Andrew Ross Sorkin speaks with Netflix founder and Co-CEO Reed Hastings during the New York Times DealBook Summit in the Appel Room at the Jazz At Lincoln Center on November 30, 2022 in New York City.
Michael M. Santiago | Getty Images
Back by popular demand (OK, fine, I just wanted to do this again), I asked a bunch of past and present media and entertainment executives to give me one significant and/or surprising industry prediction for 2023.
I did this last year, too, and a few came true, or at least partially true. Bob Iger did, in fact, return as Disney’s chief executive. Vice tried to sell itself in pieces (and together). Roku made a bid for a stake in Lionsgate’s Starz (not the studio) but walked away without a deal.
The rest? Not so great. But we’ll try again this year, and in honor of the 12 days of Christmas, I’m bumping the number of predictions from 10 to 12.
Executive 1: Netflix will merge with another company
Disney seems like a long shot given recent regulatory pushback on Penguin Random House’s attempt to buy Paramount’s Simon & Schuster and Microsoft‘s $69 billion acquisition of Activision Blizzard. Disney has a market valuation of about $165 billion. Netflix’s market capitalization is about $130 billion. That would make a merger one of the largest deals in history and would create a streaming giant that dominate the industry — and almost certainly ring all sorts of antitrust alarm bells.
Shari Redstone’s Paramount Global is much smaller, with a market valuation of less than $12 billion. Netflix has sniffed around trying buying Paramount Pictures before. Netflix co-CEO Ted Sarandos has long coveted the physical Paramount lot, according to people familiar with the matter.
Netflix co-CEO Reed Hastings would likely want nothing to do with Paramount Global‘s cable network business, given his long disdain for the legacy pay TV business. But perhaps private equity would take the linear cable business off his hands, giving Netflix the movie studio and CBS, which Hastings and Sarandos could use as an advertising-supported reach-builder for some of Netflix’s biggest hits. Whether Netflix would want to take on paying billions for live sports rights is another story.
A deal with another company would also give Netflix a chance to write off little watched content, a tax benefit of which Warner Bros. Discovery is currently taking full advantage.
Executive 2: An ex-Disney exec returns, with his company
Bob Iger passed over Kevin Mayer for the Disney CEO role in 2020, prompting Mayer to bolt the company and take the CEO job with TikTok. At the time, the choice seemed confusing. Disney’s future appeared to be Disney+ and streaming video, not its decades-old theme park business.
Iger has an opportunity to get a second chance with Mayer if he acquired Candle Media and named Mayer his successor. He could also get another chance with Mayer’s co-founder of Candle Media, Tom Staggs, who also left Disney when it became clear he wasn’t going to be CEO.
Kevin Mayer, co-founder and co-chief executive officer of Candle Media, chairman of DAZN Group, speaks at the Milken Institute Asia Summit in Singapore, on Thursday, Sept. 29, 2022.
Bryan van der Beek | Bloomberg | Getty Images
Still, Iger said during a Disney town hall last month he isn’t focused on M&A for the time being. Candle Media has acquired intellectual property assets including Reese Witherspoon’s Hello Sunshine production company and Moonbug, which owns the animated kids series “CoComelon.”
Iger’s calling card as CEO is acquiring IP, including Pixar, LucasFilm and Marvel. “CoComelon” could fit well within Disney+.
But choosing Mayer or Staggs would also imply Iger made an error in judgment the first time.
Executive 3: Iger extends his contract
There’s been lots of speculation over who Iger will choose as his successor. History suggests he has a hard time leaving the role of Disney CEO.
So perhaps the most obvious answer as to who he will pick is: no one (at least, not yet).
Robert Iger speaks during the Sandy Hook Promise Benefit in New York City, U.S., December 6, 2022.
David Dee Delgado | Reuters
Christine M. McCarthy, Senior Executive Vice President and Chief Financial Officer The Walt Disney Company.
Source: The Walt Disney Company
David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives at the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 05, 2022 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images
Warner Bros. Discovery CEO David Zaslav has spent the past year cutting costs to slim down the merged WarnerMedia-Discovery and service the company’s nearly $50 billion in debt.
Zaslav’s cost cutting moves haven’t yet convinced investors he’s on the right track to returning the company to glory. Warner Bros. Discovery shares have fallen about 60% since the April merger.
Existing investors will lose patience with Zaslav and the board, and will demand changes, said one executive. It’s possible an activist will take a stake in the company, but it’s even more likely long-time shareholders will lose confidence in his strategy when it doesn’t produce a notable valuation bump in 2023, the executive predicted.
Executive 6: The cost of sports rights will peak
Live sports rights have been the lifeblood of the legacy pay TV industry for decades. National Football League games continue to dominate ratings. College football and NBA playoff games frequently draw enormous live audiences compared to almost everything else on cable all year.
But media companies are now focused on building their streaming businesses as replacements for traditional pay TV. Consumers buy these services a la carte, meaning non-sports fans don’t have to buy services that include sports. Limited audiences, combined with a legacy media industry intent on focusing on profits and cost cutting, could end the trend of live sports commanding big rights increases.
