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Netflix To Shut Down Its DVD-By-Mail Business

On April 18th, Netflix announced it would be ending its DVD-by-mail rental business after twenty five years. 

Before it started revolutionizing the entertainment industry by ushering in a new era of streaming, Netflix’s business model revolved around sending DVDs through the mail. Since 1998, the company says it has shipped out more than 5.2 billion DVD rentals to subscribers across the country. 

However, ever since the introduction of its streaming platform in 2007, the revenue from DVD-by-mail has, “by design,” steadily declined. In 2022, the DVD business generated $145.7 million —just 0.5% of its total revenue. While there are still some die-hard fans of the service who treasure the obscurity and nostalgia, Netflix needed to prioritize boosting profits in the wake of its stagnant growth over the past year. 

“Our goal has always been to provide the best service for our members but as the business continues to shrink that’s going to become increasingly difficult,” said Netflix  co-CEO Ted Sarandos in a blog post on the company’s website. 

The DVD announcement was part of Netflix’s earning report for the first quarter of 2023, where they reported that revenue had risen 4% from a year prior to $8.1 billion, and that profit had reached $1.3 billion, according to The New York Times. Despite this success and its attempt to cut costs by shutting down the DVD-by-mail service, the company still faces some serious challenges ahead in a writer’s strike, increased streaming competition, market consolidation, and an epic live business failure on the 17th. 

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Amazon Announces Free Ad-Supported Streaming Service just for Fire TV

Yesterday Amazon announced the launch of Fire TV Channels, its new free-ad-supported (FAST) streaming experience set to hit Fire TV devices this week. While Amazon had already offered FAST content on the Fire TV, Fire TV Channels will now be constantly updated throughout the day with new content and integrated across the Fire TV interface in areas like the home screen and category specific pages. 

Eventually, this new content will include over 400 live channels from ABC News, CBS Sports HQ, FOX Sports, MLB, NHL, Xbox, and Condé Nast traveler. 

“With the launch of Fire TV Channels, we’re doubling down on our free ad-supported TV (FAST) experience… We’ve seen that [customers] have been engaging with it when we surface it in a topical way. In the past six months alone, monthly hours streamed of this content has grown by 300%.” said Charlotte Maines, director of Fire TV advertising, monetization, and engagement. “When our customers love something, we invest in creating more ways to surprise and delight them.” 

FAST channels have seen significant growth in the cord-cutting era as customers have hit “a sort of saturation point with streaming video-on-demand offerings.” They don’t want to pay for, nor keep-up with, more streaming services. According to Forbes, FAST channels “combine the comfort of traditional broadcast within the streaming landscape.”

By expanding its free-ad-supported content, Amazon is hoping to capture more market share at a valuable time. Additionally, the company hopes to leverage Fire TV Channels’ ad space. Now they can target the Fire TV customer base (which tends to include Prime subscribers and younger families) through Amazon’s DSP, which would be incredibly valuable to advertisers. 

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Warner Bros. Discovery reveals new combined streaming service, MAX

During a press presentation on the Warner Bros Studio lot on Wednesday, the company finally unveiled the plans for its new streaming service, Max. Launching on May 23rd, Max will combine offerings from HBO Max and Discovery+ for a monthly subscription price of up to $19.99, with two cheaper tiers priced at $15.99 and $9.99. 

“Max is the one to watch,” CEO David Zaslav said. “It’s the one to watch because it’s the place every member of the household can go to see exactly what they want at any given time.”

In August 2022— just a few months after the company’s merger—WBD announced its plans to create an “all-encompassing” single streaming app (hence its name, Max). The platform will have a very wide range of content, combining HBO’s premium scripted content and originals, Discovery+’s unscripted reality programming, and WBD’s well-known kids & family content, which, according to JB Perrette, HBO and Max CEO, has unsurprisingly not mets its true potential on HBO Max. WBD CEO David Zaslav also confirmed that “in a few months” WBD will reveal plans for “important and differentiated” live sports and news content on Max. WBD hopes that enough of a variety of content can beat out rivals like Netflix and Disney+. 

