portion of WBD they’d be buying, it is horrible as a result of it takes a alternative out of the marketplace for customers.

And but, is not one of many greatest complaints all of us have as customers is that there is too many various streaming companies? So, I do not suppose it is an issue so far as eradicating alternative out there. What we do not know is what would Netflix do from a packaging standpoint? Would Netflix roll that content material into WBD content material into Netflix? Would they maintain HBO Max separate?

A variety of what buyers usually are not realizing although can also be what’s being proposed on this deal.

As a result of as a part of this deal, if it goes by way of with Netflix and WBD, Netflix would get dwell TV channels within the UK, they get TNT, they get sports activities rights, they get the Olympics in 2028. That is a really completely different enterprise than what Netflix is in as we speak. As well as, Netflix can be getting the platforms and programs internally which can be at present offering the linear HBO channel to 3rd occasion companions. MVPDs.

Is {that a} enterprise Netflix needs to be in?

We do not know. In order that they’re getting a bunch of belongings right here offering the deal goes by way of, that we actually do not know what Netflix tackle that’s. Nevertheless, this concept that simply Netflix will purchase it and lay everyone off, they cannot afford to try this. Netflix shouldn’t be a studio. Solely WBD is. They’re nonetheless gonna must depend on the individuals who produce this content material, distribute it. Netflix has already stated they need to proceed what WBD is doing so far as releasing films in theaters.

Now, I perceive when individuals say, properly, that is not very particular. Perhaps they shorten that window. They could. We do not know. However I feel buyers must deal with this deal as soon as it is truly achieved. And I ought to have simply stated at first, too, to make this clear. I do not personal inventory in any of corporations we’re speaking about. I am not a monetary analyst by way of making bets.

I do not give out funding recommendation. I speak to lots of corporations concerned. I speak to distribution companions, studios, movie show chains, broadcast or sports activities leagues, I have a look at the info and I try to make educated selections primarily based on that.

And that is actually what I feel buyers ought to be taking a look at. Now flip aspect to that, it is laborious to solely have a look at that as a result of within the present US political surroundings, we all know that politics performs part of these massive potential acquisitions extra so than they did 5 or 10 years in the past.

So a part of that is additionally going to be tied to politics. There’s simply no approach round that. I do not hedge bets on which deal we’ll undergo or not undergo, nevertheless it’s very clear that WBD has belongings which can be extraordinarily beneficial from a content material standpoint.

Rena Sherbill: Does the hostile provide from Paramount shock you? Does the trajectory of this deal slash offers, does that shock you? Does it inform any of your opinion on this realm or barely exterior of this realm?

Dan Rayburn: No, it would not to me as a result of now you’ve gotten individuals leaking textual content chats between two completely different CEOs. You’ve gotten insiders speaking who should not be naturally, which we at all times have on this deal, any deal this dimension.

You’ve gotten rumors which can be thrown on the market that are not truly primarily based on details or it is primarily based on one individual’s opinion. So a deal of this dimension, it is actually not shocking. We take into consideration the trade tied to studios, streaming, sports activities. Sure, it usually falls underneath media leisure.

We might be laborious pressed to discover a deal that is being proposed that’s this massive and this important over the past, name it 10 years. Sure, Amazon, MGM, Studios, completely different. That was simply Studios solely. You might consider the AT&T (T) deal, DirecTV, which clearly did not go properly, however that is once more, not fairly the identical right here as a result of AT&T is a provider. So that is only a actually, actually massive deal so far as dimension, but in addition simply the influence to the trade general.

Rena Sherbill: I used to be going to say, is there any use to say, Netflix buys WBD, would you set it at like a 70% or there’s actually no function in any of that? Let’s all be affected person.

Dan Rayburn: No one has an perception into any of that. And what occurs if Paramount comes again and says, we’ll now provide $35 a share?

Modifications the whole lot in a single day. I do not know that they are going to try this. There’s hypothesis on the market, however yeah, I do not make guesses. I make educated bets primarily based on knowledge. And proper now it is simply too early. The opposite factor we do not know is, is that this going to move regulatory scrutiny? We will speak all day lengthy as an trade or as buyers about why it ought to occur or why it will be nice or not nice, however the deal has to get achieved.

The European Union goes have to have a look at this. The DOJ goes to have a look at it. Netflix personal feedback on the deal is 12 to 18 months to get achieved. They imagine it will likely be. However bear in mind WBD shouldn’t be splitting out into two entities till the newest they’ve now stated is Q3 of 2026.

After which it’s important to undergo the regulatory course of. This doubtlessly, if it closes, this might be two plus years. Straightforward. So so much’s going to vary within the trade within the subsequent two years, two and a half years. I feel it is simply too early to invest on any of it.

Rena Sherbill: And why does the EU weigh in, are you able to clarify that?

Dan Rayburn: Yeah, the EU has to weigh in primarily based on the proportion of your income that comes from Europe. And on this case, it is a big sufficient share to the place the EU must approve the deal.

Traditionally, for listeners that do not know, the EU would not most occasions try to cease offers. Yeah, they do with iRobot (IRBTQ). There’s been a pair instances right here and there.

In lots of instances, the EU merely says, OK, we’re not going to cease it or attempt to cease it, nevertheless it comes with some form of phrases of some variety. And that is not unusual in any respect.

