Outspoken media analyst Rich Greenfield is calling on Paramount Global controlling shareholder Shari Redstone to fire the company’s CEO, Bob Bakish.

According to Greenfield, creating and trying to build Paramount Plus into a streaming service that can compete with Netflix and Disney Plus has been a costly strategic mistake.

Because Bakish has continued to double down on streaming, Greenfield sees firing Bakish as the surest way to change that strategy.

Greenfield believes Paramount would be better off as an “arms dealer,” profitably supplying programming to companies competing in the streaming wars.

Also Read: Paramount Global Cuts Streaming Losses, Posts Higher Q4 Profit

The launch of Paramount Plus “left Paramount with a subscale streaming platform, a weakened relationship with its MVPD/vMVPD partners and an over-levered balance sheet as linear TV headwinds grow stiffer,” Greenfield said in a report Monday.

“To make matters worse, it is not even clear what the best course of action is now given the aforementioned strategic missteps that are now hard or impossible to quickly reverse,” Greenfield said.

One of Bakish’s other missteps, as far as Greenfield is concerned, was the decision not to sell Showtime in a deal worth $3 billion.

“After Redstone came up with the idea to sell Showtime, Bakish convinced the Board that keeping the asset was a better idea to financially engineer improved profitability at Paramount Plus and increase the subscriber base of Paramount Plus by giving Paramount Plus to existing Showtime subscribers,” Greenfield noted.

Also Read: Paramount CEO Bob Bakish Lays Out Plan To Raise Earnings, Cut Costs

The $3 billion a sale could have brought in would have helped Paramount Global’s balance sheet. Plus, it would have cleared up an awkward situation with distributors.

“So now there are millions of Showtime subscribers who are getting a streaming service that includes the linear CBS network and a wide array of the content found on Paramount’s linear cable networks, while ALSO paying for that same content as part of their basic cable subscription,” according to Greenfield.

Greenfield said before Viacom was combined with CBS to form Paramount Global, “there is no doubt that Bob Bakish was the right CEO to helm Viacom in 2016.” Greenfield credits Bakish with playing a critical role in improving Viacom’s relationships with distributors and improving internal morale at the company.

Greenfield also endorses Redstone’s decision to combine Viacom with CBS as being prescient in seeing that scale would be important in the media business and consolidation would continue.

But he noted that Viacom was worth $12 billion and CBS was worth $18 billion five years ago. Now the combined company is worth only $7.5 billion.

“Given our belief that Bob Bakish does not agree with our stated strategy and is directly responsible for what is today Paramount Plus, we believe Shari Redstone and National Amusements must terminate Bob Bakish and seek new leadership at Paramount immediately," Greenfield concluded. "It may already be too late to save Paramount, but a new strategic direction is the best hope Redstone and National Amusements have for saving what is left of the company.”

If viewers like free TV channels, they’ll love a free TV set even more.

That’s the idea behind Telly, a new company launched by CEO Ilya Pozin, a founder of Pluto TV, the free-ad supported streaming platform acquired by Paramount Global.

Telly plans to give people a new, state-of-the-art set with a unique dual-screen design worth about $1,000. On Monday, it opened a website where consumers can sign up for one of the first 500,000 free sets that will begin shipping this summer.

The company expects to make money selling targeted advertising and data about what its customers are watching and how they respond to advertising through an array of apps that will be available to users. 

“Telly is a revolutionary step forward for both consumers and advertisers,“ Pozin said. “For too long, consumers have not been an equal part of the advertising value exchange. Companies are making billions of dollars from ads served on televisions, yet consumers have historically had to pay for both the TV and the content they watch.    

“All of that changes today,“ he said. “When I co-founded Pluto TV, we created an entirely new model that offered amazing TV content to viewers for free. Now, with Telly, we are providing the actual television for free as well.”

The venture is backed by a group including media-industry analyst Rich Greenfield’s LightShed Ventures, which co-led Telly’s initial funding round, and Gary Vaynerchuck, CEO of Vayner Media, an agency that specializes on younger demographics and social media.

“Telly is a huge leap forward, leveraging the explosion of the connected-TV ad market and the desire from consumers for greater control and interactivity that does not disrupt the TV viewing experience,” Greenfield said. “The groundbreaking dual-screen design enables advertisers to completely reimagine the living room experience while providing consumers an incredible TV at the easy-to-say-yes-to price of free.”     

MNTN, which specializes in precision media campaigns (and has actor Ryan Reynolds as its chief creative officer), is a launch partner with Telly.

The Telly TV features two screens. The first screen has a 55-inch, 4K picture. The second screen displays an array of customized apps and ads. It also has a five-driver sound bar built in.

“Don’t let free fool you — this is the most powerful and advanced TV ever built,” Dallas Lawrence, chief strategy officer at Telly, said. “It is packed with so much technology and computing power, you should think of it more like a Tesla.”

Lawrence, formerly with Samba TV and Roku, noted that 80% of adults also use a second screen — such as a smartphone — when watching TV. “Our goal is to say, put that one away. Everything you need is right here,” he said.

The set is managed by Telly OS, which controls the two-screen experience. The Telly OS is not a streaming operating system. The set comes with an Android TV dongle enabling it to receive connected-TV programming via streaming. It also has a broadcast tuner and three HDMI inputs that allow users to plug in their choice of streaming devices, including Roku, Amazon Fire TV or Apple TV.

At launch, the rectangular second screen features a smart assistant, like Alexa, called Telly. It comes with 40 video games and a fitness app that’s driven by a built-in camera with full motion capabilities. Zoom is also a launch partner. Telly can also help search for something to watch via an artificial-intelligence based recommendation engine and connect the viewer to the show with a click on the remote or voice command.

Smarter Smart TV

“It’s almost an oxymoron to call TVs today smart TVs,“ Lawrence said. “They’re really just a screen with a plug in the back that delivers content to you. It hasn't evolved much in a decade. This is the first truly smart screen that has all of your apps, all of your capabilities, in the living room.”

Telly will be frequently updated. In the future, users could ask Telly who is at the front door by connecting to a doorbell app or raise the temperature via a smart thermostat.

While watching TV on the big screen up top, a user can add apps to display a news feed, a weather feed or a sports feed on the bottom screen. Someone watching a football game can check stats, fantasy results and odds, or make a bet through FanDuel, all with the click of a remote. Or they can Zoom with other fans. Part of the second screen featuring an ad could be sponsored by Pizza Hut, enabling the user to order food.

The second screen has an advertising section that’s always on and connected via remote. Because the ad is on the second screen, it doesn’t interrupt programming. And because it is interactive, it could be particularly valuable to programmers, who could get viewers to sign up for Apple TV Plus or Paramount Plus or tune into the Oscars with a voice command or a click on the remote.

“Every single interactive-TV experience I have ever seen has always distracted from the on-screen experience with an overlay on top of what you are watching, or it shrinks the screen,” Greenfield said. “This will be the first time ever where the interactivity doesn’t obscure the actual main screen.”

Ultimately, Telly could help the TV ecosystem. “The more connected TV sets out there, the better,” Greenfield said. “If you create increased engagement through an interactive second screen, it’s better for all these content creators. If I were at Netflix or Disney Plus or Pluto or Tubi, I would love this.”

Tell Telly About Yourself

When people sign up for Telly, they agree to fill out a survey. “The day we install our TV we know a lot about you that you shared,” Lawrence said. Other set makers don’t know anything about who is buying their TVs, he noted.

Telly’s user agreement allows the company to collect anonymized automatic content-recognition data. Telly is also equipped with built-in radar that enables it to know exactly how many people are in front of the TV at any given time. 

“We can tell if two people saw the ad on the TV or if no one was in front of the ad. These are all things no one else could do at scale today,” Lawrence said. “By the end of this year, we’ll have half a million TVs and homes producing data. Our panel will be 10 times larger than Nielsen’s entire panel and hundreds of times larger than TVision’s.”

Several measurement companies have already signed to receive person-level data from Telly. “Just from our initial data licensing agreements, the average revenue per user on this television is already more than twice what Roku's ARPU is,” Lawrence said.

That data will be used to make the ads that appear in programming on the big screen more targeted.

