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We can’t imagine it’s ever an easy time to be a finance executive in the entertainment industry. But if we had to make an educated guess, it really isn’t smooth sailing right now.
With two back-to-back billion dollar cable network write-downs from media behemoths Paramount and Warner Bros., it’s clear that the transition to a fully blown, profitable streaming era may be rockier than anticipated.
Amid this tumultuous moment, CFO Brew spoke to Jason Cherubini, co-founder and CFO of Dawn’s Light Media and executive in residence at Loyola University Maryland, about streaming profitability.
For some time now, all eyes have been on streaming profitability, as analysts wait for companies to actually make money off their nascent streaming platforms, despite their popularity and ubiquity. Now, though, as customers complain about streamflation, some companies may have to rethink how they charge for and group subscription streaming services, while still aiming for that ever-elusive profitability.
“In the next few years, as we’re seeing people shift over to being almost purely online, I think it’s going to be more the bundles of streaming services essentially replacing people’s cable packages,” Cherubini said. As bundles grow in popularity, we’re also seeing companies clearly delineate what belongs where, Cherubini pointed out: Warner Bros., for instance, has clarified which projects fall under the HBO instead of Max umbrella.
That’s something we’re seeing in other industries, but it’s just easier to spot in streaming, he noted, citing things like AMC+’s Shudder, a streaming service exclusively catering to horror and thriller fans. CFOs in different industries should take note, though, he says, because there’s a valuable lesson in all of this.
“Across a lot of industries…you can really reach a global audience with whatever you’re putting out there,” he explained. “You don’t necessarily need to water things down to be popular to everybody. You can target your niche and charge them a premium for it.”
Digital products, including streaming services and other apps, are “obviously going to be the first that move in that direction, because they’re so easy to deliver and cheap to deliver,” he said, “but this same thing we’re seeing across all products: You can get something that is very niche to you.”
And while it might take some time for the niche-as-premium bet to pay off in the streaming wars, the benefits of cornering a smaller market are already plenty evident. In a sense, it’s the premise of key aspects of the modern economy.
“You have one very niche shop in Peoria [Illinois] that can service the entire United States, so it doesn’t need to be popular just in that geographical region,” he noted, explaining that your real question, in a country of [more than] 300 million people, is: “Can you get 1% of them who really like your product?”
That’s something a CFO in any industry can chew on.