The Office Is Leaving Netflix

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A “Most Important” column on a Thursday? What’s going on with the Entertainment Strategy Guy’s usual Friday column? Well, an out of town wedding, which means I’ll be on the road tomorrow. So enjoy an early bite at the entertainment biz apple. 

Also, next week, with a birthday, Fourth of July, and some household projects lined up, posting will be light again. However, I have a lot of fun ideas planned for July, so keep checking in.

Most Important Story of the Week – The Office Is Leaving Netflix (in 2021)

Imagine that you have a favorite restaurant. A fancy small plates restaurant with a named chef. The first time you go, the meal is incredible. Almost all the dishes are delicious. (The service is impeccable too.) And for how much food you get, well, the price isn’t too bad!

Naturally, this becomes a restaurant you visit often.

Fast forward a bit. A year or two later. The small plate place has changed its entire menu. It’s a bit more adventurous. You try a few plates, and well this time there are a few dishes that are misses. Meanwhile, your old favorites are gone. (The service is still impeccable.) Do the portions seem a bit smaller? Man, this bill is kinda pricey for what we got.

Naturally, you don’t go as often anymore. 

Since this is a business strategy site, let’s take the above two scenarios and put them in terms of the old quality drivers: the product–in this case the food–isn’t quite as good. Though part of the product–the service–is the same. Meanwhile, the price for the food (both in terms of quantity delivered and quality of dish) is much lower. Hence, you don’t go as often because it isn’t as valuable.

You see the Netflix analogy, right?

One part of Netflix’s product is just fine: the user experience. They’re way out in front of everyone else in streaming. But the prices are going up, starting in the US and expanding to the EU. These prices are going up right as the quality of the product (in terms of both size of offering and quality of individual titles) is about to potentially fall off a cliff facing. Starting about two years ago–and continuing for the next half decade or so–Netflix has lost or will lose theatrical movies from Disney and Universal, new shows from The CW, library TV content from Disney, Fox, and others (including The Office which was widely speculated about online) and more.

Let’s not pretend that losing thousands of hours of the most valuable content is nothing. You can’t lower quality while raising prices and say, “This will have no impact.” Signs are Friends and The Office are Netflix’s most valuable TV series in terms of hours viewed; I continue to believe that Disney has the most popular movies being made because…they do. (See box office.) Moreover, the biggest shows and movies aren’t just bigger by a little bit–long time readers know where I’m going with this–they are MULTIPLES more important. (Article explaining that here.)

As we move into the next wave of the streaming wars, the value of a content library will be increasingly important in separating the services. Consider this (hypothetical) situation with (made up) numbers. Netflix has a service that most customers value at a “5”. Disney offers a service most customers value at a “4”. But Netflix costs twice as much as Disney’s service…so how many keep both? How many cut the cord for Disney? What if HBO ends up with a service customers (hypothetically again) value at an “8”, but it costs even more than Netflix? What if NBC and Hulu are free…but have better content valued at “3”?

I don’t know! That’s a complex equation with too many variables to compute. Then we’ll have to repeat the exercise country by country around the world. But whereas we know one key piece in that equation absolutely—price per month isn’t a secret—we’re left guessing on how much less valuable the Netflix library will be after The Office, Friends and Disney movies (after Dreamworks movies, Fox TV series and others have already left) depart the platform. So will this hurt Netflix? Yes. How much? It remains to be seen.

(Here is where I wish I could link to my article explaining how to value content libraries (versus series, which I did here), and my take on which service has the most valuable content library. But, um, I haven’t written those yet. Yes, I’m on it. I’ll do what I can.)

Other Contenders

Kanopy Dropped by New York City Public Libraries

I don’t live in New York, so I had never heard of this streaming service before it popped in my Twitter feed about a dozen times this week. Kanopy has an interesting business model where it charges libraries up front for access for their patrons to documentaries, independent/foreign films and some library films, which it pays per view to content owners. However, it raised prices for New York Public Libraries, and NYPL had to drop it. My initial take is that older movies seem to be a missing piece in the streaming landscape–and because of rights issues their costs are too high–but of course the best solution is to just fix our outdated copyright system. As for independent films, they seem to be the prestige football that every new streaming service buys the rights to, then realizes they aren’t nearly as valuable as the prestige suggests.

Slack IPOed, but does Slack work?

Slack is much more tech than entertainment. So normally, it wouldn’t make this column. (Like how I ignored a lot of famous IPOs recently.) But Slack is penetrating entertainment companies like email did before it. But does it work? Count me in the skeptical camp. Sure, it lowers email usage, but does it decrease overall communication? Or increase deep work? I doubt it. (Here’s the article from Vox that inspired me to include it by Rani Molla, and it doesn’t surprise me that the data journalist is the most skpetical of Slack.)

