Stan’s $30m Showtime output deal: Has streaming boss Mike Sneesby ‘burnt his boats’?
Yesterday saw streaming player Stan announce a major content output with Showtime. Nic Christensen looks at the deal and what it means for both Stan and the wider market.
Back in 1519, during the Spanish conquest of Mexico, commander Hernán Cortés scuttled his ships, so that his men would have to conquer or die.
Yesterday some in the streaming market were wondering if Stan boss Mike Sneesby had just done the same thing.
In signing what is rumoured to be a $30m a year deal (when fully operational), Sneesby has made a clear sign of his intent in the Fairfax Media/Nine Entertainment joint venture.
“It is the most significant deal that has been done in recent television history, not just SVOD but in television,” said Mike Sneesby, CEO of Stan, at a press conference. “There are a lot of components to it but we see significant value in the deal, but we’re not going to talk about what it has cost us.”
In its basic elements, the Showtime deal has three parts:
1) Stan gets the exclusive rights to all new Showtime series content in Australia, like Billions and the new Twin Peaks;
2) it expands its Showtime library and will eventually, over time, pick up the rights to the libraries of existing shows from rival Presto and Foxtel; and
3) it has the SVOD licencing deal for Showtime parent company, CBS’s content, giving it the exclusive rights to shows Madam Secretary, Under the Dome, and Limitless, after their broadcast window expires with Ten.
It is, by all accounts, a significant deal that comes almost a year to the date since Stan launched.
But it also worth unpacking the components of the deal and what the rumoured $30m buys the streaming player.
Firstly, the real benefit of the exclusive new Showtime programming is from a marketing perspective – it gives Stan something fresh to drive subscribers with.
To quote Sneesby, yesterday: “Stan will be the home of Showtime. We won’t be changing our own brand per se, but in conjunction with Showtime’s programming we will using their shows as part of our go-to market campaign and you have seen that with Billions.”
For those unfamiliar with Billions it is a new US television drama series starring Damian Lewis (of Homeland fame) and Paul Giamatti, the show is set around the financial world in New York, and Stan is already promoting it aggressively, such as the wrap-around in today’s Australian Financial Review, and the channel is hoping for strong consumer interest given it drew 2.99m viewers for the show’s US premiere last week.
While the reviews may be good for Billions there is a big question mark as to when the other new Showtime franchises will arrive.
At the moment it looks like Stan has Billions and will have to wait for the new series of Twin Peaks, due out in 2017.
Other shows in the pipeline include Halo (also likely to be out in 2017) and there is also a question mark over when Showtime’s new Jim Carrey comedy I’m Dying Up Here will be ready, with some reports suggesting 2016 and others 2017.
Sneesby, however, is optimistic that he will have other Showtime content to promote this side of Christmas.
“Just because we only have the hard line on Billions and Twin Peaks doesn’t mean you won’t see more of that first run content before the end of the year,” he says.
“The first run new content will come to us for the life of that series – i.e. for the duration that those programs are made, you’ll see season after season stacked on Stan. ”
Stan’s media release also promoted “hundreds of hours of quality Showtime programming” which will be “exclusively available on Stan” on SVOD.
These shows include hits such as House of Lies, The Affair, Penny Dreadful, Ray Donovan, Dexter and Californication; however, the release neglected to mention that Foxtel retains broadcast rights and the first SVOD window rights on these programs.
Foxtel and Presto were quick to point out that under their pre-existing content output deals shows like Ray Donovan will still air first on Foxtel with it retains the broadcast rights and the first SVOD rights. After that period (usually 18 months) the rights will go to Stan.
Sneesby argues there is still a strategic value for Stan in getting these rights.
“Very strategically we will be growing Showtime’s catalogue,” he told Mumbrella after the press conference.
“Over the duration of our deal as those arrangements come out of their licence (they will move). Also a lot of them will have non-exclusive licences but over time they will convert to exclusive licences.”
The rights situation is similar for CBS content such as Madam Secretary, Under the Dome, and Limitless, which will air first on Ten and Ten Play before it reaches the SVOD window and becomes exclusive to Stan.
There is a value here but for much of the Australian audience but at the end of the day it is ‘exclusive content’ that has aired elsewhere first.
The real question for Stan is: is the estimated $30m a year price tag, once it eventually scales up and has the six seasons a year of new content plus library content, worth it?
Sneesby won’t comment on the price of the deal but emphasises that Stan isn’t paying it all upfront, instead the platform will pay for content as it gets it.
“(For) all of our content across the platform we pay a set licence fee, and it usually done on an hourly basis,” said Sneesby. “It is not a revenue-sharing deal – you buy the licence window and you buy (it) outright.”
“The thing about this deal is it doesn’t change our business plan,” Sneesby said. “We are hitting our business plan numbers, if anything this gives us greater confidence to accelerate our take-up of subscriptions.
