We’re knee deep in baseball season, the desultory Dog Days of deep summer looming just ahead. Typically about now, sagacious and slightly desperate columnists cast about for theoretical deals that can transform the stinker local team into a contender. 

The streaming wars are reaching a similar place. Fifteen months post-Netflix Great Correction, the streaming landscape is in dire need of approaches other than cutting, shutting, laying off, and licensing out. Nowhere is the angst, and the need for transformative ideas, felt more keenly than with Disney, the world’s biggest and best known media company, now stuck in a nasty damned funk. 

Bob Iger returned as CEO seven months ago, and now is more than a quarter of the way through the two-year contract he signed after the Disney board summarily jettisoned Bob Chapek.

Since then, Iger has faced down two activist investors, seen off fearsome in-house annoyance Ike Perlmutter and 7,000 other laid-off humans, and reorganized the company to give creatives responsibility over their spending. He’s also mothballed or cancelled projects, and is preparing to license others. After all that, shares on the last day of June have risen a scant 31 cents, that’s 0.3% of the $89 or so share price, since 2022 ended. 

In part, that’s because Iger hasn’t fixed the company’s three biggest challenges: what to do with Hulu, what to do with ESPN (and all the rest of its broadcast/cable holdings), and what to do about a successor. But it’s also because of slowing growth at parks and resorts, accelerating cord-cutting for its cable cash cows, and possible blowback over the high-profile tussle with presidential wannabe and Florida Gov. Ron DeSantis. 

The successor question got still more complex with June’s surprise departure of CFO Christine McCarthy, a long-time Iger ally and potential successor. It’s apparently true that McCarthy’s family indeed is facing serious health issues. Yet it’s also been reported that McCarthy wanted even deeper cuts than Iger has been willing to do, which suggests more unpleasant work lies ahead for somebody. 

McCarthy’s departure contributed to Wall Street’s deepening Disney distaste. In response, analysts are devising some seriously creative solutions to the company’s challenges, while employing surprisingly strong language questioning whether Iger, corporate America’s closest thing to a white knight, can fix the company he’s synonymous with.

“My controversial take is that the succession plan should be to sell (Disney) to Apple or someone else, so it becomes a division, so it becomes much easier to fill those seats within a corporate entity,” Needham & Co. Sr. Analyst Laura Martin told me this week. In a recent report, Martin downgraded revenue expectations and spotlighted worsening investor sentiment that’s unlikely to improve soon. 

“….the tone of incoming calls about DIS has shifted distinctly negative, and sentiment has further deteriorated since CFO Christine McCarthy left last week,” Martin wrote. “Our HOLD rating on DIS is based on our belief that consensus estimates for DIS are too high owing to DTC losses and another year of weak earnings from linear TV and box office. Longer-term, we believe DIS's asset mix of both digital and physical assets (i.e., an Omniverse) maximizes its economic value capture, that DIS benefits from generative AI, and that DIS will be a takeover target.”

Martin calls the Disney CEO job is one of the most complex on the planet. For all of Disney’s synergies between theme parks, consumer products, sports and film/TV/streaming, they are different businesses requiring very different managerial skill sets. No one on the horizon (except the departed Chapek) has had anything close to the job’s full range of experience.  

To Martin, selling to Apple also would fix the $3 trillion hardware company’s biggest problem: “It’s been doing an absolute shit job on content. For Apple, either you have to go out in the market and buy storytellers, or you can hire four of the best storytellers on earth, and you get all of their (intellectual property).”

And with $90 billion a year in free cash flow and around $200 billion more in the bank, Apple is one of the few companies with the financial resources to make such a mammoth deal happen, though it’s never spent more on an acquisition than 2014’s $3 billion purchase of headphone maker Beats. 

A deal would further cement the two companies’ alliance announced in early June to create immersive entertainment experiences for the $3,500 Apple Vision Pro headset coming next year, Martin said, while simplifying the job of finding Iger’s replacement. As she pointed out, the company’s been seeking a worthy Iger successor for a decade. 

