64 BriefingThe future of entertainment The EconomistNovember 16th 2019
2 more than the 7,500 episodes and 500 films
that Disney+ will offer in its first year. It
will spend $15bn or so this year on original
content. Mr Sarandos says there are no
plans to adjust Netflix’s strategy in re-
sponse to all the new competition.
Disney, with its must-see shows and
profits that are the envy of the industry, is
also here to stay. So in all likelihood is hbo
Max, which can tap its parent company’s
170m customer relationships. “We could
not do this without at&t,” says Bob Green-
blatt, chairman of WarnerMedia Entertain-
ment, who oversees the group’s direct-to-
consumer business. “There is no way that
we could so easily reach tens of millions of
people on our own.” As with Comcast,
whose Peacock service should find a nest in
the new media landscape, entertainment is
becoming an important source of revenue
for at&t. The phone giant will also use hbo
Max to acquire and retain wireless custom-
ers. Smaller content players such as Dis-
covery and Sony Entertainment will have
to identify niches. cbsand Viacom (which
are merging) are planning an arms-dealer
strategy—of supplying content to anyone
who wants to buy it.To xfinity and beyond
Over time, firms that can aggregate the va-
rious streaming services in bundles with
simple interfaces will reap rewards. Con-
sumers are overwhelmed by the volume of
content coming their way. They are in-
creasingly fed up with having to search for
shows on various platforms. Internet ser-
vice providers such as Comcast and Veri-
zon can help curate this video onslaught.
Comcast’s xfinity Flex, a new service for
broadband-only customers, for example,
offers a seamless way to use more than 100
video and music services. A voice-con-
trolled tv remote can search for, say, “the
episode in ‘Seinfeld’ where George claims
to be a marine biologist”.
Then there are the technology giants.
For them, producing entertainment is not
an end in itself, says Matthew Ball, former
head of strategy at Amazon Studios (and an
occasional contributor to The Economist).
In Amazon’s case, tv is a way to retain
Prime subscribers and sell more shoes and
loo roll. For Apple it is about selling hard-
ware and expanding its range of services.
Many media executives, particularly
the veterans among them, worry about
what this means for the future of high-
quality content. In their view, much of the
film and tvbusiness is now run by clueless
outsiders. They cite Apple’s “Stories to Be-
lieve in”, as its first tv shows were mawk-
ishly trailed, as evidence of naivety. “The
Morning Show”, a drama about working in
television starring Jennifer Aniston and
Reese Witherspoon, got mixed reviews.
“The show, and the service, don’t need to
exist,” concluded Rolling Stonemagazine.Despite kudos for backing critically ac-
claimed shows like “Fleabag” and “The
Marvelous Mrs Maisel”, Amazon’s longer
record in tvdraws similarly tepid reviews.
“Apple doesn’t know what the fuck they are
doing and Amazon knows less,” concludes
a former film-studio bigwig.
Top management at at&twants hboto
produce a lot more programming. In prac-
tice, that could include less rarefied fare
that might appeal to America’s heartland,
not just its coastal elites. hbo’s unabashed-
ly elitist old-timers are not keen on the new
strategy. The decision by John Stankey,
head of the telecom firm’s entertainment
unit, to ramp up production prompted a
raft of departures, including that of Rich-
ard Plepler, hbo’s head, who gave the green
light to “Game of Thrones”. “Stankey wants
hboto compete with Netflix,” says Rick Ro-
sen, a founder of the Endeavour Agency.
But many people worry that there is a big
risk of hbo’s brand losing its distinctive-
ness. “After 20 more years of doing it,” jokes
one streaming boss, “John Stankey will be a
great creative executive.”
It would nevertheless be a mistake to
conclude that outsiders will never get
things right. Jeff Bewkes, former chief ex-
ecutive of Time Warner, once dismissed
Netflix as “the Albanian Army”. Now Holly-
wood considers the company a legitimate
film studio. It is also easy to overstate the
role of senior executives at media firms’
parent companies. Much of the creativity
in Hollywood comes from lower down,
from outside big firms and from informal
networks of writers and stars, some with
their own production companies, includ-
ing Ms Witherspoon and Michael B. Jordan.
Tinseltown has a way of absorbing out-
siders. Media executives point out that Ap-
ple and Amazon are already adapting. At
first they put tech types in charge of their
tvoperations but later installed seasoned
film folk with strong links to the creative
world. On November 12th it was reported
that Mr Plepler is in talks with Apple about
an exclusive production agreement. Likemany a moneyman seduced over the years,
Jeff Bezos, Amazon’s boss, seems star-
struck. He goes to all the awards ceremo-
nies, including the Golden Globes—above
and beyond what even movie-studio
bosses feel obliged to, remarks a former
studio executive.
As long as money keeps flowing, cre-
ativity should flourish. So far, shareholders
appear happy to let it flow. Netflix’s share
price has fallen from its peak in mid-2018
but the company remains highly rated rela-
tive to earnings. Disney shares have risen
by 28% since the company revealed the de-
tails of Disney+ to investors in April. at&t
and Comcast are also up this year.
Even before the taps are tightened—as
they inevitably will be—the streaming
wars have reshaped media well beyond vid-
eo entertainment. The shift from linear
schedules to fragmented, on-demand con-
sumption makes it harder for any one com-
pany to exert a big influence on people’s
viewing, says Bob Bakish, chief executive
of Viacom. Every company needs to adapt
accordingly, he adds. It is also weakening
the link between entertainment and televi-
sion news. That is most visible in Rupert
Murdoch’s decision to sell much of 21st
Century Fox to Disney, a deal which closed
in March. He continues to control News
Corp, containing newspapers, and Fox Cor-
poration, a broadcaster that owns Fox
News and other assets.Silicon Valley, season two
The wild card hanging over the industry is
what the tech giants will do next. Some
people think Apple could cut its spending
on entertainment or even exit the busi-
ness. It is seen as more unpredictable than
Amazon, which seems committed to mak-
ing and showing content. Yet the overrid-
ing view in Hollywood is that, with their
untold piles of cash and their valuations of
$1trn or so apiece, the tech giants are only
just getting started. They could easily swal-
low a media firm or two.
Trustbusters may stymie any such
move by Alphabet, Google’s parent, which
already owns YouTube. Amazon might find
it hard in practice given scrutiny of its rapid
expansion (and Jeff Bezos’s ownership of
the Washington Post). Apple might have an
easier time. When Mr Bewkes was looking
to sell Time Warner a few years ago, talks
were held with Apple as well as at&t. There
has been much chatter about Mr Iger’s
comment in his autobiography that, if
Steve Jobs were still alive, Disney and Apple
would have combined (Disney, for its part,
nearly bought Twitter in 2016).
For all Mr Sarandos’s fighting talk, even
Netflix could be a target if the streaming
wars affect its growth and the firm’s fi-
nances come under pressure. As dizzying
as the pace of change has been in media in
the past few years, it is unlikely to let up. 7Fantasia
United States, streaming subscribers, mSource: UBS *Forecast †Owned by Disney312108642086420Quarters after launchDisney+*ESPN+†HBO NowShowtimeCBS All Access