We noticed that when Comcast (CMCSA) acquired NBC. There have been phrases to that deal the place it was accepted by the DOJ, however it’s important to adhere to sure phrases. that tends to be how the EU does appears to be like at mergers like this, nevertheless it’s it is one other unknown of many unknowns.

Rena Sherbill: Sure, many unknowns throughout the board. Do you suppose it is of worth to go once we’re speaking about streaming firm by firm or sport by sport?

Dan Rayburn: Ooh, that is a tough one. As a result of a few of these tie into a number of naturally. It is as much as you. I do not understand how you need to do it. Perhaps sport is less complicated.

Rena Sherbill: Let’s begin NFL as we’re December twenty third. Christmas video games about to occur.

Dan Rayburn: Okay. NFL. Effectively, everyone who’s a listener, who’s an NFL fan already is aware of simply how fragmented NFL streaming is and viewership is. It is simply, it is far and wide by way of the place you go to get what sort of content material, the standard of the content material that it is in.

There’s so much there to interrupt down, however I might say the most important factor that is fascinating proper now in regards to the NFL. We’re recording this on Tuesday, December twenty third. And yesterday was an ESPN sport, which introduced further knowledge to the display screen, which was attention-grabbing, a knowledge enhanced sport as they referred to as it.

The important thing factor right here for listeners is between December twenty fifth, twenty seventh, there’s 5 NFL video games which can be going to be performed. None shall be broadcast nationally on TV. Netflix has two video games on Christmas. Amazon (AMZN) has one. It is a triple header. Peacock has an unique sport on Saturday the twenty seventh. After which the NFL community has one.

So 4 of the 5 video games are streaming completely on three completely different platforms. Now, after all, the video games are OTA over the air. All NFL video games are. And native NBC associates will present the unique sport on. That is going to be on Peacock. However it simply goes to indicate how a lot the NFL is counting on streaming companies to get their video games worldwide and the way the distribution mannequin has modified over the past couple years.

As a result of broadcasters used to have these video games on the vacations. Christmas, Black Friday, wild card video games. They used to have all these. They usually’ve been stripped out of their packages to promote to, from the NFL, license, I ought to say, to streaming platforms due to what they’re prepared to pay for it. You and I do not like that.

It makes consuming sports activities extraordinarily tough. However what customers do not actually perceive is the sports activities leagues usually are not doing what’s greatest for us They don’t seem to be doing what’s straightforward for us they’re doing what makes them essentially the most cash for the league and the NFL has at all times been essentially the most fragmented on the market in comparison with say the NBA or Main League Baseball, though Main League Baseball with their new offers are gonna be fragmented as properly

Rena Sherbill: And what are the numbers displaying? Do we have now that sort of knowledge evaluation to see if, properly, for one, what are the numbers in comparison with common broadcast video games? Is that one thing that’s an apples to apples comparability? Is that one thing that is achieved? After which B, is the sports activities protection, is that resulting in extra subs? Is that resulting in extra income?

Dan Rayburn: Yeah, so that you’re asking a very powerful query right here that we have now within the trade, which is what’s the influence of sports activities content material on direct to shopper streaming companies? And we do not have a solution.

And the explanation we do not have a solution is as a result of not one of the sports activities streaming retailers and virtually all of the, or I ought to say leagues and the entire direct to shopper streaming companies, virtually none of them get away viewership in any variety and in the event that they do it is so excessive degree and imprecise the place they do not outline what a viewer is that we do not know what the influence is they do not point out issues on churn and retention they do not even publicly disclose Netflix as an organization has by no means publicly disclosed its churn to Wall Road ever in historical past so issues like churn we do not know.

Rena Sherbill: Is that by design? Like, one would suppose that if that they had one thing to brag about, they’d brag about it.

Dan Rayburn: I do not suppose it is that. It is definitions within the streaming trade are very tough as a result of not like broadcast TV the place we have now requirements, we haven’t any normal within the streaming world.

There’s nothing. We’ve for dwell occasions, simultaneous streams, AMA, common minute viewers. You’ve gotten month-to-month lively customers. Nobody defines it the identical. Netflix simply got here out with a brand new metric they’re calling month-to-month lively viewers.

There’s all, you’ve gotten concurrent streams, you’ve gotten concurrent gadgets, you’ve gotten distinctive streams. There’s all these completely different metrics and the businesses do not use the identical methodology. After which on high of that, when they’re utilizing Nielsen, which has a number of the worst knowledge on the market, you’ve gotten sports activities leagues calling out Nielsen publicly as a result of they do not belief their knowledge and but they nonetheless use them.

After which Nielsen determined to vary their methodology from what they utilized in earlier years to one thing they name the large knowledge plus panel measurement, which isn’t apples to apples, which everybody agrees. So how do you evaluate final yr’s viewership to this yr’s?

You’ll be able to’t. So it makes it additionally very laborious to determine what has viewership been over a protracted time period. That is a problem. After which you’ve gotten Netflix, their month-to-month lively viewers, the best way they outline a month-to-month lively viewer on their platform is any one who watched not less than one minute of advertisements month-to-month. One minute. That is it.

After which they take that quantity and so they multiply it by the estimated family of dimension. So principally how many individuals are on the sofa? What’s that attain? And that is their quantity. And that replaces what they name the MAU, month-to-month lively viewers.

