Streaming and media expert Dan Rayburn shares why investors should only care about teh warner Bros/Netflix/Paramount deal if it happens (0:40). NFL and NFLX; streaming and sports (11:00). Appropriate metrics to use in this space (18:40). Brand and revenue: Apple, Google, amazon, Disney, Netflix (27:40). What is TV? (45:00)

Transcript

Rena Sherbill: Dan Rayburn, an expert if there ever was one in the streaming space, in the media space, wich encompasses so many things right now. Dan has been on a few times before, he’s been writing on, or we’ve been having his writing offered on Seeking Alpha for quite some time. He runs his own blog, streamingmediablog. He makes copious media appearances on various mainstream networks. Dan, welcome to the show.

If you would start us off. What do you feel like is top of mind? Netflix (NFLX) is obviously in the headlines a bunch, vis-a-vis Warner Brothers (Netflix and warner Bros. Revelation: A Deal Riddled with Uncertainty

The potential acquisition of Warner Bros.Discovery (WBD) by Netflix presents a complex scenario for the future of the streaming landscape.While some investors fear a reduction in market choice, the true implications remain unclear, notably regarding Netflix’s packaging strategy. Will WBD content be integrated into Netflix, or will HBO Max remain a separate entity?

Beyond the content itself, the deal introduces Netflix to a very different business model. It would gain live TV channels in the UK,sports rights – including the Olympics in 2028 – and the platforms currently used to deliver linear HBO channels to traditional MVPDs. Whether Netflix desires to operate within this linear TV infrastructure is a meaningful question.

However,the narrative of a simple acquisition followed by mass layoffs is likely an oversimplification. Netflix isn’t a studio; WBD is. Netflix will still need the expertise of those who create and distribute content, and has already indicated a willingness to continue theatrical releases, though the window for those releases could possibly be adjusted.

Investors should remain focused on the specifics of the deal after it’s finalized, rather than speculating on outcomes. The current political climate also adds a layer of complexity, as political considerations now play a larger role in large-scale acquisitions than in the past. Despite these uncertainties, WBD’s content assets are undeniably valuable.

The recent opposed offer from Paramount is not surprising, given the leaks, insider chatter, and rumors that typically accompany deals of this magnitude. Deals of this size and significance are rare, exceeding even the Amazon-MGM studio acquisition or the AT&T-DirecTV deal (which ultimately proved unsuccessful).This deal’s impact on the industry as a whole is substantial.

Ultimately, predicting the outcome is premature.The possibility of Paramount re-entering the fray further complicates the situation, highlighting the need for patience as the situation unfolds. No one possesses definitive insight into how this will play out.

The Murky Metrics of Sports Streaming: Why We Don’t Know What’s Working

It makes consuming sports extremely challenging. But what consumers don’t really understand is the sports leagues are not doing what’s best for us. They’re not doing what’s easy for us – they’re doing what makes them the most money. The NFL has always been the most fragmented out there compared to, say, the NBA or Major League Baseball, even though Major League Baseball with their new deals are going to be fragmented as well.

Rena Sherbill: And what are the numbers showing? Do we have that kind of data analysis to see if, well, for one, what are the numbers compared to regular broadcast games? Is that something that is an apples to apples comparison? Is that something that’s done? And then B, is the sports coverage leading to more subs? Is that leading to more revenue?

Dan Rayburn: Yeah, so your asking the most significant question here that we have in the industry, which is what is the impact of sports content on direct-to-consumer streaming services? And we don’t have an answer.

The reason we don’t have an answer is as none of the sports streaming outlets and almost all the leagues, and all of the direct-to-consumer streaming services, almost none of them break out viewership in any kind of detail. And if they do, it’s so high level and vague, were they don’t define what a viewer is, that we don’t know what the impact is. They don’t mention things like churn and retention. They don’t even publicly disclose netflix’s churn to Wall street – ever,in history. So things like churn, we don’t know.

Rena Sherbill: Is that by design? Like, one would think that if they had something to brag about, they’d brag about it.

Dan Rayburn: I don’t think it’s that. It’s definitions in the streaming industry are very difficult as, unlike broadcast TV where we have standards, we don’t have any standard in the streaming world.

There’s nothing. We have for live events, simultaneous streams, AMA (average minute audience). You have monthly active users. No one defines it the same. Netflix just came out with a new metric they’re calling monthly active viewers.

There’s all, you have concurrent streams, you have concurrent devices, you have unique streams. There’s all these different metrics and the companies don’t use the same methodology. And then on top of that, when they are using Nielsen, which has some of the worst data out there, you have sports leagues calling out Nielsen publicly as they don’t trust their data, and yet they still use them.

And then Nielsen decided to change their methodology from what they used in previous years to something they call the big data plus panel measurement, which is not apples to apples, which everyone agrees. So how do you compare last year’s viewership to this year’s?

You can’t. So it makes it also very hard to figure out what viewership has been over a long period of time. That’s an issue. And then you have Netflix, their monthly active viewers, the way they define a monthly active viewer on their platform is any person who watched at least one minute of ads monthly.One minute. That’s it.