Lots of News with No News – Ann Sarnoff is the New Warner Bros Head

This seems like heresy. Warner Bros–the iconic studio that has been around for decades–has a new boss and I don’t have the decency to call that “news”?

I mean, yeah? Listen, if this were the head of the company, that’s news. But if I told you Andrew Jassy had a new head of sales, would that be major news? (Jassy is the head of Amazon Web Services.) Probably not: she would be two people removed from Jeff Bezos. Well, that’s the case with Warner Bros now. It’s not like Sarnoff is even reporting to the head of the company. She’s reporting to the guy who reports to the head of AT&T. 

Which has sort of been the trend. The head of Universal reports to someone who reports to the head of Comcast. If Viacom gets a new owner, this could happen to Paramount to. At Disney, Alan Horn does report to Bob Iger, but he’s one piece of a huge Disney conglomerate now. The point is the head of the “movie studio” is no longer the be all, end all of the studios. (And I am loathe to judge hires because we just know so little.)

Entertainment Strategy Guy Update – Oh the Pac-12 News

Lots of Pac-12 news over recent weeks, especially about my favorite topic, whether or not the Pac-12 should sell to a strategic partner, which I wrote about here. (They shouldn’t.) First, the Sports Business Journal reports that the Pac-12 feels very good about the bids they’ve gotten. Later interviews and reports clarified that this likely means they’ve gotten bids for $750 million, but at a $5 billion valuation, and likely the investors will insist on some control. Which is okay with the Pac-12, since they’ve emphasized via leaks they want a “strategic” partner who can aid in growth. 

The website John Wall Street had good coverage too. They brought up the issue of whether the Pac-12 will stay together after 2023–I can’t see UCLA leaving, but USC maybe–and this issue has become more salient since UConn decamped from the AAC for the Big East and then there were rumors that UCLA would join…the ACC? The other interesting nugget from John Wall Street is that the Raine Group sees Pac-12 media revenues leaping 240% in 2024 and beyond. Wow. That’s a huge leap.

Data of the Week – Podtrac Shows Downloads Drop with New Standards

One of the problems with data is getting it right. Like accurate. A fun story in this regard happened as Podtrac has gone for IABV 2.0 certification: it had to ensure it’s download data was correct. As a result–as Podsights reports–you can see that several podcast companies have seen downloads drop in double digit percentage terms. Which is good that we’re getting more accurate, but just another caution that digital measurement is still evolving. Read their whole take here. (Also, I saw this article advertised on Twitter, which is actually the type of article I’m fine with Twitter advertising to me.) 

Listen of the Week – HBR Ideacast on “How To Fix Your Hiring Process”

This week’s HBR Ideacast offers some great advice on how to hire well. To start, most businesses don’t think about how well they hire. As in they don’t know if they hire good candidates or not.  Which is just incredible. Take a listen for other fun tidbits on how to hire well. 

As a bonus, this quote from Bill Simmons on Ryen Russillo’s podcast regarding media access resonated with me as I peruse the entertainment press on a daily basis. (He’s talking about sports, but doesn’t it apply?)

“So I talk way less to people than I used to because I became convinced over the course of this decade that just about everyone is full of s***and using us for whatever purpose they have and it became so hard for me to figure out who was actually telling me something, that I have gravitated more toward the people I talk to know I actually completely trust. 

Versus why is this person reaching out to me? Why is this agent trying to make friends with me and feed me stuff? What is their angle? I’m always trying to think of it like, ‘What is the other person getting out of giving me this?

I’m also with sources and stuff, especially with the NBA…you always know who the source is for just about anything that comes out…I know who everybody’s sources are. Every major reporter. I know who their four people are. I know where this stuff is coming from. I know what the agendas are.”

Just keep that in mind whenever you read any news about any entertainment company in any outlet. (Except mine. I have no biases.)

Long Reads of the Week – Myths Debunked: Slate on Vaccines and The LA Times on Homelessness

My two long reads aren’t on entertainment, but are about debunking myths. I’m a huge believer that if we don’t have good data we can’t make good decisions. Well, this Slate article by Daniel Engber explains that anti-vaxxers aren’t causing the rise in measles outbreaks, debunking that myth. (Though, still vaccinate your children and we should work to increase vaccinations.) Similarly, the LA Times tackles a few myths on homelessness in this opinion piece. Basically, it’s about housing availability and prices, not mental health/addiction or people migrating to LA to be homeless. So read them.

The Entertainment Strategy Guy

The Entertainment Strategy Guy

Former strategy and business development guy at a major streaming company. But I like writing more than sending email, so I launched this website to share what I know.


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