Last week I shared my four key lessons for the streaming industry from 2022—the departure from the traditional calendar, the crushing impact of debt, the primacy of ARPU, and the potency of international markets. This week, I’m looking forward to 2023 and beyond. It’s always fun to make informed predictions, but it’s especially interesting as Hollywood struggles to rightsize and recalibrate after an upside-down year in the markets.
One note: I’m not going to guess which company will buy another. M&A activity will certainly pick up as increasing bite-sized market caps become appetizing for larger competitors with cash on hand, Lina Khan be damned. That hardly counts as a prediction—it’s a certainty. With that out of the way…
1. Prepare for Non-Traditional Bundles
There are all kinds of ways to bundle streaming services: supplementary scale bundles, like the Disney Bundle, which leverages Disney+, Hulu and ESPN+ to increase the overall size of its footprint; ecosystem bundles, like Apple One and Amazon Prime Video, which keep people subscribed to a broader lifestyle offering within a platform; and bundles that cross-pollinate, like old school promotions, such as Paramount+ partnering with Walmart. (Bob Iger launched Disney+ through a similar numbers-boosting deal with Verizon.) In 2023, expect to see much more diverse and creative bundling outside of traditional video services.
Streaming companies that are encountering higher churn and saturation rates in core markets, increased competition, and inflation, will see subscriber growth slow and engagement splinter. The fix isn’t in bundling streamers, it’s in finding an audience elsewhere. Sixty-four percent of audiences want a bundle of some sort, according to Nielsen.
This isn’t new. Credit card companies and telcos partner with various entertainment, fitness, and gaming companies. Look at Hulu and Spotify, or Apple TV+ and PlayStation. The latter is a useful case in point. Audience profiling demonstrates strong overlap among PlayStation players who like Apple products, as well as a higher affinity to drama series than comedies. Bringing Apple TV+ to PlayStation breaks down the barrier to entry, like pricing, and expands the potential audience base. Finding overlap between streaming customers and those who dedicate their time and attention to a non-video platform can more effectively create a daily lifestyle package.
2. Catalogs Will Continue to Offload
HBO Max dropped Westworld and The Nevers, but everyone (including yours truly) pointed to the fact that these shows weren’t drawing massive crowds. Moving forward, however, it won’t just be the less buzzy series or the untouched films that get offloaded. Nor will it just be HBO Max, which is a unit of the debt-strapped Warner Bros. Discovery, a company increasingly in search of cost savings.
At its core, content removal is a consequence of a few things: not wanting to pay backend fees, taking advantage of tax write-downs, and “freeing up” room on the digital carousel shelf. It’s also about to become a new monetization tactic as audiences use tiered entertainment options. Free, ad-supported platforms like Pluto TV and Freevee asserted themselves in 2022. Paramount’s Pluto TV made up 1 percent of all viewing in October, according to Nielsen. Viewers were particularly interested in watching older shows, as Pluto TV chief Tom Ryan recently told Matt Belloni.
Take a series like Ozark. It was a huge hit for Netflix, but in a year or two. people will not be signing up to watch Ozark, which has since concluded in sinister fashion. The question now is how does Netflix make additional revenue from the show? It’s probably, at least in part, by finding a new partner for whom Ozark is exceptionally more valuable. Yes, reruns have come to streaming. Netflix helped build its business through premium linear reruns. Now we’ve reached the point where less flush streamers will happily pay to air reruns of other streamers’ content.
Netflix doesn’t even have to offload the series exclusively to Pluto TV or Freevee. On the contrary, it could simply license out the first few seasons to free, ad-supported networks without giving up its own SVOD rights. Indeed, there are multiple options available to squeeze more value out of existing libraries. This is also where audience insights for original titles become so crucial: In a post-correction world, success may be defined less by having the best possible content library, but rather the ability to leverage existing assets to maximize cash flow without hurting the subscription business.
3. Streamers Will Push Hardware to Reduce Churn
Apple, Amazon, and Google all have subscription products that they’re trying to grow in the form of Apple One, Prime, and YouTubeTV, respectively. All three companies also sell hardware products that help to lock in their customers to their media ecosystems: Apple TV, Amazon Fire Stick, and Google TV with Chromecast. These are not minor revenue lines: Apple, of course, sells the most expensive streaming device, and also the most niche. Amazon Fire TV sticks make up a significant portion of streaming hardware globally, alongside Roku. Google has not only Chromecast but also Android TVs that it sells in partnership with television makers like TCL.
Yes, the Big 3 are also among the largest companies in the world, and I expect that this is the year they’ll start acting like it in streaming—not by buying everyone’s shows (as many in town would like) but rather by leveraging their physical assets, distribution, and platforms.
