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Disney+ into Diamonds: Mining's blueprint for a renaissance in TV streaming

THE streaming industry today faces intense scrutiny from unforgiving investors. Similarly, this time 10 years ago, the mining industry faced its own investor crisis, after enjoying years of endless capital and abundant customer growth. The mining industry worked through its hangover and emerged with its reputation enhanced. What does mining's recovery reveal for the future of streaming?

Richard Gannon
 Image: iStock/Ogulcan Aksouy

Image: iStock/Ogulcan Aksouy

The 1981 blockbuster, Raiders of the Lost Ark, burst onto screens with our hero, Indiana Jones, swiping a miniature golden statue, deep in the Amazon jungle. Chaos ensues, Indi out-runs a thunderous boulder, and makes a daring escape. Movie magic is born.

Summer 2023, and the ageing archaeologist's box office appeal cannot keep up with an eternal Tom Cruise or the cultural zeitgeist of Barbie. Our old friend's last adventure?

On the smaller screen, TV streaming services kept us sane (ish) across the pandemic. An explosion of content. Incredible value. Shared cultural experiences around the world.

The pandemic juiced streaming … from being awkward skinny teens to small screen idols.

Is streaming the next Blockbuster Video?

But streaming - once the shark in the waters of legacy media empires - now faces predators of its own.

The incumbent media giants aspired to capture Netflix's high-growth tech valuation multiple during the "streaming wars".

Streaming's "moat" was its enormous capital - tens of billions of dollars spent annually on extraordinary new content. Yet today, despite this spending, increasing audience churn rings alarm bells, as customers tighten discretionary spending.

Media empires fell in love with an abundance of capital to spend, but consumers want the dopamine rush of algorithmic social media feeds.

The moat is compromised.

The moat is always execution. The moat is not capital.

Attention market share has been conceded to unruly new digital neighbours - TikTok has reshaped culture and hypnotised a generation. Mr Beast will become the first billionaire YouTuber. Celebrity AI chatbots are emerging via Meta. Each of these shape-shifting cyber-punks are firing on the streaming citadels of Hollywood.

Consumers have moved from mainstream media, to social media, and - looking forward - are now themselves content creators, with our smart-phones and generative AI empowering the Spielberg in each of us.

Streaming must navigate the stormy waters of post-peak attention market share.

Streaming is no longer a trophy asset. It is not Manchester United or an NBA team - with sheikhs and tech billionaires ready to pay mega-prices for the brand elevation that comes with ownership.

Today, streaming's owners are focused on more sober ambitions: profit & positive free cashflow.

Technology companies monetise streaming through device renewal, plus algorithms which maximise users' time in the ecosystem. Media empires also monetise content through theatre releases, advertising, merch and theme parks.

The streaming industry that survives will be based on content investment that delivers attractive returns of capital through multiple monetisation strategies, far beyond today's reliance on subscription revenue.

Déjà Vu - have we seen this movie before

As we ponder streaming's dilemma, let's look at the global mining industry in 2012.

Between 2000 and 2012, China lifted 400-500 million of its people out of poverty. The Chinese economy grew by 10% per annum, driven by enormous industrialisation. China's resources-intensive investment delivered an unprecedented "boom" in global demand for commodities.

During that period, the mining industry enjoyed extraordinary access to cheap capital. The industry spent one trillion dollars in a decade:

Producers feared missing out on market share. The market rewarded growth pipelines, however tenuous, and investors were cheerleaders. Giant new investments in emerging economies were applauded. Volume (of mine supply growth) was in-vogue.

The future envisaged was a "super-cycle", different to cycles of the past. It was Fast & The Furious, just with less realistic plotlines. Good. Times. Forever.

What happened next?

Well, around 2012, China paused for breath. Its economic growth decelerated. Commodity prices weakened. The mining industry's cashflows disappeared. Capital destruction. Write-offs of tens of billions of dollars. Allegations from regulators of bribery and mis-management. New financial controllers move into the C-suite. And the major miners churned through 15 CEOs in the next 10 years.

Boom. Over.

Suddenly, the call for mining industry supply discipline:

"Capital misallocation remains a key issue. We don't want to oversupply and cannibalise our business."

…became the accepted industry mantra.

The mining industry pivoted, and prioritised financial returns. As a result, the top 40 global mining companies have paid $500 billion of dividends to investors in the decade since 2012.

And here is the point.

The outlook facing mining in 2012 mirrors the outlook for streaming today:

  • Stalling customer growth.
  • Depletion of easier-to-extract mines / customers. (Trends in streaming's developed-market subscriber growth, customer lifetime value & audience churn … upset the Wall Street heavies).
  • Investor patience has worn thin - attractive returns on capital spend are required.
  • Content-producers face regulatory scrutiny of any large M&A.
  • Technology will re-shape the future business model.

So how did the mining industry re-build trust with investors?

