Andrew Ross Sorkin speaks with Netflix founder and Co-CEO Reed Hastings throughout the New York Occasions DealBook Summit within the Appel Room on the Jazz At Lincoln Heart on November 30, 2022 in New York Metropolis.
Michael M. Santiago | Getty Photos
Again by in style demand (OK, advantageous, I simply wished to do that once more), I requested a bunch of previous and current media and leisure executives to provide me one vital and/or stunning trade prediction for 2023.
I did this final yr, too, and some got here true, or a minimum of partially true. Bob Iger did, the truth is, return as Disney’s chief govt. Vice tried to promote itself in items (and collectively). Roku made a bid for a stake in Lionsgate’s Starz (not the studio) however walked away with out a deal.
The remaining? Not so nice. However we’ll strive once more this yr, and in honor of the 12 days of Christmas, I am bumping the variety of predictions from 10 to 12.
Govt 1: Netflix will merge with one other firm
This one was truly talked about twice — one govt predicted Netflix would merge with Paramount World. The opposite guessed Disney, as Iger’s signature transfer upon returning to CEO.
Disney looks as if a protracted shot given current regulatory pushback on Penguin Random Home’s try to purchase Paramount’s Simon & Schuster and Microsoft‘s $69 billion acquisition of Activision Blizzard. Disney has a market valuation of about $165 billion. Netflix’s market capitalization is about $130 billion. That may make a merger one of many largest offers in historical past and would create a streaming large that dominate the trade — and nearly actually ring all types of antitrust alarm bells.
Shari Redstone’s Paramount World is way smaller, with a market valuation of lower than $12 billion. Netflix has sniffed round attempting shopping for Paramount Photos earlier than. Netflix co-CEO Ted Sarandos has lengthy coveted the bodily Paramount lot, in accordance with individuals conversant in the matter.
Netflix co-CEO Reed Hastings would seemingly need nothing to do with Paramount World‘s cable community enterprise, given his lengthy disdain for the legacy pay TV enterprise. However maybe non-public fairness would take the linear cable enterprise off his palms, giving Netflix the film studio and CBS, which Hastings and Sarandos might use as an advertising-supported reach-builder for a few of Netflix’s largest hits. Whether or not Netflix would wish to tackle paying billions for reside sports activities rights is one other story.
A take care of one other firm would additionally give Netflix an opportunity to write down off little watched content material, a tax advantage of which Warner Bros. Discovery is presently taking full benefit.
Govt 2: An ex-Disney exec returns, along with his firm
Bob Iger handed over Kevin Mayer for the Disney CEO position in 2020, prompting Mayer to bolt the corporate and take the CEO job with TikTok. On the time, the selection appeared complicated. Disney’s future seemed to be Disney+ and streaming video, not its decades-old theme park enterprise.
Iger has a chance to get a second likelihood with Mayer if he acquired Candle Media and named Mayer his successor. He might additionally get one other likelihood with Mayer’s co-founder of Candle Media, Tom Staggs, who additionally left Disney when it turned clear he wasn’t going to be CEO.
Kevin Mayer, co-founder and co-chief govt officer of Candle Media, chairman of DAZN Group, speaks on the Milken Institute Asia Summit in Singapore, on Thursday, Sept. 29, 2022.
Bryan van der Beek | Bloomberg | Getty Photos
Nonetheless, Iger stated throughout a Disney city corridor final month he is not centered on M&A in the meanwhile. Candle Media has acquired mental property belongings together with Reese Witherspoon’s Howdy Sunshine manufacturing firm and Moonbug, which owns the animated children collection “CoComelon.”
Iger’s calling card as CEO is buying IP, together with Pixar, LucasFilm and Marvel. “CoComelon” might match properly inside Disney+.
However selecting Mayer or Staggs would additionally indicate Iger made an error in judgment the primary time.
