Dana Blankenhorn

The Coming Disney Breakup

Walt Disney Co. is in play. (I remember getting one of these sent to me after the Disney Channel's launch in 1980.)

CEO Bob Iger fired his replacement and can’t find another one. The company is killing its streaming service by reducing content and raising prices. Its deal with Penn Entertainment, directly running a sportsbook, means ESPN is now incompatible with the main company’s business model. The resorts business is tanking, thanks mainly to climate change.

My guess is that the entertainment company will be sold to Apple, probably within a year. ESPN, ABC, and the parks will be spun out as separately traded companies. It might happen all at once.

The only reason to keep the whole thing together was “synergy.” A bad year for one division might be offset by a good year in another. The combination would then be a better investment than the parts.

But that’s not working. The movie business is dying. Disney is doing all it can to hasten that by refusing to bargain with its unions. If management and labor aren’t partners, you can’t do business.

The TV business was dead years ago. This includes cable.

The resorts business is increasingly divorced from the rest of the company.

The Internet is doing to the streaming business what it did to print. Paywalls take away 90% of your audience. Advertising rates keep declining because there’s too much free content. Live sports are viable but the billionaires who control teams and leagues keep pricing fans out of the market. If it’s all just about money, the players will gravitate to whoever offers more of it.

Death of Old Hollywood

Hollywood was born 110 years ago based on the control of distribution channels.

The theaters made the films. The “studio heads” all started as theater owners.

Since then, control over distribution has determined the industry’s direction. When the Supreme Court took away the theaters’ power, it transferred to TV networks. Then it went to cable.

Now it’s in the hands of the Cloud Czars.

I’ve been writing about this since 2019l. Apple, Amazon, Google and (eventually) Meta will control our entertainment options because clouds control distribution. Microsoft may join them, but they were so burned by their efforts at the dawn of the Internet Age that it will take time.

The companies that became heirs to the studios made the previous jumps, to the small screen and then the multi-channel screen. They haven’t made this one. They don’t own clouds. The survivors will be those who can sell out.

Why Clouds Will Win the Streaming Wars

Since long before the streaming crash began, I predicted its Big Three would end up being Apple, Google, and Amazon.Com.

Not Netflix. Not Disney. Not Comcast or Paramount or Warner Brothers.

The Cloud Czars.

As usual, I was early to the story. But it has long been clear that, when push comes to shove in streaming, money talks. The coming result was easy for me to see and the story was easy to do.

Of the three Cloud Czars, Amazon is the best-positioned. They have the front-end technology with the Fire Stick, which has one-third of the U.S. market. They have Prime Video, which becomes a huge value if you use the Amazon store. They can re-sell every other streamer’s stuff and make money. They’re also global, something only Netflix and Disney among their competitors can lay claim to.

The Streaming Winners (And Losers)

This is something I saw coming years ago at Investorplace.

Streaming will be owned by the Cloud Czars.

All the entertainment companies with their lawyers, producers, and lobbyists are going to fade away. Together, they’re worth a fraction of what Amazon or Alphabet are. Amazon and Alphabet are, in turn, worth barely half what Apple is.

It’s game over.

The reason is simple. Think of the cloud as the operating system of our time. Control what’s beneath and you control what’s above. IBM understood this in the 1960s. Microsoft understood it better in the 1980s.

The TV Content Crash

Ever since the Web was spun, over a quarter century ago, TV content providers have been getting squeezed out of the advertising market.

That’s not how it’s reported. But fewer people have cable than can watch a broadcast. Fewer still have access to streaming. What’s left of broadcasting now are mostly one-set news shows, cheap reality and game shows, endless re-runs of movies and old TV, people sitting around tables talking, or sitting in chairs yelling. Cable is evolving into the same wasteland.

Streaming is where it’s at because of ARPU. That’s Average Revenue Per User. Broadcasting is free, cable brings in very little to most channels, but a streaming subscription costs $10-15/month and the programmer only shares that with the producer.

