Andrew Ross Sorkin speaks with Netflix founder and Co-CEO Reed Hastings in the course of the New York Times DealBook Summit within the Appel Room on the Jazz At Lincoln Center on November 30, 2022 in New York City.
Michael M. Santiago | Getty Images
Back by widespread demand (OK, high-quality, I simply needed to do that once more), I requested a bunch of previous and current media and leisure executives to present me one important and/or shocking trade prediction for 2023.
I did this final yr, too, and some got here true, or no less than partially true. Bob Iger did, in reality, 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 relaxation? Not so nice. But we’ll strive once more this yr, and in honor of the 12 days of Christmas, I’m bumping the variety of predictions from 10 to 12.
Executive 1: Netflix will merge with one other firm
Disney looks as if a protracted shot given latest regulatory pushback on Penguin Random House’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 would make a merger one of many largest offers in historical past and would create a streaming big that dominate the trade — and nearly definitely ring all kinds of antitrust alarm bells.
Shari Redstone’s Paramount Global is way smaller, with a market valuation of lower than $12 billion. Netflix has sniffed round making an attempt shopping for Paramount Pictures earlier than. Netflix co-CEO Ted Sarandos has lengthy coveted the bodily Paramount lot, based on folks aware of the matter.
Netflix co-CEO Reed Hastings would probably need nothing to do with Paramount Global‘s cable community business, given his lengthy disdain for the legacy pay TV business. But maybe personal fairness would take the linear cable business off his palms, giving Netflix the film studio and CBS, which Hastings and Sarandos may use as an advertising-supported reach-builder for a few of Netflix’s greatest hits. Whether Netflix would need to tackle paying billions for dwell sports activities rights is one other story.
A cope with one other firm would additionally give Netflix an opportunity to put in writing off little watched content material, a tax good thing about which Warner Bros. Discovery is at the moment taking full benefit.
Executive 2: An ex-Disney exec returns, along with his firm
Bob Iger handed over Kevin Mayer for the Disney CEO function in 2020, prompting Mayer to bolt the corporate and take the CEO job with TikTok. At the time, the selection appeared complicated. Disney’s future seemed to be Disney+ and streaming video, not its decades-old theme park business.
Iger has a possibility to get a second likelihood with Mayer if he acquired Candle Media and named Mayer his successor. He may additionally get one other likelihood with Mayer’s co-founder of Candle Media, Tom Staggs, who additionally left Disney when it grew to become 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 Images
Still, 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 property together with Reese Witherspoon’s Hello 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” may match nicely inside Disney+.
But selecting Mayer or Staggs would additionally indicate Iger made an error in judgment the primary time.
Executive 3: Iger extends his contract
There’s been plenty of hypothesis over who Iger will select as his successor. History suggests he has a tough time leaving the function of Disney CEO.
So maybe the obvious reply as to who he’ll decide is: nobody (no less than, not but).
Robert Iger speaks in the course of the Sandy Hook Promise Benefit in New York City, U.S., December 6, 2022.
David Dee Delgado | Reuters
Christine M. McCarthy, Senior Executive Vice President and Chief Financial Officer The Walt Disney Company.
Source: The Walt Disney Company
David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives on the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 05, 2022 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images
Warner Bros. Discovery CEO David Zaslav has spent the previous yr slicing prices to slim down the merged WarnerMedia-Discovery and repair the corporate’s practically $50 billion in debt.
Zaslav’s price slicing 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.
Existing traders will lose persistence with Zaslav and the board, and can demand adjustments, stated one govt. It’s doable an activist will take a stake within the firm, but it surely’s much more probably long-time shareholders will lose confidence in his technique when it does not produce a notable valuation bump in 2023, the chief predicted.
Executive 7: The price of sports activities rights will peak
Live sports activities rights have been the lifeblood of the legacy pay TV trade for many years. National Football League video games proceed to dominate rankings. College soccer and NBA playoff video games continuously draw monumental dwell audiences in comparison with nearly every part else on cable all yr.
But media firms are actually centered on constructing their streaming companies as replacements for conventional pay TV. Consumers purchase these providers a la carte, which means non-sports followers do not have to purchase providers that embrace sports activities. Limited audiences, mixed with a legacy media trade intent on specializing in income and price slicing, may finish the development of dwell 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. Those rights will probably be renewed in 2023. But in 5 to seven years, it is doable conventional TV will probably be completely eradicated.