“Netflix is a great company, Disney is a great company, but we have a portfolio of content that is very diverse and broadly appealing,” Zaslav said at the time. “We think it could be [up to] 400 million homes over the long term.”

But is variety enough?  HBO Max and Discovery+'s combined 96 million subscribers are currently dwarfed by Netflix’s 231 million global subscribers. Moreover, the linear TV business that WBD so heavily depends on is “declining faster than expected," according to Insider, and "Netflix's big correction of 2022 has cast new doubt on streaming's profit potential." Wall Street wasn't initially impressed either — WBD's stock declined nearly 6% on the day of Max’s announcement.

WBD has to convince viewers that its new service has enough “breadth and familiar, beloved content” to pay for, or potentially give up their favorite streaming service for.  

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UFC and WWE Merger Will Create a Streaming and Advertising Powerhouse

Early Monday morning, Endeavor announced it has acquired WWE in a $9.3 billion deal. The company plans to merge WWE with UFC (which it acquired in 2016) to form a $21.4 billion sports-entertainment behemoth. While this deal is “a major step toward greater consolidation in the entertainment industry,”  the merger will also create a “streaming and advertising powerhouse” as it looks to hash out its TV rights and streaming deals in the near future, according to EMarketer.

Currently, WWE is engaged in a $1 billion TV deal with NBCUniversal’s USA Network and the Fox broadcast network. While it is set to expire in October 2024, the networks’ right-of-first-refusal window is now open. However, their streaming deal with NBCU’s Peacock service expires in 2026. As for UFC, their $1.5 billion deal with Disney/ESPN, which includes an exclusive streaming pay-per-view agreement with ESPN+, isn’t set to expire until 2025. As such, the two brands will continue to discuss their own separate linear-TV rights deals—at least for one more time. As for streaming though, according to Sportico, “it’s possible that a new UFC/WWE streaming deal may be worked out to the satisfaction of all parties well before the clock runs out on the legacy contracts.”

This is due to the sheer popularity and success of the brands. In the past couple years, combat sports and professional wrestling have garnered a massive, growing audience. WWE is viewed by 11 million fans according to Insider Intelligence, and claims that its broadcasts are viewed worldwide by over 1 billion households each week. While UFC’s numbers are harder to track due to its pay-per view model, viewers and revenues have reportedly reached record levels. Both Raw and Smackdown are “up significantly in the dollar demo” season-to-date, despite a 16% TV-wide decrease in the number of 18-49 year-olds watching TV every night.

As a result, Insider Intelligence predicts that “with its considerable size, wide demographic, and growing place in pop culture, the new WWE-UFC corporation will be sure to throw its weight around in the advertising and streaming worlds.” WWE Chairman Vince McMahon agrees that the the new public company  “will be well positioned to maximize the value of [their] combined media rights.” Moreover, as more streaming services look to acquire the rights of sports content, the new company will be sure to get a good price in whatever deal they make. 

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Warner Bros. Looks to Close Deal for ‘Harry Potter’ Online TV Series

Bloomberg reported this morning that Warner Bros. Discovery is nearing a deal to produce a “Harry Potter” television series for HBO Max. As opposed to the more recents spinoffs of the franchise in the past couple years, this project would be directly based on J.K. Rowling’s best-selling book series. Each season would reportedly draw from one of the seven books, suggesting an on-going franchise that could stretch for years. Deadline has since confirmed that Warner Bros is in talks with Rowling to join the project as a producer—a big hurdle to clear as she retains creative control over any exploitation of her work. 

Warner Bros. has been exploring a potential “Harry Potter” television series for a few years now, as the studio has had a long history with the franchise and Rowling. From 2001 to 2011, they adapted each book in the series into a blockbuster feature, which combined generated more than 7.7 billion at the global box office, according to Variety. Those titles, along with the spinoff Fantastic Beasts titles, make up a theatrical library that has grossed more than 9.1 billion to date. Since then, the “Potter” brand has been popularized even more with theme parks, tours, storefronts, and more. 

It’s obvious that the Harry Potter property has remained a dominant cultural force, and will be sure to attract a huge audience given how important quality, existing IP is in today’s content world. According to Deadline, WBD CEO David Zaslov "has stressed multiple times his focus of franchises", identifying Harry Potter as a priority.

