Major competitive streaming services now face a turning point where they must cooperate to bundle and market their offerings or risk being preempted by tech giants, Warner Bros. Discovery CEO David Zaslav declared Thursday during a MoffettNathanson conference on technology, media and telecom.
“If we don’t do it to ourselves, I think it will be done to us,” he said. “It will be Amazon who does it, or Apple who does it, or Roku who does it. They’ve already started.”
Consumers’ frustration about content’s dispersal across platforms is a core problem, Zaslav said.
“One of the challenges in the business right now is… the difficulty for a consumer in aggregating the content that they love,” he said. “Entertainment, nonfiction content, sports content, everyone's Googling where is it, how do I get it. It's not rational and… it's not a good consumer experience.”
“Imagine you were back 30 years ago and you wanted to watch CBS and you had to download and buy something,” he elaborated. “And then you want them to watch ABC, had to download and buy something…”
The model is also unsustainable because it is not profitable for most of the streaming services. “There are a lot of people in this business that are just losing too much money,” he said. The current streaming scenario is a “war… a very disruptive market. A lot of what’s going on makes no sense. Big overspend, [too-low] pricing of products."
“So a lot of that is going to change, I believe, over the next couple of years,” he added. “And we're going to try and push toward that change, because we have a lot of great content” that is valuable “artillery.”
Traditional M&As probably aren’t the answer, because navigating the regulatory process to emerge with a new set of assets can take years -- and the industry is changing so quickly that no one knows what it will look like at the end of that process, Zaslav said.
“But there should be a consolidation, and I think it's more likely to happen in the repackaging and marketing of products together,” he said. “That's what makes sense. We have to, as an industry, reach that point. For me, it seems very clear that if we were to package this great product that we have with others, if we were to wake up tomorrow and in each market, if we're the Number 1, 2 or 3 product, if we marketed two or three for a specific price, it would be great for consumers. It would probably reduce churn. We'd both be marketing one product. And it would provide a meaningful consumer experience, not just on price but… I now have a bigger [and broader] package of content.
“The content owners in markets or more broadly across regions could [take such a cooperative approach],” he added. “And whether we do it this year or in three years, I think eventually, something like that will happen.”
Zaslav didn’t address the numerous, tricky challenges that would have to be overcome to make such cooperation possible -- including profit and cost-sharing terms, companies’ valid concerns about protecting data and systems that have taken years and huge investments to build, technical compatibility issues, and how partners would manage to avoid the divisive, consumer relationship-damaging carriage negotiation feuds that have become the norm with the pay-TV bundles system.
But it’s hard to disagree with his basic premise. If streaming media companies don’t find a way to provide consumers with more workable solutions soon, they will indeed be clobbered by deep-pocketed players like Apple that recognized the low churn and high profitability of service bundles years ago, have their models in place, and are now expanding those models at a rapid clip.