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Sector expert Dan Rayburn on streaming and media space (1:15). WBD, Comcast spinning out linear assets (2:50). Netflix and Spotify (6:15). Nielsen is a joke (9:20). Metrics to look at - ARPU, very important (14:15). Netflix is still king (16:20). Why Disney's an interesting one (25:55). Warner Brothers' rebranding (33:30). DIRECTV doing some cool stuff, NFL free on YouTube, new Amazon numbers, Peacock still losing money (38:40).
Transcript
Rena Sherbill: Dan Rayburn, an expert in streaming and media, welcome back to the show. It's great to have you back on Investing Experts, talking to you on Seeking Alpha.
Dan Rayburn: Thanks very much for having me back. Yes. Since the last time we spoke, we were talking a little bit more just about sports. But as you could see from the 13 pages of notes I sent you just in the last ninety days of what's been taking place in the streaming industry just across the major players, it's it's incredible.
The industry just really never stops in terms of content bundling and pricing going up and new services being announced. We have two coming out later this year. I eat, sleep, and breathe this every single day as an analyst, and even that is hard just to keep up with all the news.
RS: Absolutely. A lot of movement in this sector in general in the markets, a lot of things to keep abreast of.
But, certainly, the last time you were on was late twenty twenty three, early twenty twenty four. Last time, yeah, you were talking about Super Bowl numbers and Disney deep dive.
Before that, some numbers out of Netflix (NASDAQ:NFLX). What are you seeing out of the space right now? Let's start broad picture. How would you summarize it for listeners?
DR: So everybody knows as a consumer, they have a lot of choice in the market when it comes to streaming services, both free, live on demand, pay per view, pay to own, pay to rent, pay to download. There's lots of options.
But as we discussed last time in terms of sports, sports is still the one that's the most fragmented because it's it's hard to find for average consumer where to get the sports content you want and what platform and how Netflix is gonna have some exclusive content this year with sports.
So will YouTube (GOOG) (GOOGL), the NFL for the 2025-2026 season. They'll be streaming games exclusively on four different platforms. So consumers have a lot of choice in the market, and that's great.
But with that comes complexity. You have some companies changing names. That that adds more complexity. Prices are always going up. That's not gonna go down. You have more ads being inserted into services as well.
The ad loads are getting higher. So this idea that one day consumers will just get everything that they want in one place at one price, that sounds great. That's not our reality.
It's not gonna happen. So every household really has to decide just how much do they wanna spend and what content is most important to them. And that's the way it's been, and that's the way it's gonna continue to go forward.
RS: Out of the deals that we've seen recently happen, which do you think are the most important for investors to beware of and to pay attention to the finer details perhaps?
DR: Well, no doubt, going forward, the fact that we have both Warner Brothers (WBD) and Comcast (CMCSA) coming out publicly and talking about how they're gonna spin out their linear assets into a a different company, that is one of the biggest things that investors have to watch because we all know what the PTV markets are doing as far as cord cutting.
We have those numbers. And we knew this was coming with WBD when in Q1 that they broke out every segment of their business with its own financials.
That was a key sign they were preparing to separate assets. In Q2 of 2024, they also took a $9,100,000,000 write down on its linear TV networks. So we saw that coming.
It's only a couple weeks ago that they officially announced it and said that they'd be spinning it out, and they gave some details as to when that would take place, basically completed, they think, by next year.
And then you have Comcast, which Comcast has had already announced that they were gonna do this and and spinning it out. And it makes sense based on the way they're looking at the financial markets, and they wanna keep debt with certain portions of their legacy business.
But they also want Wall Street to think of them as higher value from a stock standpoint if they have all streaming or what they call D2C, direct to consumer services in one portfolio without the legacy side.
So Comcast did announce the new name. It's called Versant. So that's gonna be the the planned spin off of some of its linear channels, and originally, it was called Spinco. That's just what they were calling it. So it's still on track.
They're saying to be spun out by the end of 2025. They also mentioned that they're not gonna launch their own streaming services.
They're gonna rely on their unique brands to develop their own digital strategies. They also came out and said what was interesting, some investors were saying, okay. These guys will go start bidding on sports.
But they said they're not gonna actually target large sports leagues because they said it cost too much to license. So not surprising. At the same time, they said they weren't interested in the F1 as the audience is too small.
So when you look at Versant and and the Comcast linear networks that they're spinning out into that, 65% of their programming is live. So we see where that business is is headed.
That is the biggest fundamental change in the business models with some of these companies in the last two to three years is spinning out to linear assets because we always have more bundling, repackaging, repricing.
But you're now talking about separating CapEx and OpEx costs from different lines of businesses into different companies with different balance sheets.
And Disney (NYSE:DIS), we thought, was gonna do this as well. Initially, they talked about maybe getting out of some of the legacy live linear channels, think ABC and other.