While WBD has had recent success with the brand—including the Harry Potter 20th anniversary reunion special, the Harry Potter: Hogwarts Tournament of Houses event series on TBS; and the Hogwarts Legacy video game—a lot can go wrong with this reboot. For one, the original films were extremely well-received, so it will be especially difficult to top that, and recasting the iconic characters is likely to upset loyal fans who have Daniel Radcliffe, Emma Watson, and Rupert Grint engraved in their minds. There is also the issue of JK Rowling herself, whose public image is in shambles after a “seemingly endless string” of transphobic tweets. While it’s very possible the show could be a “slam dunk” for Warner Bros, “it will be an enormous challenge to get this right," says one Forbes Reporter. "It sure does seem like they’re playing with fire here.” 

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Netflix's Continued Experimentation with Sports Programming

This week, Netflix released its latest golf documentary “Full Swing.” Featuring the biggest stars in the sport, including Justin Thomas, Jordan Speech, and Brooks Koepka, the first two episodes of the show secured two of the top 10 programs on the streaming charts last week, according to the latest Wrap Report. 

In the past few years, services have recognized the importance of sports to the streaming atmosphere. “Full Swing” represents Netflix’s continued experimentation with this type of content, following “Break Point,” a show featuring the world’s most talented tennis players; and the popular “Formula 1: Drive to Survive” series which just finished its fifth season. While platforms such as Amazon, Apple, and Youtube have chased after the rights to carry live sports aggressively, Netflix has instead pursued a more modest strategy, focusing instead on telling impactful documentaries and sports themed shows.  The thought process here, is that they will attract the same audiences that would otherwise be interested in live events, but at a significantly lower cost, since licensing rights to live sports can be incredibly expensive.

However, live sports has found a place in the streaming ecosystem already by drawing in younger viewing. For example, according to The Wrap, Amazon Prime’s “Thursday Night Football” overindexes Millennial audiences by a whopping 82%, whereas NBC’s “Sunday Night Football” consistently underindexes in Millennial household viewership.

While Netflix has demonstrated its desire for sports content, this may not be enough as the streaming wars continue to heat up. Sports is one of the only types of programming that can resonate with everybody, which means it will become much more important to audiences. If Netflix wants to compete, it might have no choice but to join the battle for the rights to live sports events. 

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Disney CEO Bob Iger Willing to Sell Hulu

In an exclusive interview with CNBC last Thursday, Disney CEO Bob Iger said that “everything is on the table” concerning Hulu’s future. Currently, Disney owns 66% of the platform, while Comcast owns the rest. However, under the joint ownership agreement, Comcast can force Disney to buy out its stake in January 2024 at a guaranteed minimum equity value of $27.5 billion (or about $9.2 billion for the 33%). During the interview, Iger expressed his continued concern about undifferentiated general entertainment, seemingly suggesting that Hulu’s content has no place at Disney as it doesn’t fit with the brand.

Disney, at the moment, is very focused on cutting costs rather than on spending, announcing thousands of layoffs and a $3 billion hit to non-sports content production. Like other media companies, it is grappling streaming's return on investment, as linear television diminishes. Still, publicly acknowledging that Disney is open to selling Hulu is daring. Not only does it put Hulu employees on high alert, but it also adds more uncertainty to Iger’s own company. Threatening to be a seller rather than a buyer would behoove Disney if it actually were to buy Comcast’s stake.

Moreover, selling Hulu could strengthen Comcast at the behest of Disney—testing one of Iger’s longest-held rules, according to CNBC. Keeping Hulu, though, is critical to Disney’s streaming strategy, which offers three relatively low-priced services (Disney+, Hulu, and ESPN+) rather than one massive product at a premium price. Iger has long thought that having too much content in one place, or this overload of choice, could lead to consumers feeling like they’re paying too much for content they are not watching— which was the downfall of cable TV. Thus, selling Hulu would unravel this strategy, and very well might affect Disney+ and ESPN+, which could soon be canceled too.

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My Sector is Video Streaming

My sector is Video Streaming and I will be following the The Hollywood Reporter, TechCrunch, and The Verge.