Jul 18, 2019
New challengers in the content streaming space! HBO Max and Disney+ enter the race for video delivery dominance. Listen in to hear VP of Growth, Spencer Burke, and Strategic AE, Patrick Forquer, discuss the lay of the streaming land, offering packages, and the frontrunners.
Spencer Burke: Have you guys watched ET recently?
PJ Bruno: Pretty much every Christmas, yeah.
Spencer Burke: Really?
PJ Bruno: No.
Spencer Burke: Oh.
Patrick Forquer: This is our best content in years.
PJ Bruno: It's the best yet. Hello again. Welcome back to Braze for Impact, your martech industry discussed digest. My two esteemed guests today, close friends and colleagues, once again, Spencer Burke of the [house growth] and Patrick Forquer from the sales org. Gentlemen, welcome back.
Patrick Forquer: PJ.
Patrick Forquer: What a pleasure to be with you and Spencer again.
PJ Bruno: I'm very excited about today. Spencer, good to you. You're looking very tanned.
Spencer Burke: Thanks, Pat.
PJ Bruno: Where did you go?
Spencer Burke: Thanks for having me, PJ.
PJ Bruno: Yeah, man. Always good to have you back on. You always have insightful big words.
Patrick Forquer: I just drank some excellent cold brew on tap. I'm fired up.
PJ Bruno: That's good. Me too. I forgot that you're supposed to dilute it with water.
Spencer Burke: Yup.
PJ Bruno: I just do straight-up.
Patrick Forquer: Yeah.
Spencer Burke: Wow.
PJ Bruno: That's right. I'm fired up. My vision is vibrating a little bit, so let's jump in before I can't see. So this episode, we're getting in the streaming wars. We're all aware of how many different companies are trying to capture the apple as far as streaming services. We've got Netflix, which has been around for a long time. There's Hulu. Now we have two big contestants jumping in the ring. First of which, HBO Max joins the growing mob of streaming services, chasing after Netflix. Their parent company AT&T, they unwrapped this direct-to-consumer streaming service this past week. HBO Max will feature 10,000 hours of content from HBO, Warner Brothers, DC Entertainment, CNN, TNT, Cartoon Network, Adult Swim, and other Warner media properties, planning to launch next spring. It's the first major venture to come from AT&T's $104 billion takeover of Time Warner. They're going to have a lot of titles. They're taking Friends off of Netflix, which is pretty huge. I know every once in a while, I'll jump into a few random episodes just because it's chicken soup for the American soul. It truly is. Also, Patrick mentioned to me that some Reese Witherspoon movie is coming to HBO Max too, and you're the Reese Witherspoon fan.
Patrick Forquer: I am a huge Reese fan. I'm on the board or director of the Reese Witherspoon fan club, a huge supporter of all of her work. Very excited to have that.
PJ Bruno: Yeah. What's it called?
Patrick Forquer: It's called The Reese Witherspoon Story.
PJ Bruno: That's good.
Spencer Burke: On a serious note, which ... Do we do serious on this?
PJ Bruno: Yeah, we can slide into the serious.
Patrick Forquer: Let's try it on for size and see how it feels.
Spencer Burke: As Netflix loses content, I often feel like I'm on an airplane, a little bit trapped. I'm not really excited about any of my options, but I'm at home on the couch. I want to watch something. Do you guys think Netflix can sustain its edge as it's losing some of this content, Friends and The Office or some of its most streamed shows? When you sit down and put on Netflix, are you really excited about the options? How do you feel about their current content library?
PJ Bruno: I think their sweet spot as far as ... It all comes back to original content because yes, they were first in the space. They were quick to absorb some of our favorite shows, but as they start to lose some of those tried and tested sitcoms that we love so much and keep going back to, they still continue to put out really, really great "original" content. When I say "original", there's quotes around that because it's not super original. It's just paying people for their content and branding it Netflix, but the original content that's come out of there ... Stranger Things, I just burned through in a day and a half, season three, and I'm ready for season four. They just keep putting out great things.
Patrick Forquer: Yeah, I think the interesting part if you look at the evolution of Netflix since it really doubled-down on focusing direct-to-the-consumer, evolving from the DVD business back in the day-
PJ Bruno: They still have that DVD mailing service, though, by the way.
Patrick Forquer: Do they really?
Spencer Burke: Do they?
PJ Bruno: They do. It still exists in case you guys want a mailed DVD.
Patrick Forquer: Ugh, I would love that.
PJ Bruno: It's nostalgic.
