Are Netflix and Disney+ Really Beating HBO Max and Apple TV?

Disney and Netflix have been posting record-breaking numbers in their streaming uptake. They and Amazon Prime are the frontrunners in the streaming wars. The other players—Peacock, HBO Max, Apple TV, CBS, etc.—are not seen as frontrunners, at least not yet. The Financial Times has a couple of articles on this. There’s been a lot of press about how Disney+ and Netflix are winning while HBO Max is losing. But if you think about this carefully, I don’t think HBO Max is losing because they aren’t trying to do the same thing Netflix and Disney+ are doing. HBO Max and Apple TV need to be measured separately with separate metrics.

If someone goes to university, gets average grades, and ends up with an average job, you could call them a failure—but they’re only a failure relative to what they wanted to achieve. If they accomplished more than what they wanted to achieve, are they a failure or a success? These press results are measuring Netflix, Disney+, HBO Max, Apple TV as if winning the most amount of customers is the metric of success.

HBO Max and Apple TV are parts of a bigger empire

HBO Max and Apple TV are parts of a bigger empire. In corporate strategy, we teach very clearly that business unit strategy must enable and support the corporate strategy. It doesn’t supersede it, it doesn’t displace it, it doesn’t change it.

The question you have got to ask yourself is what is AT&T’s corporate strategy? What is Apple’s corporate strategy? What is the business unit strategy for HBO and Warner Media? And what is the business strategy for Apple TV? And is it doing what it’s supposed to do to support the corporate strategy?

If the answer is yes, then it’s a very big success.

I’ll give you an example of this. AT&T is a telecoms giant. When I was a senior partner dealing with telecoms companies, the biggest thing telecoms companies were worried about was churn. Churn is the net number of people who cancel their prepaid or postpaid contracts. And telecoms companies understand churn better than about anyone.

If HBO Max brings in a million subscribers to HBO Max, is it better than HBO Max preventing million postpaid cellular subscribers from canceling their AT&T contracts? Here’s another scenario. What if HBO Max doesn’t grow much? What if it shows no growth over the next quarter, but it prevents a million AT&T postpaid subscribers from canceling? Because AT&T has an entrenched cost base—most of it fully depreciated, the infrastructure already in place, and because the fees are much higher—the value of a million postpaid subscribers not canceling on their cellular contract is worth far more than a million HBO Max subscribers joining.

The same principle applies to Apple TV. It does not matter if Apple TV does not win an award. What matters is is Apple TV allowing Apple to reach its overarching corporate objective. And if the answer is yes then Apple TV is a success.

It doesn’t mean it’s a failure if it doesn’t compare favorably on a peer-to-peer basis to Netflix and Disney+ because it is not supposed to do that.

Churn and entering the market is a big deal. For FC Insiders who have access to SCR-Advanced, because streaming is such a big business and there’s so much happening with telecoms and 5G networks, we will be making a big update to SCR-Advanced to show the thinking that goes into how telecoms cannot be left behind in the 5G rollout in so far as they want to be players in capturing the value that will be built on it. They don’t just want to be dumb pipes—they want to deliver something valuable down that. And second, we also want to look at how they manage churn, which is relevant to any e-commerce company that is managing churn.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #9.