CEO Chris Winfrey recently encountered a TV ad that conjured memories of his company’s carriage battle with Disney last September. This commercial message, however, came from a different legacy media company pushing into subscription streaming.
“Not to pick on anybody, but everybody’s been watching football,” Winfrey said, “I saw Paramount+ advertising South Park — exclusive on Paramount+. I said, ‘Oh my goodness, what’s left on Comedy Central that we’re still paying for?!’ If customers paid for it already, they need access to it. They need to get it.”
While he didn’t offer specifics, it appeared the CEO of the No. 2 U.S. cable operator was referring to South Park: Joining the Panderverse, which premiered last month as one of several “exclusive events” on Paramount+. Comedy Central continues to air the main series, many of whose seasons are also available for streaming subscribers.
Winfrey delivered the comments during Liberty Media‘s investor day Thursday in New York. The portfolio of companies connected to Liberty’s founder, the cable billionaire John Malone, were all represented at the annual event along with Wall Street analysts and other stakeholders. Charter, of which Malone is director emeritus, is 26% owned by Liberty Broadband.
Having managed to reach terms with Disney on a novel carriage agreement, ending a 10-day blackout that overlapped with college football and the NFL, Winfrey didn’t seem hesitant to speak critically about the streaming business. The Charter-Disney deal not only left certain Disney linear networks without distribution on Charter’s Spectrum systems, the No. 2 cable provider in the U.S., but it bundled Disney+ and Hulu at no extra charge for many customers. Winfrey took a brinkman’s approach to the negotiations, vowing to walk away from the video business altogether if Disney did not compromise, given it had taken a number of high-value shows off linear TV and moved them into paid streaming.
“When you think about the direct-to-consumer business, it obviously worked for Netflix,” Winfrey said. “They bamboozled a lot of library out and they got up and they did a great job, good for them. But if you have an existing linear business, the idea that a direct-to-consumer business is somehow going to be different and apart, it’s never going to work, it’s never going to be profitable. Even if you look at it on a stand-alone basis, personally I don’t think they’ll be profitable.”
The market and industry consensus is a bit more optimistic than Winfrey, though the realization is dawning that even if profitability is achieved, margins will be nowhere near the 30%-plus range of traditional linear TV.
“Certainly, if you put [streaming] together with what you’re doing to your bread-and-butter, your cash flow engine with your linear business, I don’t think it ever has a chance of being profitable,” Winfrey clarified. “So, what we did in the deal with Disney and what we’re doing now with all of our deals going forward is saying, ‘Look, our customer’s already paid for that content. You siphoned off the dollars, you put your investment somewhere else. You stripped out the asset.’”
Hybrid distribution deals provide a “glide path” for operators, programmers and consumers alike as the transition from linear to streaming continues, Winfrey said.
In a CNBC interview before the investor day, Winfrey was asked whether deals like the Disney one extend the life of the video business. “It does,” he said. Given Charter’s broadband business, however, “We’re indifferent.”