Streaming’s challenging economics will make industry consolidation “inevitable,” in the view of Candle Media Co-CEO Kevin Mayer, but Big Tech and Hollywood are likely to remain in separate camps.
Mayer shared his outlook in an appearance at the Yahoo Finance Invest conference in New York. Most of the 15-minute sit-down focused on the Walt Disney Co., where Mayer was a longtime senior exec and now serves as an advisor to CEO Bob Iger. “Bob has his hands full,” Mayer said of the myriad issues facing Disney, from activist investors to restless shareholders to various moving strategic parts. The 72-year-old top exec is “very capable and multifaceted. He has a lot of range, so he can handle it. … You have to be disciplined, and Bob’s always been very strategic.”
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As to Disney’s lagging stock price, Mayer said the market is “reacting to uncertainty” about the future of Hulu, ESPN, the leadership of the company and other aspects of the media giant.
During his stint running the strategic planning group at Disney, Mayer engineered a historic run of M&A deals, including the acquisitions of Marvel, Pixar and most of 21st Century Fox. Prior to his 2020 exit, he spearheaded the launch of Disney+ and has gone on to focus on streaming and digital content at Candle and as chairman of sports streamer DAZN and CEO of TikTok.
An experiment DAZN ran with packaging streaming-only rights to European soccer led Mayer to believe that ESPN has considerable upside when pricing its forthcoming stand-along streaming service. Long funded by distribution fees from pay-TV providers, ESPN is actively plotting out a future as a direct-to-consumer service. One of the dilemmas in bringing it to market is about where to price it. On paper, ESPN has the potential to be the most expensive offering in modern streaming history, well above the $23-a-month top of the general-entertainment market, given its trove of sports rights.
Having found early traction with Disney+ by pricing it at $6.99 a month, Mayer recalled deciding to take a similar tack in Italy, going to market at about €10 below prior levels established by Sky. DAZN then decided to boost the price from €20 Euros to €35 and found that few if any subscribers quit the service as a result. The takeaway: “Sports fans who really want their sports will pay a lot for it,” Mayer said.
Mayer declined to address the state of Disney’s efforts to find a strategic partner for ESPN as it mounts its direct-to-consumer push. More broadly, he said, the sheer expense of reaching scale in streaming, whose profit margins are unlikely ever to reach the historic highs of linear TV, will lead to M&A. Mayer said it is “not obvious” to him that more Amazon-MGM-style mash-ups of Big Tech and entertainment are in the offing. “I think there’s a little bit of nervousness there about how the two will intersect if they’re both under one roof,” he said of tech and Hollywood. “I’m not sure it’s an obvious thing that a high-growth, tech-focused company that’s really about its engineering and its product at its core would be a great home for creativity and the type of storytelling that Hollywood represents.”
Those kinds of “cultural mismatches make buyers nervous,” he continued. “Also, if you’re Apple TV+ or Google, you have access to programming from independent producers of content” like Candle Media. “If you want content for your streaming services, you can always buy it at arm’s length.”
Succession at Disney has historically been a difficult process, Mayer acknowledged. Iger returned as CEO in November 2022 after his hand-picked successor, Bob Chapek, made a series of missteps and was ousted by the board. Iger agreed to a short-term contract and has said a special committee is weighing candidates for Disney’s future CEO but much uncertainty continues to cloud the process. “It’s just hard,” he said, “especially if you’re a CEO as successful as Bob, I think it pains him to see the company not live up to the standards he had set for it. Stepping back in was something he felt he just had to do.”
Iger and the board “will pick a great successor,” Mayer predicted, noting there are a number of viable internal candidates. Asked if he would consider stepping into the job, which instead went to Chapek when Iger last passed the baton, Mayer demurred.
As for the future of Candle, which is backed by private equity giant Blackstone, the exec said there are three possible outcomes: an acquisition by a strategic buyer; an IPO; or a sale to another P.E. firm. “We’re set up for any of them,” he said.
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