Would you rather build a bundle around Discovery or Netflix?
For the same reasons, I think Disney is much more important to Verizon than Discovery. Disney is something that could be the cornerstone of a bundle. Same with HBOMax for AT&T.
At the end of the day, I think you're making a good point about the value of having 100 million people who already pay you (probably via autopay) every month. But there are several companies like that (Verizon, AT&T, T-Mobile, Spotify, Apple, Amazon) and more trying to get there (Roku, Comcast [via X-1 white-labeling], Google). It will be interesting to see if one or a few of them can somehow aggregate demand in a way that makes access to their bundle essential. Presumably content creators are going to try to do everything they can to avoid that.
Would you rather build a bundle around Discovery or Netflix?
Depends on the economics of the deal.
If with its ~100M customer base, VZ can squeeze Discovery for exclusivity & price, and squeeze Disney+ for price, and others for similar deals in the future, and offer part of that squeeze as value to the customer, great.
With its ~74M customer base in the U.S., Netflix will be harder to squeeze.
For VZ to be able to squeeze, the streamer has to see ~100M higher-income level customer base in the U.S. as something they want.
Sure, VZ could sign a deal with Netflix that is not economically that great, and in turn, not offer anything of value from the the deal to the customer, or provide a discount to customer itself, but maybe its better to let go and wait.
Remember, they said No to iPhone a long time ago, and then Apple had to come back to them to access their customer base.
I don't think these matter in the long run. No streaming service is going to be exclusive. You simply can't afford to limit your market like that. It's just a discount play. Discovery seemed willing to take a nice discount with Verizon to immediately gain access to millions of subs. I would suspect the Netflix/TMobile deal is more to the benefit of TMobile than Netflix since they already have the largest footprint. The last thing Netflix wants is customers cancelling their full payment subscription to shift to a discounted one through TMobile.
Remember when iPhone came out and it was exclusive to AT&T? It's all just a race out of the blocks to try and gain a foothold.
I don't think these matter in the long run. No streaming service is going to be exclusive. You simply can't afford to limit your market like that. It's just a discount play. Discovery seemed willing to take a nice discount with Verizon to immediately gain access to millions of subs. I would suspect the Netflix/TMobile deal is more to the benefit of TMobile than Netflix since they already have the largest footprint. The last thing Netflix wants is customers cancelling their full payment subscription to shift to a discounted one through TMobile.
Remember when iPhone came out and it was exclusive to AT&T? It's all just a race out of the blocks to try and gain a foothold.
The bundler with a bigger customer base and especially higher income customer base can squeeze more.
The power to squeeze depends on what percentage of streamer's business is going through the bundler. Bundler with the highest percentage of streamer's business will be able to squeeze more, offer a better deal to the customer, get more customers, squeeze the streamer more, offer better deal to customer, and off goes the virtuous cycle. [/b>
With iPhone, we all know how it turned out. Now, Verizon has more Apple customers than any other carrier. In other words, among all three carriers, Apple has biggest percentage of customers going through Verizon in the U.S.. It has come to the stage that Apple had to cave in and let Verizon bundle Apple Music as part of Verizon bundle, instead of the other way around.
I don't think these matter in the long run. No streaming service is going to be exclusive. You simply can't afford to limit your market like that. It's just a discount play. Discovery seemed willing to take a nice discount with Verizon to immediately gain access to millions of subs. I would suspect the Netflix/TMobile deal is more to the benefit of TMobile than Netflix since they already have the largest footprint. The last thing Netflix wants is customers cancelling their full payment subscription to shift to a discounted one through TMobile.
Remember when iPhone came out and it was exclusive to AT&T? It's all just a race out of the blocks to try and gain a foothold.
The bundler with a bigger customer base and especially higher income customer base can squeeze more.
The power to squeeze depends on what percentage of streamer's business is going through the bundler. Bundler with the highest percentage of streamer's business will be able to squeeze more, offer a better deal to the customer, get more customers, squeeze the streamer more, offer better deal to customer, and off goes the virtuous cycle. [/b>
With iPhone, we all know how it turned out. Now, Verizon has more Apple customers than any other carrier. In other words, among all three carriers, Apple has biggest percentage of customers going through Verizon in the U.S.. It has come to the stage that Apple had to cave in and let Verizon bundle Apple Music as part of Verizon bundle, instead of the other way around.