 "We’ve seen a great response from the biggest brand advertisers across the entire consumer landscape including brands like Kia,” Lawrence said.

MNTN sees Telly data enabling it to run performance campaigns and better measure the results.

“Television is the most powerful medium in the world, and MNTN’s clients know it,” said Mark Douglas, CEO and founder of MNTN, said. “With Telly and MNTN, brands will be able to seriously level up their performance marketing strategy — right there on the biggest screen in the house. With Telly, free ad-supported TV just got real. Literally.”

Telly also is working on a plan to provide its users with even more value by launching Telly Rewards over the summer.

“If you watch the presidential debate Telly will ask, who do you think won?“ Lawrence said. “Or, if you saw a preview of Guardians of the Galaxy, [it will ask] are you planning to go see it?” 

Participants will get points that will be good for things like free Netflix subscriptions or Amazon gift cards.

“So it’s the free TV that will continue to reward you for the lifetime you have it,” he said. 

Looking at the trouble regional sports networks are having getting distributors to pay for local sports and at CBS affiliates pulling their local feeds from vMVPD FuboTV, analyst Rich Greenfield is questioning whether the retransmission gravy train for TV broadcasters has left the station.

Entertainment programming has shifted to streaming from broadcast, noted Greenfield, principal and media and technology analyst at LightShed Partners. “Time spent watching broadcast TV is falling rapidly, yet the annual cost of retrans continues to rise,” he said.

During broadcasters’ earnings calls, analysts asked as many questions about the future flow of retrans revenues as any other subject.

Greenfield quoted Dish Network chairman Charlie Ergen, who said on the satellite-TV provider’s latest earnings call: “The next step in retrans is down, not up. … I said it about regional sports, I’m saying it now. That’s where that’s going. And it’s a shame because the local broadcasters are caught in a vice between the network and the distributors. So we have some empathy for their plight, but we cannot be their bank unless we get a return. And right now, we don’t get a return.”

The FuboTV situation may be a harbinger of battles coming up with other virtual multichannel programming distributors (vMVPDs). With affiliates balking, CBS gave FuboTV a national feed of CBS programming, with CBS News replacing local affiliate news.

“When Nexstar management was asked about their leverage in negotiations with vMVPDs vis-a-vis the national vs. local feed, they stated: “that [news] is what people want us for as is the local content,” Greenfield noted. “We hope Nexstar management does not actually believe that as retrans would be a tiny fraction of what it is today without the power/leverage of NFL games on Sunday.” 

Also: FuboTV Says Loss of CBS Affiliates Has Had Little Effect On Sub Growth

If local viewers do want local news and can’t get it from a CBS affiliate, they can get it from local ABC, NBC or Fox affiliates, Greenfield added.

“The irony of all ironies is hearing TV station group owners now begging for regulatory relief to have vMVPDs included in antiquated retransmission consent rules to remove access to the national feed,” Greenfield said. “While the Cable Act of 1992 is embarrassingly outdated, as we talked about a decade ago, we are not holding our breath for it to be updated anytime in the next several years. If station groups are hoping for regulatory relief, #goodluckstations.”

While cord-cutting is putting pressure on distribution revenue, it is also hurting ad sales, cutting into reach, he adds. 

“Have TV station groups overplayed their hand as the price/value drops with too many direct-to-consumer streaming alternatives?” Greenfield asked. “Feels like management and investor expectations for revenue growth are inflated, with serious headwinds growing.” ■

FuboTV CEO David Gandler said he bought 46,000 shares of the company’s stock for about $137,000, according to a Securities and Exchange Commission filing and a series of tweets Monday.

Also on Twitter, analyst Rich Greenfield of LightShed Partners pointed out that Gandler had sold 50,000 shares of fubo stock for $1.5 million in November. 

When Gandler sold, he received $34.46 a share. When he bought, he paid $2.98 a share.

In his tweet, Gandler said “I could not be more confident in fubo’s ability to meet its goals. As a testament to my confidence, I bought 46,000 shares of $FUBO today.”

Gandler added that other members of the fubo executive team also bought shares on the open market, including CFO John Janedis. Janedis bought 7,000 shares at $2.94 a share for a total investment of $20,580.

Last week fubo released its first quarter results, saying that it lost $140.8 million on record revenues of $243 million. It said it lost 75,000 subscribers.

In December 2020, Greenfield urged investors to sell “money losing” fuboTV. Greenfield noted that it would be difficult to make money in the virtual MVPD business, especially with little leverage against content owners.

At the time, the stock traded at $44.

“There is no special sauce [for] Fubo, which can turn the fundamentally flawed MVPD/vMVPD business into a good one, especially if it lacks scale and other products to bundle,” Greenfield said.

Also: NewFronts: FuboTV Offers Custom Audience Segments to Advertisers

FuboTV has been looking to move into the lucrative sports betting market.

In January, Greenfield upgraded fuboTV from sell to neutral.

"Fubo’s financial challenges could worsen in 2022 if their recent sports rights licensing deals do not drive enough incremental subs. Lastly, we believe it is highly unlikely that Fubo has access to capital going forward," Greenfield wrote.

"All that said, with Fubo stock down nearly 85% in 13 months and the company sitting on $375 million of cash, we are going to wait and see whether management abandons their sports betting 'fantasy' to reduce the cash burn in 2022 and beyond. While the company could also put itself up for sale, we believe the most likely buyers would look to poach Fubo’s subscribers post-bankruptcy, rather than buy the whole company at the current $1.4 billion valuation," Greenfield wrote.

Fubo shares closed at $2.91 on Monday, down 10.46%. ■

If you want a higher-level executive position in the business of media and technology, you must be able to respond to tough questions from equity analysts in a way that doesn't deliver a straightforward answer, but nonetheless offers something vaguely provocative and which keeps the discussion moving slooowly forward. They won't let you on an earnings call without that skill. 

As for Andy Forssell, executive VP and general manager of HBO Max, he was asked on Twitter by prominent Lightshed Partners principal Rich Greenfield why HBO Max is encouraging customers to pay $149.99 for a full year of service by offering four free movie tickets for WarnerMedia's upcoming reboot of The Matrix.

Since the full-year offer represents a 16% discount from the monthly $14.99 price of ad-free HBO Max, Greenfield wondered if WarnerMedia and HBO Max are worried about churn. 

Forssell, a grizzled veteran who's logged plenty of hours over center, responded Wednesday morning, acknowledging that it's a "challenge" for "external observers" like Greenfield--and the rest of us!--to understand the machinations behind HBO Max's go-to-market strategy.

And frankly, it still is. 

"We're constantly doing many tests in parallel (volume would surprise you) of so many kinds of offers--really wide ranging, otherwise you don't learn fast enough or broadly enough," Forssell tweeted back, before asking Greenfield if he took advantage of the price discount. (He said he did.)

■

LightShed Media Partners analyst Richard Greenfield has described a decidedly bleak prospect for Sinclair Broadcast Group successfully transitioning its debt-ridden Bally Sports-branded regional sports networks into a direct-to-consumer streaming service. 

It‘s “#GameOver” for that gambit, Greenfield said in a posting this morning. 

Also read: Sinclair Streaming RSN Plan Slammed by MLB Commissioner Rob Manfred

“Sinclair has tried to convince investors that it can avoid a Diamond Sports bankruptcy by transforming its 14 RSNs from being locked into the legacy MVPD/vMVPDs bundles to a direct-to-consumer, over-the-top streaming service … and that there is a robust sports betting opportunity for the Diamond Sports RSNs to take advantage of,” Greenfield wrote.

The analyst may have gotten the number of Bally Sports RSNs operated by Sinclair's Diamond Sports Group wrong — it‘s actually 21. 

But Greenfield appears spot on when he said that the whole pitch appears based on a “fabrication:” That is, all 14 Major League Baseball teams that have linear TV licensing deals with Bally Sports RSNs are willing to also license their DTC/streaming rights to Diamond Sports.

Last week, MLB Commissioner Rob Manfred damned the plan —  and perhaps, Diamond Sports into eventual bankruptcy — when he said simply that Sinclair doesn‘t “have the rights” it needs to pull off an ambitious DTC plan revealed to investors over the spring. 

