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Baby Yodas don’t come cheap: The streaming wars will cost Disney, Netflix, and WarnerMedia $16 billion

The streamers want your money, which means they’re going to spend lots of money making stuff you want to watch.

Baby Yoda.
The official press site for Disney’s Mandalorian describes this character as “The Child.”
Disney

We don’t know who is going to win the streaming wars in the long run.

In the short run, though, the streaming wars look very good for you, if you like to watch TV and don’t mind going to different places to find the stuff you want.

But these wars look like they’ll be very, very expensive for the people trying to get you to watch TV shows. And they look very scary for people who need you to subscribe to pay TV bundles.

That’s the big takeaway from a fascinating presentation from analyst Michael Nathanson, the co-founder of MoffettNathanson Research, who debuted a new batch of data for the attendees of the Code Media conference in Hollywood this month. You can see Nathanson’s slides and his entire talk below.

But before you dive in, let’s highlight the big, connected ideas Nathanson is talking about here:

  • If watching sports (and to a lesser extent, news) on TV is important to you, you’re going to probably keep paying for a bundle of TV channels — either from a traditional pay TV distributor like Comcast or from a new one like Hulu. Big, expensive licensing deals for sports like football remain locked up with traditional TV networks, and those networks aren’t leaving the bundle anytime soon.
  • There are plenty of people who are paying for a TV bundle who don’t care about sports and news, and those people are eventually going to cut the cord. Nathanson figures there are about 13 million of those people, and he says they are definitely going to bail on traditional TV packages and just stream TV shows they do care about from services like Netflix and HBO Max. That will bring the universe of pay TV subscribers down to about 81 million people.
  • Those 13 million cord-cutters-to-be are up for grabs for the streamers: They’d like you to take the money you’re paying Comcast and spend it with them instead. Which means they’re going spend like crazy over the next few years to win you over. The below chart — the finale of Nathanson’s presentation — shows the huge jump in spending that’ll come from Disney, HBO-owner AT&T, and Netflix over the next four years on movies and TV shows that will eventually live on their streaming services. Nathanson pegs the total increase at $16.2 billion — just a little bit short of what Disney itself is spending this year. “This industry’s going to create another Disney,” as Nathanson puts it.

That spending is almost certainly going to benefit you, the viewer, in the near term: You might not like all of the stuff these companies are going to make, but you’re certainly going to have plenty of choices. It’s also good news for lots of people who make money making TV shows and movies — not just the creative moguls like Shonda Rhimes, who are getting huge deals to work exclusively with Netflix and other streaming services, but also for the armies of workers that put these projects together: sound mixers, art directors, hair and makeup artists, and many, many others (the next time you finish a movie or TV show, stick around and really look at the credits).

That spending boom seems very unlikely to continue in the long run; most people I talk to in the industry assume we are in a land grab phase and that things will become more rational as winners and losers shake out. Until then, if you’re the kind of person who likes the idea of some of the biggest companies in the world spending billions of dollars a year to entertain you, you’re in luck.