Ripe For M&A
According to John Malone, billionaire media investor, removing the middlemen from content production and going direct to consumers will foster a rash of mergers and acquisitions between the major studios and networks over the next several years. He's RIGHT!
Malone argues that Netflix, Amazon, Apple, the remaining FAANGs and other gate-crashers in the streaming content biz are end-running the major studios with their direct-to-consumer strategy.
Studios Just Couldn't Get It Right
You have to hand it to Netflix, in the very volatile world of mass entertainment they have achieved great success and up-ended a 100 year-old industry.
Hollywood played Netflix all wrong. First it was, Netflix needs content and they'll buy it from us. Then it became - they will buy it from us and we'll keep the rights. Then it became - they will buy it from us and we don't keep the rights. Then it became - if we don't deal with them, they will go to our talent pool and produce content themselves. Which Netflix DID! Now Netflix both, and produces their own content.
$100 Billion Content
With a projected spend-level of $100b a year for quality content worldwide (which, I believe is unsustainable) the need to merge and/or acquire to get larger to survive is inevitable. CMG believes Malone is correct - the mass entertainment industry is changing and all players must figure out, and quickly, where they are going to wind-up.
Related Issue: Italy Falls On Own Sword
Last week Italy enacted a new law which regulates the theatrical window on Italian films. The new law dictates that there will be a wait-period of 105 days after the first cinema screening before a movie could be streamed via Netflix. The new law only applies to Italian films. France has similar screening rules but are stricter still - a minimum of four months for VOD and a full 36 months for SVOD content.
This Is: BAD POLICY
CMG believes that laws that restrict day-and-date release are bad for all participants.
- These laws hinder audience choice. Certain films can, and should, be released day-and-date. Those with big-screen pull and big audience draw are a prime example where both the exhibitor and streamer can benefit.
- These laws restrict the roster of films available to cinemas to screen, and streamers, such as Netflix offer very favorable gross terms vs. the major studios.
- These laws stifle local production of films as the streamers require/need local content to generate more subscriber acquisition.
I could go on; however, it's easy to see the short-sighted impact these release restrictions have. Hey, why not let the consumer decide if they want to view a particular movie on the big screen, their TV or their mobile device. The exhibitors need to work with the Netflixes and not against them.
Cinema Mucho Gusto