That will result in an atmosphere the place there are fewer bidders for sports activities rights, dropping the worth for sports activities throughout the board, stated this govt. Perhaps the NFL stays an outlier on account of its recognition, stated the chief. But each different sport’s prospects look bleak, stated the individual.
Executive 8: Paramount Global will promote, probably for components
This is our first repeat from final yr.
“I love Shari [Redstone], but ViacomCBS is not long for this world as it stands today,” stated a media govt final yr.
Drew Angerer | Getty Images
The govt was proper — form of. ViacomCBS modified its identify in 2022 to Paramount Global.
But Shari Redstone, who controls the corporate’s voting shares, did not promote. Perhaps 2023 will persuade her to discover a purchaser — or patrons. The firm has totally different property that could possibly be helpful to a wide range of totally different firms. As talked about earlier, Netflix may need Paramount Pictures. An organization like Nexstar may need Paramount Global‘s owned and operated native stations, CBS could possibly be match for Warner Bros. Discovery, and personal fairness could need to wind down the cable networks, which nonetheless generate money.
Executive 9: An enormous cable operator will shutter its video business
Back in 2013, then-Cablevision CEO James Dolan predicted “there could 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 would cease providing cable TV for motels and multidwelling models.
But we have but to see a significant cable operator finish the business of residential cable TV altogether. That’s coming subsequent yr, stated one govt, who stated cable operators are being pressed for bandwidth to help the expansion in streaming video.
Shutting down the declining video business, which generates comparatively low income, is a approach to acquire community capability. Wall Street may additionally cheer the transfer as capital expenditures will go down and total margins will enhance.
If a cable operator’s inventory leapt increased with such a transfer, it may speed up different pay-TV suppliers to make related choices, additional accelerating the decline of legacy cable TV.
Executive 10: Google’s YouTube will purchase the NFL’s ‘Sunday Ticket’ rights
National Football League commissioner Roger Goodell informed CNBC in July he deliberate to announce a “Sunday Ticket” rights winner by the autumn.
Well, 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 in the course of the NFL Football match between the Miami Dolphins and Indianapolis Colts on October third, 2021 at Hard Rock Stadium in Miami, FL.
Andrew Bershaw | Icon Sportswire | Getty Images
Apple and Amazon have been the favorites, with Alphabet’s YouTube TV approaching robust in latest months. Apple has needed extra flexibility with the way 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 Football” package deal because it appears to increase Prime’s attain. Amazon has been serious about “Sunday Ticket” from the start of rights negotiations, however now its founder, Jeff Bezos, additionally could need to personal the NFL’s Washington Commanders.
Alphabet‘s Google offers the league fairly a little bit of what it needs: a know-how proprietor with an enormous stability sheet and world attain, a big advertising platform in YouTube, and the power to help bundled legacy TV (the place many 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 accomplished with DirecTV.
Google additionally represents a brand new associate 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 smart. But will it make cents? (I’m so sorry).
Executive 11: Apple will ban TikTok from the App Store
Sen. Marco Rubio, R-Fla., launched bipartisan laws final week to ban TikTok from working within the United States. The Senate additionally voted unanimously to ban TikTok on authorities telephones and units.
The concern stems from safety dangers of constructing U.S. information obtainable to the Chinese authorities. TikTok’s proprietor, ByteDance, is a Chinese-based firm.
TikTok was practically banned in the course of the Trump administration, however that struggle ultimately misplaced steam and disappeared.
This govt predicted Apple would ban future TikTok downloads from its App Store given the privateness issues. That would not assist Apple-Chinese relations, that are already displaying strains.
Executive 12: Media will present shocking recession resiliency
The first a part of the prediction right here is the economic system will dip right into a recession, which is not a foregone conclusion.
But if it does, the media trade will truly profit from a number of accelerated developments, this govt stated.
First, cable twine slicing will speed up, driving extra streaming subscriptions and allaying issues that streaming progress 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 good 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 persons are supplanting higher-priced leisure with lower-cost at-home choices, stated the individual.
—CNBC’s Lillian Rizzo contributed to this report.
Disclosure: Comcast owns NBCUniversal, the dad or mum firm of CNBC.
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