The NBA will still command a big increase as legacy pay TV continues to exist — primarily supported by sports. Those rights will likely be renewed in 2023. But in five to seven years, it’s possible traditional TV will be totally eliminated.
That will lead to an environment where there are fewer bidders for sports rights, dropping the price for sports across the board, said this executive. Perhaps the NFL remains an outlier due to its popularity, said the executive. But every other sport’s prospects look bleak, said the person.
Executive 8: Paramount Global will sell, possibly for parts
This is our first repeat from last year.
“I love Shari [Redstone], but ViacomCBS is not long for this world as it stands today,” said a media executive last year.
Drew Angerer | Getty Images
The executive was right — sort of. ViacomCBS changed its name in 2022 to Paramount Global.
But Shari Redstone, who controls the company’s voting shares, didn’t sell. Perhaps 2023 will convince her to find a buyer — or buyers. The company has different assets that could be useful to a variety of different companies. As mentioned earlier, Netflix could want Paramount Pictures. A company like Nexstar could want Paramount Global‘s owned and operated local stations, CBS could be a good fit for Warner Bros. Discovery, and private equity may want to wind down the cable networks, which still generate cash.
Executive 9: A big cable operator will shutter its video business
Back in 2013, then-Cablevision CEO James Dolan predicted “there could come a day” when the cable company stopped offering video service, focusing instead of building out and upgrading broadband infrastructure.
Earlier this year, cable operator Cable One announced it would stop offering cable TV for hotels and multidwelling units.
But we’ve yet to see a major cable operator end the business of residential cable TV altogether. That’s coming next year, said one executive, who said cable operators are being pressed for bandwidth to support the growth in streaming video.
Shutting down the declining video business, which generates relatively low profits, is a way to gain network capacity. Wall Street may also cheer the move as capital expenditures will go down and overall margins will improve.
If a cable operator’s stock leapt higher with such a move, it could accelerate other pay-TV providers to make similar decisions, further accelerating the decline of legacy cable TV.
Executive 10: Google’s YouTube will buy the NFL’s ‘Sunday Ticket’ rights
National Football League commissioner Roger Goodell told CNBC in July he planned to announce a “Sunday Ticket” rights winner by the fall.
Well, the last day of autumn is Dec. 21, and the league still hasn’t announced who will own “Sunday Ticket,” the league’s out-of-market Sunday afternoon package, after the 2022-23 season.
NFL Commissioner Roger Goodell during the NFL Football match between the Miami Dolphins and Indianapolis Colts on October 3rd, 2021 at Hard Rock Stadium in Miami, FL.
Andrew Bershaw | Icon Sportswire | Getty Images
Apple and Amazon have been the favorites, with Alphabet’s YouTube TV coming on strong in recent months. Apple has wanted more flexibility with how to distribute the historic package, CNBC reported in October, and has pushed back against the league’s high asking price — more than $2.5 billion per year. Puck reported Friday Apple had dropped out of the bidding.
Amazon already owns the league’s “Thursday Night Football” package as it looks to extend Prime’s reach. Amazon has been interested in “Sunday Ticket” from the beginning of rights negotiations, but now its founder, Jeff Bezos, also may want to own the NFL’s Washington Commanders.
Alphabet‘s Google gives the league quite a bit of what it wants: a technology owner with a huge balance sheet and global reach, a large marketing platform in YouTube, and the ability to support bundled legacy TV (where most of the league’s games still air) by pairing “Sunday Ticket” with YouTube TV.
“Sunday Ticket” and YouTube TV — a digital bundle of broadcast and cable networks — is similar to what the NFL has done with DirecTV.
Google also represents a new partner for the league — a plus for the NFL when the next rights renewals are up. The more potential bidders, the better. The rationale for Google over Amazon makes sense. But will it make cents? (I’m so sorry).
Executive 11: Apple will ban TikTok from the App Store
Sen. Marco Rubio, R-Fla., introduced bipartisan legislation last week to ban TikTok from operating in the United States. The Senate also voted unanimously to ban TikTok on government phones and devices.
The concern stems from security risks of making U.S. data available to the Chinese government. TikTok’s owner, ByteDance, is a Chinese-based company.
TikTok was nearly banned during the Trump administration, but that fight eventually lost steam and disappeared.
This executive predicted Apple would ban future TikTok downloads from its App Store given the privacy concerns. That wouldn’t help Apple-Chinese relations, which are already showing strains.
Executive 12: Media will show surprising recession resiliency
The first part of the prediction here is the economy will dip into a recession, which isn’t a foregone conclusion.
But if it does, the media industry will actually benefit from several accelerated trends, this executive said.
First, cable cord cutting will accelerate, driving more streaming subscriptions and allaying concerns that streaming growth has plateaued.
Second, past recessions have proved that consumers don’t stop paying for relatively low-priced entertainment during economic downturns, said the executive. This could be good news for an industry that now has more high-quality, low-priced options than ever before.
The advertising market will also bounce back faster than anticipated as brands see that people are supplanting higher-priced entertainment with lower-cost at-home options, said the person.
—CNBC’s Lillian Rizzo contributed to this report.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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