Owning a hardware platform isn’t just about product sales, obviously. More importantly, Apple, Google, and Amazon (and Roku, for what it’s worth, at least until someone buys it) are all fighting to own the main homepage experience that greets users when they first fire up their TV, and that serves as the central hub from which they connect to all their streaming services. Hardware, after all, is relatively cheap; adoption and competition is expensive, especially when original programming or expensive rights (like NFL Sunday Ticket) are included. Providing an upscale hardware gateway is the perfect way to control that experience, gather data, and push original featured programming.
While companies like Netflix and Warner Bros. Discovery don’t want to play the hardware game, or don’t have the capital to compete there, they do want to reach the most viewers possible. That includes working with the hardware companies—getting HBO Max or Netflix buttons on remote controls, for example, which reduces friction for consumers and keeps them from clicking into other apps. Meanwhile, Apple, Google, and Amazon will continue to take a cut of subscription revenue whenever users sign up for new services on their platforms, building a moat around their peers in the process.
4. The Rise of the Middleman
If you asked me which companies were most interesting in 2022, my answer wouldn’t be Netflix or Disney. It’s Candle Media and The Chernin Group. One of the most-watched TV series on Netflix every single week, after all, is Cocomelon, created by Moonbug, owned by Candle, the Kevin Mayer and Tom Staggs Blackstone roll-up machine.
Cocomelon isn’t just a Netflix hit. The channel has racked up more than 146 billion views on YouTube with just over 830 videos—about 175 million views per video. With 150 million subscribers, it is one of the biggest channels in the world, and it collects huge advertising revenue.
Staggs and Mayer, former Iger acolytes, recognized that their old boss’ strategy remains as true as ever: in a world of plenty, true quality is scarce; even as spending slows, the market demand for high-end content and, in particular, in-demand projects from the most in-demand talent or within certain audience groups, will still drive strong negotiations. (That said, plenty of people around Hollywood think that Mayer overpaid for a number of the toys in his war chest, and that some of those deals were marked to 2021 prices, but time will tell.)
By buying niche production companies and selling those projects to the bigger players, companies like Candle and TCG can focus on creating for those differentiated audiences. This is particularly true as global communities become top of mind for streaming companies, not just an afterthought. Middlemen like Candle can then deliver the exact audiences that massive platforms like Netflix and Disney desperately want to capture.
Not every middleman company will have Blackstone funding. Nor is everyone going to focus on a differentiated audience approach. But as the Blumhouses of the world start to scale, it’s the proven middlemen that will emerge as true independent powerhouses—even as consolidation continues and spending across the industry slows. If content is still king, well, the person who owns the most in-demand content across the right audiences is queen.
5. A Massive Hit Will Come from India
Like South Korea before it, India is primed to be the next great exporter of streaming hits. Already, two of Amazon Prime Video’s ten most in-demand series globally in 2022 originated from India, according to data from Parrot Analytics, where I’m director of strategy. Many more appeared in the top 30. One of the most in-demand movies of the year globally was RRR, which became a box office hit in India and captured global attention on Netflix. Paramount+ is set to launch in India in 2023, and Disney is working on more original Hindi content to add to Disney+ HotStar.
Netflix, of course, has previewed how these trends are likely to play out. In 2022, more than 60 percent of Netflix’s subscriber base watched series and films from South Korea, which previously had only niche penetration into American markets. Shows like Extraordinary Attorney Woo shot up the most-watched list with just under 500 million hours of the romantic legal drama streamed. Spanish telenovelas from Columbia were also some of the most consistently watched non-English programming for Netflix, according to its Top 10 list.
There are still obstacles to overcome. For the size of India’s population, Netflix has issues getting Indian customers to subscribe because it is still more expensive and less appealing than traditional cable packages. Plus, Netflix currently has trouble getting Indian content to travel well outside of the country at a viable scale.
But it’s only a matter of time, and luck, before a Squid Game-sized Indian show sweeps the U.S. and global markets. Hindi language series are the most in-demand after English, according to Parrot, beating out Japanese and Korean. Plus, there are more than 600 million people in India who use the Internet and watch hours of content per day. Amazon is doubling its investment in Indian content between now and 2028. Netflix also considers the country a must-have from an engagement perspective. Indians made up more than 6 percent of immigrants in the U.S. in 2020, according to the Migration Policy Institute. All of these factors lead me to believe that 2023 will see a major Indian series or film emerge, following the success of RRR and Mirzapur.
There are many predictions I don’t have the room to get into—including TikTok going from foe to friend as organic social media content becomes a bigger factor in marketing (think the Wednesday dance scene), or streamers investing heavily in compression technology as they look to mobile devices as the next frontier of global growth. Whatever 2023 brings, I know one thing for certain: it’s going to be a wild, roller coaster ride of a year. 2022 may have been the great build to the drop, but that’s just the start.