My weekly column this week was initially about Disney+ library content. And surely, you saw how that turned into 5,000+ words of speculation. As a result, I’m going to go a bit quicker of an update this week. I kept returning to one article that inspired several ideas, so let’s make that the story of the week. (And since that came off, run a bit shorter today.)
Most Important Story of the Week (and Long Read) – The Rain in Spain is Streaming
Well, you had me at “Case Study”! In seriousness, the “streaming wars” may be a true world war, fought territory by territory, country by country. Meaning this Spain case study is a pretty good stand-in for many countries to come. Here are some other insights or random thoughts I had.
Insight 1: The Value of Local Content/Employees
One of the aspects of the streaming wars I’m really curious about is how local streamers fare against their global rivals. In the Spanish case, it’s Movistar. Honestly, what is more American than an American company (or four) believing that they can launch global media companies that can simultaneously reflect the value of every local country?
As a result, studios need to rely on local content, but existing networks and streamers may understand the market dynamics better, putting the new streamers at a disadvantage. This is a tension I’m curious to see how it plays out. (This also pairs well with this article also in THR about European Networks from July.)
Insight 2: Everyone is coming simultaneously.
Sure, Netflix beat all the streamers to market. But they’re all coming simultaneously from Disney to Amazon to Viacom even. And again this will be replicated country-by-country around the world.
This makes me more optimistic for local streamers. Instead of fighting a global battle for dominance, they can focus on winning in their region with their unique understanding of the market. Of course, there is the counter about global size, but wait two insights for my thoughts on that.
Insight 3: It isn’t “hits”, it’s portfolio performance.
Let’s say I’m running your mutual fund. (Wait, those are out now? Then, let’s say I’m running your hedge fund.) Back in 2007, I put a bunch of money into Disney and Apple. (True story.) Guess what? We made lots of money together.
Wait, you want to know how the rest of the fund did? Why? I had two hits. That’s all that matters.
“No, it’s not!” You say. “How were the rest of your picks?” Well, I put money into Chipotle a few years back…guess that wasn’t smart? The point is when it comes to investing, you analyze the entire portfolio.
The exact same thing applies to content portfolios. So congratulations to Netflix on having a hit in Money Heist (La Casa de Papel) as foreign-language, specifically Spanish-language series. The key question for all analysts and business types is: What was the hit rate? Without the denominator (total produced/acquired) the numerator (the hits) doesn’t matter. The article says Netflix has 20 Spanish originals in production, how many have they bought to date?
Take this article from WAY back I’ve been holding onto. Netflix is making 50 (50!) productions is Mexico. I guarantee when one becomes a moderate hit in the US, it’ll get hyped as “proving” Netflix is making money in Mexico. But without repeating the hit rate, we really don’t know. (And go here for my controversial take on Netflix’s hit rate.)
Insight 4: We do NOT know if Netflix overpaying for international originals is paying off.
Besides hit rate, it also depends how Netflix allocates content. Right now, Netflix and Amazon overpay in every market to get global rights. Which is strange: it isn’t often you can pay the most for eveyrthing and generate a good return. The key is how Netflix both allocates costs and then that pesky hit rate I just mentioned. If they assume a Spanish-language original generates half its money from North America, and it isn’t popular here, that may not be a good call. If they keep allocating most of the cost to the country of origin, then how can they possible make the money back?
All to say that the streaming wars will have multiple battlefields and it will be fun to see how they play out. To conclude, two random thoughts.
Random Thought 1: A new datecdote!
I missed that Money Heist had 34 million viewers during its first week. A new datecdote for the tracker. It doesn’t really change the distribution of hits for Netflix.
Random Thought 2: Bundle by Rich Greenfield
This isn’t an insight from me, but this Rich Greenfield tweet gets at how competitive it is in Spain too. And how the bundle always makes a come back.
