Brandon Katz, Senior Entertainment Reporter at Observer, joins Cross Screen Media CEO Michael Beach to share his insights on the strategies that are determining streaming success, where new entrants like Paramount+ have room to grow, and what the future of movie consumption looks like when theaters reopen in our latest Screen Wars Thought Leader Interview. Watch the interview here and read the full transcript below!
Michael Beach: All right, Brandon, welcome to the show.
Brandon Katz: Thanks so much for having me, Michael. Much appreciated.
MB: I always appreciate the opportunity to turn the tables and start asking you some questions for once.
BK: Yeah, you’re putting me at odd’s end, so I respect the strategic pivot.
MB: We’ll start off with an icebreaker we like to ask all our guests. What was your first job, and what lessons did you take away from it and apply to your career?
BK: So, my first full-time job out of college was actually as a sports reporter, but it was for a content farm website. I was lucky in the sense that I was able to go right into working in media full time, which was my goal. And I’m still very thankful to this day, but this was not exactly the most reputable outlet in the world. They were not exactly pushing us toward the highest journalistic standards in the land.
But what I did learn from that experience is versatility. I eventually began covering both sports and entertainment for that site. I became their first-ever regular staff columnist. I balanced monthly talent interviews with news updates, reviews, opinion pieces. I wore a lot of different hats in that job. And I think in today’s 24/7 cross-platform media ecosystem, it’s important that an employee is able to do multiple jobs. So I am thankful for the experience, glad I’ve moved on as my life continued.
MB: We’re a huge fan of your work at The Observer. I think you’re one of the best in the business, for sure. You cover a wide area of subject matter. You mind giving our audience an idea of your main focus and areas that you cover?
BK: Yeah, definitely. I have maintained that wide coverage area from my first job in that I have these broad topics I like to hit, but specifically it’s the film and television industry. Within that larger Hollywood umbrella, I try to do a lot of different things, which range from streaming wars coverage, of which I garner a ton of insight from the amazing Cross Screen Media. I did box-office breakdowns when that was a thing, TV and film reviews, X’s and O’s of industry analysis, talent interviews, and more. So I try to have my hand in a lot of different things. I certainly love everything ranging from the latest superhero franchise blockbuster to the little-scene critical, darling Oscars prestige bait.
MB: Big news you wrote about last week: the Paramount+ launch. Overall, what are their challenges and advantages? What does a win look like for Paramount+, and where do they fit into the marketplace?
BK: That’s a great question. As far as advantages, they have an amazing collection of kid’s content. And as we’ve seen, families with young children are one of the biggest growth demographics in terms of SVOD consumers. Paramount+ is also leaning heavily into sports and news, which is another key, attention-grabbing lane to operate in. I think they saw with CBS All Access, it routinely generated huge Q3 growth, because everyone was returning to the service or signing up for the service for the return of the NFL. So just one data point among many that underlines the importance of news and sports to a fledgling streamer. I also think their free service Pluto, with more than 40-million active monthly users, can help bring a lot of interest to Paramount+.
One big problem I see with Paramount+ is that they want to be a generalist service, the one that can compete with Netflix, Disney+, and Amazon Prime Video. It doesn’t really seem like they’ve learned from any of the mistakes their rivals have made over the last decade. I mean, there’s not a single exclusive Paramount+ original at launch to kind of anchor the service, outside of the new SpongeBob movie. And SpongeBob’s already a diluted product in the marketplace because it’s available so readily that it doesn’t necessarily count. So they don’t have anything to immediately drive interest, to generate conversation. Had they gone the specialist route, with kids’ content, news, sports, plus Pluto, and that was their whole focus, I think that would have been a really strong niche, but instead they want to compete in scripted fare despite being the last major entrant.
And they’re doing so after selling off the majority of their 2020 theatrical slate, including Coming to America, which then launched on Amazon Prime Video the same weekend Paramount+ launched. So why not keep that in your back pocket as a huge attraction right when you’re opening the floodgates? Instead, they’re kind of this, it sounds cruel, but this disparate band of brands cobbled together from the ViacomCBS library. While a lot of those are really interesting, I don’t think it gives them an identity.
They also seem to be hedging their bets a bit between pacifying Wall Street with a flashy new SVOD platform and preserving linear legacy assets. Vastly different reasons led to separate approaches throughout the SVOD industry. However, Warner Media putting WB’s entire theatrical slate on HBO Max and Disney opting for some hybrid releases and some free-to-subscriber releases on Disney+ are the types of aggressive moves needed to make a real dent in such a crowded streaming war. Paramount+ is kind of stuck in between in no-man’s-land, which doesn’t bode well for long-term success.
You asked me what a victory for Paramount+ looks like and I’m not sure they even know at this point. If they really, truly want to compete, if they want to be among the three last major SVOD streaming services standing a decade from now, they need to pivot and really prioritize direct-to-consumer over theatrical or linear legacy assets.
