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You’re listening to a Frequency Podcast Network production in association with City News.
Jordan
Did you happen to watch that dragon show last night? I don’t mean to put to Game of Thrones ask a point on this, but the future of streaming platforms may depend on it. That is an exaggeration, but only a slight one, as for the first time in their history, not all is well in the world of streaming platforms. You may have heard earlier this year that Netflix lost subscribers recently, that HBO and Discovery will merge, that most streaming companies have laid off content workers, and even that Netflix will be doing the previously unthinkable and offering an ad-supported tier. Meanwhile, shows like HBO’s House of the Dragon, which debuted two weeks ago, and Amazon Prime’s upcoming Rings of Power cost tens of millions of dollars per episode to make. So while the very survival of these platforms may not depend on you and me and everyone else watching these shows, what the industry looks like a year or two from now, like who’s still around, who’s merged with who, what kinds of content these platforms are producing very well might. This is the turning point of a fledgling industry. Where does it go from here? We’re about to find out. And no doubt somebody will base a premium cable drama on what happens next. I’m Jordan Heath-Rawlings. This is The Big Story. Brian Steinberg is the senior TV editor at Variety. Hello, Brian.
Brian Steinberg
Hi, how are you?
Jordan
I’m doing well. Thanks for joining us.
Brian Steinberg
Absolutely glad to be here.
Jordan
Why don’t we start with what everyone’s, hopefully, I guess, watching this month and next month, how important to the entire streaming industry, I guess, is HBO’s Game of Thrones prequel, House of the Dragon and Amazon’s gigantic Lord of the Rings spinoff prequel, I guess, Rings of Power, how important are they?
Brian Steinberg
These types of shows are really significant, I think. Look, there are dozens and dozens, even hundreds of new shows launching across all these different streaming platforms every week. And I think it’s easier to get an edge in the marketplace if you have a property that already has some history. People know what Game of Thrones is, what Lord of the Rings is, why you’re seeing a lot of reboots and revamps of different shows that were once on the air. For example, Full House with Fuller House on Netflix. I think the services, first of all, many of them are owned by Disney, NBC, CBS, that have libraries for all this stuff that could just be dusted off and brought back but it’s harder and hard, if you look at the old adage about TV shows, that 80% of them fail no matter what happens. And it’s because it’s hard to get people to make a regular habit of a new program and it’s gotten even worse now. So Lord of the Rings, House of Dragons, these shows have some history, some already a marketplace edge. People know they are, it’s easier for them to kind of latch on to them.
Jordan
In the current climate of the streaming industry, are these the shows that will kind of decide the next chapter in it? I ask this question because it seems like a very tumultuous time for streaming platforms.
Brian Steinberg
It is a tougher time. I think earlier this year, Netflix reported some earnings hiccups. And I think the sense of the matter is that with the possible recession looming, consumers can only spend so much on streaming services. There are roughly 10, 12 many out there. How many of them can people afford and subscribe to newsletters, news outlets, satellite radio, pay for groceries and gas? I don’t know that every streaming service is a must-have or a nice-to-have, and I think consumers are going to work their way through that in weeks to come. So, yes, I think there’s a sense that the growth these things are seeing over the past couple of years may have been a snag and Disney is coming on very strong. Amazon is coming on very strong. Apple is buying up sports rights as Amazon is kind of the survival of the fittest right now.
Jordan
Maybe you can take us back to earlier this year. I think for myself and probably for some of our listeners, that was the first time we’d kind of heard any sense of trouble in the industry when Netflix announced that for the first time in its history, its number of subscribers had dropped. Was that sort of the end of the boom times? When did we realize that this was no longer just an upward trajectory?
Brian Steinberg
Well, I think it’s been coming on for a while. Disney has been building and coming on very strong for a while. They have a portfolio that could out Netflix. Netflix in terms of the properties they own. They have a lot of stuff that has historical value, sentimental value, emotional attachment, Star Wars, National Geographic, the Marvel movies. But yes, I think back in April, Netflix kind of reported losing 2 million subscribers and suggested might lose 2 million more in months to come. That is a sign the audience for streaming is finite, not infinite. Look, you have Discovery, Warner Brothers, whereas Discovery trying to merge HBO Max and Discovery+. You have Paramount and Comcast working on Peacock and Paramount+. And a lot of these folks have the skills to make shows that have the emotional attachment and history. Netflix isn’t the only person out there and a lot of folks are catching up to them.
Jordan
In terms of Netflix, they’ve recently said they’re going to add an ad-supported tier to their programming. A couple of years ago, they were this giant in the industry and everybody else was playing catch up. It seems like a very quick turnaround.
