The media business, like any other industry, tends to loudly celebrate its victories and downplay its defeats. For any publicly traded company with shareholders’ interests in mind, that’s the way it should be.
But for every success like Comcast’s smart deal to buy and integrate NBCUniversal—which has benefitted both the content and distribution sides of Comcast’s business—there are deals like AOL buying Time Warner for $162 billion, only to watch the whole thing burst like a dot-com bubble.
It’s been almost 18 years since the AOL-Time Warner debacle, so that won’t show up on this list. But there are plenty more well-intentioned but no less disastrous deals and business moves that have occurred in the media industry over the past decade.
From ill-conceived product launches to imploding mergers and acquisitions, here is FierceCable’s list of the 10 worst media business moves of the past 10 years. We hope you enjoy and please let us know if we missed anything. —Ben | @fierce_video
10. News Corp sells MySpace for $35 million
Rupert Murdoch’s News Corp in 2005 made a good deal for MySpace, buying the social media platform for $580 million. Then it turned into a fantastic deal. In a few years, with help from gobs of Google ad money and a massive influx of users, MySpace’s value skyrocketed to $12 billion.
But then Facebook snatched the social media crown from MySpace and the resulting fallout from shrinking financials, planned staff reductions and Murdoch’s rumored willingness to sell, chewed up and spit out MySpace’s valuation. By the time Murdoch finally got around to accepting offers, the price was reportedly down to $100 million, which actually sounds nice compared to the $35 million he ended up getting for the once-venerable social media site. —Ben Munson
9. Viacom’s early Netflix streaming deals
Call Viacom “patient zero” in the OTT plague affecting the linear video business.
Ratings cratered dramatically in 2011 for one of Viacom’s perennially powerful cable networks, Nickelodeon, falling nearly 17%. At the time, befuddled Viacom CEO Philippe Dauman blamed the drop on Nielsen accounting errors.
But it became clear over time that Viacom’s aggressive licensing deals with Netflix were a big part of the problem. Nick’s youthful audience didn’t care if an episode of “SpongeBob SquarePants” was new or five seasons old. They just knew that they could binge-watch it on their mom’s iPad with no commercials.
Soon, the entire linear television industry caught the bug, particularly for repeat programming, with viewers flocking to SVOD platforms. The more the cable and broadcast networks tried to make up for the under-delivery of audience by packing in more commercials, the more the audience fled to the binge-minded safety of Netflix.
Today, the big traditional programming conglomerates are assuming a more defensive posture, with Disney eschewing content deals with Netflix and aiming to challenge the platform head-on. And this strategy can all be traced to Dauman and Viacom giving up the farm for what they thought was incremental coin on a trivial emerging platform a decade ago. —Dan Frankel
8. Yahoo picks up NBC’s canceled “Community”
In 2014, the National Broadcasting Company, which had carefully gauged the vitality of programming since the dawn of television around 60 years earlier, decided to pull the plug on a whimsical yet creatively marginal comedy about a mishmash group of community college students.
Under the ambitious leadership of former Google engineering go-getter Marissa Mayer, and anxious to build its brand into a destination for original video, Yahoo bypassed NBC’s decades of wisdom, paying the equivalent of private-school money to license season 6 of “Community.”
Created by Dan Harmon, the offbeat comedy charmed critics and carved out a loyal audience. But support from both groups had ebbed quite a bit by the time Yahoo opened its checkbook. Yahoo essentially ended up paying top dollar for a show that had, in a TV industry term parlance for aging series, jumped the shark.
In 2015, Yahoo CFO Ken Goldman conceded that the company took a $42 million charge on “Community,” along with two originals, “Sin City Saints” and “Other Space.” —DF
7. LeEco streaming service goes bust
LeEco founder Jia Yueting is closing out his 2017 by being blacklisted by China’s national debtors and labeled a “discredited person.” It’s the latest in a series of misfortunes that befell LeEco, which has made a number of costly mistakes in the past year, including abandoning a $2 billion deal to buy Vizio and dumping $150 million into Matt Damon vehicle “The Great Wall,” which only made $34 million at the U.S. box office.
LeEco also this year saw its U.S. streaming service, EcoPass, which arrived as part of the company’s lavish U.S. launch event, go up in smoke. LeEco corralled an impressive list of media companies—including Lionsgate, MGM, A&E, Showtime, Scripps, Hearst and more—to contribute content to its streaming service, which was going to be available on LeEco smartphones, TVs and connected cars.
But within months, the service was shuttered and rather unceremoniously replaced by three free months of DirecTV Now for customers who bought LeEco devices. —BM
6. Viacom splits from CBS
Viacom Chairman Sumner Redstone seemed confident in the decision to split Viacom, home to thriving cable networks MTV and Nickelodeon, from CBS, an old-fashioned broadcaster. While the split happened a little more than 10 years ago, the decision ended up sending Viacom on a path of misfortune that intensified in the past few years, as the cable ad sales wells began to dry up and legal dramas wrapped the media conglomerate in turmoil.
MoffettNathanson swore that the whole Viacom ordeal, which resulted in former CEO Philippe Dauman’s ouster in 2016 with a heck of a golden parachute, could have been avoided.
“In our view, the circus at Viacom was put into motion more than 10 years ago by the ill-fated move to separate CBS and Viacom,” the firm wrote. “The idea that the market was mistakenly valuing the old Viacom asset made zero sense to us at the time.”
