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ROKU sends shockwave thru Streaming video Ad biz, -26% stock drop
An AMAZON PRIME vs NETFLIX $$ numbers comp / Inside THE GRAY MAN 1st weekend #s / Alan Horn joins WBD to advise Zaz
Mornin! This is Sean McNulty and here’s the Hollywood + Media news to know on FRIDAY July 29, 2022.
Where let’s send our Friday morning coffee toast ☕️ out to Norman Lear, who reflected on turning 100 years-old this week in the NY Times (he’ll also have a 2hr special on ABC in Sept btw).
So Norman please tell us you have coffee every day so we know the 497 studies that come out every year about coffee and longevity are true… 🙏
Although I found this insight from his piece (among many other gems) something to keep in mind about encouraging real life longevity:
“Those closest to me know that I try to stay forward-focused. Two of my favorite words are “over” and “next. It’s an attitude that has served me well through a long life of ups and downs, along with a deeply felt appreciation for the absurdity of the human condition.”
PLUS: Here’s your TORONTO FILM FEST lineup, including many Sept & early Oct movie releases as per usual… but also quite a few which won’t hit theaters or streaming until well into November 🧐:
UNI’s “The Fabelmans”
SEARCHLIGHT’s “The Menu”
NETFLIX’s “Knives Out” sequel
Plus Harry’s AMAZON pic “The Policeman” which is end of October.
Also makes me wonder - between VENICE & TIFF’s hearty lineups this year… What’s going to surprise drop at TELLURIDE over Labor Day? (maybe Alexander Payne’s next pic?). Any thoughts - email me email@example.com
ALSO: I join Janice & Tatiana on The Ankler Hot Seat podcast 🎙to talk through:
The PEACOCK challenges at NBCU and the tough decisions that face them come 2023, what the Social Media revenue alarms from this week mean for the Studios reporting next week in “Q2 Earnings: Maverick”. Ok fine week 2 🙄.
Good news!! This is one of those full free WAKEUP editions for all Ankler subscribers 🙌. Happy Friday!
I mean - like I could keep new BEYONCE behind a paywall… Here’s the link to BEY’s new album on SPOTIFY. Plus new the new MAGGIE ROGERS album plays me off at the bottom today.
IN THIS EDITION
WTF happened with ROKU last night
A “Gray Man” vs. other NETFLIX pics viewing comp
A look at AMAZON subscriber $$ vs. NETFLIX subscriber $$
Plus AMAZON mines the “Rocky” library to grow the “universe” as WB sets “Creed III” 2023 date.
Cable companies now have a BROADBAND problem, as CHARTER matches COMCAST’s blanking in Q2 account adds.
All the new things to watch this weekend, and more.
📽 THE SILVER SCREEN
While I ignore minutes streamed ‘news’ (if you’ve listened to me on The Ankler podcast… I’ll save you the rant), this one piece of data that NETFLIX reveals actually does have one use: comparing the popularity of films that are roughly the same length.
It’s not perfect by any means - it assumes an “everyone finished the film” caveat, and that no accounts watched a movie twice - although this part is likely much less of a factor on an ‘opening weekend’.
AND: NextTV kindly did a comp on what NETFLIX released for “The Gray Man” opening weekend vs. other major films in the past year.
I’ve added some running times for deeper analysis, and again - “Viewers” assumes everyone watched the full movie. While that’s not entirely accurate of course, this is the only thing NETFLIX gives out… so it’s the best we can do.
These are global #s:
“Hustle” - 85 Million hours
Duration: 117 minutes (2 hours)
Viewers: 42.5 Million
“The Gray Man” - 88.5 Million hours
Duration: 122 minutes (2 hours)
Viewers: 44.2 Million
“Don’t Look Up” - 111 Million hours
Duration 145 minutes (2.5 hours)
Viewers: 44.4 Million
“The Adam Project” - 92 Million hours
Duration 106 minutes (1.45 hours)
Viewers: 63 Million
“Red Notice” - 149 Million hours
duration 118 minutes (2 hours)
Viewers: 74.5 Million
ALSO IN MOVIES
AMAZON is wasting no time mining the MGM library - orders a script for a “Rocky” spinoff movie, “Drago”. Btw if there’s ever a “Paulie” movie - count me in 👍. But uh this one is being written by Robert Lawton, who wrote a Nicholl Fellowship-winning script about the making of the first “Rocky” pic. /The Wrap
AMAZON developing a biopic on author Philip K. Dick, to be directed by Alfonso Cuaron, and would star Charlize Theron. /THR
HBO’s “Industry” star Marisa Abela is favored to play Amy Winehouse in the “Back to Black” biopic in the works from director Sam Taylor-Johnson. /Variety
Michael Mann adds Patrick Dempsey, Jack O’Connell and Sarah Gadon to his ”Ferrari” pic at STX, to start shooting next week with Adam Driver, Penelope Cruz & Shailene Woodley. /Deadline
IN THE HOLLYWOOD EXECUTIVE SUITE
STX is closing their UK office as they reconfigure their business under new ownership, could impact up to 12 people. /Deadline
CEO Jon Feltheimer dropped from $19 Million to $5.6 Million, mainly due to a large drop in bonus.
