MIAMI — There will be more un-bundling, and there will be re-bundling. There will be a push for stronger regulation of tech giants. And for sure there will be more big paychecks for content providers.
Those were among the predictions and observations offered Tuesday morning by four top Wall Street media and tech analysts — MoffettNathanson’s Michael Nathanson, Morgan Stanley’s Ben Swinburne, JP Morgan Securities’ Alexia Quadrani, and Macquarie’s Amy Yong — who gathered for the opening session of the NATPE conference, which runs through Jan. 18.
Here are 10 things we learned from the discussion, moderated by Lionsgate investor relations chief James Marsh.
The dizzying pace of change in media and particularly television has Wall Street just as confused as everyone else. “Wall Street is mirroring what is going on in the industry. There’s a lot of convergence and a little bit of confusion of how investors should look at the landscape,” Yong said.
The traditional pay TV channel bundle is on a diet and more streaming upstarts are entering the arena. But over time, consumers will demand more order to their menu of media options. “We are unbundling right now, but we will be re-bundling,” Swinburne said. “This complicated consumer world will eventually become more simplistic.”
Until that simpler day dawns, however, there will be churn. “Churn rates are going to keep going up and up and up,” Quadrani said. “The question (for consumers) is how many of these OTT platforms will you have at any one time.”
Netflix has a unique form of body armor that no other company (right now) can buy. “Netflix loses $2 billion a year,” Nathanson said. “That business model cannot be replicated by any of the other companies we cover. They have (seemingly) unlimited money to spend and an investor base willing to look out many years for return on that investment.”
On the flip side, traditional media CEOs have encouraged analysts to think short term. “The executives have trained the analysts to look for short-term gifts, like stock buybacks and the deal with Netflix on the last day of the quarter,” Nathanson said. The two companies he credits with a more long-term outlook: Disney and Fox. “Hopefully 2017 was the bottom of the short-term exercise,” he said.
The stark differences in the regulatory environment for traditional media compared to the FAANG digital behemoths will change. “These are companies that are global in scale with no vertical integration limits — they’re essentially unregulated,” said Swinburne. Look for concerns in Europe about privacy, data mining, and, of course, fake news, to drive a regulatory agenda.
Don’t count out international players like China’s Tencent and Alibaba from jumping into the media M&A fray. “We really haven’t talked about the global forces that are coming,” Yong said.
The more content that floods the zone, the more clout that successful creatives with track records wield. “The rising power here is the creative community,” Nathanson said. The growth of the market is “going to allow content creators more and more bidders — the world’s going to become a lot more competitive for that talent. Ultimately whether it’s sports or entertainment, the winner is the person who tells the story.”
The explosion of scripted content has contributed to the decline in NFL viewership. “It’s not a coincidence that we’re seeing a massive investment in scripted drama and NFL ratings are starting to fall off,” Swinburne said. “There’s only so much time.”
Walter White, we hardly knew ye. “The slow-burn drama is going to have to go away,” Quadrani predicted. “The attention span of the consumer is now so small. The shows that took you a few episodes to really get into them — like “Breaking Bad” — those are going to be harder and harder to be successful going forward.”
(Pictured: Moderator James Marsh of Lionsgate, Amy Yong, Alexia Quadrani, Ben Swinburne, and Michael Nathanson)