Welcome to The Shifting
Jared Schain, CFA, CPA
Distribution Strategy & Partnerships @ Peacock | MBA Candidate | Ex-Deloitte | Newsletter Link in Bio
2024 TMT Outlook
THE SHIFTING #1 | 2024 KICKOFF
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Elevator Pitch
Hello Medium & LinkedIn Community
My name is Jared Schain, avid media & entertainment business follower. Currently working at the streaming service, Peacock, with experience at the NBCUniversal Ad Sales department and Deloitte in their Technology, Media, and Telecom group, I have spent much of my career fascinated by this sector. Gaining a reputation as a peer who is constantly looking to expand his knowledge of media through fellow professionals, industry publications, and social media, I have always prided myself on this passion.
Why Medium?
In August of 2023, I stepped foot into the next stage of my career and personal life as I began my first semester as an Evening MBA at the Zicklin School of Business at Baruch College. As I navigated my first semester and took advantage of the extracurriculars and Zicklin resources, I realized I finally had all the tools to take my curiosity about TMT to the next level. On the suggestion of my mentor, who was assigned by the Executives On Campus program, I decided I had nothing to lose. Medium offered an outlet to share my interest with other like-minded individuals in an already established community; it provided blogging tools & a venue to explore the excitement that has been brewing inside for several years.
About Me
2024 Outlook — Key Trends
In the first entry of The Shifting, I want to start the year off with themes in the TMT sector that I find exciting and will be affected by new developments in the coming year. Without diving too much into each (I have 12 months to do that), here we are.
M&A
With the Reverse Morris Trust set to expire in Q2 and an aggressive David Zaslav as its chief, WBD (Warner Bros. Discovery) is expected to play dealmaker. There have been talks with Paramount (see tweet below) and rumblings of interest from Comcast, but there are also countless small players on the table from studios (Lionsgate) to niche streaming players (AMC+, Starz).
Outside of WBD, there is a general sentiment that many of these companies are waiting to pounce on an opportunity in response to Big Tech hijacking its audiences using free entertainment (YouTube, TikTok.), streaming woes continuing, cords being cut, and studios struggling to get back to pre-covid highs with a weak 2024 film slate approaching. An unanticipated fix could come in the form of gaming (EA) so media companies can capitalize on their valuable & young audiences, IP, and data to counteract the 1–2 punch of cable businesses in free fall and streaming floundering. An EA-Comcast merger deal nearly happened in 2022.
Music
The live music industry had a record-breaking year anchored by Taylor Swift’s $1B tour with 2024 expected to continue the momentum. Many believe that one of the largest factors in this growth is the consumer savings from the pandemic paired with the desire they had to get out of their homes. Will the industry slow as consumers’ financial troubles build up, consumers adjust to post-pandemic life, and prices for concerts continue to rise?
Concert films were a huge trend in 2023 with Taylor Swift’s Eras Tour being the highest-grossing concert film ever, surpassing $250M at the box office. Beyonce’s Renaissance and A24-produced and critically acclaimed Talking Heads film, Stop Making Sense, contributed as well. Kicking off 2024 with a Queen concert film, Queen Rock Montreal, it will be interesting to see if the supercharged growth of both live music and concert films can continue.
MVPD Renewals
The groundbreaking Charter-Disney MVPD (Multichannel Video Programming Distributor, or in simpler terms, the providers of TV channels) deal presented a new lens through which legacy media companies will need to look as they renegotiate these deals. Before it was finally worked out, consumers bore the brunt of losing access last minute to key sporting events such as the US Open and NFL. Distributors don’t want to pay for content that isn’t exclusive to cable, but streamers don’t want to crater their ARPU (average revenue per user) by handing out memberships for low wholesale fees.
As customers continue to cut the cords because of the accessibility of streaming, how can the integration of streaming into the distributors’ offering increase retention of customers, and who has the leverage here? Is the death of cable on the horizon if properties continue to migrate to streaming and consumers have to deal with headaches such as losing access to their favorite channels in a split second? As more deals are up for renewal, we will get a better look at who has the upper hand at the table and if streaming bundled with cable becomes the norm everywhere. Say it with me? “The Rebundling”
Artificial Intelligence
It is early days in the development of AI in the context of media & entertainment. It was one of the primary discussion points during the strike and although the protections they got feel relatively favorable to the creatives, 2024 could be a preview of where future negotiations will go and how close we are to a dangerous replacement of originality with technology.
Election
CNN has leaned further into streaming and pushed for a more bipartisan approach to news. They have not been able to figure it out as ratings have continued to fall and they face continued turnover in leadership & their daily news slate. Fox News, the dominant news network, also faced challenges between its defamation lawsuit from Dominion Voting Systems and Tucker Carlson’s exit. With both networks showing falling ratings, it will be interesting to see their strategies in this upcoming election between CNN’s bipartisan approach and how accessible the programs will be on streaming.
