Subscribers may balk at watching advertising on their favorite streaming service. After all, as Rich Greenfield notes, they’re paying for the privilege of having their shows streamed commercial-free. But what if ads held the same lure, hook, and storytelling draw as the episodes they binge-watch weekly? 

That’s the promise Greenfield believes marketers can deliver, especially on channels stocked with content, such as Disney+ or Netflix. Greenfield, who is also a general partner at LightShed Ventures, doesn’t think that shift will be easy — but he believes the potential is there.

“Imagine as a marketer the type of stories you can tell when you’ve got a consumer’s attention for that many hours over the next month or two months,” he says. “That’s liquid gold to a marketer.”

You can hear more from Greenfield during his conversation with John Battelle while watching the video below, or read our lightly edited transcript.


John Battelle
Welcome to another Signal Conversation. I’m very excited today to be speaking with Rich Greenfield, partner and TMT Analyst at LightShed Partners and the General Partner of LightShed Ventures where he invests in the future of media, marketing and technology. We’re going to talk today about streaming which is an expertise of Rich’s and it’s not been Rich an even keeled market this past few months, so we wanted to check in with you and see what’s going on. So welcome to Signal, Rich.

Rich Greenfield
Thanks for having me. I think there’s a lot of debate over the streaming wars, and are they just beginning, how is it changing? You know, that was a term for a while, especially during the pandemic, everyone got really excited about how amazing streaming was going to be for the future media.

Right. There’s been a lot of tumult, the big build up, and then seeing the success during the pandemic of all these new streaming services, relatively new, and then, you know, sort of a chaos and wipeout since. So let’s get into it. What how would you describe the current state of the streaming market?

I think in many ways you can look at sort of the success that Reed Hastings had at Netflix, former CEO of Netflix, and then the staggering, rapid success that Disney had in streaming. If you think about it, 10 million subscribers in one day, when Bob Iger last launch Disney+, 100 million subscribers in the first year. I think the success of Netflix and then Disney created sort of a problem for the rest of the industry because everyone looked at it and said, ‘Oh my God, these stocks are benefiting from jumping into streaming, spending dramatically.’ The losses didn’t matter. It was just about getting streaming was considered a way to transform your valuation.

All of a sudden people would give you credit for having a streaming business, whether or not it made money. But it was just being in streaming. Then everyone jumped in and so you saw the Peacocks and you saw the Paramount+s and, you know, all of a sudden now you’re looking at it going ‘Wait a second. Is this actually a good business? Do we have a strategy? How do we build to become,, are we trying to be Netflix or what is our actual strategy? Why are we even doing this?’ I think that’s the sort of the tumult, I think was the word you used earlier, John, I think that might be even being kind. I mean, I think a lot of these companies, if you think about what they did historically, they were really good at creating content and selling it to whoever wanted it. If you think about “Modern Family,” it was a Fox show, but it was on Disney’s ABC. Lots of content was created by other companies. Warner Brothers was the largest producer for other companies. Funneling everything onto your own streaming service, I think was sort of unnatural. All of a sudden, all of these companies are now questioning. ‘Why exactly are we in this business? Should we stay in it? Should we go back to what we used to be good at?’ I think this is going to be a seminal next 12 months in the industry. My guess is there’s going to be a lot of companies, multiple companies who change or pivot their strategy from what they’ve been doing over the last two to three years.

Is part of that that there just isn’t enough advertising to support this because it’s obviously at its core, a subscription play. I think that’s one of the reasons everyone got so excited early in the stock market. ‘Oh my God, they’re all going to build these great subscription businesses. It’s going to be cable all over again.’ But is it that they realize that maybe it’s harder than then they thought, or they’re the market isn’t as big as they thought for the advertiser dollars to support all of this?

I think the key issue is the cable bundle was this amazing creation. If you think about it. There was no alternative. You either subscribe to cable or you didn’t. You couldn’t pick and choose. You may have loved ESPN or you may have loved Food Network. It didn’t really matter you either took everything or nothing. Sure you could have added on, you know, HBO or Showtime, but you were taking you know what ended up being hundreds of channels with effectively no consumer choice over what you chose. You were just subscribing. You the cable network, it didn’t matter which one you worked for, you never had to do any marketing. You never had to do any customer retention. In fact, it didn’t even matter how often somebody watched. Obviously would have hurt your advertising revenue. But the money from subscription you know, the dollars that were being paid from cable and satellite operators, to a cable network or broadcast network, you sort of looked up at the sky and money just can’t kind of rain down every day, every quarter. It didn’t matter how much you were being watched.

Now, let’s turn this into the streaming world. You now have to go out and actually acquire customers, retain customers. If they’re not using it, they’re going to cancel. You mentioned the word advertising. Well, if you’re not watching something, then it’s really hard to sell advertising because it’s based on time spent. I think one of the things that nobody in the streaming space is really talking about, and that I don’t hear enough of, is that none of these companies are focused on optimizing for time spent. Because think about the world we grew up on.