Patrick Forquer: But they took all this content from the big linear players, NBC, CBS, etc, before the linear TV folks really knew the gold that they had on their hands. So to see this now retraction of that to say, "Oh, wait ..." They built this tent pole around this really popular chicken soup for the soul type of content, Friends, etc, and are pivoting now to towards the original content. So they built the audience, leveraging all the great content from other folks, and now that those folks are pulling that back, they have critical mass. So I actually see it ... I don't see that as a huge threat to Netflix overall because they're putting out something like 80 to 100 original movies every year. Think about that. Think about that scale.
Spencer Burke: Half of them are Adam Sandler movies.
Patrick Forquer: Yeah.
PJ Bruno: Oh man.
Spencer Burke: He keeps doing it, though, doesn't he? He's trying his best. He's staying.
PJ Bruno: He is trying.
Patrick Forquer: But they're playing a volume game right now. They're putting out a massive amount of content. Only 5% or so needs to hit. As long as they're getting single digit hits out of the massive volume they're putting out, they're going to continue to see subscriber growth. They raised their prices recently. They now have that mass where it doesn't matter that things are going away, as much as it helps those other services. To Netflix, they've already got that.
PJ Bruno: HBO Max and chill doesn't quite have the same ring to it, I don't think.
Patrick Forquer: Right. Well, the interesting thing about HBO, though, if you think about the different big players, HBO is obviously one of the big ones out there where they're known for lower volume but extremely high quality content. Game of Thrones, etc. But what'll be interesting to see now is as they scale that ... And their CEO has talked a lot about that, especially since the merger with AT&T. They'll scale that, and the idea is keep the extremely high level of content, and maybe not get to the level that Netflix is getting, but you're getting at a much higher "hit rate" of things that work and things that resonate with the audience, even though the overall volume may be lower than Netflix. It'll be higher than where they are now. There are so many different universes coming together with DC, Turner, etc. I'm excited to see what that looks like and takes shape. The original lineup that they've come out with looks awesome in addition to ... Yeah, you probably know double-digit people that watch Friends every night before bed. So that alone is just like ... It's one of those shows that people just watch and feel better about [inaudible].
Spencer Burke: With Netflix, it's not just that they need 5% to 10% of the shows to be winners. Their equation is slightly different because their audience is so broad. They're creating really niche content, and in linear TV, niche content takes up a time slot. So the opportunity cost of that is really high. Do I want this show for middle America to take the 7 o'clock time slot, but I know no one in San Francisco is going to watch it? Versus on Netflix, we can ... I don't even remember what that Ashton Kutcher show where they're out on the ranch is called. The Ranch? Is that it?
PJ Bruno: Oh yeah, I think it is called The Ranch. Sam Elliott.
Spencer Burke: Yeah, we can release that and Stranger Things and Dark. There's this horror sci-fi thing going on at the same time as this western-type story. So what they're trying to do is create content that really hits different parts of their audience and have winners for each of those segments. I think HBO and Disney have both done the opposite, really high-quality, broad appeal, Game of Thrones. Disney has a huge history of some amazing winners in that category.
PJ Bruno: Right. Not taking risks is just fully inline with that vision. When you look at the remakes of recent with Aladdin coming back to live action, Lion King ... I'll probably go see that on Friday.
Patrick Forquer: Definitely.
Spencer Burke: Ooo, date time?
Patrick Forquer: I think it's Friday date night.
PJ Bruno: We do work directly next to a movie theater.
Spencer Burke: We do. Yeah, just walk next door.
PJ Bruno: Speaking of Lion King, we might as well move on to our next big one: Disney. Disney+ streaming service. The release date, the price, the shows and movies to expect. So as we know, Disney is betting big on its 2019 streaming service, Disney+, the future home for streaming almost all things Disney. It'll be the hub to watch the big budget Star Wars series, Marvel Cinematic Universe films, all the Pixar movies including the just-released Toy Story 4 sometime next year, and a bunch of original shows and movies based on those franchises and others.
Spencer Burke: Yeah, so I guess the rivalry with Netflix is heating up.
Patrick Forquer: What's interesting about the Disney+ product to me is first of all, I'm really excited about the original content they have coming out on Pixar and in the Star Wars universe and the Marvel Universe. Again, they're pulling all that Marvel content off of Netflix, for instance. So they have what HBO has, which is this blend of the tent pole original content that's very high quality, and they have a history of putting out great content, but also having the older Disney shows and older Disney movies to pull you in. But the third pillar that they have that I think is unique to Disney is parks. So what they have ... Spencer actually sent me an article on this a month or so ago, but what they have is they build these universes like Marvel, Star Wars, Nat Geo, etc. People get really into those ecosystem plays, but then they're also drawn to then go visit those types of experiences in real life. Spencer and I were at Disneyworld last year, and I can tell you business is booming. If you look at the-
Spencer Burke: It's amazing.