“I have spent plenty of time modelling the numbers. Our business plan trajectory says we can absorb this deal even though there are a lot of variables in how it can shake-out over time.”
During the press conference Fairfax CEO Greg Hywood and Nine chairman David Haslingden were in the audience and were asked if they were confident they would not have to invest further funds beyond the existing $50m they have each invested.
“You have to see this in the context of adding to a successful business. Clearly this deal underlines the confidence in the business … it is that simple,” said Hywood dismissing the question.
But Haslingden noted that it would really depend on whether Stan’s subscribers grew. “If anything we look at this deal as financially positive both in terms of the timing of the agreement and in terms of the cash investment.
“Of course it depends on the take-up dynamics that we have seen in the last couple of months, and this is, before the (Showtime) deal, real momentum.”
As Mumbrella noted this week in its Streaming Wars series, Stan has been trumpeting its gross subscriber numbers of almost 700,000. This number reflects everyone who has ever given Stan a credit card – it is not active subscribers who are probably closer to the 350,000 mark than 700,000, let alone paying subs who are likely 100,000 subscribers less.
In the wake of today’s deal the next year or two will interesting.
Showtime’s content will definitely help drive subscriber growth but a real question remains as to whether or not that growth will be substantial enough to ensure Hywood and Haslingden don’t need to send rescue boats.
Nic Christensen is the media and technology editor of Mumbrella
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Content aside, the Stan and Presto user experiences are both very poor. Not entirely surprising for Presto given its Foxtel association. But you’d expect a startup like Stan would invest in creating a user experience worthy of the content. Instead it looks and feels like a 90s video store. Perhaps it too has the baggage of Nine and Fairfax?
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Agree with the comment above. Regardless of the content available, Netflix have put massive effort in to make sure the stream will always work. Which is so good that you don’t actually notice it. Until you try an inferior service like Stan or Presto (as well as the free to air streaming services).
Clearly from this investment Stan don’t see this as being a major part of their business. But where people will stick with Netflix, because they trust it to work they will just churn through the others based on who has a particular show on offer or a discount price.
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I also agree with the above. I have Netflix and Presto. You could argue that the content on both is similar (movies on Presto are probably better/more current), but I’ll be cutting Presto due to the user experience. I watch it via my PS4, and every time I start it I have to put in a password. It also sometimes logs me out mid show. That never happens with Netflix and, ultimately, has made the difference.
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Can anyone explain to me why TV and film still needs a business model based on exclusive rights? Something something radio…
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Stan’s rebranding of the Amazon Prime Instant Video service continues to follow the Amazon SVOD company who also announced last month, it too was partnering with Showtime.
Nothing new here….
Again, if you use a VPN, you get more than just the Stan line-up on Amazon’s SVOD service.
Is $30m too much to pay for a better Amazon product just a click away?
http://techcrunch.com/2015/12/.....-to-prime/
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A very bold move. But Stan didn’t really have much choice. It’s a crash through or crash approach really. With Netflix’s deep financial pockets and the strength of Foxtel behind Presto they are decidedly the third offering in a market that might only be big enough for two profitable players.
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Wish Stan had invested some of that into their CDN / architecture, so that their service worked properly.
Oh well.
Note: I have 100mbps FTTP with a top-tier ISP, and also use other streaming services; looking at the network graphs, it’s pretty obvious where the problem is.
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Agree with Keith and Experience above. I recently signed up to Stan on a three month trial and while I was very impressed by their catalogue (particularly movies), I’d be lying if I didn’t tell you I was shocked by how rubbish the interface looked and felt on the PS4.
I do applaud them for having a real crack at the SVOD market but they’ve still got a long way to go.
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I’d make the observation a good UX service for streaming needs a minor, and I mean minor, investment in serious hardware like Apple TV. Sony a company seeking to spin off PlayStation. Their R&D will hurt your experience.
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The buzz I’ve heard about Stan and overall experience from colleagues who use the service is not great…hope the $30M investment paysoff..
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One of the reasons I got foxtel was because of their showtime channel and was really keen to get into Billions. Ahh well, looks like its back to getting my fix from other *ahem* sources
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I have read all the hot air about this deal. Hats off to Stan and CBS for great P.R. spin, but through a sober lense, this is hardly “the most significant deal in recent television history”. A very expensive contract for a handful of shows a year. Given there were 409 dramas produced in the U.S alone last year, there are plenty of pickings left for the other players in the Australian market, including Foxtel and Presto. In the meantime, Foxtel customers can continue to enjoy day and date releases of new seasons current Showtime titles such as “The Affair,” “Penny Dreadful” and “Ray Donovan.”
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Stan is a funny name for a streaming service. Stan. The old man.
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