While CBS has bounced back from the initial stock price fallout of the split and Viacom seems to be on the road to recovery, it’s possible the whole thing could have been avoided if they had just stayed together. —BM
5. Redbox and Verizon team for Netflix competitor Redbox Instant
In 2012, Redbox and Verizon announced they had cooked up a Netflix killer in the form of clunkily named Redbox Instant by Verizon. The companies were pouring in $450 million and Verizon was taking a majority 65% share. But like many of Verizon’s ventures into video, it did not have a happy ending.
As Variety pointed out, it was a shortfall of content and marketing that did in the service and, in 2014, Verizon and Redbox admitted defeat.
“The service is shutting down because it was not as successful as we hoped it would be,” the companies said. “We apologize for any inconvenience and we thank you for giving us the opportunity to entertain you.”
Redbox Instant wasn’t an awful idea per se: It combined streaming content and some rentals for a reasonable $6 per month. But it arrived just as Netflix was beginning to set the standard for original content with early hits like “House of Cards” and thusly, the service got lost in the shuffle. —BM
4. CBS and NBC pay $450 million each for Thursday Night Football
CBS chief executive Les Moonves has stridently insisted that NFL games are still the most valuable asset on television despite their recent across-the-board ratings drop, providing a priceless tune-in mechanism that drives viewership for the entire network schedule.
Let’s just say that CBS Corp. and Comcast/NBCUniversal pay through the chin strap for this asset. Last year, the two companies split a two-year, $900 million deal to each broadcast five Thursday Night Football games per season.
So when the Seattle Seahawks limped into the Arizona Cardinals’ University of Phoenix Stadium on Nov. 9 with NFL ratings down 5.7% across the board compared to a downer 2016 season, NBC wasn’t just paying $45 million to show a game featuring two tired teams trying to play a brutal game on just four days of rest.
NBC also had to share the game with the NFL Network, which shares NBC and CBS’ window for each of the 10 Thursday night games a season. Oh, and the NFL is also now selling digital streaming rights to these games to Amazon. —DF
3. NBA pays $500 million to get out of broadcast revenue-eating deal
When the NBA formed in 1976 by merging in part with the ABA, one of the two teams that didn’t get invited to the new league struck a unique deal. The Spirits of St. Louis took a smaller payout than the Kentucky Colonels, but Spirits owners Dan and Ozzie Silna negotiated a deal for a percentage of the NBA’s future broadcast revenues for the remaining ABA teams: the Denver Nuggets, Indiana Pacers, New Jersey Nets and San Antonio Spurs.
As the NBA grew in popularity, that deal became increasingly burdensome to the league, which ended up having to pay the Silnas about $750 million since the merger. That amount included a $500 million sum the Silnas secured in 2014. That payment put to rest a lawsuit from the Silnas seeking revenue share from NBA League Pass and international distribution deals, things that the NBA likely never envisioned back in 1976. —BM
2. Verizon launches Go90
People in the video business tend to talk about Go90, Verizon’s once-ballyhooed mobile video service, like it’s dead, even though executives and workers for the short form-focused, ad-supported service are still employed and trying to make it work.
“Go90 tried to tell us, ‘Watch this way,'” said Michele Edelman, executive VP of marketing and cloud strategy for Vubiquity, gesturing with her hands as if watching video on an imaginary smartphone. “But it didn’t take off.”
Edelman was speaking last month at the Streaming Media West conference in Huntington Beach, California, and made Go90 her example of why mobile video has limitations.
“Have you ever tried to watch a horror movie on a small screen?” She added. “It’s not scary. And screen size has something to do with that, for sure.”
Of course, Go90 isn’t finished. Verizon continues to tweak its executive team and its programming mix to make it work. But survival goals fall short of where Verizon’s lofty bar once stood when it plunked down several hundred million dollars for a 24.5% share of AwesomenessTV.
Go90 launched in September 2015 with great fanfare, a quarter-billion-dollar push by Verizon to become a trendy digital-video native, a la Netflix, capitalizing increasing mobile-video consumption habits of younger consumers and its newfound ad-tech capabilities, acquired when Verizon bought AOL.
But building an audience has been a slog from the beginning. You don’t hear about Verizon spending hundreds of millions of dollars on Go90 content anymore. And everyone seems to be still writing Go90’s epitaph.
“I surmise Go90 was a bust because it has too much short-form content,” Jim O’Neal, principal analyst for Ooyala, told FierceCable in October. —DF
1. Netflix tries to spin off DVD business
In its “Bad Decision Hall of Fame,” Huffington Post ranked Netflix’s 2011 decision to spin off its DVD business into a new unit called “Qwikster,” and raise prices to boot, as bad a call as “New Coke, Prohibition and that time Garth Brooks dyed his hair black and played rock music under the name Chris Gaines.”
Indeed, “better choices have been made at 24/7 Las Vegas chapels after too many Limoncello shots,” HuffPo added.
Netflix ended up losing, at least temporarily, 800,000 customers and saw its stock price plunge to unimaginable depths. Of course, with its market cap now exceeding most of the media companies it used to license content from, CEO Reed Hastings and the Los Gatos gang can look back and laugh a little.
But it wasn’t just like it was an idea that didn’t work. It was clearly a bad idea that didn’t work. Netflix was essentially asking a user base of 12 million customers—many of whom hadn’t worn out their last DVD player—to pay two different bills for two different services.
Who couldn’t see consumer backlash happening from that? —DF