Extrapolating further, Greenfield described MLB as being philosophically similar to the NBA in terms of how it manages digital rights. The MLB did decide in 2019 to let its teams negotiate their digital rights themselves. To date, however, only four of the 14 MLB teams that Sinclair partners with have offered up their OTT rights: the Miami Marlins, the Tampa Bay Rays, the Kansas City Royals and the Milwaukee Brewers. 

Also read: Why Sinclair‘s $250 Million Sports Streaming Swing Could Deliver a Walk-off Defeat of Pay TV

Ultimately, Greenfield believes, MLB and NBA teams will work with their respective league and a third-party technology vendor to make their own DTC services, re-negotiating with pay TV operators to preserve whatever revenue is left from the linear ecosystem.

And Sinclair very likely won't be a part of those forward-looking enterprises, he said. 

”Sinclair has no expertise in digital or streaming, has never built a direct-to-consumer subscription business and only covers a portion of the U.S.,” Greenfield added. “Sinclair is actually one of the worst possible choices for the leagues to partner with in digital.”

Classifying Sinclair as an absolute digital beginner is too harsh. 

Not only does the broadcaster‘s portfolio include 185 local broadcast stations, but several digital over-the-air channels, hybrid AVOD/local programming streaming service STIRR, a major investment in ATSC 3.0 tech and the shared local-news service NewsON, plus a better integrated ad-selling infrastructure.

But again, Greenfield's larger point — that Sinclair and Diamond have a tough ninth-inning rally in front of them — holds up. 

Sinclair bought the Fox Sports RSNs from Disney, as well as the Marquee Network and YES Network, in August 2019 for $9.6 billion, putting them under the control of a separate company it owns, Diamond Sports, and selling the naming rights to the channels. 

Much as they did in 2015, when AT&T paid $49 billion for DirecTV, analysts questioned what the heck Sinclair management was thinking paying a such a huge sum of money amid declines for the multichannel video programming distributor business. 

Sinclair was left trying to pay off nearly $10 billion in debt with an RSN business that has annually escalating costs in the form of team contracts, but declining EBITDA from pay TV customers continuing to exit the ecosystem. 

“After Sinclair purchased the Fox RSNs from Disney, we wrote that we expected the newly renamed Diamond Sports RSN group’s EBITDA of $1.6 billion to turn negative by 2025,” Greenfield noted. 

Google parent Alphabet didn’t talk about its streaming TV service YouTube TV, or its escalating battle with streaming device maker Roku, on its Q1 conference call April 27. But what it did say about the YouTube internet video service should send shivers down every TV executive’s spine.

On the call yesterday, which was broadcast over YouTube, Google senior VP and chief business officer Philipp Schindler said that YouTube’s Brand business -- which offers content tied to a specific brand, meaning it also attracts higher ad revenue -- has more than 2 billion global monthly logged in users, watching over 1 billion hours of video every day. Think about that for a minute.

LightShed Partners’ senior analyst and partner Rich Greenfield did, tweeting shortly after the Tuesday call that at 1 billion hours, YouTube has 2.5 times more streamed viewing hours than Netflix, which he estimated streams 400 million hours per day. 

“Linear TV’s future is grim at best,” Greenfield tweeted.

That alone should get some TV people nervous, but then Schindler got a little scarier, noting the ad reach that the service has. He first said that Taco Bell saw a 27% incremental reach for its limited time offer campaigns. Kellogg’s Special K campaign’s incremental reach was more than 30%, he said.

Then he got downright terrifying. 

“Historical approaches to reaching audiences through, let’s just say, call it linear TV, don’t really work anymore,” Schindler said. “Advertisers are using YouTube now to reach the audience they can’t find anywhere else. And remember, more 18-to-49-year-olds are actually watching YouTube than all linear TV combined, and brands are also seeing more incremental reach on YouTube compared to TV.”

If there is one thing that will ensure the death of any business, is that the money it depends upon for survival finds another place to go. And Google, after already scarfing up most of the digital ad revenue and all of the search ad revenue in the world over the years, is getting ready to dominate the ad space in branded video content as well. 

Because in the end, it doesn't matter if the kids are watching makeup videos on YouTube, Shadow & Bone on Netflix or the 17th season of Grey's Anatomy on ABC, ad money is going to flow to whatever they are watching. And now it looks like more kids are watching makeup videos. 

Analysts that follow Google and usually concentrate on the Search engine ad growth, are beginning to take notice of the TV implications to YouTube’s success. In a note to clients, Evercore ISI Group analyst Mark Mahaney noted the “tipping over of linear TV ad budgets, some of which we believe are being shifted over to YouTube.”

YouTube, Mahaney added, is at an ad product inflection point with its Direct Response offering and what the analyst noted as a “massive ARPU ‘gap up’ opportunity” given that it monetizes at less than a 10% premium to Twitter.    

Canaccord Genuity Capital Markets analyst Maria Ripps noted that ad revenue rose across the board for the internet giant -- up about 30% each for search and networks and 49% for YouTube.

“YouTube saw robust demand from DR and continued strength from brand spend, and the company remains focused on integrating shopping features given how often users go to YouTube to decide what to buy,” Ripps wrote. “During Q1 Google launched new capabilities for users to purchase items from their favorite creators along with the ability for merchants to place product feeds directly inside video action campaigns.”

What’s even more disheartening is that YouTube’s DR business didn’t even exist three years ago. On Alphabet’s Q4 earnings call, Schindler said it was “one of the largest and fastest growing ad offerings on YouTube.” Paired with TrueView for action, which provides  in-stream video ads that enable advertisers to convert prospects from within the ad via lead generation forms, he claimed it makes it easier for advertisers to unlock opportunities through video campaigns.

On the Q4 call, Schindler said that 60% of TrueView for action customers were new to YouTube and that the company more than doubled the number of active advertisers using the service in the first six months of 2020.

On Tuesday’s conference call, Schindler said the DR business is “just getting started.”

He noted that Calvin Klein tested out the shopping capabilities of the BrandConnect program, and saw a 200% lift in brand search, selling out multiple products.

“For merchants, they can now bring their product feeds directly into their video campaigns and I think we are still scratching the surface on what’s possible really with commercial intent on YouTube,” Schindler said. 

So I’m beginning to think that YouTube TV, which everybody thought was going to kill pay TV when it first started offering 70 channels for $35 per month, doesn’t mean that much to YouTube as a business. It’s had to raise its prices first to about $40 in 2018, then to $50 in 2019 and last June to about $65 per month,  only has about 2 million subscribers, making it about the size of Sling TV, and maybe if it can’t get what it wants from Roku -- which according to reports is along the lines of giving special search privileges to and access to data for the separate YouTube app, that’s no skin off its back. Roku has accused Google of “anti-competitive practices,” which should rattle the internet giant a bit in the current political climate, but it seems that even if YouTube TV lost a million or so subscribers minus a Roku deal, it wouldn’t matter much. There are 2 billion people watching 1 billion hours of how-to videos and infomercials on YouTube each day, and the YouTube app is still available on the  Roku lineup. So in the long run, Google will eventually get what it wants either way. 

Sony is making the smart play by not launching a “Sony Plus.”

That’s the contention of LightShed Partners analyst Richard Greenfield, following the studio’s announcement of a new output deal with Disney. The agreement delivers to Disney Plus rights to Marvel Spider-Man films and other Sony movies, after they complete their “Pay 1” window through a separate agreement announced several weeks ago with Netflix. 

The pact, which runs from 2022-2026, gives Disney Plus rights to the Marvel titles it doesn’t already own (aka Spider-Man), about nine months after their theatrical run. It’s the window that was previously confined to ad-supported cable and broadcast TV.

The deal is reportedly worth hundreds of millions of dollars of its entire span.

Also Read: Netflix Ups the Ante with Latest Deals 

“Every studio exec should be questioning whether competing in SVOD ‘really’ makes sense vs. being an arms dealer,” Greenfield tweeted Wednesday, applauding Sony’s deal. 

Indeed, Sony once had grand plans about building an OTT ecosystem based on its PlayStation console business. But before it even ditched its quest to be a virtual pay TV provider (RIP PlayStation Vue), it ran away from the SVOD biz, too, selling Crackle to Chicken Soup for the Soul in 2019. 

