The root problem facing streamers is the lack of daily usage, says LightShed's Rich Greenfield

Warner Brothers Discovery shares they’re falling after quarterly results missed on the top and bottom line. Separately, the company and Disney plan to offer their streaming services, Disney Plus, Hulu and Max in a bundle which would mirror the traditional cable TV package released a skinny bundle a version of it. Want to bring in rich Greenfield light shed partners talk about the earnings. Talk about the state of media. We’ve also got this Paramount potential transaction in the in the offing. I don’t know what you want to start with the earnings, what did you make of them? I mean you got MBA rights too, Andrew. I mean you got a lot of moving parts, right. We got a lot of things going on in this company in this sector right now. And look, earnings are disappointing obviously, but I mean it’s not shocking. I mean, when you think about what’s happening, linear TV is in a lot of trouble. And you know, I think it’s one of the things that’s certainly giving Adam Silver pause when he thinks about where the NBA rights are going to go. You know, you, David Faber, you and all the whole team have been, you know, actively talking about, you know, obviously Disney’s going to get them for Disney, Disney or ESPN and the new flagship streaming service, it’s going to go over the top. That’s all going to be part of it, Amazon. But then do you choose NBC, which is, you know, yes, you have your challenges with your own linear TV business, but you’ve got broadcast. And you’ve also got the sort of financial fortitude of the Comcast Cable business, that broadband business that Warner Brothers Discovery just doesn’t have. And I think that’s, you know, increasingly problematic for their chances of retaining the NBA. OK. So if they don’t get the NBA, what would you think about this stock in the future and where it is even now? Look, investors will panic in the short term. It doesn’t mean that’s the correct long term decision. The investors are going to fear that, Oh my God, they lose the NBA. Not only do they lose some subscription fees and some advertising, but they’re going to fear that longer term Charter, Comcast, others are not going to have to carry this portfolio of networks because you can get HBO through Max directly. Do you need to carry the Turner and you know this Discovery scripts networks that have been put together in this company? I think the answer is yes. It’s a lot of channels to sort of give up. It’s a lot of channel heft for these distributors to give up. But the knee jerk reaction is going to be panic among investors if they don’t get it. But again, overpaying like let’s just say you pay 2 1/2 to 3 billion to beat out Comcast, that may not be a very good financial option either. What do you think the well earnings question, I mean they are they they’ve got cash and they’re they’re paying down the debt, right. You you keep seeing that he’s doing exactly what he said in terms of cash generation and that’s the that’s where I was going to go with this. He is doing what he said and shareholders don’t seem to like that because we’re at a point now where it doesn’t matter how much cash you can squeeze out of the existing company. Revenues are declining, EBITDA is declining and this is what’s affecting all of the companies in the sector. The, the fear is right that this legacy TV business is now in accelerating secular decline and the streaming businesses aren’t growing. I mean, you saw it at Disney, right? They’re going to lose Subs this quarter. The only reason they added Subs was because they gave them away in part of a charter deal. Like the growth has stopped. Warner Brothers Discovery has lost Subs over the last year domestically like that sub story is gone. Yes, you’ve raised price, you’re limiting the losses of these businesses, but the growth story is gone and the core businesses are getting worse. And are you a believer that any of these bundle programs, the one we just mentioned at the top of this with Disney now between Max and Disney is going to help the case. We obviously know about this sports bundle that includes, we call it, we we call it bundle itis. It. It is a disease and it is something where you think that bundling the these services together is going to save you. It’s fixing the wrong problem. The problem is you have high churn. The reason you have high churn is that you’re not creating a service that has enough daily engagement where people want to keep paying for it and so they need to fix the root problem. The root problem they’re suffering from is not enough usage, not enough great content to drive people to use it every single day. Bundling is the wrong fix. So here’s the fundamental question though. Do you believe that any of these streamers from a value proposition can actually create content at a a reasonable cost that actually moves the needle to create that daily engagement? That is the fundamental question with the exception of Netflix, which is it seems to be the only one that’s actually truly managed to do that. Can anybody else do that without the scale that Netflix already has? They could, but they’d have to do it and they’d have to literally take a long term approach of hurting the near term, you know, not generating all of that free cash flow that you just mentioned, Andrew. They’d have to literally go through an investment cycle and be willing to tolerate the pain. And whether it’s Disney, whether it’s Paramount Global, whether it’s WBD, you are seeing none of them have the tolerance to make that level of investment and sustain that level of investment. They just can’t handle it with their investors. Final question, Rich, Paramount Global, what do you think is going to happen here? We now obviously have this news about what Apollo and Sony would like to do if they could get their hands on it, which is effectively to break up the company. On the other hand, you have the Skydance deal which is still sitting there. You’ve made the argument you think no deal happens before. I don’t know if any of this changes the dynamic at this point. I’m sticking to our guns. We think there is no deal. All the things that private equity would do, all the things that you know buyers would do, they can do a lot of these things on their own. There was a Jeffrey Katzenberg was at the Milken conference and I think he very much echoed what we’ve been talking about of, you know, you can reduce cost, get out of parent me look license a lot of the Paramount content to Peacock. Brian Roberts and your team would love to have it. License it to Zaslav, he would love. You’re talking about scale and engagement. Paramount has a very important chess piece and if they stop trying to be a streaming service and they start thinking about how they can create the most value from their content, I think there is a much better story that the new Tri headed, you know, CEO group. I think they can execute a plan that creates more long term value than just simply selling this thing right now. I think they could actually fix it over the next few years and then maybe try to sell it later down the road.