VICE CHAIR Michael Burns dropped from $8.5 Million to $4.4 million
Veteran publicist Greg Longstreet joins DDA as Director of PR, will still keep director-driven list including Edgar Wright, Shane Black, Greg Mottola and others. Gina Sorial also joins as Director of Corp Comms. /Deadline
Alan Horn is coming home to WARNER BROS. Zaz enlisted him for a WBD role as a Senior Advisor - in case there was any remaining doubt about Zaslav’s commitment to the theatrical movie business 👇.
And this combined with the return of DeLuca… well everyone loves a 1999 redux - wait does this mean I have to go back to being an intern at NEW LINE? /TheWrap
📝 IN OTHER WORDS…
“David (Zaslav) is a very experienced businessman, a very successful leader and manager, but he’s never run a movie company.
I’m going to be available to help fill in blanks.”
- ALAN HORN in a THR… I guess “entry interview” for his a new “Senior Advisor” position to David Zaslav & the WBD team, reiterating he’s there as “a consigliere”, and all greenlight power still lies with Mike & Pam (& Zaz).
Although you won’t see him around the lot, or at least in the offices - he’ll be WFH due to COVID concerns (he hasn’t had it and would prefer not to).
#FunFact: He called every studio head in town (including DISNEY) to let them know. That Alan… Good Q&A.
📺 THE TV SET
JUST 3 THINGS
HBOMAX sets deal to stream “Abbott Elementary” library episodes - Season 1 goes up Aug 20 tho HULU is still the main home for it, new episodes will only be on that service this Fall so… this is more like a library kinda deal (WBTV produces the show). /The Wrap
💻 THE MEDIA BIZ
know that #medianerd 🤓 passed out 😵💫 after hitting send today.
He’ll catch you on Wednesday & definitely for Streaming report #SuperThursday next week.
Hey let’s start with the good news eh? (ok I really gotta cut down my time around Canadians)
ROKU Q2 USERS: 63.1 Million, +1.8 Million in Q2
Not gangbusters but a very solid 14% annual user growth rate. It’s slowing (a year ago it was 28%), but:
It’s coming off a bit of pandemic-high comps like everyone else
It’s a maturing US company whose International growth is only really just materially starting
Supply chain constraint issues (ROKU TV & device manufacturing) are still out there
ROKU is still the largest connected streaming platform in North America, they’re making inroads in Latin America, and just launched in the UK.
ROKU Q2 REVENUE: $764 Million, +18% vs a year ago
Sounds decent but… annual growth rate last year was pretty much 30+% every quarter. And it was 28% in Q1.
ALSO: That’s just 5% growth vs. Q1 2022. This is below their projections - problem #1 on Wall Street.
Last year Q1 to Q2 growth was almost 12%.
JUST FOR CLARITY: ROKU makes most of their money from Ad sales, not ROKU device sales. In Q2:
DEVICES (aka Player Revenue): $91 Million
AD SALES (aka Platform Revenue): $673 Million
AND: ROKU said they are essentially eating a lot of increased production costs for their devices, vs. increasing price so that is eating into $$ as well.
AAAANNND: Wall Street problem #2 - they pulled their previously stated financial guidance for the rest of 2022, and here we are.
ROKU noted that their Advertising Revenue did grow in Q2… just not as much as they were anticipating, and they missed their stated guidance.
Hence the 26% stock drop.
WHAT’S GOING ON HERE
ROKU noted they got a #PersonalBest $1 Billion in Upfront Advertiser cash this Spring… but their Ad Revenue is still heavily skewed to Scatter buys (along with a smaller Programmatic sales component) for their ROKU CHANNEL AVOD service & other Ad sales on the ROKU streaming platform.
