2022: The year that swam against the stream

Good morning! This is a year-end special edition of The Signal. This week, we published a series of 2022 roundups and predictions for 2023. Our last wrap-up today spills on all things entertainment.

A programming note: We are taking a complete publishing break on December 31, January 1, and 2. We will resume on January 3. Wish you a very happy New Year.

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Are you a fan of The Rehearsal and Irma Vep? If yes, you’d agree that the HBO originals were among the best shows of 2022. If not, you should watch them precisely for that reason.

One is a social experiment about people who simulate and rehearse an impending, difficult situation so they can control its outcome. The other is about the chaotic quest for artistic perfection. The takeaways of The Rehearsal and Irma Vep are several, but I’ll boil them down to one for each show. The first is that no matter how well-prepared you are, you’re at the mercy of forces outside your control.

Irma Vep—which by the way is pretty meta—isn’t just a commentary on today’s content factories, but also about the blurring of past and present.

I’d apply these takeaways to the entertainment industry this year, although they’re particularly applicable to streaming. Video and audio streaming platforms, riding the coattails of their pandemic-era highs, entered 2022 with plump content slates and budgets— only to be tripped by cut-throat competition and global economic upheavals triggered by the Russia-Ukraine war (rising energy costs, inflation, market slides, tech downturns, consumers reevaluating buying choices). They were, for the large part, at the mercy of macroeconomic conditions. These platforms lost plenty, but have started pulling all the stops in their quest for regeneration. And a lot of this futureproofing reminds us of the past. Looking at you, bundled TV plans.

On that note, here’s entertainment’s year gone by and our predictions for 2023.

I. The disruptor gets disrupted

I’m referring to video streaming—specifically, subscription video on demand or SVOD—as a whole.

Consumers once cut the cord in favour of SVOD. But in early 2022, they started cutting back on SVOD as subscriptions stacked up and became more expensive. Market leader Netflix losing nearly a million subscribers in its first two quarters set the tone for what was to come: a beeline to change strategies once it dawned on everybody that SVOD is no longer the goose that lays golden eggs.

Netflix stepped away from its comfort zone and erected three pillars for its turnaround strategy: monetised password sharing, ad-supported tiers, and gaming (note: the streamer launched games in 2021, but intensified its push this year with three studio/developer acquisitions in six months; it also announced that it would build its own gaming studio). It's dipped its toe into fitness content as well.

Under new boss David Zaslav, Warner Bros. Discovery (WBD) also veered away from its SVOD-is-everything model, which was put in place by former chief Jason Kilar. Zaslav, a veteran of linear TV, reversed virtually all of Kilar’s moves. He shuttered CNN+, killed projects much to the chagrin of creators, rejigged divisions, slashed thousands of jobs, and doubled down on content licensing in a cost-cutting and tax write-offs frenzy. As the content experts at IndieWire note, he’s now looking at FAST (short for ‘free ad-supported streaming TV’) as a revenue generator for the originals he canned. And lest we forget, the consolidated WBD streaming platform may controversially be renamed ‘Max’ instead of ‘HBO Max’.

Netflix’s and WBD’s SVOD rival Disney+ also launched its own ad-supported tier earlier this month, but not before contending with the musical chairs between House of Mouse chiefs Bob Chapek and Bob Iger. If you ask us, the drama at Disney deserves its own miniseries. Until then, here’s a lowdown on the battle of the Bobs:

Chapek, groomed by Iger to succeed him as the big boss of The Walt Disney Company, was undone by his poor handling of Florida’s ‘Don’t Say Gay’ bill and the lawsuit slapped by Marvel frontrunner Scarlett Johansson. Disney’s board, which had extended his contract by three years, turned on him—and so did his CFO Christine McCarthy. Depending on who you ask, this coup was orchestrated by Bob Iger, Disney’s longtime CEO who didn’t really want to leave in 2020, but did so anyway. Iger returned, and employees were reportedly thrilled. Regardless of whose side you’re on, it’s a terrible look for the boardroom.