I think that's true to a point and I like the way you think about it. But I'd push back a bit. The tricky part with streaming is that the customer has the power to go around the bundler and go direct. What the bundler offers is not access but convenience, add ons and price (not just on channels but that includes broadband and data caps if you're Xfinity or Charter). If you look at cable when it was coming together like streaming is now, there was no ability to go around the cable company and get access to an ESPN or a Discovery. The cable companies had all the power. Remember the "I want my MTV" campaign to get cable to carry MTV? That power dynamic worked until it didn't and the content providers starting jacking up prices because they knew customers demanded their product or would switch to satellite or drop cable. Now they've priced themselves out of the market and the cable companies don't make much money off of the bundle.
Thats why I'd argue it is race out of the blocks right now. Streamers need massive customer bases to spread out their fixed content costs. And the fastest way to get eyeballs and subscribers is to give away the product at cost or less. Heck, Netflix continues to effectively sell the product at a loss (given how much cash they continue to burn). Bundlers provide that volume almost instantaneously. But because you can go around a bundler, long term for them it's not about access its about convenience. And it is hard to overstate the convenience factor. I have Discovery+ as a Verizon customer but it's not on X1 yet and I can't tell you how many times we thought about watching something on Discovery+ and it was just too much of a hassle to go into another app and login etc. so we just went "meh, what's on Netflix?". Now I don't know that I'd pay for Discovery+ as a separate bill. If it was on X1 I would.
I don't think these matter in the long run. No streaming service is going to be exclusive. You simply can't afford to limit your market like that. It's just a discount play. Discovery seemed willing to take a nice discount with Verizon to immediately gain access to millions of subs. I would suspect the Netflix/TMobile deal is more to the benefit of TMobile than Netflix since they already have the largest footprint. The last thing Netflix wants is customers cancelling their full payment subscription to shift to a discounted one through TMobile.
Remember when iPhone came out and it was exclusive to AT&T? It's all just a race out of the blocks to try and gain a foothold.
The bundler with a bigger customer base and especially higher income customer base can squeeze more.
The power to squeeze depends on what percentage of streamer's business is going through the bundler. Bundler with the highest percentage of streamer's business will be able to squeeze more, offer a better deal to the customer, get more customers, squeeze the streamer more, offer better deal to customer, and off goes the virtuous cycle. [/b>
With iPhone, we all know how it turned out. Now, Verizon has more Apple customers than any other carrier. In other words, among all three carriers, Apple has biggest percentage of customers going through Verizon in the U.S.. It has come to the stage that Apple had to cave in and let Verizon bundle Apple Music as part of Verizon bundle, instead of the other way around.
I think that's true to a point and I like the way you think about it. But I'd push back a bit. The tricky part with streaming is that the customer has the power to go around the bundler and go direct. What the bundler offers is not access but convenience, add ons and price (not just on channels but that includes broadband and data caps if you're Xfinity or Charter). If you look at cable when it was coming together like streaming is now, there was no ability to go around the cable company and get access to an ESPN or a Discovery. The cable companies had all the power. Remember the "I want my MTV" campaign to get cable to carry MTV? That power dynamic worked until it didn't and the content providers starting jacking up prices because they knew customers demanded their product or would switch to satellite or drop cable. Now they've priced themselves out of the market and the cable companies don't make much money off of the bundle.
Thats why I'd argue it is race out of the blocks right now. Streamers need massive customer bases to spread out their fixed content costs. And the fastest way to get eyeballs and subscribers is to give away the product at cost or less. Heck, Netflix continues to effectively sell the product at a loss (given how much cash they continue to burn). Bundlers provide that volume almost instantaneously. But because you can go around a bundler, long term for them it's not about access its about convenience. And it is hard to overstate the convenience factor. I have Discovery+ as a Verizon customer but it's not on X1 yet and I can't tell you how many times we thought about watching something on Discovery+ and it was just too much of a hassle to go into another app and login etc. so we just went "meh, what's on Netflix?". Now I don't know that I'd pay for Discovery+ as a separate bill. If it was on X1 I would.
