(For Part I of this series on Netflix versus Crazy Rich Asians, click here.) If you can’t tell by my article last week, I had a lot of fun with my comparison between Netflix romantic comedies and Crazy Rich Asians. ...
(This is the third part of a multi-part series exploring one specific Netflix number. To read the other pieces:
Okay, enough skepticism. If we take the latest datecdote from Netflix, at face value, what can we learn from it?
Well, to start, let’s take a look at the history of “80 million” in Netflix releases…
What other evidence of “suspicious” numbers do you have?
In a future article, I’ll write about another “theme” of this website called, “Theme X: Be Skeptical”. Especially with competitors. Don’t give them the benefit of the doubt!
One of the corollaries to that theme relates to data. The corollary is, “Be wary of large, rounded numbers.” Data isn’t often rounded so evenly. This applies to scientific studies, political causes and other social phenomena. Oh, and entertainment success stories.
I’d add, if the same company keeps repeating the same big number that would be weird, right?
Netflix has this problem with their original movies, and I don’t think anyone has pointed this out yet. Researching the “80 million customer accounts” I naturally googled to try to find every news source uncritically repeating this datecdote. Imagine my surprise when the first occurrence of 80 million accounts wasn’t October in the Q3 shareholder report, but actually in June!
See, their “Summer of Love” romantic comedies weren’t the first time they had “80 million customers” watch something. For example…
– In June, Dana Feldman on Forbes also reported that 80 million customers had watched a “romance film” on the service. Rereading it, this looks like it includes both originals and licensed films. This came from a Netflix tweet.
Clearly there was some rounding going on. And for press releases or on information provided on background, Netflix is under no obligation to be precise. But let’s assume the numbers are close enough. If the baseline assumption is all Netflix movies combined get 80 million customers accounts involved, the “Summer of Love” films didn’t really boost viewership that much did they? Either for romance films or original films. Eighty million customers is just what big groups of movies promoted by Netflix tend to get.
But if I wanted to be skeptical, I mean, what are the odds that exactly 80 million customers watched an original in from January to June, which is the same number that over the previous year watched a “romance movie” and then, after two more months of Netflix rom-coms being released in the “Summer of Love”, they had all in 80 million customers watch an original romantic comedy? Is that crazy overlap, or three part coincidence?
What if we take all the recurring 80 million customers at face value? What can we learn from this number?
We can triangulate the floor for Netflix “Monthly Active Users”.
This is the biggest way that streaming video distributors, social platforms and subscriptions services in general try to game the narrative. A customer or user includes anyone who “samples” a subscription. So you order from Blue Apron, or start a Hulu free trial, or sign up for SnapChat. Those are all users or customers.
But Monthly Active Users (MAUs) is a much better approximation of who is actually using your service regularly. (Or weekly or daily active users, which are even smaller time periods.) That means actual people you can monetize through ads or monthly billing. With Netflix, we have no clue what their monthly or weekly active users are. Most social platforms include this in their SEC filings. Netflix does not—it isn’t a social platform—and instead focuses on “subscribers”.
(For Part I of this series on Netflix versus Crazy Rich Asians, click here.)
If you can’t tell by my article last week, I had a lot of fun with my comparison between Netflix romantic comedies and Crazy Rich Asians. Unfortunately, I had a lot of ideas for that article that hit the cutting room floor.
Some because they were too speculative, some to save room, and some to make a tighter narrative. (I had tried a long shot publication at a bigger outlet.) And some because I couldn’t prove them. So for a respected publication, it didn’t make sense.
But this is my website. I’m free to make all the speculation and ask all the tough questions I want to here. Since Netflix only provided me one number—80 million customer accounts watched an original romantic comedy the last summer—well, I want to ask that number a lot of questions. I want to interrogate that number to within an inch of its life. So that’s what I’m doing today. Asking—and answering—all the other questions inspired by this comparison.
What other “circumstantial” evidence did you leave out?
A few pieces, but one major one. Essentially, the major studios stopped making romantic comedies for two reasons. First, they don’t have a high enough “ceiling” in that they don’t ever tend to have billion dollar movies. Second, and crucial for our math, is that they also don’t tend to perform well overseas. This applies generally to all comedies. Comedy is a local phenomena so it’s rare for comedy films to do well overseas unless they are very, very broad. (Some of the broad sitcoms like The Big Bang Theory or Simpsons do travel. Others, I’ve heard, don’t.)