So it is attention-grabbing to see how Netflix comes out with that metric, however then Amazon a month in the past at their unboxed occasion got here out and stated that Prime Video now reaches 315 month-to-month viewers globally. However it did not outline what a viewer is. So is a viewer, you watch two seconds, 10 seconds, one second, there’s any soccer on Prime Video, you go to amazon.com’s homepage, it hundreds within the higher proper hand nook. If I do not click on on it, if I do not have interaction with it, am I a viewer?

I do not know, Nielsen will not say. So a part of the issue we have now right here and a part of the issue buyers have is it’s totally tough to know what’s truly being considered and which platforms for what time period.

Outdoors of some companies, for example, NBC Sports activities is admittedly good breaking out viewership particularly for Peacock after they do video games for NFL. Fox would not break it out, however Peacock does, which is good.

However what we do not get is, okay, that is what number of AMA, common minute viewers you had, however how lengthy did individuals truly look ahead to? They will not say. So we have now some items of information right here and there, however ESPN will not get away what share is versus pay TV. In order that causes a problem as properly. So we have now some numbers.

However we do not have sufficient particulars to really know what is going on on and to your actual query is, what’s the influence? Is that making extra individuals join? And if that’s the case, is it additionally making them keep longer?

Rena Sherbill: I do know you are not a monetary analyst, however do you’ve gotten an opinion on what metrics buyers ought to be centered on for a corporation like Netflix, even Amazon, if you wish to weigh in, or another corporations within the house, after which additionally how that dovetails with the metrics that you just’re centered on?

Dan Rayburn: Completely. So whereas I am not a monetary analyst, what I imply by that’s I am not giving out inventory suggestions. I am not placing out studies. I am not a purchaser, promote aspect, institutional cash supervisor analyst, however I’m taking a look at monetary info all day.

I am taking a look at SEC filings each single day. There’s about 50 corporations in my trade tied to sports activities media, leisure, cloud infrastructure that I am monitoring which can be public. And I am studying each SEC submitting that they put out. And the explanation for that’s there’s lots of actually good info within the SEC filings that lots of people simply do not see as a result of it is not within the press launch. That features wire reducing.

Firms do not put what number of wire cutters that they had, take Verizon (VZ). Verizon would not put in its press launch what number of pay TV subscribers it misplaced for residential prospects as a result of they do not need to spotlight it. So you bought to have a look at the SEC doc. So I’m continually taking a look at monetary info. Anyone who’s taking a look at this house as an investor by this house, imply, DTC, Direct to Shopper Streaming Companies is aware of that profitability is the most important factor over the past 18, 24 months that the trade has moved to.

The entire get massive FAST mannequin that everyone had years in the past and through COVID, that does not work anymore. There was a time period the place Disney’s (DIS) DTC service was shedding $100 million a day. There was one quarter the place they misplaced $1.1 billion.

What occurred over a few years was Wall Road then stated, hey guys, overlook progress in any respect prices, you bought to get the profitability. All people’s burning by way of an excessive amount of cash.

And what occurred? WBD over time, D2C, it achieved that. Paramount, it achieved it. Disney, it achieved it. Now, Peacock remains to be shedding cash by way of its D2C enterprise, nevertheless it’s virtually there by way of profitability. Additionally they all outline profitability otherwise as properly, so it’s important to have a look at their definition of that.

However I might say the most important factor buyers need to have a look at, and one of many challenges is as a result of it is being faraway from most corporations is ARPU, common income per consumer.

As an investor, would you relatively have extra subscribers that quarter at a decrease ARPU or fewer subscribers at a better ARPU? Naturally, the upper ARPU. It is making more cash on the best way to profitability. What’s attention-grabbing is that Netflix, Disney, and a few the others, Roku, have stopped saying ARPU. They don’t seem to be giving buyers that knowledge anymore.

And a part of the reasoning is, properly, our enterprise has modified a lot as a result of we now have subscription plus we have now promoting. We’ve blended. We have got packages the place we’re bundling with different companies the place we’re getting paid much less in a wholesale fee.

I perceive that, nevertheless it makes it a lot more durable to trace these corporations from a monetary standpoint when you do not have common income per consumer. Trigger one of many issues it’s important to take into consideration is how does providing Black Friday offers influence ARPU when you may get 12 months at three or 4 or 5 {dollars} a month for that service.

Is the corporate truly getting cash on that? Chances are high they are not. And that’s a part of the explanation why this yr, Peacock had no Black Friday deal. Good. I do know I noticed on-line some customers had been like, man, that stinks. Like, the place’s the deal? It is sensible for them as a result of Peacock remains to be shedding cash.

However it goes to indicate buyers ought to watch how content material is packaged, the way it’s bundled, the value will increase, after which additionally how a lot cash is spent on content material. We do get from Netflix and some others, the whole sum of money that they’re going to spend on content material creation and licensing yearly.

So for Netflix, it was about 18. It’s going to be about $18 billion this yr. What you need to do is watch how that modifications over time. What we do not get from Disney is a breakdown of their whole content material spend particular to streaming solely versus broadcast.

They only lump it up into one massive quantity, which actually is not too useful. However buyers ought to have a look at after they can, ARPU. They need to have a look at content material spend. They, over time, ought to look extra at advert income. So only a few corporations proper now get away the proportion of whole DTC income that comes from subscription versus promoting, however a number of do.