In earlier remarks made at a Variety event on Monday, Greenfield elaborated on the competitive nature of the SVOD business. Most media conglomerates don’t have the scale—or the will and commitment—to succeed in it right now, he said. 

Also Read: Comcast Launches Disney Plus and ESPN Plus on X1 and Flex

“Everything Disney is doing illustrates that the one thing they have learned in the first 12 months of Disney Plus is that the resources to be successful are far, far beyond what they initially anticipated,” Greenfield said. “Everyone is going to have to learn this."

“The way to win in the streaming wars is to be incredibly focused, put the consumer first and stop worrying about your legacy business, stop worrying about breaking windows,” he added. 

Of course, Greenfield’s advice doesn’t necessarily pertain to Sony, which has found a way to profit from keeping windows intact. 

“This groundbreaking agreement reconfirms the unique and enduring value of our movies to film lovers and the platforms and networks that serve them,” said Keith Le Goy, president of worldwide distribution and networks for Sony Pictures Entertainment. “We are thrilled to team up with Disney on delivering our titles to their viewers and subscribers. This agreement cements a key piece of our film distribution strategy, which is to maximize the value of each of our films, by making them available to consumers across all windows with a wide range of key partners.”

Analyst Rich Greenfield’s research company, LightShed Partners, said it is launching an investment firm--LightShed Ventures--that will focus on the technology, media and telecommunications industry.

It’s first fund--LightShed Ventures Fund 1--will invest $75 million in the seed and series A rounds of private companies in the sector. 

Lightshed Ventures has already invested in Podchaser, Slipstream, Antenna Analytics and another unnamed company. 

“LightShed Partners will serve as the foundation for what we do at LightShed Ventures. Our unique, thematic research remains our life blood. The principles behind our research will underpin our investments. But the research itself is just the start of our flywheel. Everyone knows we have one of the biggest megaphones in TMT to amplify our ideas and strengthen our brand and mindshare,” said Greenfield, general partner of Lightshed.

Greenfield started LightShed in 2019 with fellow analysts Walter PIecyk, Brandon Ross and Jamie Roberts Seltzer.

LightShed Ventures said its limited partners include a significant institutional investor and a group of prominent media, telecom, tech, sports, entertainment, music and financial executives.

Greenfield and LightShed have focused on the way technology companies have disrupted traditional industries, including the TV business. 

“We have spent much of our time understanding upstart industry disruptors and have been active angel investors,” said Piecyk.

Rich Greenfield, the analyst who is outspoken in his belief that streaming will demolish the traditional TV business, said he was wrong about his recommendation to sell stock in the Walt Disney Co.

Read Also: Disney Plus Now at 86.8 Million Subscribers

In a post entitled “Upgrading Disney to Neutral: We were Wrong,” Greenfield and his colleagues at Lightshed partners, said he under-appreciated how quickly business would return to “normal” despite the continuing COVID pandemic and underestimated how completely Disney management would throw itself into its pivot to streaming.

“While we cannot fix our mistake, we believe investors will find it valuable for us to analyze why our call went off the rails, particularly in the past couple of months,” he said.

Read Also: Rich Greenfield Urges Investors to Sell 'Money-Losing' FuboTV

In particular, Greenfield said they were surprised that new Disney CEO Bob Chapek has gone all-in on streaming. They were “blown away” that Disney plans to increase content spending to more than $8 billion by 2024.

“Honestly, we felt Disney had given the CEO job to the wrong person,” Greenfield said. Instead Chapek has "impressed us” by leaning hard into the streaming playbook.

Read Also: Analyst Rich Greenfield Launches LightShed Partners

Greenfield also said that Disney has been managing its business to get the most possible subscribers and not prioritizing average revenue per unit or other shorter-term financial metrics. The company is also moving toward unifying its streaming products, putting ESPN into Hulu and pushing the Disney Plus-ESPN Plus-Hulu bundle.

Finally, Greenfield and Co. were surprised that the market no longer cares about the performance of ESPN and Disney’s other traditional TV properties.

“We believed Disney was moving slowly in streaming to sustain the health of those legacy TV assets,” they said. “While virtually every investor we talk to would like to see Disney spin-off its legacy broadcast/cable network assets, especially ESPN as we have suggested, they believe any value from a direct-to-consumer sports streaming business is a net positive compared to the legacy business simply evaporating over the next five to six years.”

Disney stock was down 0.69% to $177.35 in mid-day trading Friday.

Controversial media analyst Rich Greenfield has joined four former BTIG colleagues to create LightShed Partners, a telecom, media and technology research firm that will provide clients research and analytical information on public and private companies in the space.

Greenfield will be joined in the new venture by former BTIG technology analyst Walter Piecyk and former BTIG media analyst Brandon Ross, former BTIG telecom analyst Joseph Galone and former BTIG VP of media and tech equity research Mark Kelley. Together the partners have more than 20 years of TMT research experience and have worked together for more than a decade.

Greenfield has been a media analyst for quite awhile himself, covering the space for Goldman Sachs for eight years before moving on to Fulcrum Research in 2003 and Pali Research in 2007. He joined BTIG in 2010.  At BTIG, Greenfield has been a big proponent of streaming media and the continued dismantling of an antiquated programming model.

Greenfield had said that he and Piecyk would split from BTIG to start their own firm in July. At the same time, BTIG said it would collaborate with the new firm “on a variety of important strategic initiatives.” 

According to a press release, LightShed will initially offer tiered, subscription research for institutional investors like its first client, venture capital giant KKR.

LightShed added that it has also struck a strategic relationship with KKR, a long-time TMT investor that has deployed $26 billion in TMT transactions since 1983. KKR will work closely with LightShed’s founders as they build their research platform for TMT investors globally.

“LightShed is the culmination of our team’s decades of work analyzing the tectonic shifts in TMT, from the earliest stage startups to publicly-traded industry behemoths. We have always pushed boundaries in our research and this new enterprise will allow us to be even more creative in helping our clients identify trends ahead of the broader market,” Greenfield said in a press release.

[embed]https://twitter.com/RichLightShed/status/1171455751971196928[/embed]

At launch, LightShed also offers its subscribers and corporate clients a library of historical analysis going back to 2006 via its website www.lightshedtmt.com.

“The LightShed team pioneered the blog format for institutional research and will continue to innovate research techniques and mediums, both to educate our clients and to interact with the key TMT industry executives,” Piecyk said in a press release. “While others are busy mailing PDF’s, we will be seeking to leverage popular, user friendly modes of communication, multimedia and new web technologies to push the LightShed platform even further and provide differentiated content to our clients.”

LightShed said it will also provide premium subscribers with opportunities and special events that give them the ability to engage with executives and thought leaders in the industry.

“In our experience, nothing is more valuable to investors than sitting face-to-face with industry executives to understand how they think about their business and the rapidly evolving TMT industry landscape, whether it be a legacy industry giant, an established disruptor or a pre-seed startup,” said Ross said in a press release. 

For AT&T and Time Warner, now comes the hard part.

In the months leading toward U.S. District Court Judge Richard Leon’s rejection of the federal government’s attempt to block the AT&T-Time Warner merger, both companies made a lot of promises. Now, with the $108.7 billion deal having closed last Thursday (June 14), they will have to make good on them.

On June 12, Judge Leon rejected the U.S. Department of Justice’s claims that the deal was anticompetitive, calling into question the DOJ’s math and its assertions that the combined company would restrict access to programming or raise prices.

He also attempted to nip any thoughts by the government of appealing his decision, adding any moves toward a stay would “cause irreparable harm to the defendants in general and AT&T in specific” and would be a “manifestly unjust outcome of this case.” The DOJ agreed, but still has the right to appeal.

Related: AT&T, Time Warner Cleared to Merge

Agreeing to Arbitration

Though Judge Leon imposed no conditions on the deal, AT&T and Time Warner pledged a few things they hoped would smooth the approval path. Perhaps the pledge with the biggest impact across the industry was the promise to offer “baseball-style” arbitration in carriage disputes between its networks, such as TNT, TBS, CNN and Cartoon Network, and other distributors.

