Welcome back to What I’m Hearing, and happy Boxing Day to our Canadian readers.

Speaking of Canadians, today we’ve got a very special WIH and WIH+ crossover event, with Julia Alexander taking the reins for her 2023 predictions in the Streaming Wars. (Sadly, she isn’t forecasting Paramount+ will be rebranded as Taylor Town.)

And remember, if Santa left you a lump of coal, or if this email was forwarded to you, treat yourself with a Puck membership by clicking here. You deserve it.

I’ll be back on Thursday. Now it’s over to Julia for….

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…

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.

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.

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.

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.

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.