But then just in the last, call it two to three months, they've been pretty vocal, their CEO, saying we actually see a lot of value in keeping those bundled. However, he did say that they did look at all the options on the table.
They did talk to people about potentially who might want to acquire them as far as linear assets, and they just decided they felt it made more sense to keep it under one company and one umbrella.
So, different approach in the market, but by far, that is the biggest thing investors are gonna be looking at going forward.
RS: What would you say about the Netflix, Spotify deal that was announced last week?
DR: The report in the market was that Netflix and Spotify were talking to one another. There wasn't an actual agreement announced.
And the story was that the two companies were talking about creating content together because Spotify has access to a lot of, of course, artists and whatnot, and they they specifically talked about some award shows.
Maybe Netflix could create some content from that. That's not too surprising. I don't really know why that's a new story, though, because Netflix is talking to every type of content owner out there to see what makes sense for their platform.
So that that's not really something, really anyone in the industry should should keep an eye on because if that content is created, it's also gonna be very niche and very small.
And it's not Netflix saying, hey. We're trying to get into the podcasting business or video podcasting business. That's not what they're looking to do. But Netflix does keep in mind, you know, test certain things in the market.
Remember that they had a a website at one point where where you could buy you know, fans could buy merchandise, physical merchandise, swag and whatnot, from some of the actors who were tied to some of their most popular series who were creating unique pieces of, you know, physical clothing.
And they tried that out for a little over a year, and they shut it down. And it just was like, okay. That's didn't really work. Not the business we're in. So the the Spotify and Netflix news, I think, is just getting a little bit overblown.
There's no actual news there as of yet.
RS: Is it just because it's Netflix and Spotify and those are big headline names that it gets more attention than perhaps it deserves?
DR: The real reason that it got big attention was because the outlet that did it, who I don't even wanna bring attention to, loves to write in the headline exclusive: Two companies are talking to one another. That's not news. Netflix, Spotify, Warner Bros., Discovery, Prime Video, YouTube, pick whoever you want.
They're talking to companies every single day. That's their job. Hey. What do you guys do? Is there a fit? Can we do something cross licensing, content, marketing?
That is the business world that we're in, so that's not news. So, these days in in the news media - that is the mainstream press in particular - that covers streaming, they have no clue what's going on.
The amount of mainstream media that's still writing that Super Bowl was streamed for the first time for free ever last year or this year because it was on Tubi, it's been streamed over 10 times for free.
Fox (FOX) always had it for free. You didn't have to authenticate. So it's incredible just how much the media gets wrong about the streaming space because, frankly, they don't look at the SEC filings.
They don't know the numbers of these public companies. If you ask members of the media, how much has Disney lost in their direct to consumer streaming service until they turned a profit? They don't know.
Well, it's a little over $11,000,000,000. So a lot of the numbers and metrics that people should be looking at, they're not because it's just easier to write a big headline that, oh my god, Netflix and Spotify are talking to one another. And then you read the article, and what did it say?
They said, well, nothing may come of these talks. That's not news.
RS: So what would you say? Would you add anything to the conversation that deserves more airspace/what would you say isn't deserving of the airspace that it's getting? Would you add anything to those two columns?
DR: Oh, there's there's always so much. I spend so much of my time on LinkedIn just trying to correct others because opinions are okay, but facts are what matter.
Numbers, words, they mean something. So it's incredible how many times people throw out numbers that aren't accurate in terms of who's profitable, who isn't, who has how many subscribers.
And I see people reporting things like, well, Hulu has over a 100,000,000 subscribers. And it's like, guys, what what are you talking about?
Disney reports these every quarter. It's in the 50,000,000. You're off by double. So there's a lot out there about viewership. The number one problem just that we have as an industry is measurement and Nielsen.
Nielsen is the biggest joke around, and everybody uses it because there's no other alternative. But Nielsen won't even define what a viewer is. And the example I always give is Thursday night football on Amazon (AMZN).
You go to amazon.com's homepage and you go there to buy sneakers. The video loads in the upper right hand corner. If you don't interact with it or click on it are you a viewer? I don't know. Amazon won't say.
They say ask Nielsen. When you ask Nielsen, they say leave us alone. Stop asking. So I've been targeting Nielsen online for years saying, listen.
You guys are talking about transparency. That's the word they use all the time. Transparency. We provide all this transparency into viewer data, and yet they don't even define what a viewer is thirty years into this industry.
So do you have to watch that video for two seconds, ten seconds? Do you have to click on it? I don't know. So as an industry, there's all this garbage thrown out there about viewership.
And for the first time ever, you know, Nielsen loves to say things like, you know, streaming overtook TV as the main viewing mechanism. Well, yeah, define TV. Well, they define YouTube as TV.
Well, the average clip on YouTube is under eight minutes. Well, what's the average clip on Netflix? It's not eight minutes. So, they're comparing apples to bowling balls, and the numbers don't make sense.
They don't add up. And then they say things like some of the language in terms of the methodology is, one of the ones I always find funny is they say, well, here's what it includes, but it doesn't include high bandwidth content.
