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: Netflix, Disney and other big streaming names are shifting their strategy. What can you expect?


Streaming customers are likely to see more familiar faces and less megabudget content in the coming year.

Shifting consumer tastes and corporate strategies portend changes in programming, with artificial intelligence looming in the background, as major streaming services consider how to use technology and new forms of programming without escalating annual multibillion-dollar content budgets.

“The big quandary is, how do we make [services] profitable? Things have shifted so dramatically and so quickly in how people consume,” Cole Strain, head of research and development at Samba TV, which tracks viewership of shows, said in an interview. “The streamers that find out what consumers truly want — they win.”

Streaming services are facing some big choices, noted Jacqueline Corbelli, CEO of software company BrightLine. “The cost of the content and the length of the content war will force them to make some major decisions. They are trying to figure it out,” she said in an interview.

“Great content has to be paid for, and investors want to see an increasingly efficient and profitable business,” she said, adding: “Right now the economics of these are at odds with one another.”

This year’s prolonged Hollywood strikes, the prevalence of up-close-and-personal sports documentaries and the increased licensing of older cable-TV shows are the most tangible evidence so far of how content is evolving. Throw in cost-cutting, and customers of services like Netflix Inc.
Walt Disney Co.’s

Disney+ and Hulu, and Inc.’s

Prime Video are looking at a vastly different content landscape.

What’s at stake? Streaming’s big guns continue to spend lavishly in the pursuit of engagement, which is the single most important metric in media. During its third-quarter earnings calls, Netflix said it would spend $17 billion on content in 2024, while Disney pledged $25 billion, including sports rights.

“‘I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality.’”

— Disney CEO Bob Iger

Complicating matters and raising the urgency is the pressure, particularly at Disney, to cut costs. The very future of blockbuster movies is also in doubt in the wake of box-office misfires such as “Wish,” “Indiana Jones and the Dial of Destiny” and the latest Marvel entries, “Ant-Man and the Wasp: Quantumania” and “The Marvels.”

“One of the reasons I believe it’s fallen off a bit is that we were making too much,” Disney CEO Bob Iger said at a recent employee town hall meeting in New York City. “I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality. Storytelling, obviously, is the core of what we do as a company.”

Also read: Disney CEO Bob Iger walks back comments about asset sales

Speaking at the New York Times DealBook Summit last week, Iger acknowledged that “the movie business is changing. Box office is about 75% of what it was pre-COVID.” Noting the $7 monthly fee for a Disney+ subscription, he said the experience of viewing content from home on large TV screens is both more convenient and less expensive than going to the movie theater.

Iger’s task is significantly more fraught than those faced by his rivals. He is in the midst of a turnaround at Disney aimed at making streaming profitable and is simultaneously fending off yet another proxy fight from activist investor Nelson Peltz.

Part of Iger’s plan is to slash costs. Of the $7.5 billion Disney intends to save in 2024, $4.5 billion will come out of the content budget. Previously, the company was aiming at a $3 billion content cut out of a total annual reduction of $5.5 billion. Disney plans to spend $25 billion on content in 2024, down from $27.2 billion in 2023 and a record $29.9 billion in 2022.

Read more: Bob Iger: ‘I was not seeking to return’ as Disney CEO

What streamers have done so far hews closely to the classic TV model of producing original movies and series, broadcasting live sporting events and throwing in licensed content, or syndication. They’ve also displayed a willingness to place ads on their services after vowing not to (in the case of Netflix) and have managed to mitigate spending on pricey sports rights with behind-the-scenes content.

Most prominently, Netflix has licensed older shows like USA Networks’ “Suits,” reintroducing the cast, including a then-unknown Meghan Markle, to solid viewership. “As the competitive environment evolves, we may have increased opportunities to license more hit titles to complement our original programming,” Netflix said in its third-quarter earnings statement. 

During the company’s earnings call in October, Netflix co-CEO Ted Sarandos pointed to the historic streaming success of “Suits.” “This continues to be important for us to add a lot of breadth of storytelling,” he said. “Our consumers have a wide range of tastes, and we can’t make everything, but we can help you find just about anything. That’s really the strength.”

The success of “Suits” and of original sports programming, among several tweaks, indicates that consumers like what they see so far. Streaming additions at Netflix and Disney were significant — 8.76 million and nearly 7 million, respectively —during the recently completed third calendar quarter.

Read more: Netflix’s stock jumps more than 10% on huge spike in subscribers, price hikes

“There exist a lot of popular, good shows that people hadn’t seen before. HBO Max has licensed ‘Band of Brothers.’ ‘Yellowstone’ is on the CBS network after performing well on Paramount Global

and Comcast Corp.’s

Peacock,” Jon Giegengack, founder and principal of Hub Entertainment Research, said in an interview. “Consumers increasingly don’t care if a show is new, if they haven’t seen it before.”

