Brand values: streamers take another look at their business models

Andor

For the last year, the hot topic in the streaming business has been the cost of content. Just how much do leading platforms need to spend in order to attract customers and hold on to them? But as this week’s headlines  illustrate, there also another key debate playing out – which is the role of legacy brands in the new media landscape.

At Disney, for example, the company’s streaming strategy is often thought about in terms of the progress being made by Disney+. But as this week’s restructure shows, CEO Bob Iger is also preoccupied by the role of Hulu and ESPN in the company’s grand plan. While the jury is out on the future of the former, the decision to put sports platform ESPN front and centre of the company’s new model speaks volumes.

The traditional linear side of ESPN’s business is under pressure, but the streaming business ESPN+ is up 14%. Creating a muscular new division under Jimmy Pitaro is a sign that Iger has a lot of faith in the brand – a point he reiterated in his quarterly earnings call. “ESPN,” he says, “is a differentiator for this company, is the best sports brand and television, is one of the best sports brand in sports. It is going through some challenging times because of what’s happened in linear programming. But the brand is very healthy. We just have to figure out how to monetise it in a disrupting world.”

Some analysts suggest that Iger might look to sell a minority stake in ESPN, but the fact is that Disney sees ESPN+ as a valuable asset in its own right – a superbrand that doesn’t need to diluted or diminished by being folded into Disney+.

Warner Bros Discovery seems to be reaching a similar conclusion regarding Discovery. Until this week, the assumption was that standalone streaming service Discovery+ would be folded into WBD’s soon to be launched super streamer – which might be called Max. But now we have learned that it will retain its separate status in the US (no decision has yet been made on the situation internationally).

Like ESPN, Discovery is a powerful brand that has established a loyal audience base over several decades. As WBD seems to be acknowledging, folding it into a larger operational entity risks loosening the bonds it has forged over the years.

At one level, the move in the direction of unified branding looks like a response to the Netflix effect. Having watched the upstart SVOD platform explode onto the media market and disrupt the industry’s economic base, more established rivals have felt compelled to fight back with their own all-encompassing offerings. The logic of this approach was reinforced by two additional considerations. Firstly, that unified brand structures enable operational efficiencies and streamlined decision-making. Secondly, that stand-alone streamers with less scale struggle to gain traction among consumers.

But for powerful differentiated brands like ESPN and Discovery, there are counter-arguments. By being more targeted, for example, they present consumers with clear and relevant content propositions. This is exactly what streaming was meant to be about – an alternative to the bloated aggregation model imposed by PayTV platforms.

Brand Partnerships

At the same time, these more focused brands also create room for different pricing structures and more flexible partnerships with third party platforms around the world. Take a look at the home page of Disney+, for example, where brands like Pixar, Marvel and National Geographic still have a prominent position in the company’s ecosystem. Is it far-fetched to imagine a streaming future where consumers can either acquire a Disney basic tier or a Disney + Marvel or Disney + Pixar tier for an extra dollar or two?

The issue of which brands have the clout to be stand-alone streaming propositions and which ones don’t remains front of mind for most major platforms. WBD still has to decide what to do about HBO and Eurosport while Disney needs to make a call on Hulu in 2024. Amazon is also testing consumer engagement with the launch of MGM+.

Elsewhere, Paramount has come up with a kind of fudged solution around its HBO equivalent Showtime – tagging it awkwardly to the Paramount brand. The solution doesn’t look pretty but Paramount CEO Bob Bakish is understandably reluctant to diminish a flagship brand that “has captivated audiences for decades.”

Lionsgate’s difficulties rolling out its brand as a streaming platform show how tough this call is – and it will be interesting to see how the Comcast/Paramount JV SkyShowtime fares as it rolls out into new markets.  NFL’s decision to throw in its lots with DAZN and FIFA’s investment in FIFA+ are different manifestations of the same business conundrum – which is how much faith to put in a brand’s ability to cut through.

Here, the beauty of these businesses is that they are not trying to persuade consumers to part with cash – they are simply presenting a free and simple take it or leave it proposition. That sounds like a particularly attractive brand proposition right now.