This is something I saw coming years ago at Investorplace.
Streaming will be owned by the Cloud Czars.
All the entertainment companies with their lawyers, producers, and lobbyists are going to fade away. Together, they’re worth a fraction of what Amazon or Alphabet are. Amazon and Alphabet are, in turn, worth barely half what Apple is.
It’s game over.
The reason is simple. Think of the cloud as the operating system of our time. Control what’s beneath and you control what’s above. IBM understood this in the 1960s. Microsoft understood it better in the 1980s.
The opportunity today is so big that it can’t be encompassed by one company. So, the cloud is dominated by 5 – Apple, Microsoft, Google, Amazon, Meta Platforms. These are the Internet’s primary landlords. They buy their data centers with cash flow. Everyone else must rent.
Yes, even Netflix. Even Disney. Disney today is worth just half what Meta is. And Meta is frankly garbage. Its software is not competitive. The only reason it works is because it represents the Free Web in the developing world. WhatsApp may be irrelevant in Cincinnati, but it’s a big deal in Mumbai. That’s because Meta’s 15 cloud data centers, and long distance fiber, let it offer its services free to the developing world. Everyone else charges consumers even when, as in Google’s case, they don’t have to.
People keep talking about programs or business models but it’s simpler than that. Amazon is the landlord and Netflix is the tenant. Every streamer must cobble together a network of storage and fiber from assets that are owned by a Cloud Czar.
The weaker streamers, who came from outdated business eras, have it worst. Walmart is adding programming from Paramount Global to its “Walmart Prime” bundle, which is meant to compete with Amazon Prime. Prime brings Amazon about $21 billion/year. The AWS cloud brings in $61 billion.
It’s no contest. Walmart and Paramount together are worth about $400 billion. Meta, the weakest of the Czars, is worth $470 billion. Paramount, which owns the former CBS and Viacom, is worth $17 billion. Amazon is worth $1.42 trillion.
Please. Your inner arbitrageur is now saying that Walmart can merge with Meta. It could, in theory. But Zuckerberg would be in control. You think the Waltons could take that? The deal is possible only if Meta screws up much worse than it already has. Maybe after dropping another $40 billion down the metaverse rat hole and losing another $100 billion in market cap. Maybe if Zuckerberg decides he would rather own Maui. Even then it doesn’t.
He who has the gold makes the rules. The Cloud is gold in streaming. The Czars will rule. Bank on it.