Scatter - Video Ads bought with a short turnaround, vs. the longer term “Upfront” commitments which have a near year-long time horizon… and helps smooth out any bumps that may arise in a year ahead (ie one of the key reasons why the TV business has done this for decades).
FOR EXAMPLE: Scatter is how a lot of political Ad spending is bought. Networks also charge you more for Scatter vs. the rate you’ll get in an Upfront commitment.
So they leave a certain % of Ad inventory available throughout the year depending on how confident they think the economy will be in the year ahead, if it’s an election year, etc.
Programmatic - Gist here is Ad agencies buy commercial time for their brand clients via an online third party exchange with very short turnaround time, based on their demographic needs. This is digital platforms only.
It’s also a way for media companies to sell off Ad inventory by doing very little work or resource utilization.
So the nature of most ROKU Ad sales is relatively short term, and thus can be easily cancelled… and that’s what’s happened in Q2.
Essentially - this is the Streaming Video version of what’s happened at SNAP, META etc.
While ROKU is still confident in their long term biz fundamentals… like the rest of the economy - lotta clouds on the horizon at least thru Q3 and Q4.
ROKU doesn’t know how this is gonna shake out, so they made that move to pull their financial guidance for the rest of the year, which… Wall Street hates. SNAP did a version of this as well (they declined to issue Q3 guidance) and got a similar Street reaction.
ROKU also announced… say it with me, a hiring slowdown and spending cutbacks. They’ve cut back spending -10% in Q2, plan another -10% in Q3, and plan to cut back -25% in Q4.
This doesn’t mean layoffs per se (although that -25% cut in Q4 is large…), but it’s definitely a near hiring freeze for the time being while they wait and see… and it sounds like the ROKU ORIGINALS checkbook may get smaller, commensurate with the size of the continued advertiser spend pullback. Ie. We’ll see how bad this gets.
WILL THIS SPREAD TO THE STUDIOS
PARAMOUNT+ and HBOMAX could add some color to this next week… but they’re still primarily subscription based services - HBOMAX especially.
As I mentioned earlier this week, PARAMOUNT has been downgraded by 2 different analysts over the course of a week… so they’re expecting at least some element of bad news here (although now having CBS under the same roof should help #❤️thatUpfronts💰 - old VIACOM alone likely woulda been toast here to some degree).
But HULU is really the streaming service to watch, with a significant, longtime Streaming Advertising business that will tell us something about the US Ad biz and economy. Especially as their business is entirely US only. They’re up on Aug 10.
Along with DISNEY+ of course, who will definitely be asked about this too… as they plan to launch their Ad-supported version in Q4.
But again, they’re part of a much larger Ad buying network (ABC, FX cable networks etc) to help tie sales deals into… which is really the core of the issue here:
BIG PICTURE NOTE: All of the above services have something ROKU does not - a parent company with a large Linear TV Ad sales business with years of Ad Sales relationships, and a huge Upfront business to tie their Streaming mast to during rough times.
Advertisers will cut digital Ad spends first at the sign of headwinds, they’re not cutting their Fall NFL, College Football & NBA Ad spends. All due respect, ROKU also does not have any #mustbuy inventory.
Side note: This is a big reason why Zaslav is prioritizing the TURNER SPORTS biz in his stripping of the TURNER networks OP. It gives you great stability in times like this, especially vs. OP which keeps getting diminishing ratings. So if you’re gonna invest (or look for cuts) - makes a lot more sense.
NETFLIX will have this “solo ship” issue to a smaller degree in that they too don’t have a CBS or a GOOGLE to rely on, but obviously demand for NETFLIX Ads is in a way different category & scale than ROKU.
Much like NETFLIX’s big fall in Q1… ROKU is still the industry leader here by far and will be fine, especially once their international expansion really begins to take hold.
But it’s likely gonna be an especially rough few quarters ahead, with a good thought held for a quick-ish economic reecovery in 2023.
IF YOU FOUND THIS Wakeup #medianerd 🤓 BREAKDOWN HELPFUL:
A) Here’s a button to share it
B) I’ve done similar ones for Ankler subscribers over the past week on:
AND: I will be doing them for PARAMOUNT+, HBOMAX, the NY TIMES, DISNEY+, STARZ / LIONSGATE and more starting later next week for subscribers only in the weeks ahead.