Whether Iger — a staunch defender of all things Disney who engineered the transformative deals for Pixar, Marvel, LucasArts and most of Fox —  could ever countenance actually selling the company is another, more unknowable question. 

Meanwhile, LightShed Entertainment’s analysts have their own novel suggestions for fixing what ails Disney, contained in a report released just before the holiday weekend. 

At the tactical level, stop interweaving those impenetrable Marvel and Star Wars story lines across dozens of projects, so casual fans can come into either with a vague chance of knowing what’s going on before the show is done. Also, slow the cadence of franchise projects to make each release more valuable. 

“With multiple Marvel movie and TV shows each year, has Disney actually made each piece of content feel like less of a must-see or at the very least, less of a must-see now?” LightShed Partners analyst Rich Greenfield, Brandon Ross and Mark Kelley wrote. Creating new intellectual property, beyond the princesses and delving into the company’s multiplying live-action remakes of its classic animated movies might help, too. 

Bigger picture, the LightShed team suggested two contradictory strategies: 1) integrate Hulu and general entertainment into Disney Plus, so people who aren’t hard-core fans or parents of small children have reason to subscribe, or 2) make Disney Plus just a final repository for all those franchise shows. 

“Disney could refocus Disney Plus as a vault for Disney’s catalog, much the way a consumer’s DVD wall was in the past,” the report suggests. “In this approach, Disney Plus would be where all Disney Plus content ends its life, but never where it starts its life. Movies would go to theaters and then maybe an output deal on Netflix or even offering the next Star Wars series to Max or Prime Video. After an initial licensing window, all content ends up on Disney Plus, where it lives forever and becomes a must-subscribe for families with young kids and Disney franchise super fans.”

Other analysts have weighed in, too, though not always with such radical recommendations. KeyBanc Capital Markets downgraded the company to “sector weight” on Wednesday, citing deepening uncertainties around park attendance, pricing, product differentiation from streaming competitors, the cord-cutting transition, and everything else you’ve read about the last 18 months. 

CNBC analysts Josh Brown and Stephanie Link of wealth-management firm Hightower both chimed in Thursday with negative takes on Disney’s half-year of non-progress, with Brown calling the KeyBanc report a why-bother “clown grade” that offered no new reasons to doubt the end of Disney doldrums. 

“The stock’s been a falling knife for a year,” said Brown, CEO of investment advisory firm Ritholtz Wealth Management. “Cost-cutting is not the issue. The content sucks.

They have serious content issues. That’s the part Bob Iger can fix.” 

Yes, eventually, with time, which Iger doesn’t have in his current contract. 

In fact, with Pixar’s last two films  — Lightyear and Elemental — woefully underperforming, and fan bases for Marvel and Star Wars looking a bit bored with some of the new shows, content will need sustained attention and perhaps a different spending approach (and getting Ryan Murphy back won’t fix the princesses and spandex issues at Disney Plus, and might complicate a Hulu integration). But it won’t happen overnight, or even in the next 17 months.

So the question becomes: does Bob Iger sell, kicking Disney’s manifold issues on to the next buyer? Or does he fundamentally reshape Disney Plus and a fully owned Hulu, while trying to fix everything else? And yes, what is he going to do with ESPN? Thank goodness the analysts have two more months of summer’s Dog Days to come up with more interesting ideas. 

It’s probably safe to call 2022 the Year of Connected TV, especially on the advertising side. Brands and agencies are shifting billions of dollars CTV-ward, and away from legacy broadcast and cable outlets. 

You really can’t buy a TV these days that’s not smart/connected, with a built-in operating system from someone such as Samsung or Google or Amazon, opening up a universe of streaming options. And if you don’t like that OS, or still have an older, dumb screen, you can join the video party with a Roku stick, Amazon Fire TV dongle or Apple TV puck. 

CTV is in turn opening vistas of impactful, tightly targeted advertising that just isn’t possible with legacy TV.  Brands love that. But in the rush to CTV, we may have overlooked some nuance. 