We’re seeing this right now. Aquaman is the number one movie in the world…and it didn’t open in America. Crazy Rich Asians, meanwhile, flopped in China. To show this effect, here’s some data. For my series on Disney’s Lucasfilm acquisition, I made a data set of 50 “franchise” movies. These provide a good set of comps for comic book movies and their ilk. As you can see, franchises now see 63% of the total box office come from overseas (and even this still includes a lot of old Star Wars and Indiana Jones data.)
Now compare that to romantic comedies. I don’t have as large a list, so I pulled some sample romantic comedies. The trend is clear…
Four recent romantic comedies that did “well”, had over 70% of their box office come from the US market. Crazy Rich Asians, notably, only had 22% of its total box office come from overseas. Compare that to massive blockbusters like Avengers or Pacific Rim, where over 66% or 75% of their box office came from overseas.
This has implications for Netflix. Mainly, three facts collide that can’t all be true simultaneously:
– Netflix had 80 million customer accounts watch an original romantic comedy last summer.
– There are 60 million US customer accounts. (Rounded up slightly.)
– US romantic comedies tend to have 60-40 splits in US to international viewing, sometimes as high as 70-30.
This puts us in an awkward place when it comes to the Netflix number. Based off Crazy Rich Asians and other romantic comedies, I could easily assume 60% of the viewership was US based. That leads to some really tricky “consultant math”. Go with me on these assumptions:
– Assume 60% to 40% domestic to foreign split on Netflix romantic comedies
– Assume 1.4 “viewers” for every Netflix customer account.
– Black Panther sold 76 million tickets in the United States.
– Assume 15% rewatch rate for Black Panther.
Here’s those assumptions, now it table form:
Now, even worse than Netflix claiming it beat Crazy Rich Asians, if we take some conservative assumptions, more people watched a Netflix romantic comedy than the biggest movie in the US last year (Black Panther). Do you honestly believe that?
I should call this a round up of the last two weeks. Even though I got my column out on time last week, I had a lot of spill over ideas. So many stories that they bled into this week’s edition. (Which is late again.) Business-wise, the entertainment press had two stories dominate the news in the week of December 7th, one which matters and one which doesn’t. But first, our holdover article, with a key lesson.
The Most Important Story of the Week – Youtube Kills Original Programming
Or did they?
That’s a deliberately provocative headline not quite captured by, you know, the truth. But clicks, am I right?
In reality, Youtube is quietly pulling back from original programming. Or shifting their strategy to premiere originals on their ad-supported platform (just Youtube) instead of their subscription service. Along with this move will come a likely decrease in their overall spend and spend per show.
I don’t want to go overboard here. Like saying something like, “See all original programming is bad.” That sounds just silly on its face. Obviously, HBO was built by original programming. Actually, every broadcast channel was built by original programming. AMC and USA Network took leaps in popularity by leveraging original programming people liked. Netflix captured a lot of new subscribers with House of Cards.
But I do want to push back on what I see as the implicit assumption that “original programming = success”. Just making your own shows doesn’t give you a competitive advantage per se. It isn’t a panacea to all the problems ailing your business. This is another example of executives not being creative, but simply asking, “Well, what are they doing?”
That’s why I think economically-minded companies, like Youtube presumably, may pull back on original programming if it doesn’t work right away. Maybe they do have a flashy hit–like Cobra Kai–but the costs for that and the 10 to 12 other series may not cover their bills. In that case, you pivot away from original content. I’ve been bullish on Youtube for awhile, and I think the more they focus on Youtube and YoutubeTV, the better and more coherent their offering.
If you read Stratechery, you’ve seen Ben Thompson has his “aggregator theory” that I love. My only quibble is I’ve never understood why he applies this to Netflix as opposed to Youtube. (He actually does both.) Netflix is specifically not trying to aggregate it all, but Youtube is. If you have it all, you don’t need “just a little bit more”. You’ll get it eventually. And that shows why Youtube probably doesn’t need original programming.
Long Read of the Week – Youtube and The Pressure to Publish
While I’m on the Youtube train, I want to call out this article on Variety by Todd Spangler that has been sitting in my “to read” list for a while. I don’t have a ton of insight except that Youtube has problems that seem unique to it in the video world. Netflix is going to compete very traditionally with the big studio players by making big shows and streaming them. It’s just a different channel.
Youtube has to deal with, basically, it’s algorithm. The algorithm pushes people to extreme content. Or it burns out creators. Or it caters to children. Or it is addictive. It’s a fundamentally different problem that is both easier (fixing algorithms is easier than dealing with people) and harder (it cuts directly into revenue) to solve.
