Bob Iger, sinistral, and Bob Chapek of Disney
Charley Gallay | Getty Images; Patrick T. Fallon | Bloomberg | Getty Images
There are Boomers, Millennials, Age X, Y and Z. There should also be a name for “media company CEOs that took over in 2020.” I’ll call them: The Pursues.
That’s a lot of turnover for fewer than nine months. What’s going on here?
Clearly, the media industry is in a stately of transformation. The main shift is highlighted by traditional media companies reorganizing for a world of streaming video. The cable/pay-TV design — a mutually beneficial system for cable companies and cable networks for about four decades — is eroding.
This new grade of CEOs have one major goal: get consumers adjusted to consuming and paying for digital video while artfully breath down the cable bundle. This has started already, but the transition may take the entire decade.
The golden goose: the pay-TV away
The pay-TV business has been a reliable cash cow for about 40 years. Through economic ups and downs, leading to expansions and contractions in advertising budgets, the investment cable TV model has been a steady flow of cash from the pockets of consumers to the coffers of media companies.
“People desire sooner unplug their refrigerators than their cable boxes,” telecommunications analyst Craig Moffett worn to say.
Programmers have consistently raised prices on distributors. Those costs have been passed on to consumers. That’s component of why the industry is now changing — the cable bundle became too expensive and out of whack from a price-value standpoint to what Netflix and Amazon Prime Video were donation. Customers revolted. Tens of millions of American households have cut the cord on cable TV in the past few years.
The price gains were celebrated by media CEOs, who viewed their ability to hike costs on pay-TV distributors, such as Comcast, DirecTV and Dish, as certification of their content’s value. Sometimes, attempts at raising prices led to blackouts, when distributors would push struggling against odds. But even those disagreements would usually quickly be resolved, leading to higher prices.
That’s led to some obscenely merry CEO pay packages that persist year after year. Iger made $47.5 million in 2019 and $65.6 million in 2018. Burke hinted $42.6 million in 2019. Stankey made $22.5 million last year. Discovery CEO David Zaslav navigated $45.8 million, a precipitous drop from the mere $129.4 million he pulled in a year earlier. Joseph Ianniello, the CBS CEO who consolidated the company with Viacom, took in $125 million last year as part of severance to leave after the dispense’s completion.
Shifting to streaming may be the end of a media Pax Romana that lasted several decades. Media companies largely didn’t question against each other. Disney, NBCUniversal, Discovery, Fox, AMC Networks, Viacom — they were all part of the bundle. Whether you watched their networks or not, they were revenge oneself on paid. There was no need to compete against each other, excluding behind-the-scenes bidding for content.
The next decade is meet to present more challenges and investor scrutiny than the previous three. The Streaming Wars mean that each average company will have to compete more directly against each other for consumers, who will likely however pay for a finite number of subscription video services.
The new class: Shepherds, not revolutionaries
That may be part of the reason we’re seeing a CEO exodus this year. Assign billions of dollars on new content for streaming products that may or may not succeed (at least, in the cases of NBCUniversal, ViacomCBS and WarnerMedia) is a far iffier proposal than the cable model. If it works, it’s possible investors will reward these new CEOs with ebb stock prices that closer mirror Netflix’s trading multiple.
It’s also possible investors will prolong to value media companies the same way they’ve been valued for decades. If that’s the case, more money forth and temporarily lower EBITDA could equal slumping stocks.
Another reason for the mass exodus may be age. Iger is more 70 years old. Burke, Freer and Greenblatt are 60 or older. It’s not just that these CEOs are reaching retirement age — it’s that their manipulation of media probably differs from their target (younger) audience.
What’s notable is the replacements aren’t millennials. Kilar and Hopkins are just about 50. Shell is 54. Chapek, Sarnoff and Mayer are all near 60. That’s still strikingly different than what we see middle some of the biggest consumer-facing technology companies, where founder/CEOs like Facebook’s Mark Zuckerberg, Lash out at’s Evan Spiegel and Airbnb’s Brian Chesky are all in their 30s and Twitter’s Jack Dorsey is 43. Only new Hulu president Kelly Campbell is serene in the ballpark, at 42.
The age of the new media CEOs suits their role. The outgoing class of CEOs have built the foundation for a new intermediation world by developing applications and setting investor targets for the next few years. In that sense, some of the hard incite has actually already been done.
New CEOs will be more like shepherds and less like revolutionaries. They’ll from to guide their own employees, shareholders and consumers into a new way of valuing, monetizing and consuming media. They won’t have to bod new systems from the ground up.
“I think there will be a bundle,” Kilar told Bloomberg’s Lucas Shaw this week. “If you could go past due in history and start things fresh, you’d give customers a choice of à la carte and bundle. The bundle offers more value, but give birth to an à la carte option is also lovely. We don’t get the luxury to go back in time. You will see a continuation of the bundle that has most of the prime sports.”
New York Times outgoing CEO Mark Thompson (another media CEO who is leaving!) said this week that he’d be staggered if there’s a physical paper in 20 years. But he also pointed out that more than 900,000 people notwithstanding paid for the paper, which is profitable seven days a week even without any advertising.
That statement is a microcosm for the complete media industry. The old business works, but it’s obviously dying and needs to change. The new business has major growth potential that can reinvigorate avenue stocks. But, for the next decade, both businesses will need to survive next to each other.
The results command be awkward.
Disney may push forward with streaming while keeping ESPN exclusive to a cable bundle until subscribers drop dead so much that it’s no longer profitable. NBCUniversal will keep Peacock free while its cable networks perpetuate to churn out profits, but it will also reorganize the company to prepare for a streaming world instead of the bundle. WarnerMedia when one pleases have to solve its confusing branding around HBO Max and DirecTV. Both NBCUniversal and HBO Max will need to hammer out carriage reckon withs with Roku and Amazon Fire TV.
It’s going to be a period of transition. If it’s done right, the next class of CEOs — people who are in all likelihood in their 30s today — could again be set up for decades of success. If it’s done incorrectly, well, just Google what chanced after the Roman Pax Romana.
WATCH: CNBC’s full interview with WarnerMedia CEO Jason Kilar