Patrick Forquer: It's amazing. It's amazing what they're able to do in real life at the parks, and then you look at their earnings reports and they are crushing the margins on that.
PJ Bruno: Have you guys been to a park recently? Have you seen-
Spencer Burke: Last year. We'll be back.
Patrick Forquer: We're going back. Yes.
PJ Bruno: Oh yeah, that's right. Yeah. Did you get to see some of these experiences?
Spencer Burke: Disney is incredible. The films, absolutely, but in the parks, they've thought through every detail down to ... The bars in the hotel are experiences. There's just really nowhere like that where you get the thrill of an amusement park combined with such a thoughtful experience. Everyone who's there, the cast members as they call them, is really engaged as a character in that experience. It's amazing.
Patrick Forquer: If you look at the price point for all of those top end services that we're discussing here, HBO, Netflix are going to be comparable in the $12 to $20 range depending on where they land. But Disney's is much lower because as they build these fanbases on the streaming service, that then points them to the in-park experience where they make up the difference in how much lower they are than the other services by pushing people to their other experiences that are live. That's where they make a ton of money.
PJ Bruno: I haven't been to a park in maybe 15 years. I think it's time.
Patrick Forquer: PJ, you would love it. Let me tell you.
Spencer Burke: I think that's an interesting thing about this space, though, because even ... PJ, you opened it up, the streaming war. I think people look at music streaming. All right, there's Spotify. There's Apple Music, and it's zero-sum. There has to be a winner, and everything is a trade-off. In the music space, the catalog of tracks that are on each platform is really similar. They're all licensing the music from the major labels. Spotify, Apple Music, largely going to be the same except for some of the curation that they can do. Netflix was the first mover, really, in the streaming space, especially at scale. So they at first bundled everything together. It looked a lot like your cable package. It looked a lot like Spotify might. Now that's coming undone as these other content creators are creating their own platforms and their own services. I think to have Disney really invest in that and to have consistent access to some of these titles where previously on Netflix, you'd lose it season to season, things like that, I'm super excited about that. I probably will end up spending more. Let's say you're a parent and you're looking at Disney+. You already have Hulu. You have Netflix. It's a no-brainer to add to your catalog.
PJ Bruno: All right. Well, let's just jump in to taking a look at best video streaming services of 2019. This is a top three from PC Mag. We'll see what they say, and I'm interested to hear your favorites too, gentlemen. We'll get into that in one second. Number one topping the charts is the front-runner, Netflix, at $8.99 a month as you know. It's been around a long time. Impressive catalog. Shows like Altered Carbon, Black Mirror. Bojack Horseman, hilarious. Chilling Adventures of Sabrina, I also watch. The Crown, Lost in Space, Mindhunters, Narcos, Orange Is the New Black, Santa Clarita Diet, and Stranger Things. Another cool thing about Netflix: what they do as far as video quality alongside Amazon Prime video, is they allow 4K streaming and it supports offline downloads should you be traveling and want to be able to watch a film on a flight. Coming in at number two, YouTube for $49.99 a month. I was going to say that is a high price point for me. That is too rich for my blood, but one thing I will say that does interest me is they offer that excellent selection of live sports, including other cable networks, ABC, AMC, CBS, CNN, ESPN, FX, and NBC. Also, they have unlimited cloud DVR storage. Number three, Hulu. Good one. $5.99 a month or $44.99 for Hulu plus live TV, just undercutting YouTube there. Yeah, Hulu impresses with its best all-in-one options for cord-cutters ... I love that term ... Given its diverse set of streaming options. In addition to the strong library of classic shows, it also has a good selection of movies, live TV options, more than 60 channels of news, sports, and entertainment programming. Humans in the room, what do you guys have as far as apps on tap? What are your top things that you watch?
Patrick Forquer: In our house, Netflix, HBO, and then Hulu is a distant third, I'd say. I think of the ones on this list ... I don't agree with this list, but of the ones on this list, I think Hulu is the one that will change the most over the next 12 to 24 months. Disney basically, through the acquisition of Fox and buying out the other additional investors, are taking control of Hulu. The market guesstimate at this point is that ESPN will be their home for sports, Disney+ is going to be their home for original content and children-focused entertainment, and then Hulu is going to be more the "adult", more comparable to an Amazon originals or Netflix originals for adult shows.
PJ Bruno: Where do you watch your sports?
Patrick Forquer: We have Verizon cable and Internet package.
PJ Bruno: Gotcha.