This past week, Needham & Company senior research analyst Laura Martin dropped a short note gently warning clients that maybe Connected TVs aren’t quite all that, at least not quite yet. Really, she suggests, brands and investors need a more complex understanding of what CTV is, and what it really can be. 

“From an inbox filled with stats related to the 30 stocks we cover, occasionally we see a data point that haunts us,” wrote Martin. “We can't shake the feeling that, if that data point turns out to be important, it undermines important economic assumptions we (and often Wall Street) hold as true.”

According to August numbers from services provider Amagi, “nearly 80% of CTV viewing is shared viewing,” Martin noted. Two, three or even more people are watching connected TVs together all but a fifth of the time. 

Okay, so what? 

We’ve been gathering together to watch I Love Lucy or The Wonderful World of Disney or the NFL or Friends or Game of Thrones for decades. You media philosophers will suggest we’ve been doing it since long before Plato noticed firelight flickering on cave walls. With those giant connected TVs festooning the walls of millions of homes these days, tens of millions of us are happily watching the digital hearth together. 

Except, Martin points out, that perfectly normal behavior diminishes the precision targeting promised by streaming services, platforms, and marketers. Connected TVs in fact aren’t quite as precise as the mobile phones, tablets and PCs that have yielded $55 billion a year in digital advertising. That has (at least) three potential implications: 

* Shared viewing means some targeting advertising is “wasted” on those who may not care about the ad. Should marketers pay less, imposing a “shared viewing discount” of some sort? In particular, what does it mean for Netflix, which launched its ad-supported tier Thursday at reportedly very high rates? Those sky-high CPMs might have been difficult to defend regardless, but when folks are watching Bridgerton or Stranger Things together, what are advertisers actually getting what they’re paying for? Double actually, what are they paying for? 

* CTV’s bigger screens make for more impactful shows and ads, certainly when compared to a dinky iPhone screen. But if shared viewing makes for less valuable viewing, will advertisers seeking that laser-guided precision slow their shift from mobile, to ensure they’re hitting just the right viewers as efficiently as possible? With the economy slowing and marketing budgets tightening, efficient spending will matter more.

* Ad frequency is a challenge that CTV services and platforms are supposed to manage. But lots of shared viewing could complicated “frequency capping” strategies, and affect the viewer experience, Martin suggested. 

It’s no time to panic, of course, even as the ad business, and the broader economy, tightens up. What may result, however, is a more complex and nuanced understanding of what CTV can do, and perhaps help advertisers avoid disappointment from using it for the wrong things. 

For instance, not every brand needs to target their message down to a single individual. 

If you’re Pizza Hut or McDonald’s, your target audience could be “everyone with a stomach,” whether they’re 8 or 80. That kind of advertiser cares more about appetites than demographics.

Similarly, other brands may care more about where people are, rather than who they are. The geo-targeting possible with CTV is a gift that keeps giving. And still other advertisers really only care about reaching the household, rather than any one member. 

Again, advertisers must learn to use connected TV the right way, and not confuse it with broadcast, cable, or mobile. It’s best understood as a hybrid of all that came before it, with new possibilities but also some limitations. In some situations, other alternatives might actually be better. 

Certainly, more nuance is needed. Roku took a beating in the markets last week after its quarterly earnings and future guidance proved decidedly underwhelming. 

Roku made its name selling cheap, flexible hardware to connect all those dumb TVs to the Interwebz, which led 65 million households to install its products. These days, most of Roku’s revenue comes from the ads that run on its streaming service and platform. 

That makes Roku a hybrid, but also a harbinger for what’s coming to the broader streaming sector. And that’s a little nervous making. 

“The first thing companies do in the face of such uncertainty is cancel their ad budgets,” said Roku CEO Anthony Wood during the earnings call. “Big advertisers that we traditionally get spend from are not spending this quarter. They aren’t spending with anyone. It’s not just they’re not spending with us.”

If Roku’s rotten numbers indeed show where the industry is headed, CTV’s boom may be coming to end. 