So if ya like - here’s the way to get em:
Ok technically they added 38k. Although due to the ending of a gov’t subsidy… the country’s #2 Broadband supplier is actually -21k subscribers for Q2.
This compared to a +400k gain a year ago. Yeah this is a Q2 surprise really. It was expected to slow given the pandemic boom in wfh but… Zero growth is bad. Real bad.
They also blamed the big slowdown in the housing market like COMCAST did - fewer moves/homes sold, fewer people signing up for accounts or chances to steal market share.
They said churn itself is not increasing. But if low housing change is the issue - do we think this is gonna get better this year?
REVENUE still grew 6% vs last year, so the money is still coming in…
BUT: Cable TV bundle cord cord cutting also increased to -226k in Q2. This is essentially 2X as bad as any recent quarter they’ve had, also matching COMCAST’s huge “growth” in loss too.
CHARTER blamed their price increases for this.
They also have that crazy TEXAS lawsuit judgement against them of $337 Million, and an additional… $7 Billion added this week (pending appeal). But we’ll put a pin in that for now.
VERIZON Fios also posted weak Broadband Q2 adds (+36k) and their usual loss of TV subs (-86k). ALTICE you’re up next on Wednesday.
Look Q2 is never great for Cable companies historically… but this is particularly bad.
BROADBAND: 30.2 Million (-21k)
CABLE TV: 15.5 Million (-226k)
HOME PHONE: 9.5 Million (-266k)
MOBILE PHONE: 4.3 Million (+344k)
WHAT DOES THIS MEAN FOR HOLLYWOOD
Not a lot per se… especially in regards to Broadband.
But the huge losses in Cord Cutters means the Cable TV universe seems to be shrinking more rapidly, and shaky at best as we sit on the cusp of a recession. Could just be a bad quarter… or could be a trend, but eyebrows are definitely now raised.
This means less monthly carriage fee money to Cable Networks, and a smaller base of audience for them to put ads in front of, meaning potentially lower advertising $$.
So for the PARAMOUNT’s, NBCU’s and WBD’s of the world that still have a ton of cable networks, this isn’t great news. Coming at a time where they’re already losing hundreds of millions on their Streaming services (well NBCU and PAR at least).
Not a lot of HOLLYWOOD news from the real-life version of Buy n Large #wall-E, but here’s your big numbers.
A year ago, they made nearly $8 Billion, although this quarter includes about a $4 Billion loss on their investment in challenged electric car maker RIVIAN.
Excluding their AWS cloud services, 75% of their Revenue still comes from North America.
In fact - AMAZON’s International business Revenue actually dropped by over $3 Billion vs. a year ago
WHY IS AMAZON LOSING MONEY?
Their investment in electric cars ain’t goin so well
Do you know how expensive gas was in June?
International disruption in some markets #ThanksRussia
Strong Dollar / currency exchange losses
Post-pandemic business adjustments (maybe invested in a bit too much warehouse space…).
HOW ABOUT ADVERTISING REVENUE - ANY SLOWDOWN?
Eh… not really. AMAZON is still in a growth spurt in Advertising revenue - people still wanna sell on AMAZON PRIME.
Growth was +18% vs a year ago. Granted that’s down from 25% in Q1, and 33% in Q4.
AMAZON PRIME (ish) revenue
“Subscription Services” revenue was $8.7 Billion, or about $700 Million more than NETFLIX.
This technically also includes things like AUDIBLE, AMAZON MUSIC etc… so one could argue AMAZON PRIME itself and NETFLIX make very close to the same amount of money. Although PRIME’s shipping costs are just a wee bit higher than NETFLIX’s.
AMAZON Q3 looking at 13% - 17% Revenue growth, and either flat Revenue wise, or in the black up to $3.5 Billion.
AWS cloud service is booming (unlike rivals GOOGLE & MICROSOFT) - Revenue +33% in Q2, and should continue.
That plus WALL STREET always loving a rosy projection, $AMZN stock was +13% last night.
Ah, the return of the most useless earnings call in the media industry. Ok yes granted they’re a tech company, but with what they’re spending in HOLLYWOOD and the MUSIC biz, a little clarity would go a long way.
Or even just answer “Hey, what’s a definable marker of financial success for APPLE TV+?” But alas, with these numbers… not too many questions asked. Or more like answers given.
$83 Billion. In 3 months. Although this is just 2% growth vs. a year ago.
$19 Billion. In 3 months.