And then they take that number and they multiply it by the estimated household size. So basically,how many people are on the couch? What’s that reach? And that’s their number. And that replaces what they call the MAU, monthly active users.

So it’s interesting to see how Netflix comes out with that metric, but then Amazon a month ago at their unboxed event came out and said that Prime Video now reaches 315 million monthly viewers globally. But it didn’t define what a viewer is.So is a viewer someone who watches two seconds, 10 seconds, one second? If any football is on Prime Video, and you go to amazon.com’s homepage, it loads in the upper right-hand corner. If you don’t click on it, if you don’t engage with it, are you a viewer?

I don’t know, Nielsen won’t say. So part of the problem we have here, and part of the problem investors have, is it’s very difficult to know what’s actually being viewed and which platforms for what period of time.

Outside of a few services, as a notable example,

Beyond Content: What Investors Should Really Be Watching in Streaming

The focus on which streaming service has the “best” content is misguided. Popularity doesn’t automatically translate to profitability, and investors need to dig deeper than just what shows are trending. Many shows are canceled after just one season, demonstrating that a show’s buzz doesn’t guarantee subscriber retention.

Rather, investors should prioritize key metrics like Average Revenue Per User (ARPU), content spend, and increasingly, ad revenue. While Netflix currently shares its total content expenditure (around $18 billion annually), Disney lumps streaming and broadcast costs together, hindering clear analysis. The industry is moving towards greater clarity, and Wall Street will likely demand more companies, like Netflix, break down revenue sources between subscriptions and advertising. This is where future growth lies, particularly for platforms like Netflix with their targeted ad stack.

Streaming services are already demonstrating that high viewership doesn’t equal a good return on investment. They’ve publicly stated that certain popular shows haven’t driven sufficient engagement to justify their production costs, measured by metrics like new sign-ups, platform retention, and ad-related revenue (CPM).

Furthermore, the perceived scale of streaming events can be misleading. Despite hype, the 2022 World Cup peaked at just 1.28 million viewers on fox’s streaming platform in the US – a fraction of its broadcast TV audience. Similarly, Formula One races averaged 1.3 million viewers across ABC, ESPN, and ESPN2, despite significant attention surrounding Apple’s involvement.

These examples highlight the importance of scrutinizing actual viewership numbers. While terms like “F1” and “NBA” suggest massive audiences, the reality is often far smaller. investors need to focus on these concrete numbers, and year-over-year comparisons, to make informed decisions, rather than relying on anecdotal evidence of content popularity.

Apple’s Content Strategy: beyond Depth and Breadth

The value of large-scale sports rights acquisitions,like a full NFL season,is difficult to quantify. Some companies struggle to define success metrics – whether it’s subscriber growth or platform engagement. Though, companies like YouTube, Amazon, and Apple are frequently enough playing a longer game, willing to absorb short-term losses for long-term gains.

But why is Apple investing in Apple TV? According to Dan Rayburn, Apple’s strategy centers around storytelling. They aim to integrate storytelling into every facet of their brand – hardware, software, content, and services. Unlike the early days of streaming, Apple isn’t focused on a vast catalog of content. Instead, they are “cherry-picking” select stories they believe they can add value to.

This represents a significant shift in the industry. Early streaming services like Netflix and Amazon initially competed on the depth and breadth of their libraries, boasting tens of thousands of titles. Though, Netflix realized its differentiator needed to be original content. They intentionally reduced their overall catalog, focusing rather on creating exclusive series like House of Cards, effectively changing consumer habits.

Today, most consumers don’t choose streaming services based on the sheer volume of content available, except in niche areas like anime (Crunchyroll). As catalog size changes, so do costs – whether through production or licensing.

Brand alignment is also crucial. Apple’s deal with MLS,for example,was attractive because of the league’s demographic – a significant female and younger audience. the global rights and lack of blackout restrictions were also key factors. Though, the partnership didn’t perform as was to be expected, leading to a revised agreement where the contract will end three years earlier than initially planned, and payment terms have been altered. This highlights the complexities and risks even well-aligned content investments can face.

YouTube TV Bundles, the Oscars, and the Future of Streaming: A Deep Dive with Dan Rayburn

Rena Sherbill: New frontiers, undoubtedly.Anything to say about Google and YouTube? YouTube seems to be making a real play in the space.

Dan Rayburn: I would say just a few things on YouTube. So YouTube TV has, in the last week, announced they are going to be rolling out 10 new YouTube TV bundles in the new year. Which was nice of them to tell us, but really not too helpful as they didn’t tell us when they’re rolling out, what the bundles are, or what they’re gonna cost. I did see some of the media say, great, we can finally pay for only the channels we want.

