Amazon’s plan to take over your living room

Good afternoon from Los Angeles, wherever you may be. I’ve got a follow-up of sorts to this piece about Amazon as the sleeping giant of the entertainment business.

For about a year and a half, Amazon’s Prime membership service has been promoting subscriptions ranging from the well-known HBO and Starz to niche services like Gaia and Acorn TV. The initiative, dubbed Amazon Channels, is the closest TV viewers can get to the dream of a la carte TV, where subscribers pick the program sources they want instead of buying a bundle from DirecTV or Sky Plc includes networks they never watch. You can sign up for Amazon’s Instant Video for Transparent and Catastrophe, and then add in a bit of HBO (Silicon Valley!) or Up: Faith and Family.

I wrote the story because I had heard from a number of people that Amazon is the primary source of subscriptions for a lot of new online video services created by media companies big and small who harbor dreams of creating the next Netflix. The success of the initiative has surprised the Seattle-based retailer, which has put off plans for its own live TV service and is creating new channels focused on anime and Bollywood. On Monday, the world’s largest online retailer said the effort will expand to the U.K., Germany and Austria with 25 to 42 live and on-demand channels from its partners.

The success of Channels is great news for niche players like Up, which has viewership of just a couple hundred thousand people at the best of times. It’s also good news for Starz, HBO and the other big players … at least for now. In the long term, they are just giving Amazon more and more of what it likes most: data.

Every time an Amazon customer signs up for HBO or watches Power, Amazon learns more about what that customer likes and doesn’t like. Amazon can use this information to create its own services (as it already has for Bollywood and anime) and inform what shows it makes through original video.

Amazon assures me they will never replace all of their partners. There is no way Amazon can produce everything its viewers want to see. This is likely true. But if history is any indication, Amazon does want to offer all things to all people. It is, as my colleague Brad Stone wrote in his wonderful book, The Everything Store. The only winner in that book is Amazon. While Amazon’s partners fretted about shrinking profit margins and the destruction of competitors, Amazon grabbed a larger and larger share of various industries. Entertainment is next. Just read what Amazon’s Rich Au told me:

Amazon wants to be the entertainment destination for people. Channels is a potent threat to cable providers, who don’t offer the same choice, and Apple, who should dominate the sale of online video services given the popularity of Apple TV and iTunes. Yet it should also concern content producers (like book sellers). Amazon is already one of the biggest financiers and producers of programming in the world, and its appetite is still being whet.

Peak TV is Peaking

Several cable channels are abandoning scripted programming, wary of the heavy costs required to create the next Mad Men or Sons of Anarchy. Here’s Gerry Smith:

TV networks, almost all of them owned by large, diversified entertainment companies, have been pouring money into original series to compete with fast-growing streaming services, like Netflix and Amazon, which combined will spend an estimated $11 billion this year on TV shows and movies, including the rights to shows that have already aired elsewhere. In many cases, the networks’ parent companies supply the subscription-video services with new programs and reruns.
But the gusher of new shows airing on the TV networks shows signs of slowing. While the number of series increased again last year, the growth came from Netflix, Amazon and Hulu. Every type of traditional TV network, from broadcast to cable to premium cable, cut back original production in 2016.
TV ratings are down just about everywhere as cord-cutting accelerates and less popular networks are left out of new cable-like TV services from Dish, Hulu, YouTube and DirecTV. Original series, in particular, have struggled to stand out. In the first quarter, the audience for original TV dramas fell 15 percent from a year earlier, Nathanson said. Meanwhile, unscripted reality shows grew 1 percent, sporting events increased 6 percent, and news programming spiked 22 percent.
Cable network executives say it doesn’t make sense to invest in expensive dramas unless you’re willing to make a lot of them. One or two high-end drama shows won’t change how viewers, distributors and advertisers see your network, even if fans drop in to watch the occasional favorite. While that may work for Netflix, which can gain subscribers from a single show, it’s not good for basic cable networks, which must keep people tuned in to sell ads.

The Week That Was

1. Ariana Grande suspended her tour after a bombing at her show in Manchester.

2. Les Moonves’s new contract ensures he will be collecting paychecks from CBS until he’s 77. Moonves has signed on to be CEO until at least 2021, and will be a senior adviser for another five years. Moonves consistently ranks as one of the best-paid public company executives.

3. AT&T CEO Randall Stephenson offered up some ideas of what he might do when he gets his hands on Time Warner, the owner of HBO and Warner Bros. Stephenson floated the idea of 20-minute episodes of Game of Thrones and a cable channel for Warner Bros. movies.

