The HBO Max-Discovery Plus Merger and the State of Aggregation
Recently there has been a lot of anxious industry attention given to the pending HBO Max and Discovery Plus merger planned for the summer of 2023, but what will this ultimately mean for the overall shift towards aggregation and for the streaming industry as a whole? Chris Pfaff, CEO of Chris Pfaff Tech Media, asks Evan Shapiro, CEO, ESHAP, about his take on the situation from a “cartographic” point of view. “Does it matter?” Pfaff says. “By the time it happens, will so many other things happen?”
“I'm not sure that I understand the rationale now in combining the two,” Shapiro says. “I did before. And then you look at what's happened since, and I'm not so sure I understand the rationale of bringing these two things together. I don't know that one plus one equals four. I'm having a hard time seeing how it equals two today. Especially because they lost, I think, $3 billion in market value since last week.”
“Staggering!” Pfaff says.
“I don't think budgets are being slashed, actually,” Shapiro says. “I think the money's moving from scripted into other things, and the best advice you can give someone who's in this business right now is getting out of the ‘hit business’…find things that make your consumers come every day.” He cites sports programming as a key example. He says that streamers need “daily touch points that make your customers turn on your service at least three or four times a week, if not two or three times a day, that's what's going to be important. People who use services don't churn. People who don't use services do churn. Netflix’s churn doubled in [the] second quarter. It doubled. Now, it was really low to begin with, but it doubled in a quarter that they had Stranger Things! And they're the only [major] streamer in the business that doesn't have sports.”
Shapiro mentions Apple TV+ as a big example of a streamer that has benefited significantly from adding sports offerings. “You’re looking at Apple adding Major League Soccer, adding Major League Baseball,” he says. “I think they're going to wind up with NFL Sunday Ticket. You know, we all kind of made fun of how little content they had, and now suddenly when they're going to spend 3 or 4 billion dollars on the NFL it kind of looks like genius in retrospect.”
“I don't know,” Pfaff says. “A service that didn't exist really a few years ago wins the Oscar for Best Picture and takes home Emmys with Ted Lasso, among other things – yikes! You know, be afraid people, be afraid…”
“They can lose money on TV,” Shapiro points out. “They'll gladly lose money on television to steal [the] share from everybody else.”
Pfaff agrees. “And there's another big company that begins with an “a” called Amazon…and they can lose a fair amount of money,” he says. He turns to Jennifer Kent, VP of Research, Parks Associates, for her insights into the situation. “What data do you have in respect to what people are watching? What things are resonating?”
“One thing that we are starting to see is consumers struggling with the fact that they have eight or nine different services,” Kent says. “How do you find what you want to watch when you want to watch it? And sports are a really big problem…where is this specific game, on what service…where's the cheapest way for me to watch? Do I want to watch it without ads, with ads? It's this navigation problem.”
Kent notes that with traditional paid TV services there was an aggregation value that came with the services, but it was not being provided in a way that was ultimately valued, leading to the mass cord-cutting seen in recent years. However, the benefits of aggregation are being rediscovered in streaming. “Long term, seeing this re-aggregation of services in a re-aggregated experience, I think drives a little bit of what you're seeing,” she says, further underscoring that the HBO Max and Discovery Plus merger is a prime example of this trend. “We track 300-plus standalone DTC OTT services in the US alone,” she says of Parks Associates. She notes that many of these services have already merged into aggregation platforms. “How many are going to be able to stand alone?” she says. “And how many are going to be these large services that are kind of aggregating these properties together? Who knows?” she says with a laugh. “Everything moves so quickly!”
Learn more about aggregation at Streaming Media West 2022.
Watch full-session videos from Streaming Media Connect 2022.
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