And over time, the demand goes to return from Wall Road to the place even somebody like Netflix goes to have to interrupt that out. As a result of we all know that is the place the expansion of income is coming over the following couple of years on the advert aspect, particularly with Netflix with it being extra focused, proudly owning their very own advert stack.

So I might simply say as buyers, you actually have to have a look at these metrics versus lots of what I see individuals sharing on-line day by day, which is, you realize, this service is best than this as a result of they’ve this piece of content material. However we do not know that that piece of content material you are referencing to really retains subscribers.

Look what number of reveals get canceled after one season. Recognition would not at all times equal profitability. That’s one thing I’m telling buyers on a regular basis.

Rena Sherbill: And why not? Why is not it an one to at least one? As a result of we simply do not know sufficient of the precise numbers to extrapolate that correlation?

Dan Rayburn: We do not, however when Netflix comes out and says regardless that that present is standard or that collection was standard, it did not drive the engagement that we’re trying to get primarily based on the cash it prices to provide it. What does that inform us? It is not funding of their {dollars}.

Now, we do not know the numbers precisely, however streaming companies come out and made that very clear through the years in reference to very particular reveals or collection.

And what they’re saying is the sum of money we spent on it merely would not warrant the suggestions that we’re getting so far as engagement. Nevertheless, they outline engagement.

Perhaps that is new signups. Perhaps that is maintaining individuals on the platform. That is also the variety of advertisements or what the CPM is. They measure it in lot of various methods. However lots of it’s simply primarily based on viewership. And what lots of people within the trade do not know is simply…

What the precise viewership is for lots of those occasions like world cup. Let’s simply use that for an occasion. Individuals speak in regards to the world cup and the way massive it’s and oh my God, it is this massive streaming factor. It is not in 2022. The world cup streaming on Fox peaked at 1.28 million viewers. That is it. Now’s the world cup big on TV? Completely. It is one the biggest issues on the planet on broadcast TV.

Streaming within the US on Fox, 1.28 million. That is actually, actually small. All of the discuss Apple and F1, we have now numbers from ESPN. The biggest US tv viewers on document for Components One was 1.5 million viewers AMA. Largest, 1.5. Races this yr on ABC, ESPN, ESPN2 averaged 1.3 million viewers.

That is it. So, many do not know what is definitely going down. So far as viewership goes, they hear phrases like F1 and Apple, NBA, proper? They usually assume that it is simply big, big numbers on the market. However the actuality is lots of these numbers are literally actually, actually low.

And that is why it’s important to have a look at the numbers as an investor. What’s that viewership? Now, once more, evaluating it yr over yr will be tough primarily based on the metrics. However I wager lots of our listeners do not know that Fox’s stream of the World Cup solely did 1.2 million at peak.

It is a low quantity. After which some corporations do not put out something. Now, the numbers factor too, tremendous attention-grabbing right here that we had an entire bunch of video games throughout Thanksgiving vacation. Not one of the corporations broke out who broadcast video games in the course of the Thanksgiving vacation. Not one of the corporations broke out stats for streaming. None.

And I assumed that was actually attention-grabbing this yr that none of them needed to offer out any numbers by any means.

Rena Sherbill: We had an analyst on a number of months in the past, Jack Bowman, speaking about how Amazon Prime, everybody thinks that is an enormous cash maker for Amazon, nevertheless it’s truly a cash loser, however an enormous model amplifier for them. Is that this or is that this that? Is, for example YouTube TV and NBA and all of this stuff, F1 on Apple, are these model amplifiers, however looks as if not essentially income boosters?

Dan Rayburn: In lots of instances it might be. I do not know the reply, neither does anyone else. It’s a must to be on the firm and be an insider to know. However I feel the most important query to ask right here is, why does that matter?

In case you’re Apple (AAPL), would not matter whether or not you lose a billion {dollars} or two billion {dollars} a yr off of the Apple TV streaming service. No. It is irrelevant to your steadiness sheet. You’ll be able to afford to. And you are not within the enterprise of content material. That is not their core enterprise.

So it’s important to have a look at their numbers very otherwise than Netflix as a result of Netflix is within the enterprise of content material. They don’t seem to be within the streaming enterprise. All people says they’re in a streaming enterprise. They don’t seem to be. Streaming is a expertise.

Netflix is a content material enterprise who’s utilizing streaming expertise because the distribution mechanism to get it to you and me. Apple’s core enterprise shouldn’t be content material. Prime Video, their core enterprise shouldn’t be content material. It is commerce and promoting.

We might all like to know, trade analysts, Wall Road, everyone, we might like to know what’s the precise price to function Prime Video and what does Amazon get in return both from promoting particularly inside Prime Video movies, all the extra potential income they get from individuals being Prime members that perhaps maintain the prime membership for the video.

Do they order extra merchandise? Amazon has extra knowledge on us than I feel anybody exterior of Google. In order that they know precisely what’s working and what’s not.

I feel Wall Road will get too caught up on a number of the corporations the place it is any individual had a report out I overlook when saying that earlier within the yr, properly, Apple is shedding $3 billion a yr on Apple TV. So? That is a one-sided story.

