A lot of things happened in 2021 that we didn’t see coming — and, no, we don’t mean the continued presence of the coronavirus. From MGM being swooped up by Amazon for $8.45 billion to Ari Emanuel finally taking Endeavor public to CAA swallowing up rival agency ICM, this past year kept everyone on their toes.
And, of course, nothing compared to the industry-shattering deal between AT&T and Discovery, which will see WarnerMedia merge with David Zaslav’s nonfiction powerhouse to form Warner Bros. Discovery sometime next year.
But what about 2022? We have some thoughts.
1. HBO Max will rebrand as Warner Max with the inclusion of Discovery+
One of the biggest mergers in Hollywood history should come to fruition in 2022 when Discovery formally takes over WarnerMedia to form Warner Bros. Discovery. When that happens, the fates of numerous senior executives, most particularly WarnerMedia CEO Jason Kilar, will be decided. While most in the industry expect Kilar to exit, we’re going to make a different prediction.
Not only will Warner Bros. Discovery combine their two streaming services, HBO Max and Discovery+, they’re going to drop both of those names in favor of a fresh start. (A name that had been bandied about has been Warner Max.) That will allow HBO to maintain its prestige brand and position itself similar to FX within Disney-owned Hulu. The inclusion of Discovery’s nonfiction content only further pulls the streamer away from whatever brand recognition HBO was giving HBO Max.
JB Perrette, president and CEO of Discovery Streaming and International, said during Discovery’s November earnings call that consumers will probably see the eventual coupling unfold in two steps: First, the two services will be bundled together, and then a second phase where they are combined into one major streaming service. “There will be meaningful cost savings from combining into one platform,” Perrette said. “I think there also will be meaningful consumer benefits from combining into one platform.”
2. Gaming will upend the streaming wars
For the last two years, the streaming wars have been dominated by Netflix, Amazon and Disney — with others like ViacomCBS, Comcast’s NBCUniversal, Apple and Paramount also making smaller waves. But in 2022, they’ll have a new competitor for consumers’ time: gaming.
“Gen Z population, our youngest generation, we’re seeing that greater rise in time spent on gaming. So that’s their No. 1 activity. And not only do we see Gen Z gaming, but we actually see gaming across the board in terms of generations. So while it might have the most traction with Gen Z, we actually see all generations gaming to some capacity,” Jana Arbanas, Deliotte’s Vice Chair and U.S. Telecom, Media & Entertainment Sector Leader. “There is something that we really need to pay attention to as the population matures and their disposable income increases over time.”
There have been signs of gaming’s encroachment into entertainment, from the many mentions of the forthcoming “metaverse” by top media and entertainment CEOs, to Netflix launching its own gaming division. Expect that to continue. One expert argues the writing on the wall began last year.
“Before the tragedy of Astroworld, Travis Scott broke out into the metaverse in 2020 via Fortnite to the tune of 50 million viewers who drove a No. 1 hit. Ariana Grande shattered those numbers this past year, and the marriage of games and music grows stronger in 2022 as music licensing for games – not to mention micropayments to artists (virtual tip jars, etc.) – become massive new revenue streams,” Peter Csathy, head of the Los Angeles-based tech and media advisory firm Creatv, wrote in his own 2022 predictions.
3. Disney and Comcast will end their Hulu partnership early
One of the strangest marriages in the streaming era will end two years ahead of schedule.
Comcast still owns 33% of Hulu but has an agreement with Disney to either sell its stake or force Disney to buy it out by 2024. That 2019 deal valued Hulu at $27.5 billion (making Comcast’s stake worth about $9.2 billion). But that is essentially the floor for the valuation. As Hulu keeps growing, and its profit margins grow, Comcast’s stake is likely to become much more expensive to buy out.
At the moment, the service is in a bit of limbo since Disney has a financial incentive not to grow it too fast since that will make the Comcast buyout even more costly. So it’s definitely in Disney CEO Bob Chapek’s interest to find a way to buy out Comcast as soon as possible, even as early as 2022.
Lightshed analyst Rich Greenfield has been among those pushing for Disney to seize complete control of Hulu as soon a possible: “To make matters worse, with the importance of streaming subscribers growing by the day, the cost of buying out Comcast’s 33% stake in Hulu could already be well north of $15 billion compared to the floor valuation of $9 billion; every day [Disney CEO Bob] Chapek waits, the cost is going up.”
4. Roku will buy a studio
For the third year in a row, Lionsgate and Sony will be surrounded by talk of either a sale or merger.
Lionsgate already appears to be priming itself for some kind of sale with its decision to look at either selling or spinning off the premium cable network Starz. That would make Lionsgate a more attractive asset to any potential buyer. And that buyer could very well be Roku.
Advertising is increasingly becoming Roku’s biggest revenue driver and original content is a great way to sell ads. Roku is already building on its acquisition of Quibi’s library by ordering additional seasons of “Most Dangerous Game” and “Die Hart,” as well as one-off revivals like “Zoey’s Extraordinary Christmas.”
Apple is another company to watch as it looks to further beef up its original content pipeline. So far, the tech giant has resisted any major outside acquisitions and has largely built its library from the ground up. But with Amazon primed to take over MGM sometime next year, Apple may feel the pressure to pull the trigger on acquiring a bigger library of video content — as well as a production entity that can expand its offerings.
For now, we’re going with Roku as the surprising new player in the streaming wars. CNBC recently asked top executives to anonymously make predictions, and the first one listed is Roku buying Lionsgate.
Roku, which already controls much of how consumers watch their streaming TV, could be primed to the biggest player nobody saw coming.
5. Advertisers will ignore TV ratings
Linear TV ratings have been falling for everything that isn’t live sports. And Nielsen, long the go-to industry source for TV audience measurement, has found itself under increasing pressure to more accurately measure how many people are watching. The ratings measurement company has been besieged by multiple instances of miscounting viewers and even lost its accreditation from the Media Ratings Council.
Nielsen plans to finally roll out a way to measure viewership across multiple devices in a product it calls Nielsen One. But that won’t be fully implemented until a year from now at the earliest.
And given the company’s recent struggles, one expert argues that advertisers will simply stop caring about ratings altogether.
“The under-the-radar story I’ll be paying close attention to is the decoupling of ad ratings from program ratings,” Alan Wolk, co-founder and lead analyst at the consulting firm TV[R]EV, said. “As addressable advertising becomes more and more common and advertising is sold on audience impressions, not (gross rating points), advertisers won’t care how many people were watching a particular show so long as they were the right people and the show was contextually relevant.”