It’s very simple. They both lost the streaming war. And this is a Hail Mary pass to elbow in before the game of musical chairs ends and there are no more seats at the table.

But all the news has been about AT&T’s balance sheet, who will run the combined operation…this is what small people address, the smart people look at the bigger issue. And the bigger issue is streaming consolidation.

HBO played its hand completely wrong. It was late to market and was focused on satiating its cable customers, and as a result, the price for HBO Max was too damn high. You could get Disney+, with a better catalogue, for half the price. And you got Apple TV+ essentially for free. And everybody has Amazon, because of Prime, and Netflix is the big kahuna, with first mover advantage and the most direct pay subscribers, where do we go from here?

One thing is for sure, the public will only pay for a limited number of streaming services. End of story. Right now, it’s more expensive to watch TV than it was in the cable bundle era, assuming you subscribe to everything, which is why most people don’t. Furthermore, there is endless churn depending upon hits. If you don’t have a steady slew of new product, people will sign up for one show and then sign off. That’s no way to run a business. And that’s why Netflix has spent so much on production as the lay people keep bitching about its balance sheet. You spend now to reap the reward later, didn’t we learn this with Amazon, which also had first mover advantage? You don’t let anybody else play.

And let’s not forget Hulu, which is mostly selling traditional TV shows. Less necessary than Netflix, but how necessary?

It’s a well-known fact that the CEOs of these companies who try to diversify are clueless. Not only communications companies, but Microsoft too. Buying Skype for all that bread, never mind Nokia. Just because you’re smart in one area does not mean you are smart in another. Which is why doctors and dentists are notoriously bad investors, and Apple rarely makes big acquisitions. Apple isn’t trying to eat everybody, it’s trying to grow what it’s got. And it already got burned on the Beats purchase, the software had to be rewritten, they bought air, they won’t do that again. As for headphones, they now make their own, overpriced of course, Apple can be out of touch with the public too, did you see they just discontinued their HomePod? A device no one was clamoring for. If you’re interested in audio, you buy boutique brands. If you’re interested in voice control, you go with Amazon, maybe Google, but Amazon was first with the Echo, and perception is its voice control is better than Apple’s, people have had too many bad experiences with Siri.

So, AT&T and Verizon buying media properties? That’s like Oracle buying the Yankees. It’s apples and oranges. We learned these projected synergies don’t work all the way back in the nineties, when Bob Sillerman sold a bunch of concert promoters to Clear Channel radio. Let me see, do I know anybody, ANYBODY, who has changed cell phone providers based on the perks, i.e. HBO Max, Discovery+, Apple Music? No, not a single one! Sure, most people stay with their carrier, but the big story in the last half decade has been T-Mobile, which focused on price. That’ll get people to switch.

And buying DirectTV, or AOL… What next, BlackBerry? And these guys make eight figures, their boards should be held liable, or is everybody with money in America completely out of touch with the street?

Is WarnerMedia a drain on AT&T’s balance sheet? Yes. But that’s not the real reason they’re offloading it, they’re looking to the future, and they’re worried they’re going to be in a whole heap of trouble. It’s like Cisco buying Flip, they soon woke up and realized video was going to be a feature in smartphones so they shut it down, while it still had a viable market!

So there’s all this scuttlebutt about who will control the combined company, the day after the “Wall Street Journal” did a whole feature on WarnerMedia’s Jason Kilar. You may think you have control, but control always goes with the money, no matter how good a job you’re doing. And everybody is expendable, everybody! Think of all the HBO programmers who left that we thought were irreplaceable, like Chris Albrecht…the power is in the platform, not the individual, and this not only in TV…think of all the wankers who believe they can make it alone on Substack, what do they say, don’t give up your day job?

As for John Malone’s tax shenanigans… Everybody who has followed this movie knows that the king of cable doesn’t like to pay taxes, that’s anathema. But he’s been in the business for decades, the youngsters writing about this merger are still wet behind the ears.

So now we’ve got a ball game. This merger is streaming genius, a combination of highbrow and lowbrow. HBO and HGTV. And if you read the story in the recent “New Yorker,” you know many people today watch HGTV like they used to watch CNN…as in it’s on 24/7, like wallpaper, are they willing to pay ten bucks for the package? Sure! Well, you need to start cheaper, Discovery+ is priced at $6.99. The introductory price is always lower, everybody knows that, it behooves you to sign up early, which makes me wonder about the bozos at HBO with their fifteen dollar price point. Mercedes has never sold as many cars as Toyota, never ever. Aren’t these lessons you learn in business school?

Well, these executives out of their depth can read a spreadsheet, they can work the numbers, they just can’t see the big picture. They’re focused on margins instead of market share. This is playing out in newspapers as I write this. The enemy is Alden Global Capital… It’s maintaining its margins to make money, cutting staff and planning on taking its papers down to zero and then throwing them away. This is the opposite paradigm, but it’s still relevant. Alden knows where it’s going. Even worse, after twenty years, all these local papers have been unable to adjust to the internet. Sure, the aforementioned WSJ and the NYT and WaPo have…but the rest, they can’t get anybody to pay for their online product for two reasons: 1. There’s not enough content, the news hole has been cut too far. And 2. The first-mover advantage, they’re already subscribing to one or two or all three of the big three, and that’s more than enough.

Content is never king, never ever forget it, it’s all about distribution. And HBO Max and Discovery+ were heading for distribution death, it doesn’t matter what they wanted to air, it’s too late. But combine them and you’ve got a fighting chance, assuming they continue to roll out a plethora of new product and start with a low price.

Sure, if you work for one of these entities you’re worried about your job, I understand that, but if you’re an investor or consumer this is manna from heaven, the only question that remains is…

How many streaming services will people pay for?

We don’t know yet.

Comments are closed