What is high bandwidth content? That's not even a term we use in the industry.
So they're also making up their own terms that have no definition. So the the biggest problem we have is tons and tons and tons and tons of articles being written about viewership, and yet we don't actually know what viewership is.
And the vast majority of these services don't break out viewership per user.
Some do. Roku (ROKU), Netflix will say how many hours they're spending, but they don't then tell us how many ads are delivered in those hours. So what's the actual monetization taking place per hour viewing? Nobody will actually say.
RS: So who are the group of companies that you're focused on in terms of paying attention to the sector? What names would you put in that category?
DR: Well, it depends on how you wanna cover this market. I'm covering vendors, so the ones on the back end providing all the infrastructure services, ones most consumers don't know.
Yes, they know Google and Amazon cloud services, but a lot of the ones on the back end, they don't know.
And then on the consumer facing side, there's over 100 OTT services just in the US. There's over 1,200 globally. The ones most investors are really are covering are Amazon, YouTube, WBD, Paramount, Netflix, Prime Video.
Those are those are the six big guys. Seventh, you have to throw in there, Comcast, NBCU, Peacock. Outside of that, you have smaller services that are out there. Okay. Apple TV plus (AAPL), but they don't give out any stats.
So we don't have a lot of information on them. So that's something we just don't really have much insight into.
And then you have smaller services, tons of them out there. Something like Crunchyroll focus in anime, which is great. They have a a growing business, but there's far too many, again, members of the media who then wanna compare, Netflix to a smaller service.
So they wanna compare Netflix to YouTube TV. Well, YouTube TV is live linear channels. Netflix doesn't have a list of live linear channels.
They're gonna have four next year in France with TF one. That's a deal they announced this year that'll kick off next year, but Netflix is not in the business of live linear channels.
Yes, one off live events. So it all depends on what investors are looking to follow in the market, but the biggest thing that they should be following here is a couple key metrics.
Clearly, the balance sheet metrics, ARPU, very important.
Average revenue per user is very important. And the whole reason that Netflix has stopped reporting the number of new subs per quarter they're getting, And, of course, Wall Street doesn't like that.
But it makes sense because, historically, Netflix got all their revenue on the digital side from a subscription service.
When all of a sudden you're now inserting ads and more than 50% of new users to Netflix are signing up for the ad plan in the areas they're offered, that's a number from Netflix, now all of a sudden your revenue stream is getting diversified.
And you might get at $8 a month at the base plan, you might get less from a subscriber from a new subscriber just from the initial $8 a month, but you might make over time 5 or $6 from that member just in terms of ad revenue.
So Wall Street shouldn't look at just how many new subs you got because you could have fewer subs in one corner quarter but make more revenue because the ad load was better.
The CPMs were higher. So I'm not surprised that Netflix followed really in Apple's footsteps, which was years ago when Apple started stopped reporting how many new iPhones they sold every quarter, and Wall Street hated it.
But what Apple said was, hey. Depending on the price and some of the other things going on as far as our supply chain, we could sell fewer iPhones in a quarter and yet make more money.
And Wall Street, isn't that what you should be focusing on? So, of course, Wall Street wants as much data as possible. I get that. But the fact that Netflix followed what Apple did, I'm not surprised.
And, also, Disney recently the CEO recently came out and said, don't be surprised if over time we follow the Netflix route, which is we stopped giving out number of new subs, especially since we have three different streaming services.
And within those services, we also have many different bundles and packages.
RS: So let me ask you to go through the main companies you're focused on and go into detail about what they're bringing to the table, how investors may be thinking about it in context, how they should be parsing through this information.
I'll let you have at it, give your thoughts on the main companies you're focused on. Does that sound good?
DR: Sure. Yeah. So let's start with Netflix. They're the king. When Bob, the CEO of Disney, comes out and says on an earnings call, Netflix is, "the gold standard", what does that tell you?
Netflix is the king here. And, yes, we do have a lot of members of the media saying YouTube has won the streaming wars, and YouTube has won in the living room.
That's complete nonsense. First of all, there's no streaming war. Wars are not good. The definition of war is an armed conflict. That's not good.
What we have in the market is competition. That is great. But we have many in the industry again comparing what's taking place on TikTok to what Netflix is doing or saying, Netflix should get into TikTok's business.
Why? The average video is under thirty seconds. It's not the business they're in. And most of that content's being viewed on the phone, not the TV. So you have to look at Netflix as far as just what they've been able to do over time.
The amount of profitability that they've had just about $11,000,000,000. I don't have the exact number in front of me, but about $11,000,000,000 of free cash flow combined in the last three years.
That's incredible. Flipside, Disney lost, I think it was $11,400,000,000 before they turned a profit in their D2C service. That's a big contrast in companies.
