Two weeks ago, we had a topic that demanded immediate attention. Last week, we could leisurely stroll through video game data. This week we can both react to news and gaze at the future of home entertainment. That, plus a rant on bad data, a VERY long read of the week and more in this week’s column.
Most Important Story of the Week – Goodbye Ultraviolet, Hello Movies Anywhere
Here’s a true story about my experience with the “Movies Anywhere” app. I had bought The Muppets Christmas Carol on iTunes because I couldn’t find it on streaming or on linear TV. Then when I went to send it to my Google Chromecast…oh, it turns out Apple doesn’t support that functionality. (Here come the device wars!)
A friend who was over recommended the Movies Anywhere app. That does broadcast to Chromecast and soon we had the Muppets and Michael Caine in our living room, celebrating the holidays. (Yes, we were distracting a toddler while we played board games.)
But I’ll admit it: when I first looked at the Movies Anywhere application, I would have bet anything this was a fake application designed to hack into my iPad and sell all my data to Ukrainian troll farms.
Well, I learned this week, it used to be called, “Disney’s Movies Anywhere”. This is a Disney app! Run by Disney! I trust Disney. So all is good.
That’s a branding point, though. I work in entertainment, but with the deluge of new applications and services–how many FASTs are there just in this last year? How many digital titans allow you to buy movies? How many ways can you stream music?–I missed that Disney had launched a home entertainment application. And looking at the application, I didn’t really trust it. (Even though that application is tied in with four other studios and the big digital players like Apple, Google, Vudu and Amazon.)
(I shouldn’t feel too bad, though. With only 6 million accounts, that’s the equivalent of 2% of the US population. Not many of us are using it. Oh, and that’s if the 6 million accounts are US only, not global. Please journalists, always clarify global versus US numbers.)
That new Disney app, though, is responsible for the news of the week, that UltraViolet, an industry collaboration to build digital storage for owning movies, is shutting down. I want to draw some lessons from this week. (UltraViolet was buzzy when I was in b-school, too.) Lessons about how “owning” things still fits in the entertainment ecosystem. (If you want to learn more about Ultraviolet shutting down, Janko Roettgers has it covered.)
Value Proposition 1: Customers still want to own things.
That’s blunt. But given that I read a lot of techno-futurists promising that 2018 foretold of a future where buying things is obsolete, it is worth repeating. People will always want to own things. Especially things they love. I imagine some future “all subscription world” where the subscription folks try to take a child’s favorite teddy bear. That’s as silly as a world of common ownership of the means of production.
Of all the things they buy, people love entertainment the most. People define themselves by what they watch, and they don’t just “like” what they watch, they love it. They love what they listen, too. So, inevitably there is a desire to not just watch it once, but to own it forever. That’s the pitch of the Disney vault back in the day: buy it now and you’ll own a treasure for the rest of your life.
Which isn’t to say that the balance between owning, renting and “free” (with advertising) won’t change over time. Subscriptions are on their way up. Owning on its way down. But people still want to own things. If people want something, you can make money off it.
Value Proposition 2: Forever doesn’t mean forever.
For adults of my age, The Little Mermaid started a trend of “must own” VHS for households. This VHS was the first of a run of incredible Disney animation (going through Beauty and the Beast, Aladdin and The Lion King). There was a thought, if you buy these, well you got them forever. You owned this classic film. That’s how I felt at the time.
Then DVDs came along. So we upgraded. The picture was clearer and didn’t get fuzzy over time. If you had kids, you bought a new Little Mermaids DVD. Or, in my case, I bought new Star Wars DVDs. Then Blu-rays tried to replace those. Then digital tried to replace those. (The same process happened in music with vinyl to tape to CD to mp3, and iTunes/Amazon/Google each with separate platforms.)
In other words, even when we “own” things, it turns out these aren’t antiques we can store and have appreciate in value. So as much as we want to own things, forever doesn’t mean forever.
Value Proposition 3: Who do we trust in the future?
The pace of replacement technologies is, if anything, accelerating. Even if we believe Google, Amazon and Apple will survive for decades, will their services survive for as long? Google habitually shuts down under-performing applications and websites. I’ve always wondered what would happen if Apple spontaneously shut down iTunes. (And is that outrageous? If subscriptions services take off, it’s not impossible.)
This finally brings us back to UltraViolet. As it gets shut down, the 30 million customers who put their trust in it–despite their worries probably–were proven wrong. Everyone else who never trusted it are vindicated. And now as you look at Movies Anywhere–and surely other applications to come along like it, or any of the Apple/Amazon/Goolge electronic sell through merchants–you have to wonder, if I go all in on this, what will happen in five or ten years, if technology changes? Maybe we’ll all transfer our digital files to WeChat once it enters America and takes over.
So what is the future?
I love the TVRev feature to summarize, “What does this mean for you?” in their weekly column and I wish I could do that for “electronic ownership” but I can’t. Customers want to own things, but kind of know they can’t, and therefore the trust is broken. This process may be accelerating.
Honestly, I don’t know how to solve this problem. For example, maybe Disney can integrate selling into its streaming? But won’t that be confusing and possibly misleading, like Amazon’s offering? See it’s complicated. If I had any advice, I’d say, start with the customers and what they want. If you know that, you can offer a great product (and make money off it).
