Welcome back to What I’m Hearing+, live from Connecticut, where I’ve been enjoying my annual Labor Day retreat. This week, the latest skirmishes in the two-fronted streaming wars—both the cold war between massive players and smaller platforms, and the open warfare between those massive players and the cable providers, who refuse to be put over the barrel again.

But first…

• Messi’s Latest Score for Apple: Last month, I outlined the symbiotic relationship between MLS and Apple TV+. In short, the world’s largest company paid a presumably sweet premium for broadcast rights, but Apple won, too: the cost-benefit ratio of live sports is arguably better and more predictable than spending hundreds of millions of dollars on new shows and movies that might fall short. Now, research from Antenna suggests that the partnership is off to an enviable start. There were 110,000 signups to MLS Season Pass on the day that Argentinian god Lionel Messi debuted with Inter Miami FC, a 280 percent increase from signups on the first day of the 2023 season.

  That won’t translate directly to Apple TV+ subs, since fans can sign up separately for MLS Season Pass. But Apple offers a discount to customers who sign up for both its streamer and Season Pass, in an attempt to convert those eyeballs into long-term users. So far, we know that 48 percent of customers who signed up for Season Pass between Feb. 1 and July 31 already had Apple TV+, while 15 percent decided to sign up for Apple TV+, too. I’m considering this a small win for Apple.

  Live sports is a key element of Apple’s streaming strategy. After all, Apple TV+ has tons of great originals—it currently has the third highest demand share of original programming in the U.S., according to Parrot Analytics, where I work as director of strategy. But that doesn’t create as much value as it should, in terms of customer acquisition and retention, due to the lack of diversity in its content portfolio. (The best modern streamers combine high- and lowbrow fare, procedurals, kids content, and more, to keep every flavor of subscriber entertained.) MLS, in theory, is helping Apple close the gap.

  The biggest winner, of course, is Messi. The star scored an innovative revenue-share deal with Apple. How will this arrangement look if he decides to go back to Europe or play in the Middle East one day? I’m sure Apple doesn’t want to countenance the possibility. I imagine his agent will be in touch with Eddy Cue soon.

And now for my thoughts on ESPN’s battle with Charter and Zaz’s latest partnership…

The Max deal, in particular, speaks to the growing desperation of cable network companies that are being squeezed between Pay TV cord-cutting and streaming consolidation. A few years ago, this type of freebie would have raised more eyebrows than it has today. AMC, which once projected that it could have between 20 million and 25 million streaming subscribers by 2025, recently saw its numbers drop for a second quarter in a row, to just 11 million subs. But long term, the AMC-Max partnership seems like it will facilitate attrition, not growth: how large is the market for an AMC streamer when so much top catalog fare is available elsewhere? Most importantly, how likely are those customers to convert to paying AMC+ subscribers for one or two shows? More broadly: who really benefits from licensing and syndication when the market is coalescing around a few mega-scale streamers?

Traditionally, of course, syndication benefited all parties and grew the linear TV ecosystem. The major networks could confidently take the financial risk on a show, in part, because they knew it would enjoy a long monetization tail on lesser channels. Meanwhile, reruns became the coin of the realm for these second-tier networks, whose portfolio of syndication rights made them more valuable to the cable distributors. And since companies like Disney and NBCUniversal owned an emporium of different networks, including high-value offerings like ESPN or Bravo, they could be sold as a larger bundle to, say, Charter or DirecTV customers.

This framework, alas, has gone the way of the DVD. AMC’s deal with Max is ostensibly premised on the notion that the network will capture subscriber attention from the larger platform, which it can leverage to convert viewers who want more of Dark Winds, for example, into AMC+ subscribers. But on balance, this arrangement likely benefits Max more than AMC. In the increasingly zero-sum world of streaming, where prices are rising and customers are becoming more selective, the rewards will agglomerate to bigger platforms versus niche streamers.

Syndication can still be a win-win, especially in international markets. In the U.K., for example, Better Call Saul is one of the highest performing titles on Netflix for retention, according to Parrot Analytics, where I work as director of strategy. Between 25 percent and 33 percent of all Better Call Saul consumption came from Netflix customers at risk of cancelation, as defined by Parrot’s content valuation measurement system. It’s also a non-exclusive title, and while it’s core to Netflix’s U.K. offering, it doesn’t detract from AMC’s linear businesses.

With its Max deal, however, AMC isn’t simply licensing content to boost revenue—it’s trying to leverage Max’s audience to boost subs for AMC+. That thesis might suggest that AMC and Warner Bros. Discovery don’t view Max and AMC+ as competitors, but that’s precisely what they’re doing: competing for attention and customer dollars.