Instant Family

Last year a real Hollywood movie was made on our street. 

It came out early this year, and Wikipedia says it grossed $120 million. It found life on Amazon Prime and, when I saw it was available, I gave it a look.

The film stars Mark Wahlberg and Rose Byrne as childless adults who spent a month being driven up and down the street in black cars on their way to filming. Primary filming was done at 262 Winter. We’re at 215. Our house was never shown.

I remember 262 from back in the day, in the early 1990s, before the neighborhood became gentrified. It was barely a shell when a man named Michael bought it and renovated.

Some history. These houses all look like Craftsman barns, a central beam and a roof that slopes to the sides. My son John calls them “double-barreled shotgun shacks.” The homes on the east side were built around 1908, in the City of Oakhurst. Oakhurst folded in 1915, and the homes were joined to Decatur. Those homes on the west side were built in the early 1920s, when the City of Kirkwood folded and became part of Atlanta. Our house dates from 1923. The developer of the Oakhurst homes was a woman in Kirkwood named Lavinia Winter. Hence the name Winter Avenue.

The Death of Cable (and what comes after)

On March 25 Apple announced the death of the cable television model.

What replaces it is, in a word, the Internet. Streaming services, yes, but with far more interactivity than cable or broadcasting ever offered. True integration between audiences and programming, whether you need news, sports, or entertainment. Available wherever you happen to be. All you need is a mobile phone.

This is the entertainment model of the future.

Sounds great. People are now paying $200-250 per month for bundled Internet and TV service, with the TV taking up two-thirds of that bill. They’re paying another $60 or so for mobile Internet service, with calling bundled in.

There’s a lot of money at stake.

I covered the birth of the present world. I covered it twice.

Consolation Prize

Think of this as Volume 17, Number 27 of the newsletter I have written weekly since March, 1997. Enjoy.

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Let's see what's at the cinema:

• After Earth  – A father-and-son find they can only rely on one another after everyone else has been forced to abandon it.
• Man of Steel – Superman turns out to be a farm boy who must choose to fight for Europe against his own people.
• This Is The End – Rich Hollywood stars, and Hollywood, get the apocalypse they deserve. (right)
• World War Z – Only one man can save us from the zombie apocalypse.
• White House Down – A black President and his White House must be saved by a white tourist.
• The Lone Ranger – This time, Tonto tells the tale. And the white guy is still the good guy.
• Red2  – The CIA saves the world from nuclear disaster. 

 

Notice what all these films have in common? They're generally about rugged individuals saving a complex civilization through the use of their rude simplicity. When liberals appear, they're the butt of the joke.

They are all, fundamentally, conservative.

Last Word on Jobs

I've been wracking my brain trying to think of another executive who passed at the absolute peak of his wealth and fame, as Steve Jobs did. This is the best I could come up with -- Irving Thalberg.

Of course even in that case Thalberg had been aced-out of his role as sole head of production five years before his death. (He had suffered a heart attack at age 33 and died of pneumonia in 1937.)  So maybe even that's not a true analog.

But it's true that the studio closed the day of his funeral, just as Apple stores did yesterday in celebration of Jobs. Both Thalberg and Jobs were cultural icons, people who transformed the consumer world (as opposed to the Watsons of IBM, who worked with businesses).

If y'all can come up with a better analog, let me know. Elvis was fading when he passed at ae 42, and Lennon's star was 10 years dimmed when he died at age 40. John F. Kennedy comes to mind, but he was shot -- he didn't die of cancer, age 44.

It's a puzzlement.

The Market is Bigger than the Law

To hear Florian Mueller tell it  Google is doomed.

In addition to its other legal troubles involving Android, it may have grossly violated the General Public License (GPL), taking copyrighted work willy-nilly from open source and turning it into the semi-proprietary Dalvik.

Well, since it's St. Patrick's Day, we'll quote a little Finian's Rainbow.  Things are desperate, but not serious.