Totally agree that monopsony power of bundlers was much stronger when 100% of content provider's business in an area had to go through the bundler.
As I mentioned on another thread a while back, bundler that has the biggest percentage of streamer's business will still have some monopsony power. This power is similar to that Amazon has with book publishers, that Walmart has with food brands, etc. With this power, you can squeeze in a price low enough that you can sell to the customer cheaper than the streamer sells itself or sells to other competitors, effectively giving customer little choice but to come to you and effectively getting streamer to come to you for the percentage of the business going through you.
In other words, not as strong of a power as if 100% of streamer's business was through you, but still enough power for you to take some cut of the economic action.
The recent selling seems to be the textbook definition of uneconomic sellers.
So should we expect a rebound as selling pressure eases? Or is this the unwind from earlier uneconomic buyers (I saw a post on the shorts buying back)?
The recent selling seems to be the textbook definition of uneconomic sellers.
So should we expect a rebound as selling pressure eases? Or is this the unwind from earlier uneconomic buyers (I saw a post on the shorts buying back)?
Probably just as much as the prior rise was a case of uneconomic buyers?
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KJP
What about Netflix?
Would you rather build a bundle around Discovery or Netflix?
For the same reasons, I think Disney is much more important to Verizon than Discovery. Disney is something that could be the cornerstone of a bundle. Same with HBOMax for AT&T.
At the end of the day, I think you're making a good point about the value of having 100 million people who already pay you (probably via autopay) every month. But there are several companies like that (Verizon, AT&T, T-Mobile, Spotify, Apple, Amazon) and more trying to get there (Roku, Comcast [via X-1 white-labeling], Google). It will be interesting to see if one or a few of them can somehow aggregate demand in a way that makes access to their bundle essential. Presumably content creators are going to try to do everything they can to avoid that.
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LearningMachine
Depends on the economics of the deal.
If with its ~100M customer base, VZ can squeeze Discovery for exclusivity & price, and squeeze Disney+ for price, and others for similar deals in the future, and offer part of that squeeze as value to the customer, great.
With its ~74M customer base in the U.S., Netflix will be harder to squeeze.
For VZ to be able to squeeze, the streamer has to see ~100M higher-income level customer base in the U.S. as something they want.
Sure, VZ could sign a deal with Netflix that is not economically that great, and in turn, not offer anything of value from the the deal to the customer, or provide a discount to customer itself, but maybe its better to let go and wait.
Remember, they said No to iPhone a long time ago, and then Apple had to come back to them to access their customer base.
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dwy000
I don't think these matter in the long run. No streaming service is going to be exclusive. You simply can't afford to limit your market like that. It's just a discount play. Discovery seemed willing to take a nice discount with Verizon to immediately gain access to millions of subs. I would suspect the Netflix/TMobile deal is more to the benefit of TMobile than Netflix since they already have the largest footprint. The last thing Netflix wants is customers cancelling their full payment subscription to shift to a discounted one through TMobile.
Remember when iPhone came out and it was exclusive to AT&T? It's all just a race out of the blocks to try and gain a foothold.
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LearningMachine
The bundler with a bigger customer base and especially higher income customer base can squeeze more.
The power to squeeze depends on what percentage of streamer's business is going through the bundler. Bundler with the highest percentage of streamer's business will be able to squeeze more, offer a better deal to the customer, get more customers, squeeze the streamer more, offer better deal to customer, and off goes the virtuous cycle. [/b>
With iPhone, we all know how it turned out. Now, Verizon has more Apple customers than any other carrier. In other words, among all three carriers, Apple has biggest percentage of customers going through Verizon in the U.S.. It has come to the stage that Apple had to cave in and let Verizon bundle Apple Music as part of Verizon bundle, instead of the other way around.
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dwy000
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LearningMachine
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samwise
The recent selling seems to be the textbook definition of uneconomic sellers.
So should we expect a rebound as selling pressure eases? Or is this the unwind from earlier uneconomic buyers (I saw a post on the shorts buying back)?
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Spekulatius
Probably just as much as the prior rise was a case of uneconomic buyers?
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