Add in Laura Martin’s note, and the continuing lack of standardization in areas such as metrics, and the coming months will be more complex. What’s going to result? Most likely, 2023 may not known as the Next Year of Connected TV as much as The Year Marketers Start to Figure It Out. That’s still progress, however unsexy it might be.

Amid a flurry of breathless speculation put forth this week by analysts, the possibility that Netflix is partnering with Microsoft for ulterior reasons of M&A has certainly come up. 

But Needham senior analyst Laura Martin stands out as being particularly bullish on this possibility.

“Netflix is trying to get closer to Microsoft in hopes that, after Microsoft digests its Activision acquisition, it turns and buys Netflix next,” Martin told Yahoo Finance Live. 

Netflix announced earlier this week that it will work with Microsoft as its global advertising technology partner as the streaming service rolls out an advertising-supported tier.

Martin believes there were better options available to Netflix. The other companies it spoken with — which include Google, Roku and Comcast’s FreeWheel — all have fully developed supply-side platforms (SSPs). For its part, however, Microsoft is still in the process of integrating Xandr, the SSP it purchased from AT&T late last year. 

Netflix, which said it would launch a partially ad-supported tier by the end of 2022 in order to spur its flagging subscriber and revenue growth, has also yet to announce any senior advertising executive hires. The key vendor decision should have come after those personnel additions, Martin said. 

For his part, former Netflix technology architect David Ronca, who now heads video tech at Facebook, noted that Netflix's streaming backbone was originally built on Microsoft software, including Windows Media and ActiveX. 

Regardless of its Wall Street struggles and lowered market capitalization, Netflix turning to a trusted tech partner isn't necessarily a direct link to a $100 billion M&A deal. 

However, given the business factors cited, Needham predicts that Netflix won't be able to arrive to market with an ad-subsidized iteration until at least mid-2023. 

“It looks like Netflix doesn’t have time to market as a priority with this choice,” Martin said. ▪️

Last week, after Needham & Co. Laura Martin downgraded the stock and predicted that competition from the likes of Disney +, Apple TV + and Peacock would erode Netflix’s domestic customer base, Netflix shares took a big hit, dropping more than 3% in one day and casting doubt on the future of the SVOD pioneer.

And then, a few days passed.

By Dec. 16, investors seemed to have lost their doubt about the future of the streaming service, lifting the stock to $304.21, up 2% from the previous trading day (Dec. 13) and nearly 4% above the $293.12 hole the downgrade had pushed it into. By Tuesday (Dec. 17) afternoon, Netflix stock was up another 3.7% to $315.48, it’s highest level since Nov. 27 ($315.93). A day later, the stock grew yet again, closing at $320.80 on Dec. 18, up nearly 2%. On Dec. 19, the stock closed at $332.22, up another 3.6% rise.

Another crisis averted. Like the weather in New England, it appears that if Netflix shareholders don’t like the way the stock is moving, just wait a few minutes, things will change.

Fueling that growth spurt was a Securities and Exchange Commission filing where Netflix, notoriously stingy with detailed subscriber data, issued a report that showed while growth in the U.S. is beginning to slow, the slack is more than being taken up in other countries.

According to the filing,  which came out weeks before Netflix is scheduled to report Q4 results on Jan. 21, about 90% of its growth and half of its 158 million customers are coming outside of the U.S., with Europe, the Middle East and Africa (EMEA) clocking in with 140% customer growth and 196% revenue growth between Q1 2017 and Q3 2019. Netflix has said that starting in Q4 it will break out results by region.

In Asia, a market Netflix has been trying to crack for years, customers numbered about 14.5 million, but subscriber and revenue growth since Q1 2017 has been 211% and 229%, respectively.

Anyone who has followed Netflix for a length of time already knows that international has been the growth engine for the company for years. In a blog post, Lightshed Partners’ Rich Greenfield said domestic subscribers at Netflix have been on the slow since 2012, the same time as international additions started to pick up.

“Netflix has been an international growth story for years now – anything to the contrary is misleading,” Greenfield wrote. He added that there is still substantial runway for international growth and estimated there are 500 million fixed broadband households in EMEA, Asia-Pacific and Latin America (excluding China), growing at a rate of “tens of millions of households per year.” Netflix has about 91 million subscribers in those areas, implying a penetration rate of about 20%, vs. 66% for the U.S. and Canada.

