January 30, 2023

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Streaming Trends 2023: Five Big Questions for the New Year

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In streaming warfare in 2022, battle tactics have shifted from direct land-grab mode to building sustainable and defensible positions.

Netflix saw its subscriber base shrink in the first half of the year after a Covid-fueled bump – prompting the industry leader to scramble to find new areas of growth. The company quickly built an ad-supported layer, against the idea’s year-long resistance, and aims to try to monetize widespread password-sharing in 2023. Discovery has been forced to rationalize streaming investments, as Wall Street refocuses on bottom-line results rather than subscriber numbers.

In 2023, for the major streaming services, “there is an intense focus on profitability and generating free cash flow,” amid uncertainty about which way the economic winds will blow, notes John Harrison, Americas media and entertainment leader at EY. He added, “We’re getting to this really big decision point for media companies where they have to reaffirm their commitment to direct-to-consumer. [streaming] – to make it as powerful and attractive as possible – or they have to say, ‘Long term, it’s not going to be as big as we hope.’

There are five main key questions in the new year for this sector.

How will Bob Iger revamp Disney’s streaming strategy?

Iger returns as Disney’s CEO, taking over for the ousted Bob Chapek. Iger has already indicated that he wants to pull back from “aggressive marketing and aggressive spending on content” for Disney+ in favor of profitability. How this will play out in 2023 is an open question. MoffettNathanson principal analyst Michael Nathanson, in a research note this month, opined that Disney+ would be better served by focusing on “premium branded IP” rather than general entertainment or sports. “We think new CEO Bob Iger should address the long-term viability of Disney+’s previous growth goals” and reduce investment in general entertainment content, Nathanson wrote. On a similar front, there are questions about Hulu’s future ownership (Comcast owns 33% of its Hulu stake. (Disney has the right to sell in January 2024, and Disney may be required to sell Comcast at that time.) Chapek expressed interest in striking a deal with Comcast to bring Hulu into the Mouse House fold sooner. Iger’s thoughts differ on Hulu’s strategic value to Disney. may have

Will Netflix’s advertising tiers and password-sharing monetization move the needle?

Netflix sees an opportunity to generate millions in new revenue with its ad-supported streaming play, while it plans to crack down on password-sharing violators for paying illegal account piggybackers as early as 2023. How well the company can execute on these plans remains to be seen, with third-party data indicating that advertising levels are off to a relatively slow start. Revenue from Netflix account-sharing could give customers a sense of how aggressively the company wants to push — and signs point to a gentler honor-system approach, at least at first.

What would a combined HBO Max-Discovery+ platform look like?

Warner Bros. Discovery hopes a merged HBO Max-Discovery+ platform, which will debut in the US next spring, will prove that the whole can be greater than the sum of its parts — and help justify Discovery’s massive acquisition of WarnerMedia. But it’s still unclear how WBD will handle the transition: The company hasn’t announced pricing or packaging details, just the name of the combo (“Max” is among the contenders). At a high level, says EY’s Harrison, it makes sense for streaming providers to move toward consolidation and bundling. “For all organizations with multiple streaming apps … a decision has to be made about whether the most compelling offering is pushing everything into a single app and reducing friction as much as possible,” he says.

How fast will you get?

In 2022, free, ad-supported television streaming (FAST) continues to accelerate. Paramount’s Pluto TV, Fox’s Tubi, Amazon’s Freevee and Roku channels saw gains that in some cases outpaced growth in subscription-based services. Others, including Warner Bros. Discovery, are now looking to jump into the fast lane: WBD has announced plans to license some content to HBO Max, including “Westworld,” “The Nevers,” “Raised by Wolves” and “Fboy Island” — third-party fast to partners. And Warner Bros. Discovery chief David Zaslav said the media company will “aggressively attack” the lower end of the streaming market with its own FAST offering to launch sometime in 2023.

How Will YouTube’s NFL Sunday Ticket Deal Change The Game?

Google is betting football fans will flock to YouTube for the NFL’s Sunday Ticket — which will be available for the first time in the U.S. without buying a pay-TV package (as has longtime distributor DirecTV) starting with the 2023 season. Google would need to sign up at least 2.25 million Sunday Ticket subs to break even on the deal, according to an estimate by Baird senior research analyst Colin Sebastian. But it could be a loss leader for YouTube as the video giant looks to siphon off more TV ad dollars and pack in more YouTube TV subscribers. Under the seven-year deal, Google will reportedly pay the NFL at least $2 billion per year for Sunday tickets.

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