What you are not saying is what are they getting for that $3 billion they’re shedding right here. Are they promoting extra {hardware}? Are they getting extra from the companies enterprise? So it’s important to have a look at these corporations and your entire ecosystem they play in, and a few play in only one realm.

Netflix does one factor. They seem to be a content material proprietor that distributes content material through streaming expertise. Now, okay, they’re within the bodily amenities enterprise or no matter you need to name it as a result of now they’ve a number of bodily places you’ll be able to go to.

However that is a really completely different enterprise than say Disney or Amazon. So I feel that is the best way it’s important to have a look at the companies and the funds is what’s their core enterprise? Versus, it is unimaginable what number of occasions the media and analysts simply need to evaluate Netflix streaming to Apple after which they are saying Apple’s doing a horrible job and so they’re shedding to Netflix.

They don’t seem to be shedding to Netflix. They’ve stated, I do not know what number of thousands and thousands of occasions, we’re not making an attempt to be Netflix. It is not what we need to do.

And to me, it is the identical approach when individuals say, properly, Netflix is shedding to YouTube as a result of YouTube TV has NFL Sunday ticket and Netflix would not. Netflix co-CEO Greg Peters got here out, it was a couple of month in the past. Not the primary time they stated this, however on stage he stated that bidding on a complete season of NFL video games would not make sense for them as a result of he stated that Netflix, quote, would not have a approach to determine the mathematics to know if spending a lot cash on a season of NFL video games would make sense for the enterprise.

Buyers ought to be listening to that as a result of Netflix simply stated, we do not even know if we might measure the worth of getting a full season NFL video games on the price we would must pay. They only stated like, we do not know how you can measure success or failure with that. Whether or not that is new subscribers, whether or not it is maintaining individuals on the platform.

And that is a part of the issue we have now to your query is, we do not have a few of these corporations are measuring success, whether or not it is brief or long run. Firms like YouTube, Amazon, a number of the bigger ones, Apple, they’re taking part in the lengthy sport right here. So even when they’re shedding cash for a number of years in a row, they’ll afford to.

Rena Sherbill: How would you lay out why Apple is investing in Apple TV?

Dan Rayburn: Apples made it fairly clear in terms of their technique that they need to inform tales. What they maintain saying is we need to inform tales. And for them storytelling is a part of what Apple is all about. It is a part of the model and the tradition, how they inform a narrative. Whether or not they’re telling that to their thoughts in {hardware}, software program, content material, companies, music, no matter it might be.

They very distinctively have referred to as out the truth that they’re cherry choosing choose tales that they’ll make that they really feel they’ll add worth to. They don’t seem to be going for depth and breadth of catalog. And that has modified quite a bit over the trade.

For listeners who bear in mind when Netflix got here to the market, at one level when Netflix actually began to develop its streaming library, whenever you went to Netflix web site, it will speak in regards to the variety of titles that they had for viewing. We now have 50,000 or 80,000 titles.

When Amazon launched out there, it licensed lots of the identical content material as a result of again then there weren’t lots of exclusives, licensing offers. After which Amazon in a short time caught as much as Netflix simply by way of depth and breadth of catalog. And also you and I used to select early on, most of us used to select streaming companies primarily based on who had essentially the most stuff, what choices. Netflix then realized their differentiator was not going to be depth and breadth of content material.

It was going to be authentic content material. They usually got here out and informed customers, truly going ahead, we’ll have much less content material, however we’ll have collection like Home of Playing cards and others that we are literally creating ourselves. And we expect you may nonetheless be proud of the content material we have now, regardless that it is fewer decisions out there. And what Netflix ended up doing was truly altering customers’ consumption habits.

As a result of as we speak, are you aware anybody who picks a streaming service primarily based on whether or not they have 10,000, 50,000, or 100,000 hours of content material, I doubt it. Perhaps it’s totally area of interest, proper? Some area of interest, know, crunchy roll, know, animation, issues of that nature, is smart. However shopper habits have modified over time.

And in order that’s the opposite factor to observe is, from an funding standpoint, is catalog, catalog of content material. As a result of as your catalog modifications, what additionally modifications is your price, both produce it or license it.

Rena Sherbill: And in addition, is it a matter of the content material becoming the character of the model, to your level?

Dan Rayburn: I feel it’s. With Apple and MLS, when that deal was first introduced, Apple got here out and stated that they preferred that lots of MLS followers had been girls. It was a demographic that they actually needed to assist assist and goal. It was a youthful demographic as properly. Additionally they acquired rights to the content material globally. There have been no blackout restrictions. You might come to at least one place to see each single sport.

That is exceptional in as we speak’s market with the fragmentation of content material. In order that deal was very distinctive for them in lots of methods. And but, let’s use that for example. We now know within the final couple of months that the deal did not work out between Apple and MLS in addition to they thought it will. So MLS and Apple confirmed that they’ve modified their deal. The contract’s gonna finish three years earlier.

Apple’s giving up its choice to terminate the deal after the 2027 season. And in addition the cost phrases between the businesses have been altered. No one has launched what they’re, however the phrases have modified.

As well as, you used to have to join MLS season move simply to get the video games. MLS season move is not. It is gone. Beginning subsequent yr, you are to have the ability to get all of the video games free of charge simply by way of Apple TV. You do not have to have a second subscription.

