Andrew Ross Sorkin speaks with Netflix founder and Co-CEO Reed Hastings in the course of the Latest York Times DealBook Summit within the Appel Room on the Jazz At Lincoln Center on November 30, 2022 in Latest York City.
Michael M. Santiago | Getty Images
Back by popular demand (OK, fantastic, I just wanted to do that again), I asked a bunch of past and present media and entertainment executives to offer me one significant and/or surprising industry prediction for 2023.
I did this last yr, too, and a number of got here true, or at the least partially true. Bob Iger did, in truth, return as Disney’s chief executive. Vice tried to sell itself in pieces (and together). Roku made a bid for a stake in Lionsgate’s Starz (not the studio) but walked away and not using a deal.
The remaining? Not so great. But we’ll try again 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 company
This one was actually mentioned twice — one executive predicted Netflix would merge with Paramount Global. The opposite guessed Disney, as Iger’s signature move upon returning to CEO.
Disney looks like a protracted shot given recent regulatory pushback on Penguin Random House’s try to buy 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 might make a merger one in every of the biggest deals in history and would create a streaming giant that dominate the industry — and almost actually ring all varieties of antitrust alarm bells.
Shari Redstone’s Paramount Global is far smaller, with a market valuation of lower than $12 billion. Netflix has sniffed around trying buying Paramount Pictures before. Netflix co-CEO Ted Sarandos has long coveted the physical Paramount lot, in line with people accustomed to the matter.
Netflix co-CEO Reed Hastings would likely want nothing to do with Paramount Global‘s cable network business, given his long disdain for the legacy pay TV business. But perhaps private equity would take the linear cable business off his hands, giving Netflix the movie studio and CBS, which Hastings and Sarandos could use as an advertising-supported reach-builder for a few of Netflix’s biggest hits. Whether Netflix would wish to tackle paying billions for live sports rights is one other story.
A cope with one other company would also give Netflix a probability to jot down off little watched content, a tax advantage of which Warner Bros. Discovery is currently taking full advantage.
Executive 2: An ex-Disney exec returns, together with his company
Bob Iger omitted Kevin Mayer for the Disney CEO role in 2020, prompting Mayer to bolt the corporate and take the CEO job with TikTok. On the time, the alternative seemed confusing. Disney’s future gave the impression to be Disney+ and streaming video, not its decades-old theme park business.
Iger has a chance to get a second probability with Mayer if he acquired Candle Media and named Mayer his successor. He could also get one other probability with Mayer’s co-founder of Candle Media, Tom Staggs, who also left Disney when it became clear he wasn’t going to be CEO.
Kevin Mayer, co-founder and co-chief executive 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 said during a Disney town hall last month he is not focused on M&A in the interim. Candle Media has acquired mental property assets including Reese Witherspoon’s Hello Sunshine production company and Moonbug, which owns the animated kids series “CoComelon.”
Iger’s calling card as CEO is acquiring IP, including Pixar, LucasFilm and Marvel. “CoComelon” could fit well inside Disney+.
But selecting Mayer or Staggs would also imply Iger made an error in judgment the primary time.
Executive 3: Iger extends his contract
There’s been a number of speculation over who Iger will select as his successor. History suggests he has a tough time leaving the role of Disney CEO.
So perhaps essentially the most obvious answer as to who he’ll pick is: nobody (at the least, not yet).
Robert Iger speaks in the course of the Sandy Hook Promise Profit in Latest York City, U.S., December 6, 2022.Â
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 past yr cutting costs to slim down the merged WarnerMedia-Discovery and repair the corporate’s nearly $50 billion in debt.
Zaslav’s cost cutting moves have not yet convinced investors he’s on the proper track to returning the corporate to glory. Warner Bros. Discovery shares have fallen about 60% for the reason that April merger.
Existing investors will lose patience with Zaslav and the board, and can demand changes, said one executive. It’s possible an activist will take a stake in the corporate, nevertheless it’s much more likely long-time shareholders will lose confidence in his strategy when it doesn’t produce a notable valuation bump in 2023, the manager predicted.
Executive 6: The associated fee of sports rights will peak
Live sports rights have been the lifeblood of the legacy pay TV industry for a long time. National Football League games proceed to dominate rankings. College football and NBA playoff games often draw enormous live audiences in comparison with almost all the pieces else on cable all yr.
But media corporations at the moment are focused on constructing their streaming businesses as replacements for traditional pay TV. Consumers buy these services a la carte, meaning non-sports fans do not have to purchase services that include sports. Limited audiences, combined with a legacy media industry intent on specializing in profits and price cutting, could end the trend of live sports commanding big rights increases.