Other Contenders for Most Important Story – Technical Difficulties in PPV/Tiger and Phil Match
For those who don’t know, AT&T announced a giant pay per view golf match between Tiger Woods and Phil Mickelson. Since AT&T now owns Bleacher Report, they had the genius idea to have an option to purchase the event on BR too. Of course, the BR website crashed, so they offered it for free to customers, which bugged anyone who paid for it. So refunds were issued.
These refunds won’t bankrupt AT&T, and it looks like they’ll plow ahead with future PPVs in golf. Also, I don’t think this story portend some huge change for how we consume video content. So why was it almost the most important story of the week?
Because it provides such a great lesson on the relationship between “content” and “product”.
The lesson is one I’ve hit on a handful of times but will really emphasize going forward: product matters. Yes, content is king, but your product is right there. If the process to watch content is maddeningly difficult, then customer will find other ways or not watch. Content is king, but product may be the Queen. Or at least a rook.
Other Contender – Netflix keeps friends for $80 or $100 million, non-exclusively
The romantic comedy is dead. The highest grossing romantic comedy this year is Crazy Rich Asians, which at $174 million in domestic box office pales in comparison to behemoths like Black Panther ($700 million domestic box office), Avengers: Infinity Wars ($678 million), Incredibles 2 ($608 million) and Jurassica World: Fallen Kingdom ($416 million). Who shall return the romantic comedy to glory?
Netflix. Because of course Netflix.
This summer, Netflix released a series of romantic comedies it dubbed, “the summer of love”. In a letter to shareholders, Netflix celebrated their success. Here’s Vox writing about a particular fact Netflix provided:
This summer, Netflix invested in resurrecting the mid-budget romantic comedy, acquiring movies like Set It Up and To All the Boys I’ve Loved Before for what the streaming service branded as its “Summer of Love.” And now, it’s looking like the gamble paid off: Variety reports that more than 80 million subscribers watched one of the 11 rom-coms on the Summer of Love slate, according to Netflix’s quarterly earnings report.
Vox wasn’t alone in singing Netflix’s praises. They were joined by Variety, Screen Rant, The Ringer and others to write an article on Netflix’ new found success in romantic comedy. All using one “datecdote”, a term I coined yesterday.
In our hurry to constantly keep up with the news, we let little tidbits like Netflix’s above fact wash over us and move on to the next story. So let’s pause and reflect on the fact Netflix revealed. Does this fact seem true? Since Netflix didn’t provide a comparison, I will:
Did more people around the globe watch Crazy Rich Asians or a Netflix Romantic Comedy last summer?
It’s a tough question, isn’t it? If you answer that more people saw a Netflix romantic comedy, then why did the media spend so much time on the phenomena of Crazy Rich Asians? But if you think more people saw Crazy Rich Asians, then how can Netflix numbers possibly be true?
Streaming video companies, like Netflix, have a lot of data, a lot of ways they can manipulate that data, and, most crucially, a lot of data they just don’t give the press. But we can learn a lot about how movies are distributed and judged in today’s media landscape by trying to answer that tough question with the data and facts we do have.
So let’s do our best to get some answers.
How Many People Watched a Netflix Romantic Comedy?
On the surface, this is fairly straight forward. Netflix in their letter to shareholders—a document submitted to the SEC, so a legally-binding, carefully vetted document—used this phrase:
More than 80 million accounts have watched one or more of the Summer of Love films globally.
Netflix chose two words very carefully in the above sentence. First is “accounts”. Not “profiles” or “viewers” but accounts, since this is the only unit of measurement Netflix knows for sure. They know that because they have one account per credit card. I’ve seen this called “users” or “customers” at other companies.
By definition, this is the floor for the actual number of people who watched a romantic comedy on Netflix. If two people watched a film together, well they still only count as one “account”. If two different profiles under the same account watched, they would still probably count as one. (It’s unclear.) If someone shares their password with someone else, but they use the same profile, that still counts as one view.
If account is a precise definition, “watched” is a term so loose that it could mean anything. For instance, Netflix could count as “watched”, a person who only watches ten minutes of a film and turns it off. They could only count as “watched” people who watch greater than 80% of a film, either by run time or who watched past the 80% point in the film. We just don’t know.
What we don’t know dwarfs what we little we do know. We don’t know how many total hours of romantic comedies were viewed. (Netflix, interestingly, loves to cite this number to describe how popular their platform is, but choose not to provide that fact here. For example, they released earlier this year that they had 350 million hours viewed in one day in January.) We don’t know where people watched—this is a “global” number—or even when. While presumably over the summer, it likely wasn’t a hard three month window.