In order that’s an awesome instance of the place you’re taking a model like Apple and everybody assumes no matter Apple does, properly, it’s going to simply work. Effectively, the 2 corporations after a few years, each modified the deal on the phrases and shortened it and altered the cash and altered how they packaged it and introduced it to customers as a result of they weren’t getting the outcomes that they’d hoped for.

Rena Sherbill: What else would you say about Netflix, Amazon, Apple, anything you’ll add for these corporations?

Dan Rayburn: I might say in terms of NBA, as a result of we did not cowl them, they just lately did a brand new deal in the marketplace the place Prime Video and Peacock have lots of these video games this yr.

And I might simply say they’ve achieved an awesome job. The stream on Prime Video and Peacock has seemed wonderful. The video high quality has been nice. Among the interactivity that they’ve achieved, the overlays. It is simply been actually, actually good. I have been very impressed with them.

The NBA returned to NBC for the primary time since 2002. The corporate had 5.6 million viewers AMA and peaked at 7.1 million for Peacock, which was nice for opening night time. So, you realize, attention-grabbing take right here as a result of the NBA got here out and publicly stated that we do imagine we ought to be on a pair different platforms with the brand new deal that they had been working to safe, which they’ve.

However they really referred to as out the NFL to a level and stated, we do not suppose we ought to be on as many platforms because the NFL is.

And what they’re actually saying is that they imagine there is a candy spot of let’s add distribution by way of streaming companies, however let’s not make it so tough for customers that they cannot determine on what night time and what day you’ve gotten what occasion.

And I feel the NAB has achieved an excellent job in that regard. Whereas NFLs is fragmented as you may get and baseball is in regards to the fragment once more, as a result of they simply reduce new offers.

And sorry for anybody who’s a New York Yankees fan, however subsequent yr, to observe each Yankees sport, you are gonna must have eight broadcast channels and streaming platforms. Eight. That is simply ridiculous.

Rena Sherbill: I knew individuals that attempted to observe the World Collection this yr and could not. They thought that they had been gonna be capable to and weren’t in a position to.

Dan Rayburn: They will, however they do not know the place to get it and that is a part of the issue right here as a result of now additionally you’ve gotten what? You’ve gotten new companies out there. You’ve gotten Fox One. What does it get you? What does it not get you? A worth level. Shoppers cannot bear in mind.

After which you’ve gotten ESPN. So you’ve gotten the ESPN app, then you’ve gotten ESPN Limitless with a model of it, however then you’ve gotten ESPN Plus. After which what do you get by way of authenticating in the event you’re already a pay TV subscriber to ESPN?

So the quantity of companies out there continues to develop and we did not even speak subsequent yr there’s going to be one other streaming service which is the TNT sports activities app as a result of HBO Max which has dwell sports activities as we speak is shedding all dwell sports activities subsequent yr within the US solely and so they’ll be going over the TNT sports activities app however exterior the US they are not shedding sports activities so you realize I really feel unhealthy for customers actually as a result of I eat sleep and breathe this trade each single day to your level for nearly 30 years. That is all I do.

And I just about know the place the whole lot is at any given time, however even I generally must be like, man, what sport is on what service tonight? However for the common shopper, it is irritating. It is complicated. Generally it would not work. They cannot log in. What are they paying for? Why is it not in excessive definition or 4k? Netflix, Christmas, NFL video games is not going to be in HDR. Prime Video shall be.

Distinction in high quality on the identical day with the NFL on two completely different companies. And that is so completely different than what you and I are used to on broadcast and pay TV. Once we flip it on, it doesn’t matter what metropolis we’re in, it doesn’t matter what pay TV service we’re on, all of us get the identical high quality.

Streaming, that is not the case. So it is extraordinarily complicated. The quantity of textual content messages I get from pals and others of simply, do I get this sport on this date? I am unable to discover it. This can be very irritating for positive.

Rena Sherbill: New frontiers, undoubtedly. Something to say about Google (GOOG) (GOOGL) and YouTube? YouTube appears to be making an actual play within the house.

Dan Rayburn: I might say only a few issues on YouTube. So YouTube TV has, within the final week, we’re must put out a weblog submit saying that they’re gonna be rolling out 10 new YouTube TV bundles within the new yr.

Which was good of them to inform us, however actually not too useful as a result of they did not inform us after they’re rolling out, what the bundles are, or what they’re gonna price. I did see a number of the media say, nice, we will lastly pay for under the channels we would like.

Unsuitable. I am right here to let you know that’s not the best way it is gonna work.

I’ve already confirmed that with YouTube. You aren’t going to have the ability to choose simply the 4 channels you need and pay for these 4 channels or what we name a la carte within the trade.

That isn’t what’s coming. So anybody who’s writing about that does not have this proper. These are going to be packages. Now, are a few of them going to be cheaper, you realize, what we name skinny bundles as a result of it’s going to have much less content material, however perhaps extra centered content material? Completely attainable. YouTube TV did name out they’ll have some particular sports activities packages.

However once more, not figuring out what it’ll be at what price and what has blackout restrictions, it is actually too laborious to get excited. So I am undecided why so many individuals within the media are simply going loopy over this. Till we have now the packages and the bundling, we actually do not know a lot.

