😍 2022-04-07 20:00:00 – Paris/France.
This story first appeared in Buffering, Vulture's software industry newsletter. Streaming. Head over to vulture.com/buffering and subscribe today!
WarnerMedia CEO Jason Kilar has rocked the wars of Streaming with its HBO Max strategy. What does he see happening in the industry next? Photo-Illustration: Vulture; Photo by Shutterstock
And just like that, the Jason Kilar era at WarnerMedia is over. It was more of a moment, really: When Kilar steps down as the company's CEO tomorrow, it'll be almost exactly two years since he was tapped to lead the giant entertainment conglomerate behind everything from HBO Max to Young Sheldon. He's not leaving by choice but because last May AT&T announced it was selling WarnerMedia to cable giant Discovery - and new boss David Zaslav has made it clear he wants to run the show. With Discovery on the verge of finalizing its acquisition any minute now, what had been ordered for months will become reality.
Although Kilar's tenure at the top was relatively brief, it certainly wasn't without incident. The former Hulu chief has gone through a ton of changes in his 47 months in office, including a key decision to simplify and modernize the structure of Streaming and television from WarnerMedia. And his decision to put the theatrical titles of Warner Bros. 2021 on HBO Max the same day they opened in theaters, while controversial in some circles, has been instrumental in creating a new standard of movies moving from cineplexes to Streaming weeks after their initial release. So while Kilar hasn't been at WarnerMedia long enough to implement many of the ambitious plans he no doubt had when he joined the company in May 2020, he is nonetheless leaving a company that is far different from the one he joined in May 2020. with Kilar this week to talk a bit about what the exec felt he had accomplished – and a whole lot more about where he sees the activity of Streaming head over the next few years.
Let's talk about the competition between the services of Streaming. There's a lot of talk about how many services consumers are willing to adopt, but I'm curious how much money do you think they'll be willing to spend on the Streaming in the future. The average American household for years, before the Streaming, paid $80 to $100 for cable TV. As the cable plan disappears, will consumers just transfer all that money to cable subscriptions? Streaming ? Or maybe even be willing to pay more?
My hunch is that there will probably be three services of Streaming must-have general entertainment. —Kilar
It differs by geography. So, for example, in the United States, the relative wealth of Americans is obviously quite high compared to India, for example, and so the answer is different. In the United States, many people use the virtual live TV package, as well as a few of their services. Streaming favourites. It's a fairly common experience that we see. Does it look like this in 10 years, when more sports will be available in the services of Streaming ? Maybe not. Someone who says to you in a declarative way, "This is how it's going to be"? I would be very cautious about this because ultimately it is the customer who decides. It's not us.
Our strategy has been to bring linear channels live to the best of our abilities and at the same time do things like HBO Max and CNN+ and then let the consumer make that decision. So far, this is a very good strategy. We literally had the highest revenue in the company's 99-year history last year in the face of a pandemic, in the face of theater closures, in the face of cord cuts of five to seven percent a year. That would suggest, to your question, that people - at least in the US - are certainly comfortable paying for a pay-TV package on top of a few streaming services. Streaming. I suspect that will change over time, but I just don't know how or how quickly.
And what will that translate to in the number of large platforms that will survive this start-up period in the transition from linear to Streaming ?
I have long believed that in general there will be a relatively short list of Streaming indispensable. My hunch is that there will probably be three services of Streaming must-have general entertainment. And on that, I'm referring to companies focused on storytelling. WarnerMedia is therefore clearly one with HBO Max, and then I also put Disney and Netflix in this field. I'm leaving out Apple and Amazon because they're different things — one supports a hardware strategy, the other supports a retail strategy. But my hunch is that if you go into a time capsule and step out a decade from now, you're going to see three story-centric companies that are at scale — probably over 300, 400 million happy, paying subscribers. And I think the others are going to be refactored, [either] through M&A deals [or] a pivot to be production entities, like Sony Pictures Entertainment has been. I just think we're about to see quite a bit of change on the chessboard over the next 36 to 48 months.
So, am I basically hearing you predicting, as others have, some sort of merger between Comcast and Paramount Global, for example? Or maybe what will soon be Warner Bros. Discovery is going to get even bigger?
