Liberty Media Chairman John Malone told CNBC he’s doubtful that adding commercials to long-form streaming content would help media companies be successful in the long run.
“I’m a little skeptical as to how many people do save a few bucks or are going to be willing to tolerate ads in what I would call long-form entertainment programming,” Malone said in a recorded interview with CNBC’s David Faber that aired Thursday.
Netflix launched its first less-expensive plan with commercials after years of rejecting the concept. Meanwhile, Disney+ is set to roll out its ad tier in December. Other popular streamers including Hulu and HBO Max already have its ad-supported plans in place.
Malone thinks that the important ingredient in achieving profitability is for streamers to move users from lower-priced tiers to higher-priced ones.
“I think to be successful in streaming, you’re going to have to have your own funnel. You’re not going to be able to spend a fortune on advertising and promotion in customers, because the churn will kill you,” Malone said.
The media magnate said Apple is focused on maintaining its high quality brand, while Amazon is still figuring out the optimum role that it can play as a bundler and as a promoter.
“Apple is very intent on making sure that they keep their quality level extremely high. They’re willing to add video content to their offerings. But they want to make sure it doesn’t damage their extremely high quality brand,” Malone said. “The Amazon guys I think are more commercial. I think that that they’re still experimenting. They’re trying sports, they’re trying content, they’re trying ad supported content.”
Malone said there’s “clearly” going to be some consolidation in the space as well as budgetary cutbacks by streamers as competition continues to heat up.
Sports rights
Streamers have been getting more aggressive with sports broadcasting. Apple announced a 10-year deal with Major League Soccer to broadcast matches on its streaming service. Amazon‘s first broadcast of “Thursday Night Football” attracted a record number of new Prime signups over a three-hour period.
Malone said companies are still experimenting with sports broadcasting and see how sticky and sustainable the business is.
“One still sees enormous market power in sports as long as there’s competition amongst distributors so that if a distributor feels like he has to have it, or he’s going to lose a meaningful number of his customers to somebody else to a competitor, he’ll pay the price and hope that everybody pays the same price,” Malone said.
However, he cautioned that the move could drive up the cost of a bundle and turn consumers away.
“You’re gonna have to be careful, they don’t want to end up with a very high price premium service with no reach because then the kids will stop watching the sport,” Malone said.