Mildly Journaling

Reading "An Interview With Michael Nathanson About the Streaming Endgame"

This interview goes through a lot of things through the lens of Michael Nathanson, from streaming players, sports industry, to tech industry:

  1. Youtube TV from Alphabet has the best potential among all streaming players (Peacock, Paramount Plus, Netflix) because:
  • It is the only player that has all channels content including that from other streaming players, paid TV channels and exclusive user generated content
  • Its parent company, Google, is best at the advertising game among all players
  1. Peacock is an interesting player because it has 3 very popular assets: NBC sports, NBC news and Bravo - all essential to a typical household
  • However their business model is poor because it is under-priced

MN: In this industry, I can’t blame Peacock because Paramount did it. If you look at the original, the Disney Plus launch way back in 2019, that was exceptionally cheap. They all failed to raise prices during the pandemic the way Netflix did because it was an essential good, it was like selling a mask. You’re stuck at home, you have to watch something, we’re going to raise prices. If they’re too slow to raise prices, therefore they create deflation within the entertainment channel.

  1. Netflix has the best leverage in terms of content spending
  • Having the largest subscribe base gives them the best buying and pricing power
  • Sports events are indeed driving new subscriber signups even if they denied so, because they are buying more sports events:
  • They buy sports events when there is value but they don’t depend on those to survive, unlike their competitors

don’t judge them by what they say, judge them by what they do.

  1. Tech industry spends like media companies in the streaming wars
  • around 2015 tech companies are bullish because the shift to digital advertising just started
  • since ChatGPT launched, companies have enormous capital expenses that do not convert to revenue
  • Alphabet CapEx being the most defensible because their cloud business is limited by capacity
  • CapEx spent a few years ago start slowly showing up as depreciation
  1. Meta and Alphabet as investment options
  • Meta was great when it got sold because of CapEx
  • now its CapEx would start showing up, plus its year of efficiency benefit comes to an end
  • Search is a declining business but not dead yet - quite the opposite, it’s growing in double digits (~13% for at least the past 3 quarters)
  • The market has not priced in the search growth because it is focused on the narrative around AI eating search market share
  • both companies have a tangible business use case for generative AI: digital ad
  • macro conditions are going to perhaps affect the cyclicality of these businesses

There are more discussions about topics like being an analysts in the AI era, future of the sports media, etc that are not covered here.