In baseball-style arbitration, a third party arbitrator receives sealed proposals from both parties in the dispute, and after a hearing selects one of those proposals without modification. During the arbitration period, no networks could be blacked out.

AT&T-Time Warner had promised to extend the arbitration offer for seven years after the deal closed. According to AT&T, the arbitration offer still stands.

The American Cable Association, which was against the merger, said although the arbitration offer is flawed — it doesn’t include HBO — it is an essential part of the deal.

“If there is any saving grace in the Court’s opinion, it is that the Court recognized that the offer made by AT&T-Time Warner (via Turner Broadcasting) to agree to commercial arbitration to settle program access disputes ‘will have real-world effects,’ helping to prevent ‘new’ AT&T from raising prices to its rivals,” the ACA said in a statement.

AT&T made some other promises for after the deal closing, including launching a sports-free video bundle that will cost $15 per month for non-wireless customers, but will be free to AT&T Wireless subscribers with unlimited data plans. AT&T chairman and CEO Randall Stephenson said the service, called AT&T Watch, would include Turner channels and others, but would only come to life if the Time Warner merger were approved.

AT&T also promised to offer a broadband-delivered DirecTV product, priced at between $80 and $90 per month, but details on that product were sketchy. Still, analysts saw AT&T Watch — and the telco’s aggressive discounting strategies (wireless customers get the $35 DirecTV Now package for $10 per month) — as a critical look into how AT&T views the content business going forward.

Related: AT&T to Introduce Broadband-Delivered OTT DirecTV Product

Bundles and Other Promises

In a blog titled “AT&T Wants to Give Video Away for Free,” BTIG Media analyst Rich Greenfield wrote that creating another sports-free bundle is nothing new.

“What makes AT&T Watch so significant is that AT&T is planning to give this package of video channels to AT&T wireless unlimited plan subscribers at no cost,” Greenfield wrote, adding that with an estimated 15 million AT&T Wireless customers on unlimited data plans, uptake should be high.

All of these moves appear to be in line with what Stephenson has been saying all along — the days of high-priced, fat packages of linear TV are over.

“If you’d asked me seven years ago what this world would look like today, I would have missed it so far,” Stephenson said during the April DOJ trial, according to a court transcript. “The need for people, for content creators, to go through cable companies and satellite companies to get their content to the consumer, that is a thing of the past.”

BTIG Media analyst Rich Greenfield said Thursday that 21st Century Fox executive chairman Rupert Murdoch is open to a competing cash bid from Comcast for assets it had previously pledged to the Walt Disney Co., adding that the Fox chief merely wants to maximize the value of his assets.

In December, Fox agreed to sell its cable networks FX, FXX and National Geographic, its 20th Century Fox movie and TV production studio, 21 regional sports networks, its 39% interest in British satellite company Sky and its 30% interest in online video company Hulu to Disney in a deal now valued at about $68 billion. Comcast, which already has made a formal offer for Sky for $31 billion, in May said it was prepared to make an all-cash bid for the Fox assets that would be a significant premium to the Disney offer. 

Related: Comcast Sparks an Old-School Bidding War (subscription required) 

Speaking to Cheddar TV, Greenfield said that Murdoch and his shareholders are aligned in their interests, and that reports that the Fox chairman preferred Disney stock to cash because of the tax implications are “factually incorrect.”

Citing several unnamed sources, Greenfield said he believes Murdoch is more open to a Comcast offer now.

Murdoch, he added, simply wants the best deal, meaning the most value, whether that is cash, or cash and stock.

“This is a real opening for Comcast to come in with a very significant premium bid to where Disney is now,” Greenfield said.

Related: Comcast-Fox: Go Big or Go Home 

Most analysts, Greenfield included, expect Disney to fight hard for the assets, should Comcast make a formal bid. In an earlier blog post, the BTIG analyst mentioned that losing out on Fox would be almost too much for Disney chairman and CEO Bob Iger to bear. But he added Comcast chairman and CEO Brian Roberts also is likely to dig in his heels.

“[W]e have a really hard time seeing Iger ending his career in defeat to Comcast and then simply retiring after the loss (damages his legacy),” Greenfield wrote in the blog post. “On the other hand, we cannot imagine Brian Roberts as an owner who is looking out 30+ years losing the last major chess piece on the game board that he covets, especially to Disney. That is not the storybook ending Roberts wants either.” 

BTIG media analyst Richard Greenfield – one of the early backers of the over-the-top model – predicted that online retailer Amazon is best poised to become the most disruptive force in the pay television industry, outpacing Netflix and using its vast resources to fund forays into sports and other entertainment.

“They [Amazon] are all about the bundle, it is just a different bundle than what we are accustomed to,” Greenfield said on The CUSP Show, the official podcast of the Columbia University Sports Management Program. “It’s music, it’s video, it’s shipping. They want to be a bundled player.”

Amazon has already committed to spending billions on original programming and earlier this week revealed that its Amazon Prime service, which includes free two-day shipping for products, video and music, just passed 100 million customers.

Amazon is no stranger to sports – it renewed a deal for streaming video rights for Thursday Night Football in April  – and has been thought to have greater aspirations. But the company has been reluctant to spend heavily on products that it can’t the directly to additional subscriptions. While sports hasn’t passed that smell test so far, it may in the near future.

Greenfield said data gleaned from the company’s digital relationship with viewers will be the difference.

“They are going to use that data to inform their decision making,” Greenfield said. “Amazon ran a test, they clearly understand now, even [with] just a simulcast, how many people watched, how long did they watch, why did they tune out, what did we learn, do those people buy more NFL merchandise over the course of the next year, did those people buy more NFL tickets over the next year. It’s using the data to make a much wider ranged decision than the way a traditional media company can make a decision.”

Greenfield doesn’t believe Amazon or any other tech giant wants to spend the money to wrest Sunday football from the broadcast networks. But he believes that Monday Night Football could be an attractive target.

“I think the NFL will keep Sunday on broadcast TV for the foreseeable future,” Greenfield said. “I think reach, and the success of Sunday night football, Thursday Night Football and Sunday afternoon football is going to keep that on broadcast well into the next decade. If you wanted to change the TV ecosystem in a meaningful way, Monday Night Football already moved from broadcast to cable once, moving from cable to the Internet doesn’t seem crazy.”

Greenfield noted there are risks – he estimated the NFL gets $2 billion a year for MNF rights from ESPN.

“The dollars are significant. On the flip side, this sort of feels like, if you’re a tech player, this is your one big shot to see how you can change the game. …If you pull that sports piece out of the Jenga puzzle the game collapses.”

And the analyst added that other tech companies could also enter the fray – Facebook bid on Indian Premier League cricket rights last year (it lost), streams Major League Soccer games  and in March reached a deal to stream 25 Major League Baseball games this season, Apple is investing heavily in entertainment content and even Netflix, which so far has stayed away from sports, could find a way in.

“The players that will matter [in sports rights] are going to be bigger companies that have the balance sheets and capacity to do it today and could attack this opportunity over the course of the next five years in a very methodical way,” Greenfield said.  

Comcast has raised eyebrows with its unsolicited $31 billion bid for U.K. satellite giant Sky, a move that both threw sand in the face of 21st Century Fox executive chairman Rupert Murdoch — who has been trying to consolidate the asset for years — and could solidify the U.S. MSO’s stature as king of all media.

Sky is the largest pay TV operator in Europe, with 23 million customers in the U.K., Germany and Italy. It owns original and licensed content and sports, including the coveted domestic rights to English Premier League soccer games. (Comcast’s NBCUniversal is the league’s U.S. rightsholder.)

Sky fits almost every criterion for a Comcast takeover — it’s a leader in its field, it is underappreciated, and perhaps more importantly it has ownership that is under pressure.

Fox, which owns 39% of Sky, has tried to consolidate the company for years. It first tried in 2011, but pulled its offer after a hacking scandal at its British tabloid newspapers made it unlikely a deal would be approved. Fox returned with a sweeter offer in December 2016, valued at £10.75 per share, but has run afoul of British regulators concerned with placing too much power in one company’s hands. Comcast’s bid, at £12.50 per share, represents a 16% premium to Fox’s offer.

