After a landmark year when several new billion-dollar streaming services jockeyed for attention, there is a big question greeting the new class as 2021 begins: Where from here?
Apple, Disney, NBCUniversal and WarnerMedia, the most prominent new players in the streaming game, have all made a solid go of it, to varying degrees. (Alas, poor Quibi, we hardly used ye.) Each now needs to evolve for the long haul. Regardless of how they respond to that challenge, it is clear that the great streaming eruption of 2020 will be remembered as merely the opening act of the drama.
“A decade ago, or even five years ago, media companies were dipping their toes in the water, but they were more focused on keeping their traditional businesses going,” one senior-level media exec says. “Now, it is no longer about toe-dipping. These companies see that they have to act.”
Strategies for minimizing “churn” — i.e., hanging onto subscribers — vary. HBO Max will add advertising and launch internationally; Peacock must expand distribution and leverage the Olympics; Disney+ will need to manage and market a flood of new originals; and Apple TV+ is placing big bets on movies. The main mission for all of them, though, is to be seen by viewers as essential.
Streaming is continuing to replace other forms of viewing. As pay-TV subscriptions continued to wane in 2020, the number of households subscribing to multiple streaming services reached 61%, up from 48% in 2019, according to Parks Associates. Ampere Analysis estimated the average number of subscription services per home at 3.8 even before the pandemic, up from 2.8 a year ago. Parks puts the total number of SVOD outlets at nearly 300, double the tally from 2014. All that streaming raises the bar for new services looking to stand out from the pack.
“To have a great chance at breaking out, you need to be a service that people gravitate toward and want to use regularly,” Tom Ryan, president and CEO of streaming at ViacomCBS, tells Deadline. ViacomCBS will also look to level up in 2021 with an ambitious rebrand of CBS All Access as Paramount+.
Among the new crop, Disney+ has been the only new service to clearly break out. It rocketed past its initial five-year subscriber projections in mere months, reaching 86.8 million by December 2. The company’s shock-and-awe investor day in December promised more than 100 new original film and series titles, a major ramp-up. The company says Disney+ will reach 230 million-260 million subscribers by 2024, quadrupling its annual content spending to at least $8 billion by that time.
Turning a profit will also start to happen by then, executives say. Not that it will necessarily matter to investors, who have overlooked the worst fiscal year in four decades as Covid-19 ravaged theme parks, live sports and theaters. Disney stock rose 24% in 2020 to an all-time high almost entirely on its focus on streaming.
Maintaining a steady course while turning the engines to full throttle is a risky process, however, a reality that Disney appears to acknowledge. “As we increase our output, the emphasis will always be on quality, not volume,” executive chairman Bob Iger, who spearheaded the streaming shift as CEO, stressed at the investor day. One new feature of the Disney landscape, too, is a recently announced central distribution organization with a single P&L spanning all projects. Though it promises to upend decades of Hollywood decision-making and compensation, it commanded just six minutes of stage time during the four-hour investor presentation.
Netflix, the reigning champ with 195 million global subscribers as of September, cemented its leadership position during Covid-19. It added 26 million subscribers in the first half of 2020, almost as many as it gained in all of 2019. From Tiger King in March to The Queen’s Gambit and The Crown in the fall, it released a steady supply of must-watch titles and reaped the benefits of its decade-plus investment in streaming, from a tech and operations standpoint. The other longtime members of streaming’s “big three,” Hulu and Amazon Prime Video, also saw upswings even with a raft of new competitors, demonstrating that streaming is not a zero-sum game.
Movies have become a pillar of Netflix’s strategy, and the company is poised to see another passel of Oscar nominations this year, especially with the Academy of Motion Picture Arts and Sciences relaxing theatrical requirements. Film has also become a key focus for other top streaming players, in large part because the pandemic has kept theaters closed in several major markets. HBO Max, which was the last new streaming player to launch last May, made the boldest film move by putting Wonder Woman 1984 and the entire 2021 Warner Bros slate on its service at the same time they hit theaters.
The early returns from the Wonder Woman sequel were auspicious, with overall view time tripling compared with a regular day in November and half of all direct retail subscribers watching the film on Christmas Day. Because of a complex model that company executives concede has been an obstacle in the early going, most paying HBO subscribers have not yet activated their HBO Max subscriptions, which are available to them at no additional cost. (Those signing up directly pay $15 a month.) As of October, there were about 3.6 million direct retail subscribers to HBO Max. In December, the service had 12.6 million total activations, across HBO customers and retail subscribers.
That scale lags that of many rivals, but executives say they are ahead of internal subscriber goals and remain “pleased” with the rollout. John Stankey, CEO of WarnerMedia parent AT&T, has also pointed to the higher average revenue per user on HBO Max. Disney+, for all of its meteoric early success, has had a fairly anemic ARPU of $4.52 — one reason it is raising monthly subscription prices by $1 in March.
Andy Forssell, WarnerMedia EVP and GM of direct-to-consumer operations, tells Deadline the company will still market releases like Dune and new Suicide Squad and Matrix installments as stand-alone films. But HBO Max will also look to bill the entire slate as a recurring bonus for subscribers. “Our challenge is, how do we put a label on that?” he said. “We do want them to think of it as a slate. … We’re right now addressing the question of, how do you think of that slate throughout the year?” In essence, he said, the pitch comes down to this: “If you value half those films, it’s probably worth it to you to subscribe.”
Forssell says WarnerMedia developed a strong foundation in 2020, especially considering the complications of Covid-19 in terms of production. “Over the last few months, things have been going up and to the right,” he said. While Wonder Woman 1984 was the headline over Christmas weekend, “a couple million people watching stuff that was not Wonder Woman,” he said, including series like The Flight Attendant or HBO shows like The Undoing.