You’ve studied the TV world for a very long time, John, but think about the way TV worked. How many great shows did any cable network usually have in the year? One, two? It wasn’t like a cable network is built on something you watched every night. I’m sure for HBO, even a premium network, you turned it on once a week on Sunday nights to watch whatever the new episode was of whatever show you love. AMC you turned it on when there was a new episode of “Breaking Bad” or “Madmen,” but you didn’t turn it on the rest of the week. Yes, there was always a smaller group of people that might have watched religiously but they weren’t focusing on daily engagement. If you think about the tech world, I don’t care whether we’re talking about Meta, Facebook, I don’t care if we’re talking about Google, all of these companies. What they care most about is that you never leave. They all are optimizing for time spent. It is not a behavior that the media companies, these legacy media companies, they have never been optimizing and focusing on time spent. I think that’s a huge issue as they get into streaming is they don’t understand or they’re not built to create enough program to keep you there every single day. Keep on coming back and watching. Think about Disney+ some incredible content, but just not a lot of fresh new stuff. If you want to watch “Moana” on repeat, and you’re seven years old, it’s amazing. But if you’re 50 years old like me, there’s a new episode of a few series, over the course of a year, but there just isn’t a reason to watch on a daily or even several times a week basis. That’s a huge issue for these companies is not having that regular engagement. I just don’t think that topic gets enough attention. I think that’s why they’re all thinking about, ‘Oh my god, what are we doing exactly? And how do we build a business around this?’

The one company that has built a business around this and that people do tune into every day is Netflix, right? Almost 300 million households. Netflix made a lot of headlines when they announced their advertising business late last year. This is their first full year of having that business stood up. How do you think it’s going?

I think what we’ve learned is that, and I think this would be not just true for Netflix, but for Disney too, because remember Disney launch advertising for the first time on Disney+, within the same four week period that Netflix did. I think the the challenge is, when you’ve been using a streaming service for years and years, a lot of your subscribers, even the people that were, for Netflix’s case were you know, sharing passwords and not actually paying themselves. But these services were built on not watching ads. When you bring on ads, sure, there’s a tier of consumers that certainly like the lower price and will tolerate ads. Look, I don’t think at the end of the day, I don’t think people hate ads. I think people hate ads that are not relevant, that are disruptive and annoying. I think as we’ve seen,Meta may be the best example. When you make ads that feel like content, where you know, when you scroll through your Instagram feed and you see content that actually you want to buy or you want to interact with, that’s when advertising becomes compelling.

I’d say what we’ve seen to date on Netflix and even Disney+ and others, I haven’t seen anything in the streaming ad world that is dramatically different from the way ads look on television. I think that’s going to begin to change. And I think that’s sort of the answer to your question on Netflix is, advertising is going to evolve, meaning it’s not going to look like, advertising will become my guess is more like storytelling. Where if you’re watching 10 episodes of “Wednesday,” the ads will actually evolve over those 10 episodes. And a P&G or pick your marketer can actually tell a story no longer that consumer is going to binge all of “Squid Game” or all of “Wednesday,” you can tell an ongoing story across that advertising. In a way that’s not possible. When you see the way a consumer watches linear TV because you don’t know what they’re going to watch on what network from night to night. But as long as you’re binging on Netflix, and you’re watching episode after episode, imagine you’re watching the 200 episodes of “Grey’s Anatomy” or whatever the number is now. The ability to tell a story over that entire or think of “Suits” most recently, an incredible amount of viewership. Imagine as a marker the type of stories you can tell when you know you’ve got a consumers attention for that many hours over the course of the next month or two months. That’s liquid gold to a marketer.

Obviously, it’s going to lead you know, you’re going to have to rethink how you create content or advertising content.

But I think there’s another frustration in the streaming advertising world, at least that I’ve heard from marketers and people at agencies, which is it’s really hard to solve some basic problems like frequency capping and, knowing who you’re actually average, all the problems that you would think interactive television could solve seem to be intractable in this marketplace. Why is that?

Well, one of the biggest problems you have in most of the platforms that are out there, think about, Netflix was not the first company to jump into advertising on connected TVs or on streaming. But the big problem you have, and this goes back to the TV everywhere days, and the problems that everyone saw there was, not enough time spent, meaning you didn’t have enough users and enough time spent. So you ended up when you made a guarantee to an advertiser, or whenever you had these guarantees, and you fell short, you ended up having to keep rerunning the same ad over and over again.

And that’s what we see, the same ads over and over.