PS: It didn’t help that most of Disney’s non-Marvel theatrical releases this year, particularly its animated titles, bombed. Tune in to Matthew Belloni’s excellent podcast The Town to learn more. It’s a Spotify original btw, which brings us to…

II. …So long, live audio

We covered this two weeks ago, but it bears repeating: live audio is dead. You know it is when Spotify, the world’s largest audio streaming platform, closes the curtains on all live programming except for sports. We’ll revisit the last bit later.

(Digression: the company co-founded by current CEO Daniel Ek inspired a Netflix original called The Playlist, a series so good that I recommend you watch it if you haven’t already. Yes, one is brimming with recommendations. This is an entertainment roundup after all; what did you expect?)

Spotify, like its video-streaming counterparts, had a tumultuous 2022. This was the year everyone learnt that it had shelled $200 million back in 2020 for exclusive rights to The Joe Rogan Experience, a wildly popular podcast helmed by an increasingly-unpopular man, one whose name is now muttered in the same breath as alt-right figureheads Jordan Peterson and Andrew Tate. But things got worse for Spotify over the last six months. The platform canned 11 originals from podcast studios Gimlet and Parcast. It also shuttered its live audio shows once it became evident that listeners no longer cared for Clubhouse rip-offs.

Spotify wasn’t the only one walking on eggshells, though. Ariel Shapiro of the Hot Pod newsletter writes that this was the year podcasting came crashing back to earth. Much of that had to do with digital advertising going soft, an outcome of the macroeconomic downturns my colleague Dinesh Narayanan recounted here. CNN laid off podcast employees, and SiriusXM, one of the US’ largest audio platforms, may do so too. Audacy, too, is reportedly looking to sell Cadence13, a studio that produced excellent originals. If recession is a-coming in 2023, as several economists predict, the outlook may become more dire for producers grappling with both petering ad money and audio subscriptions.

III. Theatres continue doubling as ghost towns

This one is confounding. You’d think people tired of bingeing content on their laptops, desktops, and phones for two years would ache for the movie hall experience in 2022, but no. Sure, Avatar: The Way of Water, Top Gun: Maverick, Jurassic World Dominion, and the usual suspects (Disney Marvel’s Black Panther: Wakanda Forever, Doctor Strange In The Multiverse of Madness, Spider-Man: No Way Home) either recovered costs or became blockbusters, but not all tentpole films hit the jackpot.

The last point rang even more true back home in India, where the assumption that ‘formula’ and masala films (following south Indian blockbusters such as RRR and KGF: Chapter 2) are foolproof fell flat on its face. Shamshera, Samrat Prithviraj, the Hindi remake of Vikram Vedha, Cirkus, and Laal Singh Chaddha—which marked Aamir Khan’s return as leading man after four years—did badly even as ‘non-event’ titles such as the Hindi remake of Drishyam 2, The Kashmir Files, and Gangubai Kathiawadi did well. Indie/small-budget films such as Everything Everywhere All At Once and Smile fared well internationally.

All this while Netflix original Glass Onion: A Knives Out Mystery raked in $$$ cinema-hall collections despite people knowing it’d drop on the platform not long after hitting big screens.

Tl;dr: is there a formula that works? I’d be damned if I knew.

All in all, global media behemoths cumulatively bled $500 billion this year.

Crystal ball gazing

What I said in my crypto roundup applies here, too: hound me at the end of 2023 if I’m way off with my predictions. Without further ado, here goes:

I. Apple TV+ will launch an ad-supported tier

This one’s a no-brainer. We’d told you about the challenges of Apple TV+ back in September. Pair that with Apple going hammer and tongs on advertising, and you’ll concur that Apple’s SVOD platform, like Netflix and Disney+, will more likely than not house an ad-supported appendage at some point next year.

II. Live sports rights hit the ceiling

2023 is the year all streamers, whether Spotify, SVOD incumbents, or platforms such as YouTube, will continue vying for a share of the (already bloated) sports pie.