Streaming Profitability and The Rebundling
Outside of Netflix and Hulu, the profitable streamers, none of the competitors have figured out how to make this business model work. Considering those are the most tenured services, it makes sense, but as we get closer to 2025 and 2026 when most of the remaining products have promised break-even, 2024 should show how reasonable that is. Are more delays expected in the path to profitability? With Hulu & Disney merging, Netflix could very well be the only profitable service coming out of 2024.
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Re: MVPD Renewals — will the bundling of these services expedite the break-even timeline and ensure customers avoid feeling that they are being ripped off by the ever-increasing prices? Or will bundles and wholesale arrangements (i.e. Charter) lower the subscription ARPU without a healthy ad market to recapture it, further proving that this business model may not be feasible in the long run? Thus far, The Rebundling has been more theory than reality, but 2024 could be the year it hits the mainstream or paves a path for the initiative.
Even Apple and Amazon seem to be reconsidering their strategies of funneling cash into media businesses as experimental marketing, to get consumers into their monster ecosystems and support the iPhone (Apple) & Retail (Amazon). Both Apple TV+ and Prime Video have seen changes in pricing (Amazon charging $3/mo. extra for an Ad-Free tier and Apple raising prices in consecutive years, of recently, from $7 to $10). Prime Video has done multiple rounds of layoffs. Amazon completed a pricey acquisition for MGM in 2022 and Apple has paid up frequently for Oscar-caliber films during festival runs. It will be worth paying attention this year if they may regret the degree to which they jumped in to compete with legacy media instead of focusing on their core, profitable businesses.
Library Content on Streaming — Gatekeeping vs. Licensing
The greatest form of irony in the industry may be the speed at which media companies quickly transitioned from licensing all their content to Netflix for quick cash to gatekeeping it (to compete with Netflix) to reversing back to licensing after they couldn’t handle the level of losses in streaming. This past year, WBD licensed out prestige content that they always swore was off the table (DC on Netflix). An argument can be made that licensing a vast amount of content to Netflix before they could produce high-quality original content on their own was what eventually forced the rest of the media companies into a less profitable streaming business. They aren’t licensing as much as they did in the beginning, but as desperation for profitability grows, they may change course on how aggressive they are.
Film
Coming out of the SAG and WGA strikes in 2023, the 2024 film slate will be hit hard. With a very weak Q1 2024 already underway, it is expected that this will be the first annual decrease in box office receipts since COVID, but the question is how big of a dip will materialize. Even with blockbusters such as Dune Part 2 being pushed to 2024, this will be a very challenging year for film after an already difficult period trying to crawl back from the pandemic changing consumer preferences forever.
IP — Superheroes vs. Toys & Videogames
Since 2019’s Infinity War, big-budget superhero tentpole films have fallen a long way. I look back in disbelief at how just half a decade ago, many (including myself) believed that these franchises may last forever. Although these are still some of the largest-grossing movies of the year, there is a feeling of “superhero fatigue” continuing to build and a constant stream of missing expectations. The latest example of this is The Marvels, the worst opening in MCU history. It will take time to adjust the studio pipeline, but we are already beginning to see a shift in release strategy whether that is to do with the recent woes or the strikes.
2024 will see only one MCU release — Deadpool 3. Yet, there will be 3 movies from Sony’s universe of Spider-Man characters, which typically are box office bombs as well as being panned by critics & audiences alike. With Marvel needing to revisit their new big-bad villain after firing Jonathan Majors, this will be a much-needed year to table set and plan a path forward. DC is also going through a seismic shift having just ended its DCEU on a sour note with an Aquaman sequel, transitioning to the start of the Gunnverse. The new DC franchise has already released a packed slate, starting with a new iteration of Superman in 2025.
With 2024 being nearly silent with only one film release between the 2 major superhero cinematic universes and Marvel stating it needs to revisit the quality of its TV production, we may get some hints as to what kind of IP will be driving future TV and cinema. Coming off the major success of Barbie, Mario, and The Last of Us, there could be a changing of the guards from superheroes to toys & video games that play more on nostalgia. In recent years, the highest-grossing box office films have been based on IP whether it’s a franchise, sequel, or an adaption of previously popular works. Consequently, IP will likely continue to be prevalent in decisions regarding new blockbuster releases. What isn’t so certain is whether it will continue to be superhero-dominated. Case in point — look at the upwards of 45 movies currently being developed by Mattel. Or see here for the vast lineup of video game content steamrolling through. 2024 could show off some of the powerhouse partnerships that will be delivering this content such as Illumination/Nintendo.