Brian Steinberg
Well, Netflix has long denied that it would ever consider an ad plan. We’ll never do that. Our customers don’t want it. Remember the appeal of streaming initially was to watch things ad-free. People who watch linear TV watch probably 20 minutes of ads every hour, 15, 20 minutes of ads. It is a cluttered environment they call the business. And there is great concern as ratings go down, fewer people are watching, that they need to run the ads more frequently to make the same kind of impact because people are fewer eyeballs on that show. So it is a bit of a mess in some ways, but this is a reversal. Don’t let anyone tell you that this is looking to drive by innovation. This is a reversal of the previous policy on Netflix. They haven’t wanted to run commercials. Now they’re going to try. And by the way, Disney has already been at it, and others are too. And by the way, Disney is no slouch at selling commercials. They’ve done it for decades.
Jordan
Right is where we’re at now, I’ve seen a lot of headlines talking about the beginning of the end of streaming or that the industry is in trouble right now. My question is less that and more of isn’t this like the proper market evolution and consolidation we’d expect in any industry? I don’t think anybody ever expected they’d end up paying monthly for four, five, six or more streaming services. So in the end, you said the survival of the fittest. Right? They’re all going to battle it out and there’ll be two or three big platforms to choose from when it’s all done.
Brian Steinberg
Yeah, the sense is that people only get two or three of these. There are must-haves and neat and nice to have. And that’s going to, I think, show itself up in the market pretty soon or there’s going to be more mergers. People can scale up and make their nice to have a must-have. Yeah. I think if you file the history of media, the sense that extremely or nothing probably wasn’t informed by history. If you’re looking at radio, TV, billboards, newspapers, magazines are all still around. But their share of the market has now one more piece of the pie. The pie is getting cut up more by different media venues, and social media. And so money is not always infinite. Money is finite. And the amount of people are going to spend either from subscriptions or advertisers on commercials, there’s always so much of it to go around and I think streaming is now finding its place in that pie.
Jordan
As you look at that market, and who’s got which pieces of the pie, who is holding the best hand? I mentioned a couple of years ago the answer was Netflix. No question. Now it seems like there are three, four or five people that are going to battle it out.
Brian Steinberg
Well, Netflix is first to market and still has a very sizable subscriber base and they’re international. They are still coming up with things that resound culturally. I don’t think they are done by a long shot, but some of the older school folks. I would argue Disney, which has a portfolio of services which includes Hulu, ESPN+, and Disney+ and I think HBO Max has got a huge library and a knack for coming up with culturally relevant new programming. And I think we’ve seen whether the Discovery stuff, the Guy Fieri, 90 Day Fiance stuff is going to mean that much to the average person who subscribes to watch Game of Thrones, The Wire and Hacks or Euphoria. I don’t know if that’s a mix the person wants or if they want to pay more to get that. That’s a great question. Are the two brands Sympatico, are so different that people really don’t want them together at all? It will be interesting to see how that happens and that will be something lost next year.
Jordan
One of the things we’ve seen causing at least I don’t want to say headlines because it’s mostly a whole bunch of really devoted fans who are angry, but reports of things like Sesame Street episodes and some beloved animated shows just vanishing off these platforms. And I’m trying to figure out why would HBO or Discovery do that, right? Like surely if you already own these shows, more content is more right, it’s better, why would you just remove them?
Brian Steinberg
Yeah, it’s a kind of reversal of conventional thinking. I mean, the sense has been you want to give people more and more watch, keep them on the site longer, keep them binge watching, etc. etc. I think the bean counters at Warner Brothers, Discovery have figured out that some things aren’t watched that much. They don’t generate the audience that you hope for and yet you’re still paying the licensing fee or residuals that are associated with that content being available for you. So in other words, maybe they’re not being watched that much, yet they’re still paying out the licensing fee that’s the right to air the show. Or maybe the actors, producers, and musicians get paid fees, pennies or dimes because of their part in the process. So I think maybe they’re going to say, well, if this isn’t being watched all that much, yes, I’m still paying a regular fee for use. I’m not making any money off of this. Let’s get this off right now. Let’s start right-sizing our portfolio and focus on the thing that people are actually watching regularly.
Jordan
What does that mean though, for the preservation of TV history? I mean, Sesame Street is an institution and its older episodes should still exist in some capacity, right? And I come from a background, a long time ago I used to write about video games and one of the constant concerns in that industry is the way that older content becomes unplayable, unrevisable, and you kind of lose this stuff that is an important part of the history of the industry. And what happens if these TV shows that used to be available on DVD or on reruns or wherever are all of a sudden snapped out of existence?