Wrong. I’m here to tell you that is not the way it’s gonna work. I’ve already confirmed that with youtube.You are not going to be able to pick just the four channels you want and pay for those four channels or what we call a la carte in the industry. That is not what’s coming. these are going to be packages. Now, are some of them going to be cheaper, you know, what we call skinny bundles as it’ll have less content, but maybe more focused content? Totally possible. YouTube TV did call out they’re going to have some specific sports packages.

But again, not knowing what it’s going to be at what cost and what has blackout restrictions, it’s really too hard to get excited. So I’m not sure why so many people in the media are just going crazy over this. Until we have the packages and the bundling, we really don’t know much.

Outside of that, what YouTube is doing is really very different than what others in the market are doing as far as content. And there’s this whole debate right now, which is absolutely silly, is YouTube TV? Is it not YouTube TV? Who cares? TV is whatever the user defines. Whether it’s a device or a service, it’s whatever the user defines.

And a lot of what people are getting wrong right now on YouTube is they’re saying,well,YouTube is TV more so than ever because it recently got the exclusive rights for the Oscars. And, okay, that’s cool and all, but you have to look at the entire deal in terms of what was actually announced.

As as part of that deal, YouTube is getting the Oscars. YouTube is also getting at least 10 other events that come with it. the Governor Awards, oscar nomination announcements, all these other events that are not on TV. This will be from 2029 to 2029.

But in addition, this is a really big piece. There’s something called the Google Arts and Culture Initiative. and this is a group at Google. And what they’re going to do is they’re going to help the academy digitize components of their collection. And right now in the Academy, they say they more than 52 million items.

So part of this deal also involved Google taking just the amazing resources it has and platforming to archive a lot of the Academy’s content and provide it, you know, in one place and one portal to see all this amazing great content. Like that’s a huge part of the deal. That’s not something broadcast TV can do.

So I also think for something like the Oscars and the content around the Academy, it’s a great deal for YouTube as opposed to broadcast TV because when it comes to music, it crosses borders and genres and people and culture. Music resonates with lot of people around the world. There isn’t a barrier. When it comes to specific pieces of content, especially sports, there’s a lot of content that we watch in the US or vice versa that other countries have no interest in. So youtube TV and youtube are really doing something different, YouTube in particular.

decoding Streaming Numbers: A Focus on Disney and Financial Fundamentals

The streaming landscape is frequently enough clouded by estimates and speculation.When discussing companies like Disney, relying on publicly available data – specifically their SEC filings – is crucial for accurate analysis. Disney, as a public company, transparently reports its subscriber numbers for Hulu each quarter.

The Problem with Estimates

It’s surprisingly common to see inaccurate subscriber numbers circulating online, frequently enough based on outdated or unsubstantiated estimates. This highlights the importance of verifying details and prioritizing factual data over guesswork.

Understanding the Numbers: ARPU and Wholesale Deals

Beyond just subscriber counts, understanding key metrics like Average Revenue Per User (ARPU) is vital. ARPU fluctuations aren’t always straightforward. For example, Disney’s SEC filings often explain ARPU decreases resulting from wholesale deals, such as those with Charter.

Wholesale deals, while increasing subscriber numbers, typically involve a lower per-subscriber revenue. This is clearly stated in the SEC filings, but often overlooked in press releases and subsequent commentary.

This illustrates a core principle: to truly understand the streaming business, you must delve into the fundamentals and analyze the underlying numbers. Numbers provide a clear, objective story.

The Importance of Factual Reporting

A significant issue in streaming content creation is the overuse of ambiguous language – words like “probably,” “likely,” or those ending in “-ly.” These terms lack concrete definitions and contribute to misinformation. Focusing on verifiable facts, backed by links to official sources like SEC filings, is essential for credible analysis.

Navigating Financial Reporting: GAAP, Non-GAAP, EBITDA, and EPS

Investors and analysts must also understand the nuances of financial reporting. Different metrics – GAAP (Generally Accepted Accounting Principles), non-GAAP, EBITDA (Earnings Before Interest, Taxes, depreciation, and Amortization), and EPS (Earnings Per Share) – are calculated differently and convey different aspects of a company’s financial performance.

• GAAP: Standardized accounting rules.
• Non-GAAP: Metrics adjusted by the company, frequently enough excluding certain expenses.
• EBITDA: A measure of operating profitability.
• EPS: Profit allocated to each outstanding share.

Understanding these distinctions is critical for accurate interpretation of financial reports.

Key Takeaways

• Prioritize Official Data: Rely on publicly available data, especially SEC filings, for accurate information.
• Understand ARPU: Analyze Average Revenue Per User to assess revenue generation.
• Beware of Wholesale Deals: Recognize that wholesale deals can impact ARPU.
• Demand Factual Reporting: Seek content based on verifiable facts, not speculation.
• Decode Financial Metrics: Understand the differences between GAAP,non-GAAP,EBITDA,and EPS.

Published: 2025/12/24 05:24:42

Looking ahead, the streaming industry will continue to evolve. A commitment to data-driven analysis and a critical understanding of financial fundamentals will be essential for investors and industry observers alike. The ability to discern fact from speculation will be the key to navigating this dynamic landscape.