Govt 3: Iger extends his contract
There’s been plenty of hypothesis over who Iger will select as his successor. Historical past suggests he has a tough time leaving the position of Disney CEO.
So maybe the obvious reply as to who he’ll choose is: nobody (a minimum of, not but).
Robert Iger speaks throughout the Sandy Hook Promise Profit in New York Metropolis, U.S., December 6, 2022.
David Dee Delgado | Reuters
Christine M. McCarthy, Senior Govt Vice President and Chief Monetary Officer The Walt Disney Firm.
Supply: The Walt Disney Firm
David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives on the Solar Valley Resort for the Allen & Firm Solar Valley Convention on July 05, 2022 in Solar Valley, Idaho.
Kevin Dietsch | Getty Photos
Warner Bros. Discovery CEO David Zaslav has spent the previous yr reducing prices to slim down the merged WarnerMedia-Discovery and repair the corporate’s practically $50 billion in debt.
Zaslav’s price reducing strikes have not but satisfied traders he is heading in the right direction to returning the corporate to glory. Warner Bros. Discovery shares have fallen about 60% for the reason that April merger.
Present traders will lose endurance with Zaslav and the board, and can demand modifications, stated one govt. It is attainable an activist will take a stake within the firm, but it surely’s much more seemingly long-time shareholders will lose confidence in his technique when it does not produce a notable valuation bump in 2023, the chief predicted.
Govt 7: The price of sports activities rights will peak
Dwell sports activities rights have been the lifeblood of the legacy pay TV trade for many years. Nationwide Soccer League video games proceed to dominate scores. School soccer and NBA playoff video games steadily draw huge reside audiences in comparison with nearly all the pieces else on cable all yr.
However media corporations are actually centered on constructing their streaming companies as replacements for conventional pay TV. Customers purchase these providers a la carte, which means non-sports followers do not have to purchase providers that embrace sports activities. Restricted audiences, mixed with a legacy media trade intent on specializing in income and value reducing, might finish the development of reside sports activities commanding large rights will increase.
The NBA will nonetheless command an enormous improve as legacy pay TV continues to exist — primarily supported by sports activities. These rights will seemingly be renewed in 2023. However in 5 to seven years, it is attainable conventional TV will probably be completely eradicated.
That may result in an surroundings the place there are fewer bidders for sports activities rights, dropping the worth for sports activities throughout the board, stated this govt. Maybe the NFL stays an outlier because of its reputation, stated the chief. However each different sport’s prospects look bleak, stated the particular person.
Govt 8: Paramount World will promote, probably for elements
That is our first repeat from final yr.
“I really like Shari [Redstone], however ViacomCBS will not be lengthy for this world because it stands right this moment,” stated a media govt final yr.
Drew Angerer | Getty Photos
The manager was proper — kind of. ViacomCBS modified its identify in 2022 to Paramount World.
However Shari Redstone, who controls the corporate’s voting shares, did not promote. Maybe 2023 will persuade her to discover a purchaser — or patrons. The corporate has completely different belongings that could possibly be helpful to quite a lot of completely different corporations. As talked about earlier, Netflix might need Paramount Photos. An organization like Nexstar might need Paramount World‘s owned and operated native stations, CBS could possibly be an excellent match for Warner Bros. Discovery, and personal fairness might wish to wind down the cable networks, which nonetheless generate money.
There’s additionally the likelihood Comcast CEO Brian Roberts and Redstone attain a deal to merge, however that transaction can be messy.
Govt 9: A giant cable operator will shutter its video enterprise
Again in 2013, then-Cablevision CEO James Dolan predicted “there might come a day” when the cable firm stopped providing video service, focusing as an alternative of constructing out and upgrading broadband infrastructure.
Earlier this yr, cable operator Cable One introduced it will cease providing cable TV for accommodations and multidwelling items.
However we have but to see a serious cable operator finish the enterprise of residential cable TV altogether. That is coming subsequent yr, stated one govt, who stated cable operators are being pressed for bandwidth to assist the expansion in streaming video.