Key to Disney Deal
Sky is an integral part of Fox’s sale of certain assets to The Walt Disney Co. — its content and sports assets jibe well with Disney’s own content holdings, many which are already distributed on the platform. Sky also has a compelling OTT product — Sky Now — which fits with Disney’s direct-to-consumer strategy, and Disney chief Bob Iger has called the satellite service a “crown jewel” among the Fox assets.

Fox had hoped to finish the Sky consolidation before the Disney deal closed and to transfer full ownership to the content giant once the deal was completed.

But now that is in limbo. According to BTIG media analyst Rich Greenfield, Fox has four choices: 1) increase its Sky offer and start a bidding war with Comcast; 2) start a conversation with Comcast for all of the Fox assets, while Comcast bids for the remaining 61% of Sky; 3) get Disney to work out a compromise with Comcast, like offering up its stake in Hulu, the Fox production studios (minus the Marvel content) and cable channel FX to back off; or 4) refuse to increase its bid, leaving Disney with the option of either selling its stake in Sky or being a minority partner with Comcast.

Options one and three seem most likely, Greenfield said.

Fox has said publicly that it stands by its December 2016 offer for Sky and hopes it will pass regulatory muster, while noting that Comcast hasn’t actually made a formal bid. Comcast, in announcing the deal publicly, said its bid was the first stage in the process and it hopes to work with Sky’s independent directors to hammer out a proposal.

The prospect of a mogul war between Comcast chairman and CEO Brian Roberts and Murdoch seemed not to sit well with some of the cable firm’s investors, who drove the stock down about 7% after the Feb. 27 announcement. But they seemed to settle down — the stock has started to slowly crawl back in subsequent trading — when it became apparent the deal makes more sense than they might have initially thought.

Gaining Global Reach
Sky would give Comcast tremendous scale, and scale is key to Comcast’s desire for Sky, Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said. With Sky’s 23 million customers, its set-top box technology and its content, Comcast could create a pan-European virtual MVPD and then further leverage its position as the No.1 distributor in the U.S. and Europe to launch a global service.

The Walt Disney Co. and 21st Century Fox held earnings calls last week, but quarterly returns weren’t among the most pressing questions from analysts.

Most of all, Wall Street wondered aloud if the two iconic companies would merge. As deal speculation swirled around both media giants, executives seemed eager to highlight the success of their cable and content properties while acknowledging the changing landscape.

Fox stock surged nearly 15% after reports that it had held talks, since ended, to sell off its 20th Century Fox studio, cable networks FX and National Geographic Partners, and its 39% interest in European satellite TV company Sky to Disney. In that scenario, Fox would have kept Fox News Channel and Fox Business Network, and its regional sports networks, broadcast operation and TV stations.

On Fox’s fiscal first-quarter conference call, executives were quick to point to the success of their cable operations — revenue at the cable unit was up 10% in the period, and affiliate fees rose 11%. Fox said the gains were due to growth across the portfolio.

But despite that success, Fox left the door to any possible deals or divestitures slightly ajar.

“We told you many years ago that innovative disruption would come to our industry,” 21st Century Fox co-executive chair Lachlan Murdoch said on the call. “We moved early to jettison our thin brands and went deep with investments for our rich distinctive brands, when many market pundits were skeptical of this approach.”

Whether that means more “thin brand” paring is due or it was just an attempt to give analysts historical perspective is open to interpretation. But Fox was adamant it has the scale and the assets to execute on its strategy.

At Disney, which escalated the cord-cutting conversation two years ago when it revealed flagship sports network ESPN was losing subscribers, some evidence suggested that erosion may be slowing. On a conference call with analysts Nov. 9, Disney chair and CEO Bob Iger said subscriber losses at ESPN were “not as deep” as they had been in prior quarters, in part because of deals with new over-the-top service providers.

Disney’s fiscal fourth-quarter results were mixed. Iger pointed to two-week Nielsen data that showed when live consumption of sports includes streaming and OTT platforms, ratings rise 25% to 29%, an encouraging trend. But broadcast revenue was down 11% in the quarter, and cable revenue was flat.

While neither Disney nor Fox did much to totally squelch speculation, it appears that the lines drawn in the initial reports — that Disney was doubling down on content and Fox was throwing in the towel — are much more nuanced.

Iger said Disney’s focus is on monetizing high-quality programming, and though he conceded that “some improvement from a quality perspective would be helpful,” he also pointed to the company’s strong production and creative capabilities. Disney has a live-action Star Wars series in development as well as midseason shows that should attract audiences.

“Our intention as a company is to take advantage of opportunities that exist out there today for good television and to produce more of it,” Iger said.

That could point to a deal with Fox, or another programmer. FX is known for high-quality content, and Fox’s TV production studios have cranked out perennial hits like The Simpsons and Family Guy for its broadcast unit, as well as Modern Family for Disney’s ABC.

Deal Wouldn’t Be Disney Cure-All
But not everyone was convinced that a Fox deal would solve Disney’s problems. BTIG media analyst Richard Greenfield, a staunch critic of Disney over the years, wrote in a blog post Nov. 7 that Disney should focus more on companies like Activision for gaming, Spotify for mobile subscriptions and Twitter “to capture the SportsCenter of the future.”

Sanford Bernstein media analyst Todd Juenger, another critic of the pay TV content model, said in a research note that “the chances of a Disney-Fox deal, as described, are very low.”

BTIG media analyst Rich Greenfield has long warned that the traditional programming model was eroding more rapidly than the industry thinks, telling traditional programmers that if they don’t do a deal quickly, they may be too late. While that stance has led to varied and emotional response from content companies, recent deals seem to show that at least some programming execs may have been listening.

“Over the past 10 months, industry fundamentals have eroded with it becoming increasingly clear to investors that the era of cable networks’ over-earning at the expense of the consumer is coming to a screeching halt,” Greenfield wrote in a blog Wednesday.

After AT&T’s blockbuster announcement to purchase Time Warner for $108.7 billion in stock, cash and assumed debt, the floodgates were expected to open with programmers all seeking a way out of what is a rapidly changing business. That didn’t happen but there have been some deals – Lionsgate’s $4.4 billion buy of Starz and last week, Discovery Communications’ $14.6 billion agreement to purchase Scripps Networks Interactive. Greenfield pointed to the heavy cash components of some of those deals – AT&T/Time Warner at 50%; and Discovery/Scripps at 70% -- as an indication that programmers are losing faith in the future.

Now, that might not seem to be entirely fair. Discovery and Scripps, for their part, have said their deal is a means to secure continued strong affiliate fee increases and could lay the groundwork for a future direct-to-consumer offering, much like what Greenfield and other analysts have been proposing for other programmers. And AT&T-Time Warner hasn't been completed yet, so there is still a chance for that deal.   

But historically, companies make all-stock acquisitions for two reasons – tax implications and a hope that as the stock rises the deal is worth more down the road. Taking mostly cash usually means that you don’t believe that the stock is going to appreciate. Or, if you're an individual, you won't be around long enough to see it appreciate.

Not to say all those all-stock deals were good -- AOL’s purchase of Time Warner Inc. in 2000, anyone? – but they were struck with an optimistic eye toward the horizon. That seems to have disappeared as programmers struggle with rapidly changing viewership trends, declining advertising and declining subscribers.

“Lack of confidence in the future is clearly driving a strong desire for cash-heavy exits,” Greenfield wrote. “Now the question is should everyone head for the exit and who will try to scale up to temporarily mitigate the secular challenges facing the legacy media industry?”

For Greenfield, the next steps should involve laundry list of programmers, but the most interesting in my book involve Disney, Fox, and AMC. I encourage you to investigate his blog to get the details.

Greenfield has been a staunch critic of Disney and its falling ESPN subscribers, but at this point he believes only the biggest tech giants can afford a deal, and they’re not biting. Instead, he sees Disney making a “series of strategic acquisitions in the coming year to diversify away from cable networks and build direct-to-consumer relationships and data on their consumers.”

At Fox, Greenfield hopes they will follow Time Warner’s lead and be acquired, but given Murdoch family control, he doesn’t expect that to happen. Fox has instead focused on consolidating it’s U.K. satellite company Sky – still winding through the approval process.