“Simply put, the global growth opportunity is significant, particularly as Netflix leverages a large U.S. content base and invests heavily in local/regional content,” Greenfield wrote. “It is not hard to imagine Netflix reaching 200-250 million international subscribers in the future.”

Other analysts have pointed to the international opportunity in the past. Sanford Bernstein media analyst Todd Juenger has said he believes the SVOD pioneer could reach 300 million global subscribers by 2030. In a note last week to clients, he reiterated his bullish stance on the company.

The SEC filing also seemed to poke holes in another big criticism of the Netflix service, that its international customers won’t be willing to accept price increases. According to the filing, the average rate per home in the EMEA region has risen 19.7% since 2017, in Latin America it’s gone up 10% and in Asia-Pacific, rates have increased 5.7%, and there has been no effect on growth.

So, losing 4 million domestic subscribers doesn’t seem like such a big deal, except that Martin’s report showed that the biggest impact would be on perception. Domestic subscriber growth, she wrote, has been the catalyst that has driven the stock to new highs over the past couple of years. And though she acknowledges international growth -- her report came out before Netflix released its international figures on Dec. 16 -- she writes that U.S. subscribers are more valuable.

Martin wrote that the profit contribution of each U.S. customer is three times that of an international customer, which implies that the company’s negative free cash flow worsens as U.S. subscribers decline. That, Martin wrote, means Netflix has to divert more capital to recapture those subscribers, taking it away from content.

“The problem with Netflix if it loses U.S. subs is it loses its growth stock credentials,” Martin told CNBC on Dec. 10. “So it will no longer trade at 7 times revenue, it will get revalued at 15 times EV/EBITDA, which is like half on the stock price.”

She added that Netflix also must respond to the Disney + and Apple TV Plus price points. “You just can’t have a $13 [per month] response,” Martin said

Netflix stock has never been for the faint of heart. Go back to 2009 and 2010, when a 300% swing in the stock price over a matter of months wasn’t uncommon. The same held true for 2013, when Netflix stock ranged from a low of $13.14 each to a high of $52.60. Although the swings have gotten less dramatic recently, Last year, Netflix shares went from $191.96 on Dec. 29, 2017 to $284.59 on Jan. 29, 2018, a 48% increase in just 30 days.

So, I guess this is a long way of saying, don’t sweat the small swings in the stock. Bigger gains and losses are likely ahead.

Martin has made bold statements before (and been proven right). And though not everyone is right 100% of the time, people have been waiting for the Netflix bubble to burst for awhile.

Martin said that the competitively priced Disney + and Apple TV +, at $6.99 and $4.99 per month, respectively, has heightened the need for Netflix to come up with a similarly priced tier for consumers. Netflix raised its prices earlier in the year from $11 to $13 per month for its streaming service. Overall Netflix prices range from $9 for basic service (single stream, SD), to $16 for premium (four screens, HD and 4K).

In the Dec. 10 CNBC segment, Martin said Disney was the catalyst for the downgrade. She added that she believes about half of the 16 million new accounts Disney says have signed up for Disney + are coming from Netflix.

Related: The Song Remains The Same 

According to Yahoo! Finance, Netflix is trading at about 55 times Enterprise Value/EBITDA.

But there are a lot of questions around the impact of Disney + so far. Yes, 10 million people downloaded the app and signed up for the service on the first day, but the vast majority of those customers were getting it for free. And yes, some analysts predict about 24 million people signed up for the service in November, but again, a lot of those customers are coming from services that have offered free Disney + trials (Verizon, for example, is offering a free year of Disney + to its unlimited data customers).

And then there is the question of whether Disney + paying customers are dropping Netflix or any other SVOD service, or are just carrying them all.