4. HBO pulled the plug on its animation project with Jon Stewart. The premium cable network made three big deals with `edgy’ white men who were supposed to boost their new streaming service, HBO Now. Bill Simmons’ show is dead. Jon Stewart’s show never aired. Vice’s nightly news show is…

5. Broadway shows grossed a record $1.45 billion in the 2016–17 season. Hamilton is the top-grossing show by a wide margin over The Lion King, which remains in second place 20 years after its debut.

6. The revival of Twin Peaks was a success for Showtime — at least by one metric. The premium cable network’s streaming service had its biggest day of sign-ups ever. Viewership of the show itself was slight. It drew about 1 million viewers on its first day. Yet the measure of success for a streaming service is not as simple as just who watched. Netflix, Showtime and similar services want programs that inspire viewer loyalty, which Twin Peaks certainly does.

7. Sign-ups to DirecTV Now have plateaued over the past couple of months, a concern for AT&T and programmers like Disney and Time Warner who want to offset subscriber declines.

8. Mixed reviews for War Machine, Netflix’s new original film starring Brad Pitt as general Stanley McChrystal. Netflix also canceled The Get Down after one season.

9. Video game publisher Take-Two Interactive reported strong earnings thanks to the success of Grand Theft Auto V and NBA 2K17.

Fox News’ uncertain future

For the first time since Bill Clinton was president, Fox News is in third place. The network trailed CNN and MSNBC during prime time last week among viewers between the age of 25 to 54. This stat comes with lots of caveats. Fox News’ audience skews old. It is still the most-watched network across the whole day. Its viewership is still up thanks to Donald Trump.

And yet, no one can deny Fox is particularly sensitive right now. Its prime-time line-up is shakier than ever due to the departures of Bill O’Reilly and Megyn Kelly. Its leadership is decimated after the dismissal of Roger Ailes and Bill Shine.

Rupert Murdoch, an 86-year-old multi-billionaire, is left tending the farm to reassure employees (and viewers) that the network won’t suddenly morph into a new network that reflects his sons’ more moderate political leanings.

The best explanation for Fox’s troubles may be that a network specializing in victimization and demonization is struggling to victimize and demonize. Its prime-time hosts (the columnists) are defending a president beset by scandal instead of attacking his critics. They are avoiding news stories that viewers want to see. While MSNBC feeds liberal anger and CNN tracks Trump’s every step, Sean Hannity is making up stories.

The most concise description of what ails Fox came from none other than O’Reilly (speaking on a show hosted by a fellow former Fox host, Glenn Beck): “Whenever you lose key personnel in any competitive industry — sports, media — you better have a plan. And it doesn’t look like FNC has a plan.”

Box office bingo

  • Pirates of the Caribbean #1,768 will top the weekend box office with about $80 million. That’s good for most movies, but slight for one with a budget of $T50 million. Disney will need the movie to put up huge numbers overseas. Star Johnny Depp could sure use a hit. He has weathered a string of bombs (``Lone Ranger,’’ ``Transcendence,’’ ``Mortdecai,’’ ``Dark Shadows’’) and bad press (read this) thanks to his franchise films (``Alice in Wonderland,’’ ``Pirates’’). The last Alice movie flopped, so that leaves him with Pirates.
  • Baywatch is expected to finish in second place with $40 million. The movie has benefited from a spate of good press about star Dwayne Johnson, but has been absolutely savaged by critics. Baywatch will test whether Johnson is the rare review-proof movie star.
  • Fate of the Furious is very close to surpassing Beauty and the Beast as the year’s highest-grossing movie. Foreign territories account for almost 80 percent of its haul.
  • Summer box office isn’t expected to surpass last year.

Weekend reading/listening

ESPN schadenfreude. Bryan Curtis has an excellent piece in The Ringer on why sports fans are cheering ESPN’s recent struggles. And while some media critics accuse ESPN of reducing its commitment to good journalism, he offers a superb defense.

Tribute to a Hollywood legend. Kim Masters writes about her relationship with late Paramount chief Brad Grey, a no-bullshit source.

Remixing Sgt. Peppers. Giles Martin, son of George Martin (the fifth Beatle) spoke with Bob Boilen about releasing a new version of one of the greatest albums of all-time.

Snapchat’s growth problem. Tom Dotan investigated the troubling deceleration in growth at Snapchat, and the company’s bungled response.

Black man in a white world. British soul singer Michael Kiwanuka talks about his superb song, which is from the same album as the title track of Big Little Lies.

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