Smaller programmers like AMC, he noted, have done some interesting content deals with YouTube TV, Charter and Comcast, but Greenfield sees them as more a seller than buyer. For MSG Networks, the analyst expects it will be the same, more likely as a tuck-in acquisition for Fox, Comcast or another distributor with exposure to the NY market.

Perhaps the most interesting Greenfield scenario is for Comcast/NBCUniversal. Greenfield notes that NBCU made a mid-sized content purchase -- DreamWorks Animation for about $4 billion in 2016 – but he has higher hopes.

“Given the unique regulatory environment, we continue to believe Comcast should attempt an M&A Hail Mary by trying to buy Charter and if they want to focus on smaller deals with less regulatory risk, Spotify, Twitter and MGM would all be at the top of our lists,” he wrote.

Greasing the tracks of the absolute train wreck Viacom executive chairman Philippe Dauman’s and largest shareholder Sumner Redstone’s relationship has become, BTIG media analyst Rich Greenfield suggested that Viacom stockholders should sue the media company’s  independent directors.

In a blog post Thursday, Greenfield said shareholders have a case because it is obvious given Viacom’s recent performance, that independent directors haven’t held up their end of the bargain to act in all shareholders’ best interests.

Six of Viacom’s 11 board members are classified as independent. But Greenfield argues that although they have a fiduciary duty to look after all shareholders’ interests, instead they have rubber-stamped an ill-advised share buyback program that he says “squandered” liquidity and raised leverage; Okayed promoting Dauman to executive chairman and making him the third-highest paid CEO in the U.S., despite continued operational failures under his watch and now is trying to solve its debt problems via a sale of a 49% interest in its Paramount movie studio. Greenfield views the Paramount sale as “misguided.”

All that should give shareholders more than enough fuel for lawsuits, Greenfield wrote. Adding more logs to the fire is that, according to the analyst, the Viacom board is using company funds to finance Dauman’s and board member George Abrams lawsuits against Redstone to block his removing them from the trust that will control his shares upon his death or incapacitation.

The analyst has already noted that given the structure of the trust’s board, there is no way for Dauman or Abrams to be reinstated, even if they do win.

He added that the independent board members should oust Dauman and end the financing of the Dauman/Abrams lawsuits immediately or face removal themselves.  

“Viacom’s board is delaying the inevitable and wasting company resources,” Greenfield wrote. “The best course of action is to act swiftly to enable Viacom to refocus on the operational challenges at hand, bring on new management and pursue a merger with CBS at market.”

About one year after abandoning its effort to become the uber-dominant distributor in the country when it walked away from its $67 billion purchase of Time Warner Cable, Comcast has turned its attention to programming, with its NBCUniversal unit's $3.8 billion deal to buy DreamWorks Animation, a move that will help boost its content library while potentially seeding its theme park business with new characters to build attractions around.

In DreamWorks Animation, NBCUniversal gets access to a film library that includes Madagascar, Kung Fu Panda, Shrek and How to Train Your Dragon, as well as a growing TV production arm that has churned out programming like Dawn of the Croods, Turbo and more for Netflix and other distributors. In NBCU, DreamWorks Animation finally gets the deep-pocketed parent that can help it produce more films and, with its cable and broadcast networks, provide another outlet for content.

Reaction to the deal was mixed. DreamWorks stock soared 24% (up $7.75 each) on April 28 to $39.95 per share, while Comcast shares fell 15 cents each (down 0.24%) to $61.15 per share.

Some analysts criticized the deal as being too pricey – it represents a 50% premium to DreamWorks’s stock price before rumors of a sale began to surface. Others said the benefits included additional theme park revenue from high-profile attractions and potential cost-savings on the animation side. NBCUniversal’s animation arm – Illumination Entertainment, under which DreamWorks would fall after the deal closed – farms out production of most of its animated movies to Japanese companies for a third of the price that DreamWorks pays.

“[T]o us, this deal makes a lot of sense, less because of the added animation heft to Illumination Entertainment (the studio that created The Minions) but more for what it could mean for the Universal Theme Parks,” Telsey Advisory Group media analyst Tom Eagan wrote in a note to clients. “It's easy to imagine a Shrek, Kung Fu Panda or Madagascar ride at the Universal parks."

BTIG Research media analyst Rich Greenfield took another approach, arguing in a blog post that DreamWorks has been on the block for at least three years, hasn’t traded above $40 per share since 2010 (the Comcast deal values the shares at $42 each) and has no other potential bidders besides NBCU.

“While we believe Comcast acquiring DWA is a mistake, [Comcast chairman and CEO] Brian Roberts clearly believes the acquisition is a good use of Comcast’s capital,” Greenfield wrote.

The analyst added that what could be attractive to Comcast is DreamWorks's 51% stake in Awesomeness TV, but said he believes that is overvalued, too – Verizon bought a 24.5% stake in the short-form video company earlier last month for about $159 million. And Verizon plans to develop content with AwesomenessTV for its go90 mobile video service, a potential Comcast competitor.

“DreamWorks will help us grow our film, television, theme parks and consumer products businesses for years to come,” NBCUniversal CEO Steve Burke said in a statement. “… The prospects for our future together are tremendous.”

DreamWorks will be headed by Illumination Entertainment CEO Christopher Meledandri, wile current CEO Jeffrey Katzenberg will become chairman of a new digital arm – DreamWorks New Media, comprisig the company’s ownership interests in Awesomeness TV and NOVA. Katzenberg will also serve as a consultant to NBCUniversal.

The past 12 months have been rough on The Walt Disney Co., with cord-cutting, cord-shaving and skinny bundles eating away at its flagship cable network ESPN’s subscriber base and, more recently, with the abrupt resignation of chief operating officer Thomas Staggs, heir apparent to the CEO throne.

As the perennially rock-solid Disney’s foundation begins to show some cracks, some analysts are calling for some radical changes, like opening its wallet wide to purchase subscription video-on-demand pioneer Netflix.

BTIG media analyst Rich Greenfield, a sharp critic of Disney’s failure to develop a direct-to-consumer strategy for its content and what he calls its overpayment for sports rights, believes a Netflix buy could solve two looming Disney problems in one swoop.

Greenfield in a blog called a Netflix deal an “acquihire,” made to bring in additional management expertise as well as assets.

While a Netflix-Disney pairing would create a formidable programming offering across all devices, mixing Disney’s movie studio, cable and sports content with Netflix’s original shows and deep library, the best part of the deal could be what it potentially adds to the C-suite.

With Disney chairman and CEO Bob Iger slated to retire in 2018, Netflix CEO Reed Hastings, whom Greenfield calls “a visionary CEO who understands the future of content and video programming,” could easily slip into the top role. Netflix could also solve Disney’s direct-to-consumer dilemma. It would make an over-the-top ESPN service more palatable and fill Netflix’s one programming hole, live sports.

But the price would likely be enormous. Greenfield doubted Netflix would sell for less than $100 billion. That’s well outside the $4 billion to $7 billion range of Iger’s most recent deals with Pixar Animation Studios, Lucasfilm Ltd. (which brought Disney the Star Wars movie franchise) and Marvel Entertainment (solidifying its superhero content slate).

“Buying Netflix is an awfully expensive acquihire, but it could be Disney’s only hope,” Greenfield wrote.

Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak is not so sure. He was an earlier proponent of Disney buying a stake in Netflix back when the stock was in the $40 per share range, when a Netflix stake would have let Disney capture some of the upside in the SVOD business early on and when Disney would have strengthened Netflix with more content.

An outright purchase of Netflix today, when it is at the height of its value — it was priced at $110 per share last week — could be throwing large sums of money at a bad idea.

With Netflix’s enterprise value of $45 billion, Wlodarczak said a deal could be done at $65 billion (representing a 50% premium) but would be too expensive for Disney. And it would likely remind investors of another illtimed and value-sucking mega-merger: Time Warner Inc.’s $64 billion marriage with AOL in 2000, considered to be the worst media deal of the 20th century.

Disney already has a content deal with Netflix, Wlodarczak noted. If it wants to go direct-to-consumer, he said, it has the content through ESPN, ABC and Disney Channel to do so on its own.