Outdoors of that, what YouTube is doing is admittedly very completely different than what others out there are doing so far as content material. And there is this complete debate proper now and has been for fairly a while, which is totally foolish, is YouTube TV? Is it not YouTube TV? Who cares?

TV is regardless of the consumer defines. Whether or not it is a system or a service, it is regardless of the consumer defines. And lots of what persons are getting flawed proper now on YouTube is that they’re saying, properly, YouTube is TV extra so than ever as a result of it just lately acquired the unique rights for the Oscars. And, okay, that is cool and all, however it’s important to have a look at your entire deal by way of what was truly introduced.

As a result of as a part of that deal, YouTube, I should not say YouTube TV, YouTube is getting the Oscars. YouTube can also be getting not less than 10 different occasions that include it. The Governor Awards, Oscar nomination bulletins, all these different occasions that aren’t on TV. This shall be from 2029 to 2029.

However as well as, it is a actually massive piece. There’s one thing referred to as the Google Arts and Tradition Initiative. And it is a group at Google. And what they’ll do is they’ll assist the Academy digitize parts of their assortment. And proper now within the Academy, they are saying they greater than 52 million gadgets.

So a part of this deal additionally concerned Google taking simply the wonderful sources it has and platforming to archive lots of the Academy’s content material and supply it, you realize, in a single place and one portal to see all this wonderful nice content material. Like that is an enormous a part of the deal.

That is not one thing broadcast TV can do. So I additionally suppose for one thing just like the Oscars and the content material across the Academy, it is an awesome deal for YouTube versus broadcast TV as a result of in terms of music, it crosses borders and genres and other people and tradition. Music resonates with lot of individuals all over the world. There is not a barrier.

On the subject of particular items of content material, particularly sports activities, there’s lots of content material that we watch within the US or vice versa that different nations have no real interest in. So YouTube TV and YouTube are actually doing one thing completely different, YouTube particularly.

After which the ultimate piece on YouTube, all of the numbers persons are throwing out, the Nielsen numbers, rubbish, would not make sense as a result of lots of the numbers by way of quote viewership, they’re together with reels or brief items of content material which can be 10 or 15 seconds in size.

Why are we evaluating a 15 second video to a 90 minute video on Netflix or a 4 hour size NFL sport on broadcast TV? So lots of the metrics within the trade are evaluating apples to bowling balls. It is simply, it is not even within the ballpark.

Rena Sherbill: Yeah, as we begin to perceive or simply slowly evolve these industries into no matter they’re changing into, I feel so many individuals nonetheless need to, properly, what is that this? What column will we throw this in? Is it tv? Is that this broadcast? Is that this, know, re-dub broadcast? this?

And it is identical to, issues are utterly altering. We’re breaking it down. They’re being damaged down. And I feel what I am beginning to actually perceive all through our conversations with you is how every firm is bringing their very own model strategy to it. The content material, the strategy, how they’re servicing it, your level in regards to the Oscars, like what number of completely different tentacles they’ve as part of that. It is tremendous attention-grabbing in the event you do not need to get caught within the outdated methods and put a field in a triangle.

I feel it’s actually attention-grabbing to know how that is growing and evolving. What would you permit with buyers? I imply, to start with, joyful so that you can share something that you just really feel like we should always have shared or might have shared. However what would you say are your ultimate phrases? If not, what would you say are your ultimate phrases for buyers and in addition customers?

Dan Rayburn: So for buyers that concentrate on this, there is no such thing as a streaming warfare. Struggle is an armed battle. It is unhealthy. These corporations that we have now out there which can be competing, that is factor.

Competitors is sweet. It breeds completely different bundling and packaging and pricing, go-to-market methods. All these headlines on the market about Netflix gained the streaming wars. Actually? How do you work that? And what are you measuring them on? As a result of Netflix goes to have greater than $9 billion of free money circulation this yr.

This comes right down to taking a look at numbers. All people has an opinion, nevertheless it appears no person needs to separate opinions from details today. And naturally, I am not shocked the media, they love writing for headlines. There is not any streaming warfare. It makes it sound like there’s just one winner.

There are a number of winners in terms of the distribution of content material. What they’re all doing, whether or not it is music, podcasts, information, films, they’re all competing for our time, our eyeballs.

That is the most important factor they’re competing for. We solely have a sure period of time within the day to eat as a lot content material as we would like. In order that they’re all competing, however a lot of them are completely different types of content material, completely different lengths, completely different high quality.

You do not want a 4K video in your telephone. So it comes right down to the system. You ask the query of simply TV and the best way it is all bundled. There is not any proper or flawed reply, and other people need to argue with one another about what’s TV or what is not.

TV is the way you view content material, no matter you outline as TV. Some individuals will say TV needs to be lengthy kind, it needs to be professionally produced. Youthful era would not suppose that approach. There’s, for buyers to know, there’s not a proper or flawed right here. There’s not a one winner takes all. And that is one thing that the media loves pushing as a result of the media loves highlighting losers. And it is like, there’s just one winner.

That is not the truth out there. We all know that in the event you have a look at steadiness sheets. So I feel that is actually essential to deal with. The second factor I might say is simply hearken to the quantity or have a look at the numbers.