How Many People Watched Crazy Rich Asians?
Here are some fun stats. What do they tell us?
– Netflix over the summer had 80 million customer accounts watch one of their Netflix Original Romantic Comedies.
– Amazon Prime/Video/Studios had 14.7 million total customers watch an NFL Thursday Night football game.
– Snapchat had over 10 million viewers watch a Snapchat Original show this year.
At first blush, that’s a lot of data. And it’s big! You know, in terms of size, in that 80 million sure is a lot of people.
But let’s count the actual numbers released. One. Two. Three. Four.
Four numbers is not “big data”, in the data science sense. Data doesn’t get “big” until you reach the hundreds of thousands of data points. In fact, some data scientists would say data doesn’t really get big until you have millions of data points with many, many categorical variables.
Alas, as we ponder the bare handful of data points above, if we really pause to think on them, we understand how little we’re being told. Take the journalism “Five W’s”, who, what, when, where and why. Most data can’t tell us the why—it’s implied—but in streaming video it can tell us the other four.
When streaming video companies release single data points, they usually only give us two of the five W’s. First, they give us the “who”—customer accounts, customers or monthly active users. And they give us the “where” in the broadest sense possible in that they give us the “global numbers”. But crucially they always omit the “what”. How many minutes were viewed per person? The “when” is also usually implied, but not explicitly stated, usually so that the numbers are as large as possible. In the case of The Christmas Chronicles, they gave us the “what”, but left out the why.
As a result, usually we can learn very little as competitors, observers or investors from these nuggets. A contrarian might say, look here, Entertainment Strategy Guy, you said in this very early article that you LOVE data. At least these companies are providing us some data.
Well, I’ll dust off a great quote from statistics to counter that,
“The plural of anecdotes is not data.”
Netflix, Amazon and Snapchat—who are just the three companies I’m picking on today, Twitter, Facebook, Twitch, Hulu and Youtube do this too—aren’t providing data, they’re giving us anecdotes. Selectively curated data-based anecdotes in the hopes—that are almost always granted—that unsuspecting and unquestioning news outlets will repeat to boost their perception among customers, Wall Street and competitors.
And we always fall for it.
See, the companies above aren’t choosing between one or two data points. Or even a couple of dozen. These companies are literally choosing between millions of potential data points, which make these numbers some of the most selective anecdotes you could possibly come across.
The analogy (and yes it is in the title) is the old saw about the iceberg. 10% of the ice floats above the sea, with an even larger 90% below the water. This is how it feels when a streaming company drops their knowledge on us.
With streaming video, the numbers are even more extreme. They have millions of customers watching tens of thousands of videos with at least a dozen or more categorical variables per interaction. We’re talking thousands of potential ways to meaningfully slice the data, and the companies pick one or two per quarter. Again, the plural of anecdotes isn’t data.
The line is so close to the top of the iceberg, it may as well not even be touching it. That’s how much data we don’t have access to.
I have a new name for this. Even if you have a data point, that still isn’t “data”. It’s an anecdote. It’s a “datecdote”, an anecdote of data. Interesting, but not enough to base decisions off of.
Netflix, we’ve been told, isn’t an entertainment company, they’re a product company that leverages huge amounts of data to deliver us our entertainment. Maybe that’s true, for internal work. But when it comes to PR? Netflix isn’t a data company. They’re an anecdote company. They’re a datecdote company.
I’ve spent a lot of the last week polishing an article digging deep into the second most recent Netflix datecdote. My main conclusion is that at conferences or on investor calls or when choosing to publish press releases, as journalists we need to push back. We need at least the five W’s, and we need at least comparisons to put these datecdotes in context. Without those, and this is controversial, we just shouldn’t publish their number. I’m realistic enough to know this won’t happen, but we’d know a lot more if we did.
This week was a battle for the most important story between three related streaming stories. Who won? Well, Netflix, but not for the story you think.
Most Important Story – The First Netflix Original on Linear Broadcast
To steal from my own Twitter feed, Netflix is lauded as THE truly innovative company in entertainment. I read this all the time. And when they launched (ten years ago!) they really did change a lot of things: tons of episodes to watch on demand. All episodes released at once. Thousands of shows with scrolling. Recommendation algorithms. That really was a change in how the model worked.
Since then? Well, they’ve taken a lot of hard line stances:
– Never releasing originals in a week-to-week format.
– Never introducing live streams of shows.
– Never doing sports programming.
– Never releasing movies in theatrical windows.
– Never releasing original programming on linear or other platforms.
