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The streaming industry faces an inflection point as nervous investors grow increasingly wary over the business model's long-term viability, Tim writes. 

Why it matters: Media giants just spent the last two years sinking money into and reformatting their business around growing their streaming services.

Companies have been caught between catering to their declining legacy businesses while trying to grow their streaming footprint.

"There are huge positives about DTC. Subscribers pay upfront. There's a lot of cash benefits, but it's yet to be proven how great a business it will be, how competitive it will be," Bank of America's Jessica Reif Ehrlich tells Tim.

The so-called streaming wars have already seen a few casualties. Jeffrey Katzenberg's Quibi lasted only seven months while CNN+ had the plug pulled after less than one month.

Driving the news: All eyes will be on Disney this afternoon — specifically Disney+ subscriber growth — when it reports its earnings for the March quarter.

"It's going to be the lowest quarter for net adds. This will be the trough quarter. And they said this for years," Ehrlich says. 

State of play: Netflix's plan to finally incorporate advertising appears to be fast-tracked, as executives told employees that ads could come to the service by the end of this year, according to an internal email reviewed by the New York Times. 

That's much quicker than what CEO Reed Hastings said last month, when he gave it a two-year timeline. A source tells Tim that the advertising plan is still very much in the early days. 

The Times also reported that Netflix has held talks with The Trade Desk about helping build out its advertising infrastructure. Netflix's former CFO David Wells is on The Trade Desk's board. 

While not confirming the talks, The Trade Desk CEO said during yesterday's earnings call: "I believe they have more pressure on them to create an amazing ad experience than anybody in the streaming competition. ... I'm extremely optimistic in the potential for us to partner with Netflix."

The big picture: There's been a shift in thinking as to whether or not going all-in on streaming at the expense of still-profitable legacy businesses was the right call. 

Warner Bros. Discovery CEO David Zaslav used the new company's first earnings call last month to endorse the theatrical window and promised to not "collapse the entire motion picture business on streaming."

TV networks, especially those that carry sports, still get millions in advertising revenue and carriage fees. 

What's next: The box office will probably never get back to its pre-pandemic levels, and the bundle will continue to erode. That only puts more pressure on media giants to figure out how to live in a streaming world. 

"I think there will be continued consolidation. I don't think you can tell where it's going to come from right now, but I definitely do think you'll see another two or three combinations," Jordan Fudge, founder of New Slate Ventures, said during a panel on streaming at last week's Milken Institute Global Conference in Los Angeles.

"I don't think the average consumer has bandwidth for this many streamers," Gail Berman, chairman and CEO of The Jackal Group, said on that same panel. 

The bottom line: We don't know whether the current moment is a blip or a sign that investors' thinking has permanently shifted.

"We were using a 'sum of the parts' approach and valuing streaming separately. I think most investors will look at it on a consolidated basis and not separate out streaming," Ehrlich says.

1 big thing: 😬 Streaming's moment of crisis 

Animated illustration of a briefcase, with buckles as eyes, looking around nervously. 

Banijay, the reality TV producer behind hits like "Survivor" and "MasterChef," is going public via a merger with SPAC investment vehicle Pegasus Entrepreneurs, Tim writes. 

Why it's the BFD: The SPAC market has gone from flame to fizzle, particularly for media companies. But this is the largest deal by a European-listed SPAC.

The deal is backed by investors including Bernard Arnault and Vincent Bolloré.

Details: The deal will see Banijay join with online sports gambling company Betclic Everest Group and form a new company called FL Entertainment.

FL Entertainment will be listed on Euronext in Amsterdam starting July 1.

Banijay's Stéphane Courbit will serve as chairman of FL Entertainment with LOV Group's François Riahi as CEO. Marco Bassetti, CEO of Banijay, and Nicolas Beraud, CEO of Betclic, will remain in their current roles.

By the numbers: FL Entertainment Group will have an enterprise value of €7.2 billion, or €4.1 billion in equity value.

Revenue for FL Entertainment companies in 2021 is approximately €3.5 billion, with an adjusted EBITDA of about €609 million.

FL Entertainment has already secured more than €620 million in funding, primarily made up of approximately €220 million PIPE investments and €250 million.

Be smart: Banijay is one of the most prolific global content producers and owns over 120 production companies across 22 countries.

In 2020, Banijay acquired Dutch-based super-producer Endemol Shine Group for $2.2 billion. 

Along with "Survivor," Banijay's reality formats include "Big Brother," "Deal or No Deal" and "Temptation Island," as well as scripted hits like "Peaky Blinders" and "Black Mirror."