Martin’s downgrade came just as Netflix chief product officer Ted Sarandos said more than 26 million people watched the much-hyped Martin Scorsese movie The Irishman in the first seven days after its Nov, 27 debut on the service, and that he expected 40 million to watch over 28 days. That performance was on par with the previous seven-day champ (Sandra Bullock horror movie Bird Box) which also tallied 26 million viewers after its debut about a year ago.

And it also should be noted that Disney + is loaded mostly with kids library content like Disney Channel series, animated classics and the Star Wars movies. Original content is limited, with Star Wars saga The Mandalorian topping the list, and other series like The World According to Jeff Goldblum, Encore! and High School Musical: The Musical: The Series. It wouldn’t be a stretch to think that Disney + subscribers are more than willing to shell out $7 per month for their children’s content needs, while the adults in the house watch Netflix, or Hulu, or Amazon Prime Video, or CBS All Access, or literally anything else.

In a research note, Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak attributed much of Disney +’s early success “to the fact that it is free for [about] 20 million potential U.S. households and usage by consumers that download the product has been anemic (unsurprising given the lack of original content).” He added that he believes that the discounting of Netflix stock because of Disney is “a mistake that will likely show up in very high subscriber churn as they try to move consumers even to their relatively low monthly pricing.”

In Wlodarczak’s eyes, Disney + is targeted at homes that have children less than 13 years of age (about 33 million households), “but is certainly not a Netflix killer.”

The solution in Martin’s view is something that other streaming services have adopted, but that Netflix has adamantly opposed: advertising.

Hulu, owned by Disney, is probably the prime example of an ad-supported streaming service. In Q3, Hulu said it had about 28 million customers, more than 70% who subscribed to its ad-supported tier, priced at $5.99 per month. Hulu also has an ad-free tier for $11.99 per month.

Peacock, the NBCUniversal streaming service set to launch in April, will be free to Comcast customers while others may have to pay an undisclosed and monthly fee. NBCU has said that Peacock will be ad-supported.

In her report, Martin wrote that Netflix could price a service at between $5 and $7 per month, and supplement it with a 6 minute to 8 minute per hour ad load. Since the average Netflix viewer watches the service about two hours per day, that could translate into an additional $6 of incremental revenue per customer per month, she wrote.

I’m not sure if Netflix will be as attractive with ads as without, but I’m equally unsure of whether Disney +, Apple TV +, HBO Max, Peacock and any of the others that will come along in the future will be either. I guess, like the weather in New England, we'll just have to wait and see. 

Two prominent media financial analysts, in separate presentations to two different groups, proclaimed their enthusiasm for broadcasting, cable and traditional media while acknowledging the growth of digital media in a revamped "revenue mix." 

Both analysts said they believe the frenzy over digital delivery is slowing.

"Big advertisers are going back to traditional media because they recognize that their digital advertising is not working out," Marci Ryvicker, managing director and senior equity analyst at Wells Fargo Securities, said at a monthly luncheon of the Media Institute on April 3.

Later that day, Laura Martin of Needham & Co. said, "Digital has sullied its brands" by underperforming. In a presentation to the Women in Cable Telecommunications D.C. chapter, Martin cited the extension of traditional TV brands through TV Everywhere and direct-to-consumer services such as CBS All Access as models for "the resurgence of TV."

Both analysts envision a continuing wave of media mergers, although they offered few predictions about specific deals.

"Everybody's a buyer" in the volatile broadcasting sector, Ryvicker said. She acknowledged the regulatory caps on homes reached may affect short-term growth for the largest companies.

She was bullish on Sinclair because "scale is important."

"They've under-promised and over-delivered," Ryvicker said.

On other topics, Ryvicker cited the recent collaboration of Viacom, Time Warner (Turner) and Fox Networks Group  to form "OpenAP," which will help advertisers target specific audiences. She characterized such moves as valuable. 

Ryvicker also predicted  that 2018 political advertising "will go up" thanks to the volatile campaign situation, and she expects that "cable news channels will continue to have big ratings through this administration."

She singled out Disney's performance on several levels and added that she thinks "NBC is trying to do what Disney did" in focusing on specific audience segments for growth.