In case you’re wondering how they’ve written so many APPLE TV+ checks in the past 9-12 months. Although this was -$2 Billion vs. this time last year.
Their “Services” line Revenue (APPLE TV, MUSIC, App Store, iTunes, etc) was up $2 Billion vs. this time last year, to $19 Billion.
If/when that App Store 30% cut of Revenues policy goes away further (either by choice or regulation), this will be the line item to watch.
“Services” are now basically half the size of their iPhone business, and well over 2X any other 2 categories combined (Mac sales, iPad, Wearables/accessories - all of which had lower revenue vs. a year ago).
ALSO IN MEDIA
INSTAGRAM head Adam Mosseri released another statement this week, now essentially saying yeah we’re gonna walk back some of those TIKTOK-lite changes we were testing, including:
making INSTA a full screen video experience vs. the scroll you’re used to
stuffing your feed with things from accounts you don’t follow (did somebody tell Zuck?). /Platformer
Well - they’re still gonna do that, just to a lesser degree, and also now really focus on inserting the ‘best content’… vs. the ‘eh just shove anything in there’ approach they’ve been taking in 2022 so far.
Lesson Learned here: Kylie Jenner is still Social Media’s #1 policy influencer.
PINTEREST keeps expanding into original video - sets deal with JELLYFISH for 5 creator-led series who I’m thinking make things. This is in addition to their previous deal this year with TASTEMADE to create a whole slew of produced & live content. /THR
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🏦 STOCK NOTES
D’OH NOTE: Their BROADBAND subscriber growth vs. a year ago was +800k, not +350k as I wrote yesterday. That 350k was how many subscribers they added in Q2 2021. They still added none in Q2 2022.
CHARTER -8% ($435.58) #thanksComcast
ALTICE -5% ($10.58) #thanksComcast
META -5% ($160.72)
👩💻 THE FSS FEED:
(new Stuff to Watch this weekend, Friday - Saturday - Sunday)
👓 WEEKEND READS
If you heard all the “Phase 4” and “Phase 6” talk from MARVEL at COMICON last weekend… and were like me, saying “oh yeah cool” but really are not 100 on what that any of this means - definitely check out Richard’s Ankler column this week if you haven’t yet.
Richard thank you for doing the lord’s work here on this one.
PLUS: A look at what’s behind the drop in success for the most recent “Phase 4” projects
🎧 WEEKEND LISTENS
ANKLER HOT SEAT podcast: KEVIN SMITH joins Janice & Tatiana (I would have exceeded the pod’s Jersey quota) to give the expert COMIC CON 2022 insight about what he saw & experienced on the ground in its first iteration since Covid.
ONLY IN THEATERS:
WB “DC League of Super-Pets”
FOCUS FEATURES “Vengeance” directed by BJ Novak
BLEECKER STREET “A Love Song” - In limited release, played SUNDANCE and TRIBECA, comedic romance about 2 lone travelers connecting in America’s West, in case the idea of a big screen escape to the quiet of the open skies is of interest.
HULU “Not Okay” - STREAM HERE
NETFLIX “Uncoupled” - NPH series - STREAM HERE
APPLE TV+ “Surface” - Gugu Mbatha-Raw thriller series - STREAM HERE
AMAZON PRIME “Paper Girls” - 80’s ish throwback adventure series where 4 girls time travel to present day and meet their future selves to fight an evil force, with Ali Wong. STREAM HERE
SHOWTIME “NYC Point Gods” docu at 9p
Sweat in the city, probably wishing I went to the 🏖
SHOWTIME “City on a Hill” Season 3, at 10p
🎥 TRAILER HOUSE
NETFLIX “Blonde” movie trailer - Really great spot! Kudos NETFLIX marketing - PREMIERES FRI SEPT 28
NETFLIX “Locke & Key” Season 3 trailer - PREMIERES WED AUG 10
HBO “Los Espookys” Season 2 teaser trailer - PREMIERES SEPT 16
NETFLIX “Indian Matchmaking” Season 2 trailer - PREMIERES WED AUG 10
🎧 PLAYING ME OFF
Here’s the new MAGGIE ROGERS album “Overdrive” - link on SPOTIFY
And I was digging the title track this morning - paired excellent with CHARTER earnings report reading fwiw. Plus “Overdrive” is a good analogy for my brain at this point.
If you need some new tunes:
Email me anytime at firstname.lastname@example.org or connect here on LINKED IN.
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