Media Meltdown

We’re looking back at the year in media, streaming, news, and entertainment ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 28, 2022

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TOGETHER WITH

Hello and welcome back to The Daily Upside.

For the final week of 2022, we will be bringing you some retrospectives on the biggest stories of this year, and on Friday, we’ll publish our Winners and Losers of 2022 special.

For now, let’s reflect on how this year went for the media industry. News flash: Not great. It’s been a tough year for the historically temperamental sector. Let’s get into it.

Streaming Disrupted the Status Quo. Now What?

(Photo credit: Stock Catalog/Flickr)

The pandemic delivered what most in the media-entertainment biz would consider the most valuable asset imaginable: a captive audience. And after years and years of slowly bleeding subscribers from the highly lucrative pay-TV cable business, just about every major media conglomerate — from Warner Bros to NBCUniversal to Paramount/Viacom — fast-tracked plans to launch an in-house streaming service of their own.

Now it’s become painfully clear that streaming may not be the one-size-fits-all silver bullet many assumed it would be. What happened?

Swimming Upstream

Streaming leader Netflix exited 2021 on shaky ground. In a January earnings report, it announced subscriber figures for the year came slightly lower than expected — and way down from 2020’s growth. But the real hammer dropped in April when the company announced its service lost over 200,000 paying customers in the first quarter of the fiscal year, even as analysts expected a 2.5 million gain in the period.

The ominous earnings report proved something of a canary in the coal mine for the streaming industry. The revelation proved that, despite what Silicon Valley had the entertainment industry believing, growth was not inexorable. The discovery sent Netflix into an existential crisis, while its biggest competitors fought streaming growing pains of their own:

Disney’s three-pronged streaming attack (Disney+, Hulu, and ESPN+) has surpassed Netflix in overall subscribers, but it’s still a massive money sink. The company has poured billions into both content and tech to keep the services attractive and usable, but that’s led to ballooning losses (to the tune of $4 billion this fiscal year) in the division — one that inherently cannibalizes its steady TV and now-shaky theatrical businesses. Yikes.

While making money at Netflix is no longer a distant hypothetical (the streamer pulled a cool $5 billion operating profit this year), the subscriber slowdown led it to reconsider one of its core tenants: no advertising. In search of new revenue streams, the company finally added an ad-supported tier this year — a promise it once swore it would never break.

Not so FAST

Perhaps no company exemplifies the whims and woes of a pivot to streaming more than the newly-merged WarnerBros-Discovery and its flagship streaming platform HBOMax. While Warner embraced day-and-date streaming releases for all of its theatrical films in 2021, the new leadership has reversed course, saying — surprise-surprise — it misses the billions of dollars worth of box office potential when audiences can’t expect theatrical movies to be playing in their living rooms nearly immediately.

More recently, and perhaps more surprisingly, the company is undergoing a purge of titles from HBOMax, arguing it’s more lucrative to sell streaming rights to rivals or FAST (Free, Ad-Supported streaming TV ) services than for countless movies and TV shows to sit, often mostly unwatched, on its own service. That philosophy may well put an end to the promise of having every movie and TV show imaginable at your fingertips for the price of a few streaming services (which, collectively, are slowly surpassing your old cable bill). But it’s given rise to a new paradigm of FAST services like Fox’s Tubi, Paramount’s Pluto, and Amazon’s FreeVee, which are rapidly gaining steam as a potential new solution to the disrupted, not-entirely profitable world of streaming. In other words, TV is having a Back to the Future moment.

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For the Love of the Game

Speaking of captive audiences… if there’s one thing the entire industry seems to agree on, it’s that live sports, with their massive bases of rabid fans, are just about the most important content a media company can get its hands on. And that means paying up.

2022 delivered a bevy of high-profile sports rights deals worth of a primetime SportsCenter highlight package:

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In August, the Big Ten put the kibosh on its 40-year marriage with ESPN to bring its mostly midwestern sports to NBC, CBS, and Fox in a seven-year, $7 billion deal. Rebuffed, ESPN and Fox signed a 6-year, $2.3 billion deal to carry Big Twelve sports starting in 2025.

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The worldwide leader in sports also signed a deal to air 16 Formula 1 races per season through 2025, with Sports Business Journal reporting it may be paying up to $90 million a year for the rights to the suddenly ascendant racing series. Apple, meanwhile, broke into sports rights with a deal to carry two MLB games every Friday night for $85 million per season (contract length has not been disclosed), as well as a 10-year, $2.5 billion deal to become the home of Major League Soccer, starting next year.

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The India Premier League, the subcontinent’s top cricket league, scored over $6 billion in a rights auction this year — with roughly half coming from Viacom18’s streaming rights bid and the other half from the Disney-owned Star India’s traditional TV contract.

Overall, the global value of sports media rights hit the $55 billion mark in 2022, an all-time record, and is projected to only increase in the coming years.

Sign of the Times

The desire for sports coverage extended into the world of print and (words-based) digital media. In one of the marquee media deals of the year, The New York Times acquired subscription-based sports outlet The Athletic in January for a whopping $550 million (a move to diversify its offerings not dissimilar to its purchase of Wordle just a couple of weeks later).

For The Athletic, the sale spared it the harrowing nosedive the rest of the industry faced. Outlets like Axel Springer’s Protocol, Recurrent Venture’s MEL Magazine, and the a16z-owned Future.com, which just launched in 2021, closed their doors entirely. The local media business remains grim with widespread layoffs and closures continuing apace. Even the Jeff Bezos-owned Washington Post recently shuttered its magazine and announced layoffs to come in the new year with an aplomb that would have made Elon Musk proud.

But hope remains: In Australia, legislation has tech titans like Facebook and Google paying media outlets for the rights to link to their content, presenting a new model to level the internet economy playing field. The law returned roughly $150 million to Australian newsrooms as of March, according to a study from Sydney-based media research group the Judith Neilson Institute, after being passed roughly one year earlier. Now, similar legislation is navigating the US congress with nearly 100 bipartisan co-sponsors. The disruptors have become the disrupted.

Extra Upside

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No Christmas weather on Pandora: ‘Avatar: The Way Of Water‘ nearing $1 billion global box office despite frigid US weather.

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Unclaimed baggage.

Zoom out.

Written by Brian Boyle

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