Now is that a fair comparison, stand alone? Yes. From a streaming service standpoint, but overall companies, no. Because we know Disney also has theme parks and cruises and all kinds of other business lines that Netflix doesn't have.
So you have to compare product to product and service to service as opposed to company to company. But starting off with Netflix, their Q1 earnings, free cash flow, 2,600,000,000. That's just absolutely incredible.
Also, the key thing they pointed out was they expect ad revenue to roughly double in 2025. That's a big deal. Now they've not given us guidance on how much revenue they think they can get from ads and over what time.
Wall Street has estimates all over the place in the multibillions by the end of this year. It's really unknown. The Wall Street math, everyone has a different methodology.
But we're gonna get a good indication from them by next year, I think, in terms of where their ad business is at just from a revenue standpoint. They're also extending their live event strategy to other countries.
They've talked about that as well. They did recently announce that they'd won some sock women's soccer World Cup. I think it's 2026 it starts. Double check me on that one. But so they've got more live events coming up, that's not really surprising.
Couple of things they called out was that they're still forecasting free cash flow of about $8,000,000,000 for 2025. That's absolutely incredible.
Also, the ad business we know is where growth is at for them, and they brought that ad tech stack in house in the US.
Started with Canada, then in the US, and they're gonna roll it out in remaining countries in the coming months. So now they'll have more control over their ad stack, which will allow them to do better targeting.
Hopefully, over time, they get higher CPMs as a result. They also gave out an updated number that they estimated its audience to be more than 700,000,000 people with over two thirds of them living outside the US.
They did say because of their ad tech stack that they're gonna be off be able to offer better measurement, enhanced targeting, and new innovative ad formats.
So as they expand their programmatic capabilities, what's gonna happen? They're gonna make more money from that. So that's not any of these numbers that investors are hearing.
That's shouldn't really be surprising to them because of how unique Netflix is in the market, and they're so focused on one thing.
Now, they did also talk about podcasts to your point on Spotify, will bring that up again. Because on the earnings call, and this is Q1 earnings, they said that, "as the popularity of video podcasts grow, I suspect you'll see some of them find their way to Netflix."
But as you can see, that's not gonna be a strategy. That's not driving revenue going forward. So it's interesting that the biggest thing you see finance people, media people is comparing YouTube and Netflix together.
And on the earnings call, Netflix's co CEO came out and said, quote, we believe we are more competitive, better service for a certain class of creators and certain types of storytelling.
And they're right. It's a different platform in a different medium, YouTube versus Netflix.
So Netflix is still just crushing it in the market. I don't think anybody is surprised by the success they're having. They did say they're gonna spend about $18,000,000,000 on content licensing and content creation this year.
That's a number that's relatively flat from the last two or three years. During COVID, it went down by about a billion dollars, which what they talked about, but 18,000,000,000.
And the fact that they're moving to their own ad tech stack is very important.
The other thing they said in comparison to YouTube, this is important for advertising, is they said TV and and and Netflix and the comparisons and YouTube.
They say TV advertisers, they're always buying a specific program and time of day. Think about that. That makes sense. Whereas on streaming, Netflix says they're buying against the genres of groups of shows.
So they're targeting a group of shows because they know who the audience is. That's very different than TV advertisers. So that's really what we're seeing with Netflix. It's basically, how Netflix moves is how the industry moves.
What they're doing is so unique in the market because of the size and the scale that they're doing it at. So everybody in Wall Street is really just always watching what is Netflix doing, what are they gonna do next.
I didn't look their stock price today, but, it's been around about $1,200. So it's incredible what their market cap is. Just absolutely astronomical. Shocked it hasn't split as of yet. Wall Street keeps saying it will, but it hasn't.
We're just we're all watching Netflix every time they do something, and Netflix is gonna get into more live events. We know that. They will have both NFL games again this year on Christmas, exclusive. So they're getting into more events.
But, again, at the same time, they made it very clear, and they recently talked about this at a conference about a month ago on stage. They said they weren't interested in bidding on an entire season for Save the NFL because the cost to license it is so high that they didn't feel that they could get the proper type of return that they needed for shareholders.
And that was the same thing Disney said when Disney stopped bidding on the geo rights. Once they came up, Disney had them for a period of time, for Cricket. Because Disney said that the cost of licensees, we don't think this is a great return on the business.
So Netflix is very good about knowing what they should spend money on and what they shouldn't.
RS: Is there anything that you would do differently or that you would say maybe they don't see it coming down the pike or maybe there's a headwind that they don't see or - I don't know, is there anything that you would point to that you feel like perhaps they're getting it wrong or perhaps they're not thinking about this?
Or do you feel like they're pretty much setting the tone for good reason?
DR: No. I think they understand their business very well, and I know some people would argue with me and say, yeah, but, Dan, they said they were never gonna do ad supported content. And, look, they went to an ad tier.
Okay. But the market changed. The business changed. Now they also publicly came out and said, you know what?