Spotify closed the curtains on all live audio shows save for its sports programmes, The Ringer MMA Show and The Fantasy Footballers. I say this as a severely unathletic person who is indifferent to live sport: idk what it is about the thingamajig, but everyone is tuning in, and every streaming company/vertical wants in on listener or viewer engagement. As my colleague Jaideep wrote in the last edition of The Playbook for 2022, Indian companies too are paying obscene amounts of money for sports broadcasting rights.

Apple TV, Netflix, and Amazon Prime Video have exclusive access to various sports packages (Major League Soccer, F1, and NFL Thursday Night Football, respectively), but YouTube overtook everyone to clinch NFL’s Sunday Ticket in a seven-year, $2 billion deal. This one’s a biggie because, as we relayed above, FAST (rather, ad-supported models as a whole) will dominate in 2023. YouTube bagging NFL rights may not matter to those who don't care for American football; that said, it’s the most watched sport in the US, and YouTube offering the segment as both (a) an a-la-carte option on Primetime Channels, and (b) a package on YouTube TV heralds a new dawn in sports broadcasting for social media platforms.

So yes, expect FAST services such as JioCinema, on which you watched the just-concluded 2022 FIFA World Cup, to bag more exclusive rights. This is a natural segue to…

III. …More consolidation

Hulu, Paramount, or Lionsgate will merge with an international platform over the coming year.

Hulu, because Disney, under Bob Iger, may likely spin off its sports asset ESPN. But that spinoff will require a boatload of cash, something only a sale of Hulu (debt-riddled Disney owns a majority of that company) will provide.

Context here: both Disney and Comcast (owner of NBCUniversal, which operates the streaming platform Peacock) have stakes in Hulu. Disney *could* buy out Comcast’s 33% share in 2024 if it wants to. But Bloomberg’s Lucas Shaw supposes Disney will instead hive off its Hulu share to Comcast.

Btw, there are whispers about Netflix eyeing an acquisition of Paramount+, the streaming platform run by ViacomCBS. We don't believe that will happen, but for those who love "it's such a small world!" scenarios: Viacom's Indian arm Viacom18 is a joint venture between the American parent and Reliance Industries' Network18 Group, which in turn has Bodhi Tree (James Murdoch, Uday Shankar) as a significant shareholder.

Tangent here since I brought up Netflix: its attempt to monetise password sharing will become fraught, for reasons outlined here.

Hulu and Paramount aside, we’re confident that Lionsgate, one of the few remaining independent studios, will be gobbled up in 2023. Amazon would’ve been a likely contender since its Prime Video channels already includes the Lionsgate Play add-on. But the conglomerate hasn’t had great luck with its acquisition of MGM Studios, so ¯\_(ツ)_/¯.

IV. Pushback against David Zaslav

Rudyard Kipling’s coinage “never the twain shall meet”, from his poem The Ballad Of East And West, is evergreen because it can be applied to every opposite end of every spectrum you can think of. I’m bringing this up in the context of WBD chief David Zaslav’s cost-cutting spree. His reshaping of a beleaguered company may make sense for investors and bankrollers, but it doesn't for artistes and creators. And herein lies the rub for entertainment businesses: your dividends won’t be worth much if your talent is disillusioned.

This is (especially) acute in animation divisions across WBD, Disney, and Netflix, all of which either consolidated, cut back, or experienced losses in said teams. Also consider that streamers no longer swear by the binge-watching model; if you’ve noticed, there’s been an uptick in weekly episode drops and split seasons. This means writers, animators, and even showrunners are suffering slimmer residuals or payouts.

Will creators keep churning out more for less? No. Expect a strike against content juggernauts but more so against Zaslav, whose schoolmaster approach doesn’t allow for pushing the boundaries of creativity (the kind that’d ironically attract more viewers and in turn, job security). Expect cast and crew to criticise Zaslav to the point of embarrassing WBD.

That’s a wrap-up on my rambling this year. Tune in next week if you’re a glutton for punishment.

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