What they're saying: "As a result of the transaction, the group will benefit from a robust balance sheet and will be very well positioned to capture growth in the entertainment industry," Courbit said in a statement.

2. The BFD: 'Survivor' producer to go public via SPAC

Data: IAB U.S. Podcast Advertising Revenue study, prepared by PwC; Chart: Thomas Oide/Axios

Podcast advertising in the U.S. will exceed $2 billion in revenue this year and $4 billion by 2024, according to the latest annual revenue study by the Interactive Advertising Bureau and PwC, Kerry writes.

Why it matters: Podcasting is far from a sideshow. IAB released the report ahead of the Podcast Upfronts, its three-day event where publishers and ad tech companies pitched brands for ad dollars.

That revenue growth follows deeper investments from publishers in audio and more audience engagement, along with improvements in ad tech. Here's some of what publishers pitched yesterday: 

Disney on IP: "This probably won't come as a surprise, but [Edison's] research showed Disney fans are incredibly loyal and engaged. The most exciting finding for us was that Disney fans who don't consume podcasts right now are likely to start listening to them in order to connect with their favorite franchises." — Reena Mehta, Disney's SVP of streaming and digital content

WBUR on history: "We don't always get the credit. But public media has been inventing stuff for a long time — cooking shows, call-in shows, chart-topping podcasts." — Amory Sivertson, co-host and senior producer of "Endless Thread"

iHeartPodcasts on content diversity: "You have this spread of 50 shows, each driving more than a million monthly downloads, and they're not all in one category. It's not all true crime or history or news or politics or sports. It's spread across 19 or 20 categories." — Conal Byrne, CEO of the iHeartMedia Digital Audio Group

3. Charted: 🎙️ Podcasting to reach $4B by 2024

Paper, a crypto-focused payments processing company trying to make buying, using and holding NFTs easier, closed a $7.3m seed round. Electric Capital and Initialized Capital co-led, and were joined by Polygon, FalconX, Long Journey Ventures, ThirdWeb, Night Capital and the founders of Plaid, Twitch, Fractal, MagicEden, Eventbrite, Tagomi and Bison Trails. http://axios.link/oXjR

Candid, a Dutch marketing and communications platform, acquired independent U.K. advertising agency Creature for an undisclosed sum. http://axios.link/GyW4

4. Deal flow

Disney promoted Charissa Gilmore to SVP of corporate communications at the company's TV content arm, Disney General Entertainment. http://axios.link/9cmY

Film4 promoted director Daniel Battsek to chairman. http://axios.link/njn8

Night Studios, the new content arm of talent management firm Night Inc., whose clients include MrBeast, hired Alex Piper, YouTube's head of unscripted originals. http://axios.link/R3bz

Paramount Global promoted Colin Hickey to SVP operations and Sarah Tortoreti to SVP marketing and communications overseeing VidCon as Jim Louderback transitions to an advisory role. http://axios.link/avRz

Range Media Partners hired ICM vet Denise Draper as partner in its nonscripted division. http://axios.link/PG6X

Ziff Davis appointed Glasswing Ventures managing director Sarah Fay to chair of its board as Richard Ressler retires. http://axios.link/EcpU

5. Movin' on up (or out)

Talent wars come for NFL announcers (Axios)

The 10-year deal is reportedly worth $375 million, per the New York Post, a testament to Fox's willingness to spend big to make up for lost ground.

FIFA and EA Sports end video game partnership after nearly 30 years (Axios)

"EA's game is so popular it doesn't need the FIFA brand and the financial and reputational baggage that comes with the name. But now the race is on to see which competitor will grab the FIFA license for a game of their own," Stephen Totilo writes.

Elon Musk says he would reverse Twitter's permanent Trump ban (Axios)

"It was not correct to ban Donald Trump. I think that was a mistake, because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice," Musk said. 

6. Channel surfing

Illustration of a pair of sunglasses with lenses that look like tv screens.

🐔 Situational awareness: Chicken Soup for the Soul Entertainment is acquiring Redbox, the struggling DVD-rental kiosk company, in an all-stock transaction. 

As Tim wrote last week, Redbox's stock price recently doubled and it secured $50 million in new funding.

@tim_bays: "House Hunters: International" on Discovery+. So many poor decisions are made on this show.

@kerrymflynn: Celtics vs Bucks on TNT. My sister is forcing me to support the Celtics.

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May 11, 2022

1 big thing: 😬 Streaming's moment of crisis