We were two years late to the game. We saw the market changing, and we should've changed with it, and we should've introduced an ad tier approximately two years earlier. They made a mistake. And yet, are they having trouble catching up?
No. More than 50% of all their members signing up, new members, are signing up for the ad tier. That number is from them directly. So, yes, they have been a little slow to the market with certain things. With live events, no.
They didn't think they'd ever really get into live events, but they did. Why? Well, some unique opportunities came up with NFL content that at the time when they commented they wouldn't do it, they weren't available.
So I think people gotta give Netflix a little bit of slack in terms of the fact that they've changed their strategy over the years. That's what good businesses do.
That's what good companies do. Should they have been a little faster to move in the market when it came to an AVOD advertising video on demand model? Yes. They should have. But, it's it's not slowing them down in terms of adding growth.
So, no, I would say they're file firing on all cylinders. It's very clear what they're doing with their business. They know where they're going with it. They know what consumers want.
They know that growth is coming internationally, and they know that the largest percentage growth will be coming from the ad side because the more hours we watch and the more hours they insert and the more targeted they are and the better they can measure it, what happens?
The CPMs are higher. That's more money for them.
RS: Happy for you to go on to Disney.
DR: Let's do Disney. Disney is an interesting one just because they've announced a few things here. So, you know, in Q1, Disney ended with a 126,000,000 total Disney plus subscribers.
You know, Hulu had 50,300,000. So Hulu is kind of just always little up, little down, but it's it's always hovering around fifty, fifty two, 53,000,000.
Hulu plus live TV lost 200,000 subs. And Hulu plus Live TV, it's that's a funny one. 4,400,000 paying subscribers. And if you look at their sub count over the last well, really, since it launched, they've never gotten above, I think it's 4.6, 4.7 million subs.
And so it goes up, it goes down. They gain 200,000. They lose 300,000. It just it ebbs and flows, but it's never really grown over time.
The reason for that is, remember when all these live linear services came to the market, Sling TV, Hulu plus Live TV, YouTube TV, they all sold the value proposition and they were cheap, and they were in the beginning.
And then all of a sudden, the prices went up very quickly over time. So the average live linear service now comparable to broadcast TV starts at $85.
So that's part of the reason why none of these services have really seen a lot of growth. Sling TV's under 2,000,000 now, was 1,900,000 when they last reported number of subs.
And, also, you still have some blackout restrictions. Those services didn't turn into what consumers thought they would be. So Hulu plus live TV has really kinda stayed just flat over the years. ESPN ended with just over 24,000,000 subs, but they lost 800,000 in the quarter.
The big thing with Disney, and any investor knows this following this, is in Q1 Disney's D2C business, which is D2C plus ESPN combined, had an operating income of $336,000,000.
And that's great for Disney because at one quarter, a little while ago, two years ago, I think it was, they lost $1,100,000,000 in a quarter. In a quarter, that means they were losing $100,000,000 a day from the direct to consumer streaming service.
So when consumers who don't follow the back end of this business, obviously, why would they, can't figure out why do these companies keep raising prices every year or twice a year? Well, it's because for the vast majority of them, they've been losing so much money for so long.
So what you have to do as an investor is you have to look at the SEC filings of these companies and what they put in there because Disney's, it was interesting in Q1.
They said advertising growth in the D2C business was due to increase in impressions. Okay. Increasing impressions. That's great. But was partially offset by lower CPM rates. So we increased impressions, but we got paid less for each ad. Oh, that's not good.
What you want is you want them to both go up. You increased impressions and you increased CPM rates. The advertising business is economics of scale plus targeting. So that's something you have to watch.
Disney's also doing a lot more to integrate Hulu embedding it into the Disney plus offering, plus the sports content that's there. But Disney doesn't really give us any insight into what that's doing.
All they say is engagement is up. Okay. Define up. And how are you defining engagement? Because some companies define it time spent on platform versus actually viewing content. So that's interesting.
And then, on the advertising side too in Q1, they noted that advertising was more challenged in the quarter, and they said it wasn't driven by lack of demand, but rather increased supply with new entrants in the marketplace.
And they didn't call it out, but what they're really saying is Prime Video, because Prime Video added ads, so all of a sudden all this inventory opened up. And in the last couple months, Prime has also doubled the number of ads that they're showing.
Initially, it was about two minutes. Now it's about four minutes per hour on average. Well, if you're an advertiser, that gives you more options to buy ads, which means that's competitive to Disney.
So it's really important to look at the filings and what these companies are saying as opposed to just what you're reading in a press release or you're hearing on an earnings call because it's very interesting just how we hear what they're thinking about when it comes to advertising and what they're seeing.
And that's really important. These numbers give an insight to the business of what they're seeing both short and long term.
And then the last big piece on Disney is just the fact that they're gonna launch by the fall their new D2C offering, which they're now just calling ESPN. And you can get a bundle of Disney plus, Hulu, and ESPN.