Listen of the Week – NPR’s Planet Money on the “Modal American”
I love a good walkthrough on how to do data analysis well. So thank you Planet Money team for providing it! In their quest to find the “average American”, they turn to the mode to find the most “common” American you are likely to run into.
Of particular interest to long time readers is the mention of distributions as an example for why averages can be so misleading. Take age: America has two humps in our age distribution, the Boomers and Echo Boomers (nee Millennials). Thus, the median average that is somewhere between those two group (in the Gen Xers) is wildly misleading.
How can you use this? Well, do you use advertising to target your entertainment customers? Do you use overly broad groups like “ages 18-50”. Why? Some smaller demographics may be much easier to target.
More relevant is how you use data in the first place. I’ve seen so many presentations, reports, analyses but especially news articles that give you the average. It’s always the average. But the average tells you nothing! The distribution is everything. If you run a business–and some of my readers do–don’t accept averages from your teams. Demand distributions. (My writings on distributions here.)
If somehow you don’t subscribe to it, I was fortunate to be featured in last week’s Ankler newsletter by Richard Rushfield. I write about the “coming” M&A tsunami, which I’ve been harping on for a year. If you are an Ankler fan, I can say that we’ve been talking about combining our talents for a few projects so stay tuned.
Other Contenders for Most Important Story
ACC Network Launch
It launched! It’s adding distributors, unlike a certain other conference. Any other takeaways? Well, live sports matter for linear TV. And ESPN matters, so being under that colossus can help you launch your network.
Out Of Home Nielsen Ratings Are Here
As the cable and linear viewing audience shrinks, Nielsen has finally moved to add out-of-home viewing to it’s reporting. The best write up came from Sports Business Journal. The biggest impact, in my opinion, will be to further boost live sports value from a ratings perspective for the cable bundle.
More Disney+ News: Distribution Partners
Notably, Amazon is absent from the list which both does and does not surprise me. On the surprise side, I think not having Disney+ as a sell-through option is a key gap in the “aggregation” wars. (Especially if, like Amazon, you pride yourself on serving families with diapers.) If you have a streaming aggregator and want to sell to families, you need Disney+, end of story.
On the other hand, Amazon takes it time with certain negotiations, trying to extract as many pounds of flesh as possible. With tiny sellers on its marketplace, this usually works out for them. With fellow market share titans–Apple, Google and now Disney–it takes a bit longer.
My guess is Amazon adds Disney+ by next year.
Newsletter of the Week – “Are All Streaming Platforms The Same? A Deezer Story.” in Penny Fractions
I just discovered Penny Fractions–a newsletter on streaming music–and it’s off to a tremendous start. David Turner tells the tale of the music streaming service Deezer and is worth a read. I hadn’t heard of Deezer and the story of their rise and sort of hanging on but captures a lot about the streaming music world. This is now a must read newsletter for me. Here’s the money quote that echoes a lot of my skepticism about media narratives on streaming:
Much in the same way that Pandora wouldn’t have survived its endless pivots in the mid-00s without refusing to pay its entire staff for a couple years and subsequently fighting any attempt to increase how much they pay artists, Deezer would’ve floundered without getting a bailout from Orange. The credit given to the “internet” for the success of these companies obscures what is often just aggressive anti-worker or monopolistic maneuvers that allow these money-losing venture to crawl forward…
Even though it launched outside of the United States, Deezer’s history shows that post-90s media consolidation, not technological advances, is what’s leaving working musicians as pawns in the game of multinational companies. But, I guess stories about A.I. music and all-knowing playlists are more exciting.
Lots of News No News – The Irishman NOT Coming to a Theater Near You
Not to be flippant, but why are we still talking about Netflix and theatrical releases? They aren’t doing them in any meaningful way, so until they change, this barely seems like a story.
Twitter Thread/Data of the Week
Twitter user Jack Genovese has a roll-up of BARB data, taht I wasn’t familiar with before I saw his thread. Some useful nuggets on how streaming is evolving in the UK and streaming growth despite the price hike.