Media investor Jeff Sagansky predicted that the top four streaming companies are on the precipice of “great profitability” and have effectively formed a new entertainment oligopoly, even though dropping stock prices tell a different story.
“We are in the last stages of the formation of a new oligopoly, which is going to dominate TV and film consumption for at least the next decade,” Sagansky said of streaming giants Netflix, Disney/Hulu, Amazon and Max. “Together, these four streaming services are on the brink, I believe, of great profitability. Even if this transition has been hard – they all complain – but I think they’re on the verge of great profitability.”
Sagansky, the co-founder of Eagle Equity Partners, kicked off TheGrill 2024 by also warning that Gen Z’s lack of interest in television is a “tsunami” that threatens entertainment’s entire model. “They’re watching historically low levels of television,” he said.
Sagansky outlined a “the Oligopolist Playbook” with strategies that streamers can use to maximize profit from their audiences.
In his opening remarks, the executive outlined the three major plays at the streamers’ disposal: raising prices, cutting back on costs and owning everything for as long as possible.
He predicted that as streaming services have raised their prices consistently, he has “no doubt” that in the near future “we’re going to be looking at four services, each charging $25 per month,” and viewers with a four-package bundle where they will pay as much as they do for cable now.
Sagansky added that, with a limited number of competitors, the streamers will not have to compete as hard and profit margins will increase for all. This means less production or original content overall.
“After the latest strike, that’s exactly what the streamers all signal to each other,” he said. “We’re cutting back on production, and every trade, every guild, every producer, is feeling the effects of this dramatic cutback.”
Sagansky provided a solution for the streamers for how they could maximize profit, while also being more equitable and giving opportunities to creators and future distribution opportunities.
“Given the high rate of cancellation, the short eight-to-10-episode orders and the relatively small percentage of viewing that occurs a year after the show is out of production, it would be much more equitable for each of these streamers to take a five-year license from the last season of the series and then allow the copyright and the distribution rights of the show to revert to the producer and the creative elements,” he added.
Sagansky also warned that Gen Z is “not watching television at all,” which poses a risk for the entire entertainment industry.
“Only 17% of their entertainment time is spent watching TV,” he said. “This is a tsunami forming, because when Gen Z stops buying four streaming subscriptions, you’re going to start to see a business stop growing, and it’s going to begin to shrink, and investors will immediately crush the entire stocks of the streaming sector.”
Sagansky shared the stage with TheWrap Founder and Editor-in-Chief Sharon Waxman and CEO of Mandalay Entertainment Peter Guber for the first panel of the 15th annual entertainment and tech event on the state of the industry.
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