Prioritise shareholder permission to build

Use someone else's capital: Since 2012, mining companies have tied all strategic decisions to more rigorous capital allocation frameworks, which has driven purer competition for capital internally plus internal accountability. The depth of analysis and risk mitigation supporting capital spend decisions has been transformational, managing investors' concerns about the sector's history of volatile returns.

And over this time, mining's capital spending has been extremely disciplined, prioritising shareholding returns over supply growth. The companies streamlined into fighting shape, and where necessary found deep-pocketed partners in China, Japan, Saudi Arabia plus electric vehicle manufacturers.

The media industry has been here before. In 1953, Walt Disney could not get traditional lenders for Disneyland, because "dreams offer too little collateral". So, Walt funded the theme park through a deal with ABC (creating content for an emerging new medium: you guessed it, television) and consumer brand companies (#genius).

Similarly, Netflix has shown the pathway to profitability through international content, plus licensing trusted back-catalogues.

Thinking more broadly, global economic powerhouses (India, South Korea, the Gulf states) are enormous capital pools which can drive their own unique benefits from association with major entertainment brands, such as streaming services. Might Succession's Roy siblings move their bickering to Riyadh?

Share in the upside: Streaming delivers global audiences and emotional engagement. And streaming helps mint sports billionaires, without sharing the spoils itself. Drive to Survive created enormous value for Formula One. The Last Dance catalysed an explosion of sports documentaries and uber-brand awareness for star athletes. Apple is pursuing a new business model for live sports streaming, based on risk-sharing with leagues and major athletes.

Looking forward, streaming can change the way sports media rights are structured around the world - and capture far more financial upside with the empires it helps create.

De-risk investments: Mining's austerity led to a collapse in investment appetite for risky geographies, a.k.a. places where the mining camp needs guards with big guns. Hollywood realised this 20 years ago - and since David Maisel's team showed the way by funding Iron Man with zero risk capital, the studios have made fortunes based on established IP and origin stories.

Today, audiences appear to have superhero fatigue. Hollywood's next blockbuster ecosystem - the next Marvel Universe - might be driven by generative technologies based on characters we fell in love with through streaming and children's toys.

The "mining" companies which trade on the highest valuation multiples are actually royalty companies, which don't own any mines.

What role does TV streaming play in de-risking a new character universe investment spend, whilst retaining asymmetric financial upside?

The future: Streaming's balance sheet is an investment house portfolio of royalties in celebrities, brands and sports franchises. And incubating future cinematic universes.

Teaching the robots how to talk about their feelings

The miners have avoided mega cash-funded M&A for the past 10 years. Investors no longer tolerated the financial risk, the regulatory risk and the distraction of management time.

Similarly, Warner Bros Discovery CEO David Zaslav has stated he expects consolidation within streaming, but not through M&A due to the lengthy timeline and regulatory risks involved.

Logic says the steaming survivors will include Apple, Amazon and Netflix. Giants. For everyone else, the question is how to thrive in a capital-light environment.

Wounded streaming companies will embrace bundling of content. However, the media CEOs are demanding much more creativity in deal-making! Imagination without fences. What might this look like?

Monetise the audience's engagement through targeted advertising, exclusive status offerings for premium subscribers, and retaining customers post-show in the attention ecosystem?

What are the high-grade value sections of other industries - gaming, music and sports - that streaming, with celebrity partners, can selectively mine?

Innovate more with software talent & algorithmic feed?

But what is the bigger picture?

The mining industry's greatest challenge today is its need for fierce competitors to come together to create a united, compelling narrative. To convince young talent to join the industry. To persuade generalist investors, under-weight the sector (and its modest 5-6x EBITDA multiples), to invest. And to communicate the industry's essential place in society.

Greater industry collaboration is required.

Likewise, streaming's biggest threat comes, not from each other, but from new virtual predators. Generative AI technologies trained on existing media content, will deliver unearned margin based on Hollywood's past labour. Netflix et al face their Napster moment - rogue protagonists re-writing an industry's rules. Streaming needs to devise content pipelines and value-sharing models with new digital partners.

A sustainable streaming business model depends on it.

The magic of thinking big

In 2007, Rio Tinto paid $38 billion to acquire the Canadian aluminium producer, Alcan. Within a few years, $25 billion of this investment had been written off.

BHP invested ~$40 billion in US shale energy assets, yet subsequently wrote off half of this investment.

Fast forward, and today both BHP and Rio Tinto are, once again, industry giants. Their investors were rewarded with $30 billion in dividends in 2022 alone. The mining industry has restored its brand as an outstanding steward of capital.

Streaming is having its Prince Harry moment. Once, so popular. Now, trapped in California, sweating over an escalating cost burden and an uncertain future revenue profile. No longer adored.

Creativity is essential for human sustenance. Shared cultural moments define being human.

Let's re-build streaming.

Richard Gannon (www.linkedin.com/in/richardsgannon) has led global banking, corporate and founder teams for 25 years in the natural resources, energy & media sectors.

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