Following her talk at the recent Banff World Media Festival in Canada, I interviewed Laura Martin, the senior analyst covering entertainment and internet stocks at leading investment bank Needham & Company, to sort out how the pieces are moving in this chess game between content creators, streaming services, consumers, and government regulators.
We discuss why Netflix is still at risk of a downfall, the effect of EU content quotas, why Martin thinks regulators should break up Google, and why video streaming and game streaming are likely to merge into the same subscription products.
Here is the transcript of our discussion, edited for length and clarity:
Eric Peckham: There’s an optimistic case that the rise of online video streaming is a win for both consumers and content creators because it creates a vast landscape of content platforms. Onstage in Banff, you argued that the number of content platforms (and thus the number of content buyers) will in fact shrink. Why do you see it going that direction?
Laura Martin: There are 4,000 video apps on the Roku platform today (and similarly on Samsung and on Amazon Fire). What you’ll see is a consolidation in the industry as we get big players like the Walt Disney Company, AT&T, and Apple coming into the DTC business with big, deep pockets. Although we have more buyers of content today, it’s driving prices up.
It is likely that the big players are just battling out between themselves, putting smaller players out of business. Over a 10-year time frame, I expect just three or four winners, and that will bring more discipline back into the financial aspects of the business.
Peckham: What will separate the winners from the losers here?