Watch who you belief. It is simply unimaginable to the misinformation that is in my trade. Do not belief anyone, together with me. Like vet my numbers. Now I at all times say the place I acquired them, nevertheless it’s unimaginable how I will see the Wall Road Journal, the New York Occasions, choose whoever you need. They usually’ll say, properly, you realize, as a result of Hulu has 100 million subs. And it is like, no, Hulu has 54 million.

The place’d you provide you with 100? Oh, properly that was an estimate somebody gave. Why are you utilizing estimates? Disney is a public firm. They get away the variety of subs they’ve for Hulu each quarter.

So it is unimaginable what number of occasions I see individuals writing feedback in your web site or simply posts the place simply the precise factual numbers of what number of subs exist or the ARPU or the truth that they do not notice within the SEC submitting that Disney will say, the ARPU went down this yr due to a wholesale cope with for example, constitution.

What does that imply? Effectively, it is wholesale. They’re getting paid much less per sub. They only informed you that within the SEC submitting, however after all it is not within the press launch. So in the event you actually need to perceive this enterprise, it is about understanding the basics that basically drive the enterprise. And that begins with higher understanding the numbers as a result of numbers do not lie. Numbers inform the story. And details are actually essential.

The quantity of people that write content material that say in all probability, seemingly, phrases that finish in Y. What do they imply? Nothing. There is not any concrete definition. So, it is a part of the explanation on LinkedIn I am at all times pushing out content material that claims, this is the details. These are the numbers. You’ll be able to come argue in order for you, however this is the hyperlink to the SEC submitting. You’ll be able to’t argue with the numbers in terms of the profitability.

Now, how they measure it, after all it is completely different. EBITDA, a number of the alternative ways all of them do it. Okay, completely different accounting ideas there that all of them do some bit otherwise. However that is additionally one thing it’s important to perceive as properly.

In case you’re out there, it’s important to perceive the distinction between how a few of these numbers are reported, proper? GAAP, non-GAAP, EBITDA, EPS, they do not imply the identical factor. So I feel for any investor, you simply really want to coach your self on the numbers.

Rena Sherbill: And the context of the trade, we simply did a podcast final week in regards to the hashish rescheduling information and the significance of taking metrics in context within the hashish trade. It is completely different than the numbers which can be coming from the media trade. To your level, content material is king and context additionally ought to be king.

Dan Rayburn: Context is vital. And the factor I hate, clearly, as a former soldier too, is simply the entire warfare factor. Like, simply, it is not a warfare.

What we have now is competitors. The trade is nice. And 20 years in the past, for those that do not know the trade, weren’t within the trade, man, the quantity of developments that got here out actually each quarter, as a result of one firm was trying to outdo each other with higher video high quality again then, which, you realize, did not exist. It was wonderful. It was enjoyable. It was superior. And that is nonetheless what we have now as we speak.

However it’s not a warfare, it is simply, actually good, wholesome competitors.

Rena Sherbill: Sure, level taken and ought to be taken by all. Dan, the place can individuals discover your work, your ideas?

Dan Rayburn: So I spend lots of time, actually all my time, simply publishing free content material on LinkedIn. To allow them to simply seek for me on LinkedIn. I am pushing out, some days it is 5 to 10 items of content material a day.

All of it’s tied to numbers, details. I speak to lots of corporations who give me info behind the scenes that I can put out. A few of it clearly is technical, tied to how streams work, bit charges, codecs, video high quality. I spend lots of time on TV as properly. CNBC, Schwab Community, Bloomberg TV, BBC Information. My weblog, it is streammediablog.com.

I are inclined to do longer items. I converse at lots of occasions as properly. However my job is one factor and one factor solely, to tell, educate, and empower others. So the whole lot I am doing is free. I give out info free of charge. My cellular phone quantity is listed on my weblog and LinkedIn. Anybody has any questions at any time within the trade, they’ll name me freed from cost.

So I speak to broadcasters, sports activities leagues, content material homeowners, pay TV suppliers, institutional cash managers, all of the OTT platforms, distributors out there. I am lucky to be able now the place I can simply spend all day simply serving to to coach individuals. That is my aim.

Rena Sherbill: Do you’ve gotten a favourite viewers to talk to?

Dan Rayburn: That is query. I might say I might like speaking to institutional cash managers just because the overwhelming majority of them usually are not specialists.

They’re generalists. In order that they have to trace 50 corporations of their portfolio. And so you’ll be able to actually educate them very properly in terms of what a pair corporations are doing with info they’re simply not conscious of as a result of they do not actually have the time to search out it. I might say the opposite can be sports activities leagues.

A lot of them give me an perception into what they’re considering. Not now, however what’s the way forward for leisure seem like, whether or not it is on an airplane, getting a sport, whether or not it is on cell, and particularly exterior the US. We speak a lot about streaming within the US, nevertheless it’s unimaginable what the Zone and Fubo and a few of these others are doing exterior the US. There’s wonderful deployments and implementations.

One factor to remember is, streaming is world, it is not simply US centric. So I really like speaking to the sports activities leagues as a result of they’re at all times taking a look at many various methods their companies can and are disrupted and over what time period.

Rena Sherbill: Respect this dialog, Dan. Glad New Yr, joyful holidays. Thanks for approaching and sharing a lot perception. Thanks for being so beneficiant along with your time and ideas.

Dan Rayburn: Thanks. Respect it. At all times love speaking about this. Respect everybody listening. Any questions, attain out anytime.