In 2021, he added, “We have to do a better job of telling the story.”
Forssell is tight-lipped about details of the forthcoming ad-supported tier of HBO Max — a complex undertaking since programming set up at legacy HBO contractually does not allow ads to be inserted. It should roll out by the end of the second quarter, he said, confirming a previous forecast by Stankey. Tracks have also been laid for HBO Max to light up in Latin America, the first part of its global rollout. WarnerMedia has forecast reaching between 75 million-90 million total subscribers by 2025, 50 million of them in the U.S.
Apple has been taking big swings on movies, landing projects like Emancipation, an historical action drama starring Will Smith and directed by Antoine Fuqua, and Killers of the Flower Moon, director Martin Scorsese’s re-teaming with Leonardo di Caprio and Robert De Niro. As it lines up A-list projects, the company also views movies as a customer acquisition tool. About 30% of those watching Greyhound, the Tom Hanks submarine thriller the company acquired from Sony and released last summer, had not previously been subscribers to Apple TV+.
Beyond sprinkling around some of those occasional insights, Apple has kept subscriber and viewership data under lock and key. Gauging its active subscriber base is a challenge because the service is included at no charge to those buying Apple devices, more than 1 billion of which exist in the world. (Analysts have generally agreed that perhaps a few tens of millions have sampled the service to date.) One quantitative result that the world’s most valuable company could not suppress when Apple TV+ launched in November 2019 was the mediocre scorecard from critics and media. While The Morning Show earned Emmy nominations and more recent shows like Little America and Central Park and films like On the Rocks, Boys State and Beastie Boys Story have earned praise, the service is still finding itself.
Michael D. Smith, a professor of marketing at Carnegie Mellon University who has been tracking the streaming boom, sees Apple TV+ and Peacock as the most challenged of the new breed. “They don’t have a brand yet,” he said. “I always tell people, branded content is like anchor tenants in the mall. Without it, it’s hard to get people in the door. Neither of those has managed to make its brand very clear.”
Peacock, however, is playing a very different game from Apple TV+, which is part of the tech giant’s device ecosystem and accrues to services revenue via bundles with cloud storage and Apple Music. Emphasizing its free, ad-supported basic tier, Peacock has amassed 26 million users, according to NBCU. The company has not revealed the number of subscribers to Peacock Premium, the higher tier that costs $5 a month for those not part of select MVPD footprints offering it at no extra charge.
Advertising enables Peacock to be a bit less subscriber-obsessed (it is already well on its way to hitting its 5-year user forecast). Aside from live Premier League soccer games and a new spin on Saved by the Bell, programming has not commanded broad attention. More broadly, there is still a question about whether — or how many — viewers will embrace ad-supported streaming in a sector defined by the ad-free likes of Netflix. With smart-TV adoption booming, though, the value proposition of free streaming with ads has dramatically boosted viewership of platforms like Pluto TV, IMDbTV, Tubi TV and the Roku Channel. But it is getting crowded out there.
“The problem with the advertising model is that you get confusion over who the customer is,” Smith said. “Is it the viewer or is it the advertiser? I think that’s still something Peacock is grappling with.”
The shifting of the Tokyo Olympics to 2021 due to Covid-19 wound up being a “silver lining,” Peacock chief Matt Strauss said in December during a virtual talk hosted by the Digital Entertainment Group. “The way we were planning to launch nationally [in July 2020] during the Olympics, it would have been great in many respects. But at the same time, it’s very concentrated.” Without the Games in 2020, he said, Peacock developed “a similar plan, but we spread it out across the back half of the year. And that gave us a cadence and a drumbeat from a marketing standpoint, which I think was actually better than what we initially planned.”
A couple of notable newbies arriving in 2021 will also have a degree of advertising dependence. Discovery+ will launch in the U.S. on January 4 and then continue its global rollout. Paramount+ will go live later in the year.
C-suite media veteran“There will be M&A activity between companies that own the relationship with the consumer and those that do not.”
ViacomCBS will reveal its plans at an upcoming investor day, but it has some advantages in owning both subscription services and free offerings like PlutoTV, which ViacomCBS’ Ryan founded, and ad-supported outlets like CBSN. “If you look back at the history of television, aggregators have often won the day,” Ryan said. “From the era of rabbit ears over-the-air television, through the cable operators of the 1970s and ’80s, YouTube and Hulu emerging in the 2000s, AVOD in the 2010s, there has always been tremendous power in aggregation.”
Speaking of aggregation, in a corporate sense, another wave of M&A and consolidation could well result from the race to catch up with Netflix. Streaming has already prompted massive deals like AT&T-Time Warner and Disney-Fox and Comcast-Sky.
Even if they scale up, though, media companies are going to need to change or risk extinction. Serving consumers directly as opposed to wholesaling content through TV operators, movie theaters and other third parties is a new set of muscles to develop. Amazon, Apple, Roku and other tech companies have long controlled customer data. That is a big reason why HBO Max had a prolonged standoff with major gatekeepers — and why it’s eventual pacts with Amazon and Roku are so meaningful for its progress. Others have been content to trade data or advertising inventory in exchange for gaining subscribers. And then there is Netflix, of course. While it operates as an entertainment entity in many ways, it remains very much a tech firm at its core, with reams of data dating to its founding in 1997.
“There will be M&A activity between companies that own the relationship with the consumer and those that do not,” predicts one media veteran who had a long stint in the C-suite of one of the major new streaming players. “If you’re one of the newer companies to streaming, the question is, how do you stay in the place where you’ve been accustomed to being?”
Those running media companies, the executive continues, were “indoctrinated by traditional television, which was one of the most profitable business models capitalism has ever produced. Now, all of those rules are being rewritten. Streaming is an entirely different way of addressing the audience.”