Brian Steinberg
It’s a great question. You do have to wonder about that. There are museums that keep things around. One of the problems with Sesame Street is that one of the reasons they didn’t deal with HBO a few years ago is that their DVD sales plummeted. People were no longer buying DVDs. Maybe that makes a comeback. Maybe there’s a way to sell digital packages of Sesame Street archive that people would pay for, but it will be driven by marketplace demands and consumers if they want to buy it or not. I think there is a great question. I think the thought was that gee, I can watch anything I want on stream. It will all be there. I Love Lucy or Schoolhouse Rock. I guess that isn’t going to work economically. And these media companies are going to start putting under scrutiny the content they run to make sure that they’re getting a return off of it.
Jordan
What could the future hold? Not necessarily in terms of like the marketplace battle of Netflix versus Disney, but for the kind of content that these platforms create. If the new Amazon and HBO shows we mentioned off the top don’t deliver huge hits, I know a budget crunch has been a big problem and these shows cost tens of millions of dollars or more. Could we see the end of that big budget, epic TV production?
Brian Steinberg
I think they will spend on big swings, but they may spend less on medium small swings that they’re not sure we’re going to generate the audience they need. We also keep in mind have these cable networks. They still generate a lot of cash and they’ve been starving them with content to feed the streaming companies and platforms. So I do wonder if they need to kind of look at their pie and say, gee, I’m giving it all to this slice, none of that I need to kind of rectify or kind of right size my spending and reallocate what I’m doing here. I think there’s still a market for these big swing grand ambition series, but I think that there may be less stuff it’s niche or isn’t going to generate smaller niche viewing habits, much like there are big blockbuster movies and there’s kind of art films.
Jordan
From a consumer point of view, is there a world in which cable TV kind of makes a comeback just based on the fact that some people surely must be adding up the amount of money they are spending subscribing to all these services and realizing that it’s actually more than they were paying before they cut the cord with the intent of saving money?
Brian Steinberg
It’s a great question. The cable distributors aren’t the most customer-friendly folks out there. I think if someone says, gee, I can dump this, I think they’re kind of happy. There’s not a lot of brand resonance around a Charter or Optimum or Comcast. It’s the utility company and they’re not particularly helpful friendly. They make you buy large tiers of stuff, you can’t customize the shows you want. I think there’s still a side on the people who like to get cable and send it reliable and that sort of thing. But I also think you can have more control if you can say, oh, I’ll get HBO this month because these series are on now. Let me get out of HBO until there’s a better thing coming along. I like Netflix for this. I want to watch this new series now. Let me get out of it again because I wanted to watch. I don’t need it right now. I think you may see a more activist consumer who keeps more tabs on what they’re paying out for and what’s on and maybe dips in and out as programming changes.
Jordan
Beyond the Game of Thrones, Lord of the Rings spin-offs and how they do, what will you be watching for in the industry over the next, let’s say, six months to kind of get a sense of where it goes from here?
Brian Steinberg
Well, I think sports price is also becoming very important and you’re seeing Amazon and Apple compete for major things that are coming up now. Apple got some baseball and soccer under its umbrella. Amazon, football will be covering Thursday Night Football exclusively. These guys, the sports buyers are really expensive, and Disney and NBC need them to make their business work. And if the tech guys who really, I think, can throw money around without worrying as much as Comcast or a Disney or a Paramount are willing to spend on this stuff, you may see that market really heat up and explode. And that would take viewers away from official TV and they will subscribe. If you’re a baseball fan, you may want to subscribe to Apple for baseball. And that keeps you there because there are multiple games and across the course of a season, you may end up being there for a while, not churning in and out.
Jordan
Brian, thank you so much for this. It’s a fascinating look at an industry in real flux right now.
Brian Steinberg
Glad to be here. It’s a lot of fun.
Jordan
Brian Steinberg of Variety. That was The Big Story. For more from us, head to thebigstorypodcast.ca. I will stop bothering you very soon I promise to take our listeners’ survey. A couple hundred of you have already done so. We are so grateful. Very soon we will start drawing names to give tote bags too. So leave your email. If you would like the chance to win, you can find it by clicking the big survey button at the top of the page. If you want to talk to us anywhere else, we are on Twitter at @TheBigStoryFPN. You can email us at [click here!]. You can leave us an old-fashioned voicemail 416-935-5935. Thanks for listening. I’m Jordan Heath-Rawlings. We’ll talk tomorrow.
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