How Disney And HBO Are Creating A New Entertainment Model (NYSE:DIS)

Every year the TV landscape changes – sometimes it’s gradual, sometimes it’s seismic, but the basic barometer of that change’s impact is award season.

While it is not anywhere close to a perfect system, it does still have some value.

Part of the reason why the awards races are so flawed is because all the various groups like to play favorites. The Emmys, which recognize the best in television, are the worst because they are the only group to have the option to keep rewarding the same exact shows and same exact people year-after-year… and it is an option they exercise often.

Yet what makes that imperfect scenario valuable is that when a show DOES break through, it means something. For example, in recent years we’ve seen Fleabag and Schitt’s Creek sneak into the race and dominate – in the process becoming cultural touch points.

This year we saw Abbott Elementary and Yellowjackets slide into the mix – and while they didn’t run the table, their mere presence in the conversation is enough to make people take notice.

And that’s the point of these awards shows – to make people take notice.

For consumers it is notice of the series themselves, whereas for investors it is notice of the networks.

They want to know which services are just moving the needle and which ones are moving the entire system.

It changes often, but after this year’s results it looks like Disney (NYSE:DIS) and Warner Bros. Discovery/HBO (NASDAQ:WBD) aren’t just winning, they are creating a new type of viewing pattern that could be very profitable for shareholders… in the wake of the decline of others.

First as always, some background.

This is one of those rare years where nobody is a clear “loser” at the Emmys. Every network/service with multiple top tier nominations has something to hang their hat on… even if it was just the nomination itself.

For example:

• Netflix (NASDAQ:NFLX) may have come down from its Best Drama high of last year but still won a smattering of high level awards including two for Squid Game… marking the first time a non-English series has won in either category.

• Apple (NASDAQ:AAPL) continues to break records as Ted Lasso maintained its dominance winning a handful of big awards including Best Comedy… marking the first time a streaming service has won there in back-to-back years for the same show.

• Prime Video (NASDAQ:AMZN) has yet to find its next Marvelous Maisel but its reality series Lizzo’s Watch Out For The Big Grrrls! had a day in the reality categories, breaking the stranglehold that The Amazing Race has had for years.

And then that leaves Disney and Warner Bros. Discovery.

Notice I said Disney and Warner Bros. Discovery versus Disney+ and HBO Max – that’s the difference maker.

While other companies are trading in streaming, these two are trading in television.

Let’s start with Disney which saw wins for both Dopesick and The Dropout, two of its much hyped big series from last season from Hulu. It also gets credit for three wins from Abbott Elementary on ABC and a slew of nominations – including two Best Comedy nods – for the FX roster.

That’s three networks and we haven’t even gotten to Disney+ which somehow saw its Chip ‘n Dale: Rescue Rangers movie defeat HBO Max’s Holocaust set The Survivor for Best Made-For-TV Movie. It is both the first time an animated (or partially animated) movie has won that category and the highest win to date for Disney+ at the awards.

Disney can score and did score a win from multiple directions and that’s why it is such a dangerous competitor.

You can say streaming is supreme and linear is limping along but remember Abbott and the FX collection premiere as part of the traditional model. Abbott is broadcast (ABC) and FX is cable with both feeding into Hulu giving it content.

For investors, that’s a point you can’t overlook as what the House of Mouse is doing is building a new model of entertainment – a hybrid one.

The hybrid concept started during COVID, but has evolved in the time since then. Originally it meant a day/date release in theaters and streaming, but now it has morphed into something more valuable. Now it primarily means that a company has multiple delivery methods for its content.

Broadcast, cable, premium or streaming – Disney checks three of those boxes.

The other streamers I mentioned above – they check one.

Yes, Peacock and Paramount+ aren’t listed there and they do also check multiple boxes, but they don’t play as heavy (for now) in the award space, are still very young in their life cycles, have a lower subscriber count and are still in the much larger shadow of their siblings who are still very traditional in nature.

It’s not apples-to-apples.

And that is not to say that they won’t or can’t grow, but they aren’t there yet and Disney and WBD have just run circles around them thus far in becoming full-circle services.

That brings us to Warner Bros. Discovery, which does fully check all four boxes and led off by HBO.

What HBO has done so magnificently is blend its identity into HBO Max so that any win for HBO becomes a win for HBO Max and to an extent vice versa. Like Disney, it is utilizing that same type of hybrid method, but making the brand association easier for consumers.

Emmy winners Succession and The White Lotus are great examples, both have traditional (weekly) debuts on HBO that, while also are available on streaming at the same time, have carved out a set linear time where if you want a collective viewing experience, you can have it.

That’s the part of what is holding Netflix back – the lack of a communal experience. The all-at-once approach means consumers can watch as much or as little as their schedule allows, which many see as convenient. However, it also puts everyone at vastly different parts of the story.

Having that one set time a week means it is more manageable for a lot of people and means that they don’t have to worry about being spoiled about plot points from episodes later in the year.

It matters.

That’s why HBO is such a powerhouse… once a show like The Sopranos, Game of Thrones or Sex & The City end, there’s more in the wings to restock the shelf. Being given that 9pm slot on Sundays is a mark of distinction – we have faith in THIS show and you should as well… enough to watch it live.

And all of that content lives on HBO Max, along with its own originals like Hacks and The Flight Attendant as well as content from the full WBD family from The CW, TBS, TNT, TruTv and others.

Again it’s that hybrid collective.

Yes, the Emmys are flawed, but in that flawed system series like Hacks, The Flight Attendant, The Mandalorian, WandaVision and others are breaking through. What that tells us is that when voters are forced to look elsewhere (when a favorite is not eligible), this is what’s grabbing their attention.

And that means something because it is joining a very exclusive list of programs.

Yes, the Emmy telecast was the least watched ever and yes its nominees don’t always reflect what some believe Americans are actually watching, but this is the game we play in this industry. And if you choose to invest, you accept those rules of engagement are going to be different.

So until those rules change, the best way to succeed is to understand them and decipher them, because for now even as more things in this field change… the more many will just continue to stay the same.