In most new industry segments, contraction tends to follow expansion, which is why the various players in the crowded SVOD field are looking to join forces to gain a competitive advantage.
They’re looking at the Disney-Hulu-ESPN empire and the upcoming Discovery-Warner-CNN one and realizing that yes, scale really does matter.
Many observers have noted that ViacomCBS and NBCU would make a good combination, were it not for the fact that largely outdated regulations around broadcast TV ownership plus Comcast’s role as a distributor would seem to make a U.S. merger unlikely.
Which was why no one was all that surprised by a recent Wall Street Journal story on how NBCU’s Brian Roberts and ViacomCBS’s Shari Redstone allegedly met to discuss the possibility of joining forces overseas.
This makes sense for a number of reasons beyond just sheer numbers, though those numbers--especially the size of their respective libraries--are nothing to sneer at either.
One of the biggest challenges facing all of the Flixes is, that with the exception of Disney Plus and Discovery Plus, they are largely indistinguishable from each other.
Yes, they all have a few hit shows they are well known for (e.g., Hulu and A Handmaid’s Tale) and their interfaces are slightly different, but overall the original programming on the various services is fairly identical, falling into the “HBO-like” category of edgy, intelligent series aimed at affluent, educated, coastal audiences.
In other words, people similar to the people who run the networks.
This is a great strategy for ensuring you get great feedback from your friend group, but not a very good way to ensure that potential subscribers have a clear idea of what they’re getting when they sign up for your service and are thus unlikely to unsubscribe when whatever series they’re currently watching is done.
Until now, the Flixes have been dealing with the churn issue by moving to weekly releases, hoping that by stretching out a series to three or four months, they can keep viewers hanging on long enough for them to find time to get them hooked on something else.
Not a terrible theory, but not a great long-term plan either.
Netflix alone among the Flixes seems to understand the need to appeal to an audience that is broader than the usual “HBO audience,” and has thus signed up talent like Shonda Rhimes and Ryan Murphy, who specialize in the sort of well done programming that has considerably broader market appeal than say, Fleabag or BoJack Horseman.
While that’s a very smart strategy, it’s also resulted in articles by members of said coastal elite questioning whether Netflix has lost its “cool”.
To which, I suspect Reed Hastings’ response is, “If it means we appeal to 70 million people instead of 10 million, then we will gladly keep losing our cool,” Netflix’s ultimate goal being to keep adding subscribers and all that.
But back to NBCU and ViacomCBS.
While there are differences between the two, there’s also a shared aesthetic based on their background as broadcast and cable networks.
It’s a more mainstream aesthetic that’s also more family friendly, though broad enough to encompass everything from Comedy Central to Bravo.
Which is the other strength the two network groups have: a really deep library of well-known programming.
There’s much focus on originals as a way of keeping track of who is winning the so-called “streaming wars” but the reality is that one way to keep viewers subscribing is to have a really deep and broad library of well known series and movies that they can turn to during the 23 hours when they’re not watching your hit show.
That was, after all, the key to Netflix’s early success, and between them, ViacomCBS and NBCU have a wealth of offerings, everything from The Office to Viacom’s unheralded slate of Nickelodeon series of the nineties and aughts, which have massive appeal to younger Millennials and older Zoomers. (Hence the iCarly reboot.) There’s also all those Paramount and Universal movies.
The other thing they have going for them is name recognition overseas.
This is key when you’re competing against Disney, Discovery and HBO, all of which invested heavily in overseas markets long before streaming was a glint in Reed Hastings' eye.
So while viewers may not know Viacom, they do know MTV and VH1 and Nickelodeon and Sky (now an NBCU property), and even SyFy. Combining all of those networks under one umbrella would go a long way towards giving the combined companies the sort of name recognition that will help them gain some market share from Disney Plus and Warner Bros. Discovery, not to mention Netflix, Amazon and Apple, all of which have massive worldwide name recognition already.
Whether the deal goes through or not is still far from certain--one meeting is just one meeting and there are many strong personalities involved.
Still, combining forces would be a very smart move for both networks as the battle for subscribers moves overseas. A successful merger might also set a precedent for them to eventually join forces in the U.S., even if it’s just on streaming at first.
Stranger things have happened.
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Alan Wolk is the co-founder and lead analyst for media consultancy TV[R]EV