Ryvicker described the impact of streaming video bundles as creating "a lot of nervousness and guessing" among investors. She expects that only three aggregators will survive on a broad scale, citing Hulu (largely because of its media ownership), Apple (even though it has no product yet) and Amazon.  

In response to a question, she said that she doesn't expect Apple to buy Disney because it doesn't fit with Apple's agenda to "get a device into every home." But she said that it would be "more dangerous if Apple bought Netflix," which is so well established; she did not elaborate.

"We don't have enough data to know what any of this means," Ryvicker confessed.

Martin, senior analyst, Entertainment & Internet, at Needham & Co. and CEO of Capital Knowledge LLC, cited efforts by Google and Facebook to pivot into video delivery companies, but doubted that they have the ability to reach mass video audiences.  

She said that many of the digital providers (not including Netflix) have one or two million customers compared to the 90 million pay TV users nationwide.

"The feel very 'niche-y' to me," Martin said. 

She acknowledged that customers "want rebundling," and pointed to deals such as the one between Showtime and Netflix as a possible harbinger of future alliances.  

Martin also emphasized the value of live viewing -- including sports and other content. She cited the ongoing "revenue mix shift" as advertising and subscriber fees are adapted to the evolving role of digital and mobile video consumption.

Summing up her outlook on cable, Ryvicker drew a knowing laugh from the Media Institute audience when she reminded it to "disengage the company and its stock."

"People hate Comcast but love Comcast stock," Ryvicker said.

Despite pressures on subscribers and ad sales, Needham & Co. media analyst Laura Martin said continued pressure from subscriber losses, reduced ad loads and longer subscription video-on-demand windows could spark a wave of consolidation in the content business.

In a discussion with Mark Robichaux, Multichannel News, B&C and Ratings Intelligence editorial director,  at the Next TV Summit in San Francisco, Martin said that audience erosion at cable networks – she pointed to the Walt Disney Co.’s disclosure last week that its ESPN network lost about 7 million subscribers over the past two years – and moves to cut ad loads and extend subscription video-on-demand windows will undoubtedly pressure the stocks. But she added that the ultimate result could mean more consolidation as weaker networks are swallowed up by their stronger counterparts.

“The empires of bundles that are less well managed need to end up in the hands of the best managed companies, [like] Discovery, Disney,” Martin said, adding that the weaker targets would still attract high private market premiums. “In a way, as a shareholder you want to own shares of the weaker ones.”

Martin said the dual revenue streams of advertising and subscription revenue should help cable networks weather the storm. And she added that online video doesn’t currently pose a threat – its annual sales are about $2 billion, compared to $150 billion for TV – and won’t until the industry adopts a third party form of measurement.

Martin said that digital giants like Facebook self-measure and utilize metrics that wouldn’t hold water in the TV universe. For example, Martin said the digital world considers an ad viewable if it has been watched for at least one second and 50% of its pixels were viewed.

“The implication is that when you fast-forward through the entire pod of commercials on your DVR, every ad would be considered viewable in the digital world,” Martin said.

Even with those lenient metrics, she said up to 30% of digital ads are viewed by non-human traffic and 50% are considered non-viewable.

“If the digital world wants to tap into the $70 billion of TV [ad] money, they must have third party measurement and auditing,” Martin said.

The analyst also wasn’t convinced of the impact of over-the-top services like Sling TV and CBS All Access. She said while they are admirable experiments and consumers seem to want low-cost skinny packages, Martin can’t see how the providers make any money.

She estimated that Dish Network’s Sling TV has about 350,000 subscribers after a year in business, subscribers that were likely cannibalized mostly from its satellite TV business.  Martin said trading satellite’s $70 per month revenue stream (and $30 profit margin) for $20 in monthly revenue (and $3 in profit) is a “worthy experiment, but I think it’s been disastrous so far.”

CBS’ over the top service, CBS All Access launched about a year ago as well and charges about $5.99 per month. Martin estimated that service has about 400,000 paying customers.

“Consumers are screaming that they want something slimmed down, skinnier; they’re just not showing up at the door,” Martin said.