Shutting down the declining video enterprise, which generates comparatively low income, is a solution to acquire community capability. Wall Road may cheer the transfer as capital expenditures will go down and total margins will enhance.
If a cable operator’s inventory leapt greater with such a transfer, it might speed up different pay-TV suppliers to make comparable choices, additional accelerating the decline of legacy cable TV.
Govt 10: Google’s YouTube will purchase the NFL’s ‘Sunday Ticket’ rights
Nationwide Soccer League commissioner Roger Goodell advised CNBC in July he deliberate to announce a “Sunday Ticket” rights winner by the autumn.
Effectively, the final day of autumn is Dec. 21, and the league nonetheless hasn’t introduced who will personal “Sunday Ticket,” the league’s out-of-market Sunday afternoon package deal, after the 2022-23 season.
NFL Commissioner Roger Goodell throughout the NFL Soccer match between the Miami Dolphins and Indianapolis Colts on October third, 2021 at Onerous Rock Stadium in Miami, FL.
Andrew Bershaw | Icon Sportswire | Getty Photos
Apple and Amazon have been the favorites, with Alphabet’s YouTube TV approaching robust in current months. Apple has wished extra flexibility with easy methods to distribute the historic package deal, CNBC reported in October, and has pushed again towards the league’s excessive asking worth — greater than $2.5 billion per yr. Puck reported Friday Apple had dropped out of the bidding.
Amazon already owns the league’s “Thursday Night time Soccer” package deal because it appears to increase Prime’s attain. Amazon has been interested by “Sunday Ticket” from the start of rights negotiations, however now its founder, Jeff Bezos, additionally might wish to personal the NFL’s Washington Commanders.
Alphabet‘s Google offers the league fairly a little bit of what it desires: a know-how proprietor with an enormous stability sheet and international attain, a big advertising platform in YouTube, and the flexibility to assist bundled legacy TV (the place a lot of the league’s video games nonetheless air) by pairing “Sunday Ticket” with YouTube TV.
“Sunday Ticket” and YouTube TV — a digital bundle of broadcast and cable networks — is just like what the NFL has performed with DirecTV.
Google additionally represents a brand new companion for the league — a plus for the NFL when the following rights renewals are up. The extra potential bidders, the higher. The rationale for Google over Amazon is sensible. However will it make cents? (I am so sorry).
Govt 11: Apple will ban TikTok from the App Retailer
Sen. Marco Rubio, R-Fla., launched bipartisan laws final week to ban TikTok from working in the US. The Senate additionally voted unanimously to ban TikTok on authorities telephones and units.
The priority stems from safety dangers of constructing U.S. information out there to the Chinese language authorities. TikTok’s proprietor, ByteDance, is a Chinese language-based firm.
TikTok was practically banned throughout the Trump administration, however that combat ultimately misplaced steam and disappeared.
This govt predicted Apple would ban future TikTok downloads from its App Retailer given the privateness considerations. That would not assist Apple-Chinese language relations, that are already exhibiting strains.
Govt 12: Media will present stunning recession resiliency
The primary a part of the prediction right here is the economic system will dip right into a recession, which is not a foregone conclusion.
But when it does, the media trade will truly profit from a number of accelerated traits, this govt stated.
First, cable wire reducing will speed up, driving extra streaming subscriptions and allaying considerations that streaming development has plateaued.
Second, previous recessions have proved that buyers do not cease paying for comparatively low-priced leisure throughout financial downturns, stated the chief. This could possibly be excellent news for an trade that now has extra high-quality, low-priced choices than ever earlier than.
The promoting market will even bounce again sooner than anticipated as manufacturers see that individuals are supplanting higher-priced leisure with lower-cost at-home choices, stated the particular person.
—CNBC’s Lillian Rizzo contributed to this report.
Disclosure: Comcast owns NBCUniversal, the father or mother firm of CNBC.
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