It'll be $17 a month. That's with ads. You can get it separately based on a current subscription level for existing ESPN subscribers. They'll automatically become subscribers to ESPN's new service, but depends the level that they're at.
We also don't know much of just what the new ESPN service is gonna look like because all they've said is it's gonna be enhancements to the app, and it'll have more functionality and customization, but we don't know what exactly that means. They haven't said.
We do know it'll have the ESPN lineup like you have on linear TV. But without seeing that launch in the market, we just don't really know what that offering is. And then you're gonna have consumers going, okay, what's the difference? ESPN versus ESPN plus?
So they'll have to do a great job of just marketing that and making it clear. And then this month well, actually, last month, it was we heard that Disney agreed to pay Comcast, 438,700,000 to acquire the Comcast stake in Hulu. So we've known this has been coming.
That's only been a matter of time. But now we actually have the numbers. We have a timeline of when they think it's gonna take place.
We've been waiting on that for a couple of years. We don't yet know what the impact is to Disney from an advertising standpoint on that, and that's definitely something that Wall Street is going to want to know.
But for right now, it's it's just a little bit early. And the D2C offering, just early this fall, we're all assuming it's before football kicks off in September, but we'll see. The plan is gonna be there's two plans, and it's select plan. Again, we don't know the difference between select and unlimited, but the select plan is gonna be $12 a month. The unlimited plan is gonna be $30 a month.
When it launches, it'll have a special bundle of $30 a month for Disney plus, Hulu, and ESPN Unlimited. The select plan's gonna have access to all content on ESPN Plus, but the unlimited plan's gonna have all the ESPN's linear network.
So we have some idea there in content, but we haven't seen it yet. And until we see it, it's really hard to know just how much will consumers like it and will they want it. But, another service coming to the market.
RS: And what other companies would you add to the top of this conversation?
DR: Well, you gotta put WBD in there. So WBD is gonna spin out linear networks, so that's something to watch. It won't be till next year.
They think it's completed. They're rebranding Max to HBO Max this summer, pretty much now. There was a lot of talk in our industry just about how crazy that is and it makes no sense and this and that.
But I thought it was really interesting. Their CEO came out and he told the story when they went from HBO and calling it HBO Max and the whole Max name. What he said was at the time, the idea around that was we want to explain to consumers that we had a lot of content. A depth and breadth of catalog is really what he was saying.
And so dropped HBO, just wanted to focus on the Max side, but the reason they're changing it back is during his upfront presentation, he said, quote, no consumer today is saying they want more content, but better content.
And he's right. We already have enough choice. All these services already have so much content on them. The last thing we're asking for is, man, just give me more options to have to scroll through and figure out. And what they wanna focus on going forward is what makes them unique.
And so it's interesting to watch the Max platform change over time. So you might remember at some point last year, I forget when, they started removing Sesame Street episodes from the platform.
And the media went wild. They're like, this is crazy. They shouldn't do that. Sesame Street. Kids love it. WBD came out and said nobody's watching it. They're just not watching it. We're a platform for adults. We just don't see viewership as Sesame Street on our platform.
So why should we continue to pay the licensed content people aren't watching? And they shouldn't. They're running a business. They have to do what's best for the business.
But when that happened, it was crazy just how the media really hit them was like, hey, you don't really understand how popular this content is even though they came out and said it's not popular. And that goes to show just how well all these streaming services know what's being watched and what isn't.
The other thing is their password sharing initiatives. So in Q1, the company did announce that it's rolling out its password sharing initiative, and they said it would take twelve to eighteen months to fully roll it out.
So what they said was, initially, we're rolling it out slowly, and then they said they're gonna get more aggressive - sorry, more assertive over the course of the back half of the year and into 2026.
So for consumers who might be sharing that in a way that works right now without having to pay for another user, that's not gonna work in 2026 at some point.
There's just, there there's no way they're gonna be able to do that. And, again, it's not surprising these folks are all of them are cracking down on password sharing because, again, the focus here is to get to profitability and to get to it as quickly as you can because Wall Street changed over the last couple years how they value these companies.
It used to be just get big fast, lose as much money as you want. We don't care. Just get big fast. And then all of a sudden they realized, oh, wait a minute. This is about free cash flow. This is about profitability.
So that's why all the companies started really cracking down. That's why they all started realizing that they have to focus on the right amount of content to the right user, paying the right amount.
And that's why you also see Max changing to some of its strategy where it's rolling out globally. So their platform's approaching almost 100 markets globally. They've rolled out into Europe, some in Asia. July, they rolled out some additional locations.
So not surprising you're seeing them not just also grow globally, but the other thing you're seeing is their ad supported plan. When it first launched in 2021, it promised no more than four minutes of ads per hour.
Now if you look in their website, it says you can get up to six minutes of ads per hour. Okay. So what are they doing? They're increasing the ad load. You're seeing that from some others as well, including Amazon.
So, again, not too surprising here, but why some people are confused that more ads are being shown and pricing is going up, it's because of the cost of what it takes to operate these services.