Data of the Week – Cord Cutting Surveys and Debunking from TVRev
Normally, I don’t put the data stories this high up, but this week’s “data” of the week was a survey so poor and awful, and so widely repeated despite this, that it belongs up here.
I’ve had a joke with my friends that the great thing about football this season is that the “Dr. Pepper guy” is no longer a thing. I also have said I love the Progressive commercial that spoofs those annoying GM commercials which keep tricking civilians. You know which ads I’m talking about?
Of course, I never watch ads. No sir. I DVR all my shows and fast forward through all ads. Even live sports.
But wait, how did I know about those Dr. Pepper commercials if I never watch ads? I don’t get it. Where is this knowledge coming from?
Well, it turns out the “me” that thinks I don’t watch ads is really uninformed about how many ads I actually watch. It turns out humans are terrible at describing our own behavior and predicting our future behavior. (And I can hear you out there saying, “Well I didn’t know what ads you were talking about. Maybe I am good about it.” Just stop.)
The worst current example may be surveys about cord cutting and streaming services. Essentially, a survey company asks consumers, “Are you a cord cutter?” and takes the answer and writes a report which treats it as gospel. This report is then widely shared by news outlets. I’ve been sitting on this great article by Alan Wolk on TV Rev that addresses exactly how it happens. (I was waiting for a slow news week to share.) In his part one, Wolk identifies some of the deficits surveys have regarding cord cutting: they ask for opinions, not actual behavior and in some cases, their sample size is biased in favor of cord cutting. Wolk also points out that switching to a vMVPD isn’t really cutting the cord, but cord-shifting, which shows how tricky definitions are.
But this week everything went to eleven. Another survey emerged with an even larger number, “60% of Americans have already cut the cord.” This is frankly ridiculously large, and not supported by the data. In his “Part Two” update, Wolk identified an SEO marketer behind the campaign, that was used to boost a consultancies page ranks. And many media outlets fell for it. Unfortunately, many news outlets reported it without ever fact checking the basic details.
I have simple advice when it comes to surveys: Ask “what is the sample size is?” Ask “Is the sample is biased?” Ask, “what is the confidence in the segmentation?” And finally ask, “What is the motivation of the people behind it?” I should write this up in an article, but for now, keep those questions in mind for any survey you read.
ICYMI – My Articles from The Last Week
I made dozens of charts and tables to evaluate the Oscars and a question which seems simple, “How popular are these films?” but is surprisingly tricky to answer. Already, I’ve been planning my update post for after the TV ratings come in. (I need to update some data in my initial August post as I had some years misaligned, and it actually reinforces the thesis that popular films equal popular awards show.) I also conclude with my pitch to the Academy: add a selection committee.
Netflix made a lot of news two weeks ago with its earnings report. I dug into some of the numbers to try to forecast the key number we’re all hinting at, Netflix subscriber growth.
Meanwhile, I’m working on my series on the Disney purchase of Lucasfilm and I am hoping to have it up next week, with possibly my first entertainment articles in other outlets. Stay tuned.
Other Contenders For Most Important Story of the Week
Sundance wasn’t so bad!
It seems like the initial predictions that this wouldn’t be a big market were proven wrong. Even some of the articles speculating that new streamers (like Apple) would help boost the market weren’t correct. Instead, Amazon spent big again ($41 million on three films). So the new boss there seems to be aping at least some of the old boss’s strategy. HBO bought some projects, like always. New Line had an eight figure deal. And Hulu had a bunch of other deals. I didn’t see any Apple or Disney deals, unless Hulu counts. Meanwhile, the psuedo-independents spent small seven figures like usual.
DirecTV Now Loses Subscribers
AT&T faced another bad earnings report as DirecTV Now, one of AT&T’s dozens of different streaming options, lost subscribers in the last quarter. Like 11% of subscribers. This was obviously “suboptimal” to use my favorite euphemism. Likely many of the subscribers were on very cheap deals and only went to DirecTV now to get off the phone with a rep while they tried to cancel their satellite service. And AT&T ran promotions to lower the price. So AT&T pitched this as returning to profitability with customers.
The main lesson is about the seductive pull of price discounts. Once you start playing with the price, customers begin to expect that, and when you try to normalize, they drop out. This should be a lesson to other digital players. Oh, there is also probably a lesson with AT&T that “M&A isn’t strategy” but we’ll save that for a future article.
(Very) Long Read of the Year – The Economist World in 2019
One of my annual traditions is to read two Economist issues every year, whether or not I have a subscription. The first is the Holiday Double Issue, that features bonus articles on a range of topics not usually covered by the Economist. The second is The World in 2019. If you want a good view of the forces that will be impacting lives across the globe, this latter issue is THE issue to read. I’d argue the value in forcing yourself to read it from cover to cover, as I did over the last four weeks, will provide more value than ten times as much time on Twitter. This will build both your “deep work” reading skills and provide a much broader view of global trends. This year was light on media & entertainment, but still great.
(Also, the Steven Pinker article is probably the best guest column as it refutes a lot of commonly held assumptions.)
(Shorter) Long Read of the Week – Why Law and Order Isn’t Streaming by Joe Adalian
Joe Adalian of Vulture went to solve the mystery of why Law and Order isn’t streaming. The culprit ended up being right in front of us the entire time, but I recommend going to Vulture to read the whole thing. This is an excellent example of understanding and explaining the business economics, so take a read.