MB: I was one of the early people that tracked down Yellowstone on the Paramount channel. Great show, but like you said, showing up on Peacock as an original, a lot of people are going to find that for the first time on a competing service.
I believe ViacomCBS streaming president Tom Ryan did recently suggest that the Yellowstone deal was made before the Viacom and CBS merger. But as we’ve seen throughout the industry, you can adapt preexisting deals. For example, Warner Media had a preexisting output deal with NBC Universal that gave them the full rights, full streaming rights, to the Harry Potter franchise. And yet, they went back and tweaked the deal so that all eight movies would be available on HBO Max for the first three months after launch. There is no reason why ViacomCBS couldn’t have done something similar with NBCU and Peacock.
They had a decade of other streaming services launching. They’ve had six years of CBS All Access to learn and get the kinks out, and yet it doesn’t seem like they have.
MB: Yeah. And I want to get into the movie theaters and releases shortly, but another piece of recent news last week, HBO Max started to cover more detail about their ad-supported tier. First, how do you think HBO Max is going as a whole, and what do you see as the opportunity for the ad supporters here?
BK: I’m personally bullish on HBO Max because I think they have a wonderful collection of preexisting content. I think they have the IP to compete at the same level as Disney. Their upcoming original slate is fantastic. They have a ton of great talent relations, but me being bullish on it does not equate to success in the industry.
HBO Max, as of January, had 17.2 million activations. That’s incremental growth. The 2021 WB theatrical slate should help, but it is certainly not growing fast enough to appease Wall Street, like Disney+ did. In fact, of the major corporations and tech companies that have a hand in Hollywood, AT&T is the only one to see its market cap actually decline over the last 18 months. So Disney, Netflix, Comcast, NBC Universal, Apple, Amazon, ViacomCBS, Lionsgate, all of them have actually improved their value in terms of Wall Street, except AT&T. And I think that’s indicative of HBO Max’s slow growth out of the gate. I hope they can turn it around because I think it’s a great service.
As for your question about AVOD a reporter should never say, “I don’t know,” but I just don’t know. Theoretically, a lower-cost, advertising-supported model should broaden HBO Max’s accessibility for consumers who are hunting for bargains, who are looking for cord-cutting, cost-saving options. We know Hulu generates the majority of its annual revenue from its ad-supported package. We know consumer surveys suggest that the average American audience member is willing to accept ads on Netflix if the package costs less than their standard fee. So on paper this should be a boost to HBO Max. Whether or not that turns out to be the case remains to be seen.
I think their major problem has been a marketing and messaging issue. Warner Media has struggled to effectively convey the difference between HBO Max and HBO, to update people who used to be HBO Go and HBO Now subscribers on what the current offering is. I don’t think they’ve done a great job clarifying lingering confusion among consumers as to who is eligible to convert, why they would want to convert, what they’ll receive in addition to HBO for the same exact price, and a host of other basic questions. Ultimately it comes down to Warner Media getting out of its own way. And when that happens, perhaps HBO Max can start taking off.
MB: Yeah, we’re extremely bullish on the ad-supported streaming market, as long as you have a crystal clear strategy. And I think that’s been an issue from the start with HBO Max from the beginning. They haven’t really produced a solid model of what their ARPU is going to be like on the ad-supported model We think the demand is there for the ad-supported on HBO Max, as long as the company itself is clear about strategy.
BK: With all due respect to everyone who’s working hard over there, I think we’ve seen over the last four years, and especially under AT&T leadership, there has been a lack of clarity and messaging from the beginning. I mean, John Stankey, to the surprise of his own executive board, announced a three-tiered structure for their upcoming streaming service. And then they ultimately scrapped that idea, of course. So I think from the get-go, there have been communication issues that still need to be resolved.
And in terms of transparency, even Disney+, whose ARPU is far lower than Netflix because of Disney+ Hotstar, at least they’ve been upfront and very communicative about the reasons why. I think everyone who enjoys this service is hoping that these flaws can be ironed out.
MB: And now for a thornier topic: movie theaters. You wrote about how we’re almost at 50% of U.S. theaters being open or about to open. What’s your outlook on the movie theater industry? Do you think we’re going to see these direct-to-consumer releases, like we’ve seen with Warner Brothers, next year?
BK: This is a great question. And I think it’s probably the most important question facing legacy entertainment at the moment. Now, I’m someone who doesn’t think movie theaters will ever go extinct. I think there will always be a place for communal viewing of major, big-budget, tent-pole blockbusters. But for everything else, for example your mid-budget comedies, like Universal’s King of Staten Island, your rom-coms, like Netflix’s To All the Boys trilogy, or your zany original ideas, like Zack Snyder’s Army of the Dead or Dwayne Johnson’s Red Notice, that are a little bit bigger budget, but aren’t based on preexisting material, those will probably continue to hit PVOD and streaming with increased frequency moving forward.
