Why Is Peter Chernin Swimming Against the Stream(ing)?

Why Is Peter Chernin Swimming Against
Illustration: VIP+: Adobe Stock; AP Photo

Were we to crown the smartest person working in the media business today, it just might be Peter Chernin. Since coming to prominence in Hollywood as a key lieutenant of Rupert Murdoch’s, he’s gone on to an equally stellar chapter building his own company into a global powerhouse with his peerless ability to spot opportunity far ahead of the curve.

But when he announced, as he did Wednesday, plans to launch a new content studio with $800 million in outside financing, it was hard not to do a double take. North Road Co. is betting on becoming a leading supplier of programming for streaming services and linear networks.

Which sounds great, but hold on a second. It makes sense to question Chernin’s move at a time when the OTT-driven content explosion is showing signs of slowing. He appears late to a party that has been raging for the past few years as production companies welcomed a groundswell of investor interest.

But there are plenty of indications out there that the once-insatiable demand for programming has cooled. Of course, Exhibit A is that the broader macroeconomic malaise gripping the globe will curb programmers’ appetites. Then there's Netflix's subscriber decline, which has triggered a new industrywide consensus that streaming has lost its luster.

Wall Street subsequently shifted its preoccupation with sheer subscriber growth to profitability; just today, Guggenheim lowered its stock price target on Paramount, citing in part “more modest direct-to-consumer subscriber pacing.”

Yesterday at the annual Allen & Co. conference in Sun Valley, WarnerMedia CEO David Zaslav reiterated the notion that HBO Max would be spending prudently and focusing on quality instead of quantity (including an international pullback). Two days ago, Bloomberg declared in a headline, “The Age of Peak TV Is Ending. An Age of Austerity Is Beginning.

Apparently Chernin didn’t get the memo that a market correction is coming. He went so far as to deem the very notion that a slowdown had taken hold in the streaming category as “silly” in the Wall Street Journal coverage of his new venture.

North Road Co. is also counterintuitive because Hollywood studios have reoriented their businesses into walled gardens increasingly focused on supplying their own streaming content. But Chernin sees an opportunity to supplement these internal pipelines with his own product.

The streamers aren't the only buyers out there, of course. Cable networks both here and abroad are in need of content, though their budgets have dwindled as the wind shifted to streaming's sails. Chernin will also be putting some emphasis on unscripted content, which makes sense considering the genre's staggering growth, up 26% year-over-year in 2021.

It's worth noting that as turbulent as the OTT world seems right now, it doesn't mean there aren't calmer waters ahead. Netflix, for instance, for all of its troubles, is still on track to spend $17 billion on content this year. The company is not pulling back so much as it is just being more judicious about which programming is getting a pool of dollars that hasn't shrunk.

As Chernin's investment track record goes to show, if there are pockets of opportunity around the globe to be exploited, he will find them. But the larger question his new venture raises is whether the marketplace has been so stunned by Netflix's short-term struggles that we're all blind to a longer-term narrative around streaming that is a lot more positive than it might seem at the current moment. If there's anyone who can see around corners enough to know, it's definitely Peter Chernin.