Video Gaming
In addition to the explosion of TV and film based on video games, the gaming industry itself has been going nuclear using new technologies and changing consumer preferences to its advantage. From AAA games to mobile to VR & metaverse to free-to-play behemoths like Fortnite, it seems there is an ever-expanding way to consume this content. Netflix is getting involved, companies such as Warner and Disney have played around with licensing vs. publishing strategies, and first-party developers such as Microsoft are growing through consolidation — see the Activision deal.
With Activision off the table, is EA next? And will a legacy media company such as Disney or Comcast/NBCUniversal surprise the industry by using EA to get more revenue exposure to video games and obtain the highly sought-after valuable data & audiences they control?
Fandom is more important than ever. As the merging of film, toys, parks, and other media continues, gaming will be trying to capitalize on it.
Social Media
Consumer preferences, especially those of the younger audiences, have shifted to a digital-first attitude and attraction to short-form content. The elephant in the room may be TikTok regulation, but in addition to that development, 2024 will see more attempts from legacy media to prevent their consumers from going to Instagram, TikTok, and YouTube for free entertainment.
The creator economy has also exploded with the growth of TikTok, bringing in large investments from VCs and taking attention away from traditional publishers. To increase their marketing effectiveness at lower costs, many brands have tested the increased value of reaching the consumer through third parties such as influencers. 2024 may shine a light on if all this was a bubble as VC investments continue to decrease and the consumer begins to tire of seeing ads from their favorite followings.
Podcasts
Since their popularity rose in the 21st century, podcasts have struggled to monetize their way to profitability as a business. Through layoffs and canceled shows, Spotify has already shown that it may have overplayed its hand. Will it continue to pull back on spending or is this just a breather before going back to throwing around 10s of millions of dollars at the likes of The Joe Rogan Experience and Call Her Daddy?
Digital News Subscriptions & Blogs
Traditional news outlets such as NYT and WSJ have tried to keep up with the digitalization of news, but it has been challenging with many young Americans gathering news from social media or apps such as Medium, The Athletic, Substack, and Apple News. There have been buzzy digital-focused players that came in hot but have since, had serious challenges such as Vice and Buzzfeed. There may be a shift towards subscriptions for individual creators rather than long-standing publications, but it still feels fragmented. In a challenging ad market, more digital players could collapse. Adding to these issues is the frustration many consumers have in the trustworthiness and misleading nature of large, monopolistic tech platforms.
Ad Market
As advertising revenue slumped in 2023, many expected a rebound in 2024, but it is more than likely that won’t happen. If struggles continue to show growth in the market, companies may need to find inventive ways to increase pricing and drive up CPMs through the metaverse, streaming, or video games. Another trend is the increasing market share of digital advertising and the speed at which that share grows. The trajectory of digital advertising is shown by the growth of OTT streaming as many services begin to offer advertising as an option to lower costs for the consumer. In the first half of 2023, streaming surpassed cable as the primary way of viewing TV.
International Content
Media companies are continuing to invest in international productions for their TV and film content, especially in Korea. European co-production projects prove they can be produced at a lower price point. As streaming expands past the US and the international audience craves local-language content, this is expected to continue. There used to be a time when the worry was the English-language audience’s aversion to subtitles, but it is safe to say that trend is over. And for those who still prefer no subtitles, dubbing has continued to improve through the use of technology.
Live Sports
Every few months, the same question is asked — “When will Netflix enter live sports.” Smaller streamers whose linear & cable counterparts hold sports contracts have already done so — Peacock (NBCUniversal), Paramount+ (Paramount Global), AppleTV+, and as of late, Max (WBD). It seems RSNs and national live sport rights are holding the 900 lb gorilla that is the cable bundle on its shoulders so Netflix finally jumping in or Disney moving ESPN to have a full-fledged streaming option could be the straw that breaks the camel’s back.
The options for different languages, embedded gambling, a personalized experience (i.e. Prime TNF on Black Friday), and different broadcasts happening simultaneously (i.e. Manning Cast) make streaming seem like the better option for consumers when you ignore the fragmentation that worsens with what seems like every contract renewal. All the potential for an enhanced experience raises the question of whether a new player will enter and lean into the brand loyalty they have with hardcore fans — Barstool Sports. Combine all this with a fast-approaching expiration of the current NBA rights deal and it is a recipe for overwhelming change in the industry. But still, the fragmentation and frustration it causes in customers (the first-ever exclusive stream of an NFL wildcard game is a prime example) may continue to be the greatest obstacle.
Student at Fordham University
8 个月Read your article on movies. I'm also a big movie fan and there's nothing more fun than going to the theatre for me. I think people are hurting right now financially and they see the theatre as expensive for their budget. Like you said, the 2nd half of this year may make a significant impact.