All of this is certainly possible. What you don't know is who is acquiring who, then who is the acquirer and who is the acquiree. But I think you're going to see changes. I think some of these companies could become production entities, like Sony Pictures Entertainment. Sony was a streamer. They had a service called Crackle which was not successful and they made the decision to pivot and become a production house, make movies and TV shows and sell them to the highest bidder. Could Paramount Global do the same? We'll see. You might also see some kind of inorganic combination of other players. But I don't think the current chessboard is sustainable in the long term. I think there will be changes on the chessboard.
During your tenure as CEO of WarnerMedia, have you ever considered the idea of WarnerMedia taking on any of those big companies you just mentioned? Or did you think you were big enough, even before the Discovery deal your AT&T bosses crafted?
I'm very biased on this, but if you look at our results to date, we're already one of the large-scale companies, and that's before the merger. When you look at the breadth and reach of WarnerMedia and all of the franchises and all of the intellectual property and everything that's part of this 99-year-old company, in the same way that Disney feels very good in its position and that Netflix Moreover, I feel very good about our position today. Discovery's content portfolio will obviously add to HBO Max, but make no mistake, if you look at the lay of the land right now, there are three players leading the way. It is therefore certainly not necessary to go and acquire other things. I have a very strong feeling that WarnerMedia that you see today has enough to be a large-scale player, because we already are.
I would like to have your opinion on another general question for the industry. Over the next three to five years, where do you think the heat will be the strongest: Premium subscription services, Streaming paid ad-supported or FAST, which as you know are the free ad-supported platforms such as Pluto and Tubi?
I think the biggest economic driver in the industry is going to be paid subscription. Under paid subscription, there are two versions: ad-free and ad-supported. At HBO Max in the US we have ad-free for $14,99 and ad-free for $9,99 in the US. I think this business model is going to provide the plurality of next generation revenue mix for companies like ours.
But I'm also very bullish on FAST channels. We have a healthy future there. And I want to be very clear about that, because we've been working on that a lot. I think the market Streaming paying may represent a billion households worldwide, but you still have seven billion to go. And I think FAST Channels products are going to serve those people. So, in total, how much income will this kind of income include? I think it will be a little less than the sector of Streaming paying, but in any case, I am very optimistic for both.
FAST and AVOD can also create new windows for content, right? It allows content owners to create their own syndication marketplace by streaming shows on other platforms nine months or a year after subscribing to subscription services.
I completely agree. And the way you think about the world is the way I think about the world. With price comes benefits, and when you have a free service, obviously there is going to be some type of content and with some windows attached to it as well. I really believe in it. One of the restaurants where my family goes a lot is a restaurant that plays Tom and Jerry repeating on the wall. My son always wants to go watch the Tom and Jerry back-to-back episodes. It's a FAST chain! So there is real value in that. We could do 500 channels FAST given our TV library and you're absolutely right, with proper windowing and product design it can work very well in concert with HBO Max.
Netflix should it copy what you did with HBO Max and offer an ad-supported option?
I love this team and I love this company and that doesn't change in the future when I walk away from here. And I am also a shareholder of this company. So I'm not going to give strategic advice to Netflix because of these things.
So, one of the big things your tenure will be remembered for is the decision to release the entire slate of Warner Bros. feature films. 2021 on HBO Max the same day these titles hit theaters. There were legitimate concerns from the filmmakers about how it was advertised and compensation for lost profit. But – and I admit this may sound like an apologist to you – I think the giant movie expo chains have come off the hook in this debate. Until the pandemic forced the issue, they were simply stubbornly resistant to change, much like broadcast network affiliates. What's your take on the backlash and where are things at now?
There's no doubt that change is difficult for many people, especially industries that haven't changed much in the past few decades. —Kilar
When you look at where we are now, it's very clear across a number of different metrics: It was the right decision. It was the right decision, because we were in the middle of a pandemic. Think about it right now - there's been so much debate around the decision to help people watch movies at home amid a pandemic where seven million people are dying, while making those same movies available in theaters with full-funded marketing budgets. And we were the only studio to do that, by the way. We released 18 films during a pandemic when all of our competitors were selling their films at…
SOURCE: Reviews News
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