The NBA will still command an enormous increase as legacy pay TV continues to exist — primarily supported by sports. Those rights will likely be renewed in 2023. But in five to seven years, it’s possible traditional TV will probably be totally eliminated.
That may result in an environment where there are fewer bidders for sports rights, dropping the worth for sports across the board, said this executive. Perhaps the NFL stays an outlier as a consequence of its popularity, said the manager. But every other sport’s prospects look bleak, said the person.
Executive 8: Paramount Global will sell, possibly for parts
That is our first repeat from last yr.
“I really like Shari [Redstone], but ViacomCBS is just not long for this world because it stands today,” said a media executive last yr.
Shari Redstone
Drew Angerer | Getty Images
The manager was right — kind of. ViacomCBS modified its name in 2022 to Paramount Global.
But Shari Redstone, who controls the corporate’s voting shares, didn’t sell. Perhaps 2023 will persuade her to search out a buyer — or buyers. The corporate has different assets that might be useful to quite a lot of different corporations. As mentioned earlier, Netflix could want Paramount Pictures. An organization like Nexstar could want Paramount Global‘s owned and operated local stations, CBS might be a very good fit for Warner Bros. Discovery, and personal equity will want to wind down the cable networks, which still generate money.
There’s also the likelihood Comcast CEO Brian Roberts and Redstone reach a deal to merge, but that transaction could be messy.
Executive 9: A giant cable operator will shutter its video business
Back in 2013, then-Cablevision CEO James Dolan predicted “there could come a day” when the cable company stopped offering video service, focusing as a substitute of constructing out and upgrading broadband infrastructure.
Earlier this yr, cable operator Cable One announced it would stop offering cable TV for hotels and multidwelling units.
But we have yet to see a serious cable operator end the business of residential cable TV altogether. That is coming next yr, said one executive, who said cable operators are being pressed for bandwidth to support the expansion in streaming video.
Shutting down the declining video business, which generates relatively low profits, is a strategy to gain network capability. Wall Street can also cheer the move as capital expenditures will go down and overall margins will improve.
If a cable operator’s stock leapt higher with such a move, it could speed up other pay-TV providers to make similar decisions, further accelerating the decline of legacy cable TV.
Executive 10: Google’s YouTube will buy the NFL’s ‘Sunday Ticket’ rights
National Football League commissioner Roger Goodell told CNBC in July he planned to announce a “Sunday Ticket” rights winner by the autumn.
Well, the last day of autumn is Dec. 21, and the league still hasn’t announced who will own “Sunday Ticket,” the league’s out-of-market Sunday afternoon package, 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 coming on strong in recent months. Apple has wanted more flexibility with how one can distribute the historic package, CNBC reported in October, and has pushed back against the league’s high asking price — 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 because it looks to increase Prime’s reach. Amazon has been concerned about “Sunday Ticket” from the start of rights negotiations, but now its founder, Jeff Bezos, also will want to own the NFL’s Washington Commanders.
Alphabet‘s Google gives the league quite a little bit of what it wants: a technology owner with an enormous balance sheet and global reach, a big marketing platform in YouTube, and the flexibility to support bundled legacy TV (where many of the league’s games still air) by pairing “Sunday Ticket” with YouTube TV.
“Sunday Ticket” and YouTube TV — a digital bundle of broadcast and cable networks — is comparable to what the NFL has done with DirecTV.
Google also represents a recent partner for the league — a plus for the NFL when the subsequent rights renewals are up. The more 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., introduced bipartisan laws last week to ban TikTok from operating in the US. The Senate also voted unanimously to ban TikTok on government phones and devices.
The priority stems from security risks of creating U.S. data available to the Chinese government. TikTok’s owner, ByteDance, is a Chinese-based company.
TikTok was nearly banned in the course of the Trump administration, but that fight eventually lost steam and disappeared.
This executive predicted Apple would ban future TikTok downloads from its App Store given the privacy concerns. That would not help Apple-Chinese relations, that are already showing strains.
Executive 12: Media will show surprising recession resiliency
The primary a part of the prediction here is the economy will dip right into a recession, which is not a foregone conclusion.
But when it does, the media industry will actually profit from several accelerated trends, this executive said.
First, cable cord cutting will speed up, driving more streaming subscriptions and allaying concerns that streaming growth has plateaued.
Second, past recessions have proved that customers don’t stop paying for relatively low-priced entertainment during economic downturns, said the manager. This might be excellent news for an industry that now has more high-quality, low-priced options than ever before.
The promoting market may also bounce back faster than anticipated as brands see that individuals are supplanting higher-priced entertainment with lower-cost at-home options, said the person.
—CNBC’s Lillian Rizzo contributed to this report.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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