“The risk, of course, is that no one monetizes the current pay TV ecosystem better than Disney,” Wlodarczak said, adding that it would not be in Disney’s interest to create a low-cost alternative to subscription TV.

An ESPN-Netflix pairing could also mean the consumer price for Netflix would rise materially, were Disney to try to emulate what it gets from distributors today. And reportedly only 20%-30% of TV viewers watch sports.

“At this point Disney is better served letting SVOD develop and trying to continue to mark up the price of their content as much as possible to multiplying SVOD players,” Wlodarczak said.

The Walt Disney Co., battered by fears over flagship cable-sports network ESPN’s declining subscriber base and inability to release an over-the-top product, may not be a lost cause after all, according to a JP Morgan analyst who found the hole the programmer fell into six months ago may not be as deep as some think.

In a 22-page report last week, JP Morgan media analyst Alexia Quadrani called the panic over ESPN’s subscriber losses and fears that the network paid inflated prices for sports rights to keep them out of rival networks’ hands “exaggerated,” adding that even with a 2% annual decline in its subscriber base, Disney’s cable networks can continue to grow.

Despite reports to the contrary, ESPN could introduce an OTT product as soon as 2018 at a price that could be compelling to rabid sports fans.

CRITICS HAVE PILED ON

Disney stock has never quite recovered from its slide in early August, when the company said ESPN had lost 3 million subscribers in 2014 and 7 million since 2012. The idea that the network, long believed to be pay TV’s must-have service, was affected by cord-cutting and so-called skinny programming bundles triggered a sell-off across the sector, with programming stocks losing a combined $60 billion in market capitalization.

The bad news kept coming even as Disney’s movie studio prepared for the much-anticipated December release of Star Wars: The Force Awakens. BTIG media analyst Rich Greenfield, a longtime Disney critic, said in a blog post that ESPN’s fee structure would make it impossible for it to launch its own direct- to-consumer offering.

Later, Greenfield introduced a survey by consumer marketing and intelligence company Civic Science that said more than half of those surveyed would drop ESPN if they could save $8 per month on their pay TV bill.

Other analysts also have lowered their ratings on the stock, including Barclays media analyst Kannan Venkateshwar, who downgraded Disney to “underweight” on Jan. 15, primarily on ESPN fears. ESPN has about $53.4 billion in off-balance sheet programming costs because of sports, Venkateshwar said, which could be exacerbated by a declining subscriber base.

“If the company’s subscriber loss trend lines do not stabilize, the company’s cost recognition may have to accelerate to catch up with revenue trends,” Venkateshwar said in a report.

Quadrani hasn’t ignored the declines; she just doesn’t think they will have as great an impact as others who follow the sector. Even with a 2% annual subscriber decline, ESPN could still grow its affiliate fees by 53% over the next five years, she estimated, from $6.64 per subscriber per month in 2015 to $10.18 per sub per month by 2020.

At that rate, ESPN would grow its affiliate-fee revenue by 39%, from $7.4 billion in 2015 to $10.3 billion in 2020, even with the subscriber decline. Quadrani also estimated that ESPN could go over the top as early as 2018 with a $20-permonth offering, or about the same price that OTT service Sling TV charges for about 20 channels, including ESPN and ESPN2.

OTT OPTIONS OPEN

That’s still considerably less than some earlier estimates that ESPN would have to charge upwards of $36 per month for a standalone offering, a factor of its investment in sports programming. While others have criticized the worldwide sports leader for paying big for football, basketball and baseball rights, Quadrani argued that is exactly what would make an OTT offering most compelling.

Quandrani said the OTT offering could capture about 15% of the 12 million subscribers lost from 2010 to 2018 in its first year and 15% of incremental customers lost in each subsequent year.

Disney has said it has no plans to offer an ESPN OTT product anytime soon, and Quadrani said it doesn’t need to. “If Disney chooses not to move forward with an OTT offering, we still see ESPN remaining a healthy and profitable business,” she wrote.

SIDEBAR: Up With OTT

JP Morgan media analyst Alexia Quadrani believes ESPN can launch with a direct-to-consumer offering for as little as $20 per month, beginning in 2018 — and that it could help recapture some of the subs linear ESPN has lost.

                                                      2018E                     2019E            2020E

Subscribers                                   1.75 million             2.02 million      2.27 million

Penetration of Lost Linear Subs   15%                         15%                    15%

Annual affiliate fees at:

$15/month                                     $315 million             $363 million       $409 million

$20/month                                     $421 million             $484 million       $546 million

$25/month                                     $526 million             $605 million       $682 million

SOURCE: JP Morgan estimates

Disney shares slipped in early trading Wednesday after BTIG media analyst Rich Greenfield said a study showed that more than half of its respondents would drop sports network ESPN just to save $8 per month.

Disney shares were down slightly in early trading (less than 1% or 79 cents per share) to $100.67 each.

Greenfield has been one of ESPN’s staunchest critics – he downgraded Disney to “sell” just before the premiere of its blockbuster studio release Star Wars: The Force Awakens – and he continued to turn up the heat on the programmer with this latest survey. Greenfield has said repeatedly that ESPN has paid exorbitant rights fees for sports channels and that because of its fee structure would find it impossible to offer programming direct-to-consumer. While ESPN has said it has no current intention to bypass its existing distribution partners, it has said it could offer a direct-to-consumer product in the next five years.

Greenfield, on the other hand, doesn’t believe it, adding that the sports channel has been feasting on the cable bundle for decades – it is the highest-priced entertainment network at about $7 per subscriber per month – and would find it hard to survive on a smaller revenue diet.

“The price/value of ESPN and ESPN2 is simply too high for a majority of US consumers today,” he wrote in a blog posting.

BTIG hired consumer marketing and intelligence company Civic Science, which surveyed 1,582 consumers last week, 87% of which were multichannel TV subscribers. The survey asked two questions: would consumers drop ESPN and ESPN 2 if they could save $8 per month on their cable bill; and if the channels were only available as a standalone, similar to Netflix, would they pay $20 per month to get them?

According to BTIG, 56% of the respondents said they would drop the channels to save $8 per month (the equivalent of a Netflix subscription), with 60% of women and 49% of men saying they could do without the networks. Only 6% of respondents said they would subscriber to the standalone ESPN networks for $20 per month.

That highlights what Greenfield believes is the futility of an ESPN direct-to-consumer [DTC] offering.

“[N]o matter what price point ESPN/ESPN2 launch DTC, it enables their legacy distributors such as Comcast to offer far more robust channel packages without ESPN (currently 80% of their subscriber have to take ESPN),” Greenfield wrote. “ESPN is already struggling with the pain caused by cable packages such as Verizon’s Custom TV; now imagine those type of packages offered to a wider array of consumers.  We do not believe ESPN would be able to replace half its subs with a DTC offering.”

Not even Luke Skywalker and Han Solo could rescue The Walt Disney Co. from BTIG analyst Richard Greenfield, who did his best Darth Vader impression by downgrading the stock to “sell” Friday, lowering his 12-month price target to $90 per share and claiming the company won’t be able to recover soon from overpaying for sports rights.

The long-awaited latest installment of the Star Wars saga – Star Wars: The Force Awakens – opened nationwide in more than 4,100 theaters Friday, and with more than $100 million in advanced ticket sales is expected to break box office records. But Greenfield, in a blog posting Friday, said a blockbuster movie wouldn’t be enough to right past wrongs.

In his posting, Greenfield wrote that Disney overpaid for sports rights based on too aggressive subscriber projections. Earlier Disney said it lost about 3 million pay TV subscribers in fiscal 2015.

“Not only did Disney overpay for individual sports rights packages, they also acquired too many sports rights in an effort to prevent new competitors such as Fox Sports 1 and NBC Sports from growing stronger,” Greenfield wrote.

He continued that as a result he expects Disney to “meaningfully underperform investor expectations” given that cable networks represent about 44% of Disney operating income. He predicted that Disney’s fiscal 2017 operating income will be down and total OI will be flat.

Not surprisingly, Disney stock was down on the news, dropping as much as 3.5% ($4.09 each) in early trading Friday to $108.12 per share. The stock was trading at $108.88 each, down 2.8% ($3.13 per share) at 10.25 a.m.