So WBD is definitely one to watch, and spinning out the the linear assets, that's really the biggest thing to see what happens to those assets over the call it, the next twelve to eighteen months.
RS: And rounding out the conversation, who would you round it out with? Comcast, DIRECTV, others, neither?
DR: Well yeah. I mean, DIRECTV is doing some cool stuff just with bundling, so that's something to keep an eye on. They're offering a lot of value, a lot of RS and regional sports networks in the bundles. That's great to see.
A couple key things to call out here that, you know, certainly new is the the the big one is just it's a one off, but, you do have, YouTube, which has secured an exclusive NFL game, which is gonna be on YouTube this year, and it's gonna be on YouTube free.
It's not gonna be that you have to pay. You don't have to be a YouTube NFL Sunday ticket member. You don't have to be a member of YouTube TV. It's gonna be completely free. So this is the NFL game from Brazil on September 5, and they have the global rights to the game.
So, you'll get it almost everywhere except it won't be streaming in Canada. Sorry, Canadians. But, the NFL has an existing streaming deal with Bell Canada. So there are a few countries that'll be blacked out in, but, otherwise, it's gonna be global.
It's also gonna be a matchup with the Kansas City Chiefs, which potentially brings more of an audience many times. But it's international. It's in a different time zone. So we'll see how traffic is for that.
Also, per the NFL's policy, it will be available on broadcast TV over the air in each local team's market as it always is. But that's something to keep an eye on because YouTube's never had an event of that size and scale ever, and it's free. So that's a key one to watch.
We did get some new numbers here from Amazon, which almost never gives out any numbers, and they're not great, but it's at least a little something.
They said that their ad tier of Prime Video now reaches more than 130,000,000 US consumers, which is up from 115,000,000 last year. Now that's not how many Prime subscribers they have. That we don't know. But not surprising that the number is higher for the ad tier because they're working on launching in Brazil, India, Japan, Netherlands, New Zealand, other locations around the world.
Another number that's interesting here just for listeners to know is Netflix gave us an updated number at their upfront presentation in May.
Its ad tier members in the US, so US only, spent forty one hours per month on Netflix. That's that's a big number. Forty one hours.
So interestingly, we've seen a few stats here and there.
You also have to throw Paramount (PARA) in there. Now Paramount is working to merge with Skydance, and that transaction, initially, they were hoping to close in the first half of 2025.
It didn't close by June, so we're recording this on July 8. Basically, what kicked in was another ninety day window to get this deal approved because it has to be approved from regulators. So that deal has not gone through. We're still waiting to to see that get approved.
The other thing you have to look at with Paramount is Paramount's still losing money from their streaming service. Now they've narrowed their loss. In Q1, their D2C revenue was just over $2,000,000,000, which was up almost 10% year over year, and it narrowed its streaming loss to $109,000,000.
So that's good. Their loss from the businesses is going down.
Also, let's throw out Fox. Fox is gonna be rolling out a new D2C streaming service called Fox one. It's gonna launch ahead of the college football season. It'll have live streaming and on demand. It'll have access to the full portfolio of Fox brands. You can bundle Fox Nation in with it, but there's no details on pricing.
The difference here is Fox has been very clear that they're not trying to get people to cut the cord.
So if you're a cable TV subscriber, you're gonna get access to Fox one at no cost. You'll have to authenticate, of course. But, otherwise, you'll have no cost. So they're not trying to take people away. They're just, in a very smart way, saying we wanna give you another way to get content that you're already paying for.
And if you're not, we're happy to have you sign up individually. But you're talking about maybe, by my estimates, a couple million people, would sign up for that over the next few years in the US. So it's small.
Jumping into Comcast, we gotta go through Peacock because Peacock is still losing money every quarter.
So Peacock in Q1 they had an EBITDA loss of 215,000,000. Now it's down from 639,000,000 year over year in Q1, but they're still losing money from Peacock in the end of the quarter with 41,000,000 subs.
So that's something that we have to continue to watch. They also announced that they added RSN channels. So for anywhere between $18 to $25 a month in the Bay Area, Boston, California, Philly, you could add some of the local sports league sports channels, sports teams really that you might might wanna watch.
So interesting to see what we're doing there with with RSNs in the market, which are still really a mess. And that's just been terrible as far as RSNs.
And then finally, I would end with cord cutting. Interesting how my industry loves to argue about cord cutting, whether it's taking place. Everyone wants to speculate. I don't know why.
DISH TV and Sling, they lost 380,000 subscribers in Q1. Hulu plus Live TV lost 200,000. Comcast lost 427,000. Charter, 167. Altice, 87. Fubo (FUBO), 200,000, Verizon (VZ), 257,000, and Wow, almost 12,000. So you combine that up. You combine that, you're talking about 1,730,000 total losses in Q1 of pay TV and virtual MVPDs.