I think we have absolutely seen the end of the 90-day exclusive theatrical window across the board, especially after Universal, Warner Brothers, and Paramount all blew it up in this past year. Of course, that’s going to be a case-by-case basis. Something like Avengers 5 in the future, that’s going to play in theaters for as long as humanly possible, because it has the earning power to demand such a release. But long-term, I think maybe Paramount’s 30-to-45-day window is probably going to be closer to where the rest of the industry falls. I think ultimately the pandemic accelerated the trajectory the entertainment industry was already on. It expedited this transition of direct-to-consumer business first and foremost.
Audiences now have more control over when, where, and how they watch new films than ever before, and I don’t see viewers relinquishing that convenience en masse ever again. You know, it’s the same way that I think the delivery option changed the restaurant game forever. Breaking the gravitational pull of your couch is more difficult than it’s ever been. So we are going to have to balance the two moving forward.
MB: And a follow up on that, what do you think is a big deal that most people are missing?
BK: That’s a great question. We need to pay attention to what happens when all these windows are shortened and we’re no longer putting movies in theaters for two, three months. I think one side effect could be an increase in the volume of films that are made per year. How else do we fill that kind of negative space after a movie has been pulled after 17 days to a month at most? So how they maintain production and continue to fill out a schedule that demands 24/7/365 content will be very, very interesting.
One other thing being overlooked in terms of the SVOD debate, we now have eight major entrants and hundreds of smaller companies working in the streaming field. What happens in five to 10 years when some of these start to fold, when they simply do not meet their subscriber goals?
Are we going to see another round of major mergers, acquisitions, and consolidation? Are we going to see massive, high-price bidding wars for Apple TV+’s original library? I don’t know what’s going to happen, but we know that basic economics dictate around three winners in any kind of financial field. We now have eight major streamers. It’s doubtful all of them are going to be able to exist long-term. So the conclusion of the streaming wars will be fascinating.
MB: And looking forward, what area are you most excited about in the media space five to 10 years from now?
BK: I wouldn’t say this is necessarily my most excited, but I would say I’m really interested to see if Amazon is broken up by anti-trust government efforts over the next decade, and if so, what that would mean for Amazon Prime Video. I’m interested to see if, as we discussed, ViacomCBS’s seemingly half-hearted foray into streaming is merely trying to position itself for a sale in the near future. I’m interested to see if Apple makes a material studio acquisition to bolster or even replace Apple TV+. I’m curious to see if Netflix can indeed make the transition from growth phase to profit phase.
Like I said, I think I’m excited to see how exhibitors and studios fill all this dead air, and longer term, I’m curious as to what happens when the streaming wars start winding down. I really think they’re going to have significant ripple effects throughout all of entertainment. And if we’re worried about singular powers dominating the industry already, I mean, the rich may only get richer in the future as these smaller competitors get swallowed up and/or shutter because they weren’t able to compete.
MB: All right, we’ll wrap up with one more question that we ask everybody. If you could get everyone to read one book right now, what would that be and why?
BK: Can I cheat and can I give two books? One of them would be The Hundred-Year-Old Man Who Climbed Out of the Window and Disappeared. It is a comedic, yet cleverly wholesome novel, written by Swedish author Jonas Jonasson. I think it shares some DNA with Forrest Gump because it follows this relatively ordinary man as he lives this amazing, wonderful life that intersects with so many major historical figures and events. It’s just a good, entertaining, positive read from start to finish. And I think in month 12 of a pandemic, we could all use that.
Flipping to the other side of the spectrum and actually adding on to our existential dread in month 12 of a pandemic, Lucifer’s Hammer, a dystopian novel from the seventies about a comet that hits earth and essentially pushes the reset button for all life on this planet with pockets of survivors navigating their new realities, trying to hold on to some semblance of society. And one reason I recommend this book to everyone is not only because it’s a really entertaining end-of-the-world novel, but I also think it’s absolutely insane this hasn’t been made into a big-budget miniseries. It has all the makings of a great genre blockbuster. Broad-appeal hit on TV. So Hollywood, get on that.
MB: We’re starting the push now.
BK: There we go. I like it. Michael, me and you can tag team it. We’ll write the script.
MB: Yeah, absolutely. We’ll start a petition. All right, Brandon, I know our community’s going to love this conversation, and I’m grateful for your time.
BK: Thank you so much for having me. Much appreciated.
MB: Thank you.
See the rest of the Screen Wars Thought Leader Interview series here!
Brandon Katz, Senior Entertainment Reporter, Observer: In his role, Brandon tracks the latest trending news, major moves by Hollywood’s power players, and everything from blockbuster cinema and prestige Oscar bait to the streaming wars and exclusive scoops.
Cross Screen Media is a marketing analytics and software company empowering marketers to plan, activate, and measure Connected TV and audience-driven Linear TV advertising at the local level. Our closed-loop solutions help brands, agencies, and networks succeed in the Convergent TV space. For more information, visit CrossScreenMedia.com.