On the sports front, Netflix and Amazon Prime Video have sidestepped expensive rights to live sporting events and instead produced docuseries such as Netflix’s “Quarterback” and “Formula 1: Drive to Survive” and Amazon’s “Coach Prime” and “Redefined: J.R. Smith.” Amazon also continues to air “NFL Thursday Night Football.”

Competition for eyeballs is tight with so many suitors — from Alphabet Inc.’s


YouTube to TikTok, both of which are developing long-form content — and viewers face “too many streaming options,” said Brittany Slattery, chief marketing officer at OpenAP, an advertising platform founded by the owners of most of the large TV networks.

“There is a high churn rate, because consumers keep popping in and out of services because they can’t afford all these services,” Slattery said in an interview.

Also see: Here’s what’s worth streaming in December 2023: Not much new, yet still a lot to watch

Mark Vena, CEO and principal analyst at SmarTech Research, sums up the typical customer experience: “There are too many services for streaming. I will buy service for a month, watch a movie and then cancel.”

Using technology for a new experience

Major streamers are pinning many of their hopes on technology as a way to entice viewers and expand beyond the traditional TV model they’ve adopted. Strategies include mobile gaming (Netflix), gambling (Disney’s ESPN Bet) and shoppable media (Amazon).

The biggest near-term change would bring ESPN exclusively to streaming, perhaps as early as 2025, although big games would probably be simulcast on network TV to retain older viewers.

“Technology will be a major impetus for being in the winning circle,” said Hunter Terry, head of connected TV at global data company Lotame, pointing to Amazon’s shoppable-media strategy during Prime Video’s broadcast of an NFL game on Black Friday.

The NFL game, the first ever on a Friday, featured QR codes of Amazon ads for direct purchases via mobile devices and PCs, contributing greatly to what the e-commerce giant said was its best-ever sales day — 7.5% higher than Black Friday 2022. The game drew between 9.6 million and 10.8 million viewers, according to Nielsen and Amazon, making it the highest-rated show on Black Friday for young adults (18-34) and adults (18-49).

And what of generative AI, a major flashpoint in the writers and actors strikes that roiled Hollywood for months earlier this year? Creators feared generative AI would be used to produce low- and middle-brow entertainment without the need for writers, actors or production crew.

The technology is as intriguing to streamers as it is vexing. Full-blown adoption would rankle creators as well as customers. There are also limitations: AI-created content is lacking in humor and original thought, said David Parekh, CEO of SRI International, a leading research and development organization serving government and industry.

“The pressing question is, who goes first among the streamers and risks getting blowback from studios and consumers?”said Rick Munarriz, a contributing analyst at the Motley Fool who covers streaming-service stocks. “You don’t want to offend people, but there are tools to create ideas” at little cost.

AI and machine learning are already being used to mine data to find out what resonates with viewers.

“It is very hard to produce successful content,” said Ron Gutman, CEO of Wurl, which helps streamers and publishers monetize and distribute content, and which was recently acquired by AppLovin Corp.

for $430 million. “The market is so fragmented. The problem is connecting people to content.”

Straight to streaming?

Big-budget busts present another potential source of content, by salvaging unreleased movies, according to experts.

The so-called dust-bin option is the natural successor to straight-to-video and straight-to-pay-per-view movies. There has been some precedent, with the release of Disney’s superhero hit “Black Widow” simultaneously on streaming and in theaters in May 2021.

Will streaming services end up as the first stop for movies abruptly canceled before release? Candidates include“Batgirl,” which cost $90 million to make and was in post-production when Warner Bros. Discovery Inc.

pulled the plug.

The same fate could also await two other shelved Warner Bros. movies, “Scoob! Holiday Haunt” and the completed “Coyote vs. Acme.”

While the $90 million “Batgirl” is a tax write-off, there could be upside to “Coyote” and “Scoob!” if they went to streaming without a costly marketing campaign, said SmarTech Research’s Vena.

Still, the long-term plans of streaming giants to meld tech to TV remains a ticklish task, said Wurl’s Gutman. “TV is a lean-back experience, not a lean-into technology medium,” he said.“People are looking at their phones while watching TV. It is a passive experience.”

At the same time, streaming service “must keep spending” to keep viewers, according to a recent AB Bernstein note. “Engagement is the single most important metric measured in media,” it concluded.

Tracy Swedlow, founder and co-producer of the TV of Tomorrow Showconference, said: “They’ve been burning a candle at both ends, investing in original content as well as licensing long-tail content such as ‘Suits’ and ‘Breaking Bad.’ Something has to give.”

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