That's a big number. So as you can see, we've gone through a lot of data today, a lot of numbers, but these numbers are what's driving the industry. It's not the top headlines that many people and many investors are reading about. It's what's behind those headlines? What are the actual numbers? What does it say in the filings?
RS: Something we like to preach and bring to the show is context, and I think that you have provided that amply today. So really appreciate that.
Am I misremembering that you don't go long these stocks? Is that false?
DR: There are a lot of stocks I cannot buy because I write about, especially infrastructure stocks. I'm trying to think here. So they're all stripped from my portfolios, even managed portfolios. I cannot buy infrastructure stocks because I'm breaking news on my blog about new contracts these infrastructure providers have gotten.
That said, consumer streaming services like Netflix, Apple, etcetera, yes. I can I can own stock in those. Of all the ones we talked about today, the only ones I own stock in actually is only one is Apple.
That's something I've never sold. I've had that. Wow. I'd have to count the number of years, maybe twelve, thirteen years, maybe longer. But other than that, no. I don't have any vested interest in the stock. I don't make money when the price goes up or down.
RS: Can I ask why you're not long Netflix?
DR: Netflix is just something where, frankly, I like investing in things that I'm not necessarily writing about or talking about or discussing every single day, and also - define long and define investing strategy.
You have a lot of folks who are throwing an investing strategy in all these sites, but what they don't know is, well, define the person's lifestyle and risk and what level of risk is acceptable.
And are they trying to make x amount of money because in three years, they wanna take it out and redo their kitchen? Are they saving it up for send their kids to college in fifteen years? Are they saving it for retirement?
I mean, there's all these different ways that you look at investments, and you look at who you wanna invest in long term, short term, and what short and long are to you.
So I've always taken a a very diversified approach in terms of what I invest in across many different industries, and just in terms of what I am looking to get as a return over a period of time, I also invest in private companies. I've invested in a couple of companies in the streaming space that are still private. One got sold. So another one I was a a seed investor on, which is still out there and has since raised a lot of money.
So there's different ways to invest. I would say, would I be long on Netflix? All depends on how long is and what you wanna get out of return. At $1,200 a day, a lot of people would say it's expensive. It is, but compared to what? Because people would also say when it was $600, it was expensive.
Well, that was.
RS: Well, that's what I was most mostly wondering. Like, why not hang on, get in early to Netflix? Like, maybe you did with Apple. I don't know. But and hold on to it for a while. Maybe like you did with Apple, I don't know. But that's kind of where my thought process was going.
DR: You certainly could. Apple, I certainly got in way early twelve, thirteen, fourteen years ago, and it's split multiple times since then.
There was at least a, what, four for one? I don't even remember. But, back in the days, I did own quite a bit of Netflix stock.
Sold it when it was high, and I was happy with the return. I just never got back into it, but that was probably, wow, nine, ten years ago. But, yeah, Netflix is one of those companies where I think you could also say about Nvidia (NVDA).
A lot of the other companies out there. The difference too is depending again on your risk and what you're looking for.
Netflix is also one of those stocks that can go up or down extremely quickly. The peaks and valleys in its charts are are pretty dramatic at times because a lot of shares are being traded. And then how many shares are being shorted on a particular day?
Also, look at the Tyson-Paul fight. It was fascinating how, okay, they had a problem with that one event. And investors the next day were like, man, this stock is gonna get hammered. And it didn't. Why?
Because a lot of investors are like, wow. That's the audience they had, and it was that large. This platform's even more popular than I thought. I better go out and get their stock. So the stock went up over time as a result. So I think it's just the way you're looking at risk versus reward in the market as an investor.
RS: Dan, really appreciate this conversation. If there's anything else you'd care to add to it or if you'd care to just share with listeners where they can find more of your very important work on this space and sector.
DR: Appreciate you having me. The easiest thing they can do is follow me on LinkedIn. So all the information I give out is free. As an analyst in the market, I don't charge for anything. My blog is streammediablog.com is free. My podcast is free every week at danravermpodcast.com. But on LinkedIn, I am tracking about 50 public companies in the market tied to media entertainment streaming infrastructure, reading every single SEC filing.
And I'm recapping in one or two paragraphs what everybody needs to know. What are the important numbers? Time is the most valuable commodity we all have, and most people don't have the time to read all this information.
I've already done it for you. Just follow me on LinkedIn. And I separate facts from opinions. These are the numbers. People wanna argue about something else, fine, but these are the numbers from every single company.
So everything we've talked about today comes from blog posts, from LinkedIn posts I've already put up. But I would say just following me on LinkedIn is the easiest way to get a lot of this information.
Also, many find this crazy, but I've been publishing my cell phone number for twenty years for free. It's right on LinkedIn with my email. It's on my blog. I talk to people all day long, not consumers. It's content owners, broadcasters, sports leagues, CEOs calling of what I'm seeing in the market, but I'm always talking to people and giving out information. That's my business, just giving out information.
