Kay Koplovitz, founder of USA Network, chairman of Springboard Enterprises, and member of The Common Good Honorary Advisory Board, recently appeared on CNBC to discuss the entertainment industry’s rapid evolution over the past decade towards a market that is increasingly favorable to companies with a direct-to-consumer business model. As more and more companies compete to make this transition, the key question for investors has necessarily become, what company will stand out to dominate the market long-term? The answer, according to Koplovitz, is Netflix.
In the discussion she had on CNBC’s Squawk Alley with former TiVo CEO Tom Rogers on January 18, 2019, Koplovitz confidently asserted that Netflix is “way ahead of the competition.” Koplovitz pointed out that, at the time of the discussion, Netflix had over 140 million direct-to-consumer subscribers around the world, and was estimated to grow to 200 million by the end of 2020. For comparison, HBO has 134 million total subscribers, but only five million subscribers for their direct-to-consumer service, HBO GO. So, although they have found success with their traditional subscription-based service, their direct-to-consumer service cannot rival what Netflix has achieved, and that’s what will matter in the long run.
Traditional media companies like Disney, Comcast, AT&T (owner of Time Warner Cable), and NBC Universal are all trying to adapt to the new market with direct-to-consumer services of their own, but Koplovitz explained why none of them are capable of rivaling Netflix’s success. Even though some believe that Disney has the potential to offer a service to rival Netflix, in reality, it faces the same crippling limitations as the other traditional media companies. When traditional media companies attempt to develop their own direct-to-consumer services, their growth faces serious constraints because they have to simultaneously manage the decline of their traditional business, a problem Netflix doesn’t have.
The discussion participants brought up that NBC Universal is planning to launch a new advertiser-based program, but they agreed that this model is also incapable of delivering the amount and quality of information about its users that a subscription-based system can. Additionally, the appeal of advertiser-based models to consumers is declining because of the growth and emergence of more convenient subscription-based competitors.
Koplovitz was confident that Netflix is in an ideal position to continue dominating the media entertainment industry, and the fierce competitors of the past no longer pose a threat to Netflix’s future prosperity. View the full discussion here.
Koplovitz also returned to CNBC on May 9, 2019 where she joined Squawk on the Street to revisit Disney's plans to launch a direct-to-consumer streaming service. Although the consensus was still that Disney’s new platform, Disney+, would not be able to match the success of Netflix any time soon, by acquiring the rights to popular franchises and investing millions in new original content, Koplovitz expected it could still become a notable competitor in the market. However, she remained skeptical about Disney+’s potential to maintain a strong and consistent subscriber base like Netflix does. Koplovitz also discussed Roku’s astounding recent performance, with their stock up one hundred and eighteen percent in the past twelve months. All of these recent developments supported the groups conclusion, that the growing direct-to-consumer market still had room for many more winners, both big and small.
To see the full discussion, click here.
Author: Alex Janowicz [TCG Intern]