I think a good part of that is that there isn’t enough. You don’t have enough viewership. If you look at sort of what’s happened with the streaming services, look at the size and scale of these streaming services. Leave off Netflix, leave off YouTube, the actual amount of time spent, is very small. It’s what makes Amazon so interesting is they do have a lot of time spent, they’re finally getting into putting ads into prime video unless you pay more now for the first time. Amazon is going to be a major player now along with Netflix, I believe. But to date, most of the streaming services that have had advertising have not had a lot of time spent. They’ve been relatively small services, whether you’re talking about Peacock or Paramount+ or you know, even the ad part of Max, right. I mean, the ad part of Max was launched back when it was HBO Max, they launched an ad supported tier. You don’t hear about a lot of consumers gravitating towards those tiers. Most of these things, people sort of have lived in an ad free world. I think that makes it that much more difficult. Now raising the price of the ad free tier, keeping a lower price of the ad supported tier will drive more and more people over time to take that.  I think you have a lot of elasticity to take advantage of people who don’t want to ads. But I just think it takes time when you have large installed bases. It’s going to take time for that for that shift to happen. Again, I think what you’re sort of highlighting is you’ve got the challenge of lower and lower viewership of linear TV. Advertisers are dying to be on streaming TV, and the amount of time spent on streaming TV with ads is still relatively tiny. So it’s a very tough environment for a marketer because you don’t know what to do.

What do you think the industry looks like three to five years from now? Is there going to be a lot of consolidation is it going to be everyone turns back into arms merchants to selling content to the biggest platform for the largest price like what does it look like? Does advertising grow do we solve those problems we just discussed?

I think a couple of things. One is without a doubt where there’s gonna be consolidation. I think given what’s happening in the environment, a lower viewership for broadcast and cable networks, I think it is hard to imagine, we have as many companies as we have today. Warner Brothers, Discovery, Paramount, NBC Universal, there’s going to be fewer players over the course of the next three or four years than we have today. Regulatory environments, not great. Obviously, interest rate environments not great, but I do think there’ll be fewer players.

Then second part is your question on what changes. One, I think you’ve got a little preview of it with what Disney did with Charter a few weeks ago, where Disney+ will now be part. When you sign up for cable, you’re going to get Disney+ as part of that subscription bundle. I wouldn’t be surprised to see Max you know, HBO for as long as you know it’s existed has always been a premium channel. I wouldn’t be surprised to see Max actually transform into being part of the base bundle. So you sign up for cable and you get Max and all of a sudden, there will be far more subscribers to effectively to HBO but HBO inside of Max, but Max will have more subscribers than HBO ever had.

Again, it takes down your marketing costs. Yes, you’re no longer a true DTC company. But it sort of goes to what you were saying. They were never really DTC companies to begin with, they’re going back to what they know, which is being wholesalers and that’s probably a smaller business from a valuation standpoint in terms of overall worth, but a lot safer. Just imagine if HBO could go from where it is today, probably 17 million homes pay for HBO within the bundle, if all of a sudden that number could go up to 60 million plus, the advertising opportunity would be much larger. Remember, when Disney plus is in the bundle, they’re only putting the ad supported version in. So it’s really a way to grow the ad supported piece of this much faster. I think from that standpoint, you’re gonna see other companies in the space, replicate what Disney and Charter just did. So that’s going to create more advertising inventory for sure, as well as create a better business model. Again, maybe smaller worth, but a better business model.

Then last, John, I do think that you’re going to see a couple of companies wouldn’t be surprised to see them go back and replicate the arms dealer approach and say, ‘Why are we doing this at all? This is not a great business. We’re great at making shows, and we’ll sell to the Netflix’s will sell to the Amazons will sell to the Apples, or maybe even to the Disney’s. We don’t need to be in this business too.’ That sort of plays into the consolidation point, it’s sort of similar in that idea, right? But I do think you’re gonna undergo pretty massive change. Because you know, what’s the definition of insanity is doing the same thing over and over again and expecting a different result. It’s not working, right? These companies are losing billions of dollars. It’s not just losing billions of dollars. Consumers just aren’t watching. Go to a cocktail party and ask people what are they watching? You don’t get a lot of answers. Outside of probably Netflix and Hulu are probably the two that you hear use the most, and Disney’s obviously in the process of buying the rest of Hulu, from Comcast, that’ll play itself out over the next several months. But there is a lot of other streaming services that we could go through that are just not getting a lot of consumer attention. That’s because they just don’t have enough content and they don’t know how to market to consumers on a regular basis.

Unfortunately, Rich, we have to leave it there. I could talk to you for hours about all this but we’re going to check in with you again. Thank you so much for being part of this Signal Conversation and we are going to keep our eye on the streaming market.

It’s going to be a fun, exciting, maybe a little depressing, but you’re gonna see a lot of disruption over the next course of the next 12to 18 months for sure.

Absolutely. Thank you Rich.