Patrick Forquer: But it's this-
Spencer Burke: So you haven't cut the cord yet.
Patrick Forquer: Well, so I cut the cord, and then I uncut the cord because the streaming got a little untenable where I couldn't [inaudible] the various games I wanted to watch. Verizon, AT&T, it's an interesting thing. They figured out that people are cutting the cord, so then they made it so you couldn't buy just cable. Buying cable plus sports channels basically is what we have. We have the sports package. We get ESPN and all the sports channels so that we can watch football, basketball, etc. They figured it out a couple years ago, so their bundle changed. Then I got back into it because it didn't make sense to do just cable, for instance.
Spencer Burke: That's the nice thing about YouTube TV. I did a trial of it last week during Wimbledon. You can watch live sports. You can watch live TV. So it fills that gap for cord cutters who still want to watch sports or who want to watch some stuff live. For me, Hulu had filled that gap a little bit since it was a partnership across a lot of the traditional broadcast companies, but now Hulu fits in this different spot where for me, the ranking is similar. I subscribe to some of the same services. I just don't watch Hulu quite as often.
Patrick Forquer: Yeah, and they're going to lose ... A lot of their popular content is the NBC content, which they're going to lose when NBC launches their thing. So it'll be interesting to see how they backfill that because that's what we, frankly, use it for is watching the shows on NBC that we miss and essentially using it as a DVR-type service.
Spencer Burke: Same. Same.
Patrick Forquer: Yeah. I don't-
PJ Bruno: Like the Bachelorette?
Patrick Forquer: Yeah.
Spencer Burke: Like The Good Place.
Patrick Forquer: The Good Place. Jimmy Fallon.
Spencer Burke: Oh, you watch Fallon? Ugh.
Patrick Forquer: Seth Meyers.
PJ Bruno: He's not a client, right?
Patrick Forquer: Jimmy Fallon. Great guy. I'm hanging out with him this weekend.
PJ Bruno: Your apps, Spence. Your top.
Spencer Burke: Same as Pat. I've been getting into Amazon Prime for the movie selection just because it feels very broad but also really random titles that I'm not seeing anywhere else.
PJ Bruno: What are some examples?
Spencer Burke: Teen Wolf.
Patrick Forquer: It's pretty specific.
Spencer Burke: Dune. There's some really nerdy stuff that I like that's in the realm of either-
Patrick Forquer: Which Dune movie?
Spencer Burke: The original. Is there a new one? The guy from Twin Peaks.
Patrick Forquer: Twin Peaks.
Spencer Burke: Oh, classic.
Patrick Forquer: Remember? Then they brought it back in 2017.
Spencer Burke: Yeah, I've never watched it.
Patrick Forquer: So PJ, what would be your ranking of the apps?
PJ Bruno: Oh, by use, I would probably say Netflix and HBO have to be right there at the top just because I think half of my watching is documentary. From what I've seen, they have some of the best catalogs.
Spencer Burke: What kind of docs?
PJ Bruno: I'm obsessed with cult documentaries. I've seen every cult documentary that exists.
Spencer Burke: Doing some research?
Patrick Forquer: PJ is going to be an up and coming-
PJ Bruno: You've noticed I'm charismatic, right? I'm not letting this go to waste. No, there's the Wild, Wild Country, which was very popular on Netflix, but then there's also my favorite one called The Source Family. Super, super interesting. I'll just give you the boilerplate in 30 seconds. So this guy, he was dubbed the world's strongest boy at age 12 in the 40s or something like that, and then fought in the war. He was a sniper and had 14 registered kills. Moves to Southern California and opens up a chain of health restaurants, and this was before healthy eating was actually a thing. He kicked it off in Southern California. At this point, he's in his mid-50s, and this group of mid-twenty-somethings just rally around him because he loves yoga. He loves eating healthy. He loves free love. So all of a sudden, he has this group of people they call the Aquarians. It's 12 twenty-somethings and this 50-some year old guy is leading them. Of course, in every single documentary, series, or film, it's like they worship this person, this person starts to think they're God, and then all hell breaks loose, basically. But that's the formula for pretty much every single one.
Spencer Burke: I'm speechless, PJ. That was amazing.
PJ Bruno: Oh, there's plenty more.
Patrick Forquer: I regret asking. We'll cut that.
PJ Bruno: With Amazon, we have that as well through our Prime membership. That's the interesting part about it is that-
Spencer Burke: You ever thought about canceling your Prime?
PJ Bruno: Well, here's a question, Spencer. You're married. Do you guys have one Prime account or two Prime accounts?
Spencer Burke: One, of course.
PJ Bruno: Right.
Patrick Forquer: Did that foil your follow-up question?
PJ Bruno: Same.
Patrick Forquer: You thought you were going to fool him.
PJ Bruno: No, I just-
Spencer Burke: Oh, you simple man.
PJ Bruno: We haven't consolidated yet. So that's stupid. Also, you're going to see that Apple is coming out with a TV product. Amazon already has Prime Video, which is out. We're going to see a bunch of other tech players get into the space as well. Over the next two years, I think we'll see a glut of new entrants, and then over a five year period, we'll see who's going to win out because it's not going to make sense to invest the type of money that Netflix and HBO, etc, are investing in this if you're not going to come full-on because people are coming at this with a lot of money, a lot of attention, and a lot of great content. If you're not up to execute at a really high level across every aspect of the business, it's not going to make sense.
Spencer Burke: And potentially build a theme park.
PJ Bruno: Yeah, you also-
Patrick Forquer: Oh man, what a differentiator that is.
PJ Bruno: You should build a theme park.
Spencer Burke: A Stranger Things theme park?
Patrick Forquer: Oh my God.
Spencer Burke: He'll love it.
PJ Bruno: [crosstalk].
Patrick Forquer: Oh wow. Perfect.
Spencer Burke: That's exciting.
PJ Bruno: The last question that I have for all of these services is as the smart home evolves, as Amazon and Apple are building more and more smart home products, the cable companies own the pipes. But if you're Apple and you own the TV of the future, or Microsoft or whoever, then similar to the app store and all of the stuff that we see on our phones, you're going to prebake all of your original content into the device, which is the unspoken thing because we're not really there yet from a smart home perspective. The quality of the screens, etc, isn't there from those products. So as a Amazon home device, even Facebook, etc, as they-
Spencer Burke: Self-driving cars.
PJ Bruno: Self-driving.
Spencer Burke: Guys, as we wrap up, I'd like a prediction from you. Old Town Road. Is it going to continue to be number one? Is it going to hit 17 weeks? Break the record?
PJ Bruno: I think that it will. I care very medium for that song. I'm just so impartial. I'm like, "It's all right." But I think it probably will continue.
Spencer Burke: Do you think you could do a better Old Town Road?
PJ Bruno: Like take the song and cover it?
Spencer Burke: No, like-
PJ Bruno: Write a song.
Spencer Burke: Yeah.
PJ Bruno: Yeah, I think so. I think if I have our BI team's bandwidth for a week, it's all about doing some research. All right, it's this cadence. All right, all the hits are in this key. Here are some top words that we hear from most popular songs. Systematically, with this company, we could create hit after hit after hit.
Patrick Forquer: I do think that was some of the most clever marketing of the year.
Spencer Burke: To put a hip-hop song on the country charts? It worked, obviously.
PJ Bruno: Yeah.
Patrick Forquer: I love the song. Lil Nas is [inaudible] great Twitter follower.
Spencer Burke: He's your follower?
PJ Bruno: He follows you?
Patrick Forquer: He's a huge fan of mine. No, sorry. Great Twitter follow. Yeah, definitely. The Internet is going crazy. Every time he puts out a remix, it just continues to stay [up].
Spencer Burke: Mariah Carey might be the next one.
Patrick Forquer: Mariah Carey.
Spencer Burke: I think people are trying to be really clever and use new platforms. This is getting totally off our topic, but it's related to music streaming, and actually streaming on YouTube as well.
Patrick Forquer: TikTok.
Spencer Burke: TikTok, yeah. I think the two really exciting and cool things and clever things about what they did ... First, if you're a hip-hop artist, breaking into the hip-hop charts is really hard. There's just a lot going on there. A lot of people are trying to do that. A lot of things sound pretty similar. Country, however, way easier to disrupt. So from a marketing perspective ... And this happens in the App Store too. People look at which categories and try to figure out what's the best category for me to rise through the rankings. So just being super clever about doing that, then it happened to get him all of this press because they kicked it off the country charts. That's when Billy Ray came in. Some really brilliant marketing there. Then using social media, including emerging platforms like TikTok, to help build a following, he's done that in a way that no other modern artist has to this level.
PJ Bruno: HBO and Disney could take a note, I guess, from the kid.
Patrick Forquer: Or PJ Bruno.
PJ Bruno: We'll see.
Patrick Forquer: We'll have to put you out there, PJ.
PJ Bruno: That's about all the time we have for today, gents. I'd like to thank Spencer Burke and Patrick Forquer for being here with me. Thanks, guys.
Spencer Burke: Thanks, PJ.
Patrick Forquer: Thanks for having us.
PJ Bruno: And thank you for stopping by. Take care.