That’s a lot of “nevers” for a company that’s trying to be innovative. (In my head, I want to write a satirical HBR article called, “Innovation comes from Never”.) But it looks like the last two points may change, just very gradually. And not by Netflix’ choosing.
You probably missed this, but starting on this week, Bojack Horseman, the critically-acclaimed (?) Netflix original animated series is now airing on Comedy Central. The short explanation is that the distributor and production company retained linear rights after a hold back window for Netflix. So they sold it to the highest bidder.
Personally, I don’t mind this for Netflix. They don’t have a say either way, but they should really how premieres of existing shows off network help boost the ratings. Let me provide a personal anecdote to explain. I’ve wanted to watch The Magicians for a while now, but don’t currently have a Netflix subscription (we just weren’t using it). As a result, I never went over there to catch up on the previous seasons. So as each new season is released, I never bothered to catch up becuase Syfy never did a marathon of previous episodes to let me catch up.
But, for some reason, reruns of the season 1 recently appeared back on Syfy’s linear broadcast. Now my wife and I are debating turning Netflix on just for that show. (Or apparently the Syfy Now app has those episodes. We’ll see.) As a result, I may watch season 4 next season if I can catch up in time.
The point is that allowing sampling for bingeable shows will push people back to whoever has the most episodes. If you don’t have Netflix, then Bojack Horseman is dead to you…but for the people who just watch Comedy Central, they may get hooked and join. I’m sure there are other examples of streaming shows appearing on other platforms. I know HBO has put some of their very library shows into broadcast, and maybe some other Netflix originals appeared in other countries in different platforms. Either way, I’d say this is an experiment worth taking. Good luck Netflix, even if you didn’t want this.
Other Contenders for Most Important Story – WarnerMedia will have three tiers
I’m tempted to start this sub-section by blasting Warner Media and being as snarky as I can. It’s easy to make fun of them because they are doing something different, and different is easy to mock. The blink reaction I had was, “You’re going to try to go up against Netflix with three different, confusing price tiers? Really?”
Let me paint a nightmare scenario:
“Evil corporations realize they have extremely valuable intellectual property. Famous characters like Superman, Batman, and most of all, Mickey Mouse. These corporations employ armies of lawyers and lobbyists and they get to work on Congress. They extend the copyright on all works indefinitely. This means potentially millions or tens of millions of works that could enter the public domain…never do.
Now imagine the other side:
“Mickey Mouse enters the public domain. There is a flood of Disney merchandise on the market. Evil companies have him start doing pornography. Disney loses billions in market capitalization.
Mickey Mouse dies.”
Scary stuff, right? It’s a classic dilemma. Either we radically improve copyright law and free creativity and Mickey does pornography—what the Electronic Frontier Foundation wants—or we keep the status quo forever and creativity is permanently stifled—what The Walt Disney Company wants.
If I haven’t written it before, I hate dilemmas. Not the idea of having to choose between two bad options, but the concept of dilemmas. Usually “either or” ethical scenarios are the stuff of lazy polemicists. They force someone’s opinion on you by making it seem inevitable.
The above two scenarios do that perfectly. Nightmare scenario one is corporations run amok, ruining creativity for the rest of us. Nightmare scenario two feels better to me, but is still pretty yucky. I don’t want Mickey Mouse in pornography either.
Neither side will win. Again, the “free the content” folks—who I’ve mostly heard on On The Media or read in blogs—have great points about creativity. But being an absolutist on this issue will just drive them into the brick wall of giant corporations with billions on the line. They will NOT give up without a fight. As a result, the corporations have taken the hardest of hard lines. As a result…
Copyright protection dates back to 1923.
To quote TV pitch men, there has to be a better way.
Think about that, for 150 years of American history, copyright extended for a creators live, then it absolutely froze at an arbitrary date that happens to protect Mickey Mouse and Winnie the Pooh. As long as that is the case, we can’t push the copyright law forward in time. Disney won’t let us.
The key to break through the logjam is to understand the true losers. One of my themes of this website will be “understand the economic incentives.” Most problems are clarified, if not solved, when you do this. So while there could be lots of winners by improving copyright, there are some clear losers who will fight this tooth and nail. The studios like Disney, Warner Bros. and others could hemorrhage billions in market capitalization.
So what we need a compromise. We need to realize that the two positions staked out currently in the debate are NOT the only two positions we could have. We could craft a proposal that will free millions of creative works from copyright jail, while allowing Disney and the studios to keep control of their IP, and we can do it for free. In fact, we’ll make some money on it. So here it, trying to get it to fit onto a post card to make Paul Ryan happy: