As the "streaming wars" enter a new phase with the recent launches of Disney+ and Apple TV+ and the emergence of HBO Max next spring, there will certainly be winners and losers.
John Malone, the cable and media titan, already has some ideas about who will fall on either side of that ledger. Speaking to CNBC's David Faber and timed with his company's investor meeting, Malone expressed some reservations about HBO Max's growth potential and said he believes that Apple TV+, despite an initially thin content slate, could surprise everyone.
Regarding HBO Max, a service from AT&T's WarnerMedia that will debut next May, Malone is skeptical that it will drive the growth that the company envisions -- 51 million subscribers in the US and 75 million to 90 million subs worldwide by 2025.
"In the US, if you wanted HBO, you already have HBO," Malone said. "I don't see that they gain a lot of new customers. They might transition some existing ones so that they don't have the wholesale discount... I don't see the growth for HBO in going this route and, in fact, you could see attrition."
While AT&T's initial plan is to convert existing HBO subs to the new HBO Max offering, which will include content from WarnerMedia's Turner and Warner Bros. properties, Malone believes that it will take a lot of time and money for the company to lock in the rights and distribution necessary to scale it into a truly global business.
"It will take them years to develop and hold onto enough content to be a real player internationally," he said.
Malone's much more confident that Apple TV+, a service that launched on November 1 for $4.99 per month with a content slate that is more focused on quality than quantity, will "get large numbers fast." Thanks to its strong direct relationships with consumers, Apple "is going to surprise everyone with numbers they achieve in a short period of time," he said.
Discovery's global game
Malone also expressed confidence that Discovery Communications will be successful in transitioning to a hybrid model that factors in its traditional pay-TV distribution relationships alongside a direct-to-consumer play.
"They have the pieces," he said, noting that Discovery's acquisition of Scripps Networks Interactive (which owns networks such as Food Network and HGTV) in 2018 gives the company additional "firepower" and a broad mix of owned content that enjoys global distribution rights.
"They need to make the transition from linear to interactive... direct consumer. They need that hybrid approach," Malone said.
Such plans are underway, as Discovery President and CEO David Zaslav announced earlier this month that the company is exploring an OTT service for the US market that would build on its direct-to-consumer activity in regions such as Europe.
"This is a scale game and you've got to be global to get scale," said Malone, who also put his money where his mouth is by boosting his stake in Discovery in the form of a $75 million stock purchase.
Déjà Vu all over again
And even as a slew of new standalone, direct-to-consumer streaming services hit the market and expand consumer options, Malone believes the market will eventually reverse itself to a degree and see those services become part of packages delivered through cable operators and other traditional pay-TV distributors.
"Distributors will start bundling on behalf of some of these people if in fact that reduces churn and makes the composite more desirable and more sticky," he said. "It will evolve the same way that the cable business did and the big bundle was created."
This is already happening to a degree. Netflix, for example, is already being distributed by several cable operators and pay-TV providers around the globe, and Amazon Prime Video is moving ahead with similar integrations.
Additionally, AT&T has plans to offer HBO Max through its pay-TV distribution partners, and Peacock, NBCU's ad-supported streaming service debuting next April, is expected to focus more heavily on pay-TV distribution pacts than its standalone, direct-to-consumer offering. Meanwhile, Charter Communications' new carriage deal with The Walt Disney Company at least "contemplates" the distribution of Disney+, Hulu and ESPN+ through the cable operator.
"My guess is Disney will eventually be willing to provide some split in order to be in a bundle if that reduces churn or helps distribution," Malone said.
Malone also sees this trend contributing to a slowdown in pay-TV cord-cutting as distributors take on a bigger role in the packaging of streaming services. "The erosion [of the pay-TV subscription base] doesn't stop completely but it'll make a transition that, in my opinion, these distributors will start becoming where you go for a bundle of other services," he said.
- HBO Max to Launch in May 2020, Start at $14.99/Month
- New Disney Pact Paves Way for Charter to Offer Hulu, ESPN+, Disney+
- Apple TV+ to debut November 1, fetch $4.99 per month
- NBCU Picks 'Peacock' as Brand for Premium Streaming Service
- US Pay-TV Loses Another 1.2M Subs in Q3
— Jeff Baumgartner, Senior Editor, Light Reading