A decade ago, when Iger first introduced his arms dealer analogy, the streaming philosophy was simple: take the money. Media companies, still flush from the steady revenue of the cable bundle, seemed happy to generate extra cash through license sales to Netflix or Amazon or Hulu. Now, the dealmaking calculus comes down to a more nuanced set of considerations. To wit: Is the partner a direct competitor? Would a franchise deal enrich a partner at the expense of a company’s endemic business? Will the deal generate necessary cash to support the platform? Will it dilute the brand? And could a short-term deal have long-term ramifications?

Not simple stuff! But you can see a bit of this multi-level decision-making process at work in the AMC-Max deal. Presumably AMC went with Max over Netflix, for instance, because of the overlap with prestige HBO programming, possibly leading superfans to AMC+ for future seasons. And AMC needs the visibility for any hope of its streaming business to be viable in the future. It may have been the best realistic option under the circumstances.

In reality, the new streaming franchise calculus is particularly difficult for subscale players like AMC, which may eventually need to become arms dealers (like Sony or Lionsgate) rather than attempting to be distributors, themselves. After all, it is damn hard to capture attention; it’s even harder to monetize it when you’re putting the onus on a Max subscriber to download a new app and input their payment information to continue watching Dark Winds—especially when the Max algorithm has already recommended its own related library content. Again, in the era of the aggregator, the bigger app will typically come out on top.

On the surface, this battle has raged over Disney’s desire to squeeze another $1.50 per customer per month for the right to broadcast ABC, ESPN, FX, and so forth. Rather than cave, Charter demanded that Disney throw in ad-supported versions of Hulu, Disney+, and ESPN+. Now everyone seemingly hates everyone.

Underlying the dispute is Disney’s naked ambition (or desperation) to wring the last drop of profit from Pay TV customers and then bring them over to an all-encompassing Disney bundle, with ESPN at the center of it. Of course, Iger knows what’s at stake by gambling the company’s relationship with Charter, a key player in the cable oligopoly (only Comcast is in more homes). Despite D+’s 46 million U.S. subscribers, the Pay TV margins will substantially outperform streaming for years to come, and streaming still doesn’t have the reach that Pay TV commands. But that, too, is changing.

Today, only Amazon Prime Video (about 70-75 million subscribers) and Netflix (75 million subs) boast around the same number of U.S. household subscriptions as Pay TV. (Charter, itself, has nearly 15 million subs.) Even if those numbers aren’t exactly comparable given their ARPU, cord-cutting eats into cable viewership with each passing year. Between June ’21 and June ’23, Pay TV viewership dropped 10 percent, while streaming increased 9 percent. Meanwhile, sports viewing increased by 2.6 percent on Pay TV, but jumped ever further on non-Pay TV platforms, increasing 7.1 percent between Q3 2019 and Q3 2021, according to MoffettNathanson.

Charter, of course, would love to offer all of its customers’ desired content in one place, hence the public appeal for viewers to reach out to Disney. But Disney is looking over Charter’s shoulder to a future in which it sees itself as supplier and distributor. The company is also betting that it can charge customers as high as $35 a month, or $420 a year, to reach a subset of cord-cutters who want ESPN but aren’t willing to pay for the cable bundle. ESPN+, which notably does not offer key league games like Monday Night Football, currently has 25 million total subscribers, but only a tiny fraction of that number are active users.

While the preponderance of inactive users may not immediately matter to Disney from a subscription standpoint—revenue is revenue—they will matter to advertisers, which Disney is effectively forfeiting in its fight with Charter. And they will come into play when the price of the overall Disney+ service—even with some additional value like MNF—is eventually raised some 3.5x more than that of ESPN+, with heavy churn periods as a standalone project. Right now, Charter’s biggest advantage for Disney and other networks (aside from revenue and reach) is that sports fans get all of what they need. But if Disney removes ESPN, that will change things considerably. Of course, the attendant challenge—and this really is the existential question at Bristol—comes down to whether the ESPN+ product can offer the leagues the reach they desire and provide Disney with enough cash to keep buying the ever-more-expensive sports rights.

That’s the first problem here, as Charter executives know well. The success of Pay TV drove suppliers to inflate the cost of sports, and leagues are reliant on the cash from those Pay TV deals. The second problem is that ESPN didn’t have to own all the sports when it was within the Pay TV bundle. But without the bundle support, Disney needs to own as many of the major sports league rights as it possibly can. That’s an expensive mandate at a time when Disney is cutting costs, and trying to recuperate cash through partnerships with bigger distributors, such as Verizon, or the leagues themselves.

And Disney has more to lose. Charter doesn’t want to be a content supplier, and its very business is managing decline. But as a long term distributor, Charter understands the hardships that come with trying to create a new bundle with 10 percent of the ammo of a better, bigger bundle. The question is which entity has more power in the long run. The answer has always been a little oblique, but now it’s murkier than ever.