wsj.com Opinion | The Real Future of TV?
Holman W. Jenkins, Jr.
Who’s going to benefit when the streaming TV bubble pops? Maybe one answer is to be found here: In March the tiny Chicken Soup for the Soul Entertainment bought a controlling stake in Crackle, the free, ad-supported streaming service that Sony nurtured with millions of dollars without ever quite finding the sweet spot. When a company buys another company it’s exchanging one asset (cash) for an asset presumably of comparable value. Yet Chicken Soup for the Soul Entertainment’s stock popped 36% on the news.
We all know what’s going to happen soon. Deep-pocketed players like Disney , Apple and AT&T’s Warner Media are getting ready to join the subscription streaming wars, taking aim at Netflix , Amazon, HBO, Showtime, CBS All-Access and others. Billions will be spent producing more TV than Americans can watch or will be willing to pay for.
The big players are clawing back content from each other, including Netflix’s two most watched shows “The Office” and “Friends,” which will soon appear exclusively on rival services. For consumers this can mean only one thing: Soon they’ll have to subscribe to six or eight streaming services and pay for a lot of drecky content they don’t watch to get the stuff they do.
All this has Chicken Soup for the Soul Entertainment CEO Bill Rouhana metaphorically rubbing his hands. “The streaming war is going to be amazing,” he tells me. “I can’t imagine how much money is going to be destroyed.”
Crackle’s new proprietor actually wants to throw Netflix, Disney and the rest a life preserver: Recoup some of your investment by letting the same content appear on an ad-supported streaming service. Economists call this price discrimination, and they don’t mean something bad by it. They mean making the same product available in slightly different forms to suit a different customer’s willingness to pay, in a way that doesn’t undermine demand for the high-priced version.
Mr. Rouhana’s small-fry status meant he barely got his foot in the door when Sony announced plans to sell Crackle last year. He prevailed with a unique offer. He invited Sony to remain as a partner and thereby not look like an idiot if ad-supported streaming took off in a few years and became a multibillion-dollar business. The premise is hardly implausible: While millions of viewers have shifted to streaming, only a small portion of the $70 billion in annual TV ad spending has followed them so far.
Mr. Rouhana’s name may ring a bell. He presided over the collapse of Winstar Communications during the telecom bubble of the 1990s. Like any good bubble, it left a great deal of underutilized infrastructure in its wake, and Verizon ended up owning much of what Winstar built. This time, Mr. Rouhana hopes to be the one picking up the pieces of others’ strategic gambles.
Chicken Soup for the Soul, in case you’re wondering, produces the best-selling self-help books. Mr. Rouhana bought the company because he had an intuition that brands were important amid the internet cacophony. (Chicken Soup is a brand that says “nice,” he points out.) Then, thanks to a squabble among the principals, he got a good deal on a global video-rights distributor, which incidentally owned Popcornflix, a free, ad-supported movie site whose app has been downloaded 24 million times. Next came his Crackle coup, and now he’s a budding entertainment mogul.
He and I are chatting because of a line in a column a few weeks ago in which I pooh-poohed Apple’s announcement of yet another subscription service and suggested that the “real entrepreneurial challenge today is creating ad-supported streaming that really works for viewers and advertisers.”
Everybody understands why digitally targeted advertising is superior to the traditional broadcast kind, but how to optimize it for a streaming audience? Hulu is trying “pause” ads that roll the moment you stop your program. Countdown ads let you know how long till your show resumes. Mr. Rouhana likes ads embedded in programs whose budget is covered by an advertiser from day one.
What’s known as FAST—free, ad-supported streaming—is still in its primitive accumulation phase, he says. His viewers mainly find him by googling “free movies,” but he hopes to keep them coming back with a mix of home-grown content, the occasional first-run movie, and maybe someday an ad-filled re-airing of “Game of Thrones.”
We’ll see. The stock has been down lately but a shakeout is obviously coming. Finding what to watch has increasingly become a time-consuming chore. Wading through Netflix is unrewarding. Nobody’s recommendation engine seems to be worth a damn. For all the talk of binge watching, the epidemic now is of shows and movies abandoned halfway through.
What seemed like the golden age of TV is rapidly becoming less so. Which suggests at least one advantage for Mr. Rouhana’s ad-supported business model: He and his advertisers have a reason to care if somebody is really watching.
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