By Joe Flint and David Marcelis
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 18, 2019).
Entertainment heavyweights have spent more than $2 billion on
classic television shows in recent weeks while signing talent for
new programming, in an effort to win over streaming customers who
soon will have many more options to choose from.
This week, AT&T Inc.'s WarnerMedia struck a deal for "The
Big Bang Theory," while Netflix Inc. acquired "Seinfeld" and
Comcast Corp.'s NBCUniversal said it would have exclusive streaming
rights to "Parks and Recreation." Two other shows, "Friends" and
"The Office," changed homes earlier this summer. The commitments
total over $2 billion, according to people familiar with the
"You will see more of this," said industry analyst Hal Vogel of
Vogel Capital Management, of the recent big programming deals.
The spending frenzy comes as four high-profile services -- from
Apple Inc., Walt Disney Co., Comcast and WarnerMedia -- are to
launch between November and the spring, drastically increasing the
entertainment options of customers and likely leading them to
grapple with how to spend their money and their time.
Streaming-video consumers are willing to pay for a handful of
services that cost a total of about $38 a month for about six
streaming services, according to a Magid Research survey conducted
Apple said last week that its TV+ service would be launched Nov.
1 for $4.99 a month -- cheaper than Netflix's $12.99 monthly
standard option and Disney's $6.99 monthly fee for a service also
expected to arrive in November.
Comcast and AT&T have yet to reveal the cost of their
respective offerings, Peacock and HBO Max, both of which are to be
launched in the spring. Comcast has said the Peacock service would
be free to its existing U.S. cable subscribers, and HBO Max is
expected to cost more than $15.
A customer who doesn't have a cable-TV subscription and wants
access to all major streaming services -- which also include
Disney's Hulu and Amazon.com Inc.'s Prime Video -- would likely
have to fork over $70 a month for packages that lack access to live
TV. Factoring in what is known as a skinny bundle, such as Dish
Network Corp.'s Sling TV or Alphabet Inc.'s YouTube TV, the monthly
cost of comprehensive over-the-internet video content would be
higher than that of a traditional pay-TV package, which the Kagan
unit of S&P Global Market Intelligence said averages over $90 a
HBO Max's deal for "The Big Bang Theory" and Netflix's
acquisition of "Seinfeld" -- both of which are said to be worth
about $500 million for five years -- underscore how important
popular reruns are to streaming services. Episodes of hit shows
often retain audience acclaim years and decades after their initial
run, and are seen as must-have programming.
"There are a very limited number of excellent comedy titles that
have a large number of episodes and are evergreen," said Michael
Nathanson of MoffettNathanson Research, who described the prices of
the recent rerun deals as "fair value."
"Netflix had a monopoly on these shows a few years back at fair
prices," Mr. Nathanson said. "That is no longer the case."
Coming streaming services are also touting new shows anchored by
top talent. Apple's "Morning Show" will star Jennifer Aniston,
Reese Witherspoon and Steve Carell; Peacock's original programming
will feature Alec Baldwin and Demi Moore; Disney+ is launching a
"Star Wars" spinoff; and WarnerMedia signed producer J.J. Abrams,
who will develop content for HBO Max as part of his deal.
The new services' original-content strategy marks a seminal
moment for the industry. Last year, nearly 500 original scripted
shows were available across all video platforms, almost twice as
many as in 2011, according to research by Disney's FX Networks.
But the growing competition is also prompting new streaming
services to shell out between $8 million and $15 million an
episode, significantly more than what the average TV show used to
Not all players are equally equipped to deal with the investment
spree required to acquire classic shows and develop new content.
Entertainment isn't a core business for Apple and Amazon, and both
companies generate significant amounts of cash. Amazon recently
agreed to spend $250 million just for the rights to develop a "Lord
of the Rings" series. Apple said TV+ would be free for a year with
the purchase of a new iPhone, iPad or Mac.
Netflix, on the other hand, has borrowed heavily to build its
streaming dominance. It leads all rivals with 60 million customers
in the U.S. and a further 91.5 million abroad, but its long-term
debt is over $12 billion. And for the first time in nearly a
decade, Netflix lost U.S. subscribers in its most recent
Comcast, the nation's largest cable operator, needs to balance
its desire to create a consumer-friendly streaming service without
undercutting its core pay-TV business or alienating other pay-TV
operators that carry its various networks, including NBC, CNBC,
MSNBC and USA. In an effort to navigate these matters, its Peacock
service is expected to be available free to Comcast's more than 21
million cable subscribers in the U.S. In addition, Comcast and
NBCUniversal are looking to strike deals with other American pay-TV
providers that would allow them to offer Peacock to their
subscribers free as well, a person familiar with the matter
AT&T's WarnerMedia is in a different predicament. The
company already owns a popular direct-to-consumer service, HBO Now,
which gives access to all of HBO's content. But at $14.99 a month,
it is more expensive than Apple and Disney's new streaming services
combined. WarnerMedia's coming service, HBO Max, will feature HBO's
content on top of a vast TV and movie library, as well as original
projects from stars such as Nicole Kidman, Ms. Witherspoon and Anna
Kendrick. The company has yet to settle on a price for the new
service, which has to be higher than $15 so as not to undercut
HBO's existing agreements with pay-TV distributors -- but still be
affordable enough to remain competitive given the flurry of coming
lower-priced alternatives. A person familiar with the matter
expects the service to cost slightly more than $15.
Disney expects streaming to become a new source of growth as the
traditional pay-TV business -- once the engine of its expansion --
matures. The company, which already owns Hulu and ESPN+, expects
Disney+ to have between 60 million and 90 million subscribers by
the end of fiscal 2024. It is spending heavily in an effort to
achieve that goal, betting on ambitious shows such as "Star Wars"
spinoff "The Mandalorian, " whose cost for an episode approaches
$15 million, according to people familiar with the matter. Disney+
also will house episodes of the long-running Fox animated hit "The
Simpsons," as well as the original trio of "Star Wars" movies.
Write to Joe Flint at email@example.com and David Marcelis at
(END) Dow Jones Newswires
September 18, 2019 02:47 ET (06:47 GMT)
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