Month: September 2019

Most Important Story of the Week – 13 September 2019: Debunking Some Apple Myths

This is my third try writing this week’s column. Apple TV+ is clearly the “most important story” this week since it’s Apple’s entry into the streaming wars. That’s like the United States entering World War II. What did my first two takes look like?

Attempt 1: An article about “ecosystems”, since that was the explanation du jour of the week. I wrote too much for this column.

Attempt 2: Really calling folks out for not digging into Apple’s financials. But that required me to do them too, which took too long for this week’s column. That’s an analysis article.

Still, I had so many thoughts on Apple that we’ll have enough for thoughts on Apple TV+/Channels today and in the future. Don’t worry.

(Programming note: I’m traveling for a music festival—Kaaboo 2019, the film festival for the middle-aged. Seriously, that’s how the bill it—so if I make any mistakes, I was rushed. And I’ll have my newsletter next week! Sign up now!)

Most Important Story of the Week – Debunking Some Apple TV+ Myths

Reading the coverage of Apple TV+’s pricing announcement, the media ecosystem swung from “$10 is way too expensive” to “$5 wins the content wars” immediately. That sort of surprised me. Bit of an overreaction, wouldn’t you say? Along the way, too, I noticed a lot of observers leveraging a lot of the same explanations and even numbers to explain the news. 

Let’s debunk a couple of those. Plus, I’ll add in the strategic risks for Apple implied by these mistakes. First, though, a new product that actually does make sense.

Apple Arcade Solves a Customer Problem: No in-app purchases

I play a few more iPad games then I probably want to admit. I loath pay-to-play, though. Just not how I was brought up to play games and the best games don’t feature this mechanic, in my opinion. Apple Arcade, their subscription video game service, solves this problem. Potentially. Right now, they probably don’t have enough games to warrant a subscription, but like all new businesses it will grow. And I hate subscription biz models anyways (for customers). So we’ll see. 

However, compared to Apple TV+, at least Arcade solves a customer need. Now how many customers are like me–which is market sizing–is a future question. But at least it solves a problem; it isn’t clear that folks were clamoring for more TV to subscribe to.

Debunking One: Apple TV+ is free. 

This is kind of true, in that yes, if you buy an Apple device, the service is free. But I saw tons of folks saying this free first year meant that Apple made it essentially free. That’s too far.

After a year, customers will need to start paying. I assume some others assumed that if customers buy multiple devices, they can keep stacking on year long free trials, but that doesn’t sound like any free trial I’ve ever seen. Most likely, after a year, the device that logged the free 12 months will have to start paying. And that, my friends, is where the true test of a business starts.

Strategic Risk for Apple: The Promotional Carousel Is Hard to Get Off.

Ask DirecTV or Hulu how offering ridiculously low prices worked for customer churn. Even if Apple doesn’t report subscriber numbers—they probably won’t—we’ll be able to tell by the discounts Apple does or doesn’t offer whether or not churn is happening.

Debunking Two: Apple will have 250 million potential customers.

This number is in fact true. It’s roughly how many iOS devices Apple sells per year. Roughly. The implications are not.

But is number of devices really the potential market? Consider two things. First, many families are on Apple’ plans. Which means even if the family owns four devices, or bought four, they’re still only subscribing once. More critically, look at this chart from Business Insider on iPhone sales.

58d04a02112f701f008b57db-750-563

Huh. So the US portion is really 70 million phones per year, with another chunk of iPad and laptops, which I didn’t see reported anywhere. Everyone breathlessly went with the 250 million. Sure, Apple TV+ is launching in 100 countries, does that include China? It’s notoriously hard to launch content in China, and Netflix and Amazon aren’t there. So I’m skeptical. Overall, if you’re discussing Apple’s plans, be very careful about mixing up US-focused strategies and global numbers.

(Bonus chart. During research, I found this amazing chart at Asymco. It should look familiar.)

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The Bass Diffusion Model…Explained! The Most Important Shape of the Streaming Wars

(Before we start, I launched a newsletter! It’s weekly and it’s short, and I explain my logic here. In today’s social media age, it can be hard to keep up with independent writers like myself so my newsletter will link to all my writings at every outlet and the best stories I read on entertainment strategy each week. Sign up here.)

Here’s three articles. See if you can spot the underlying mistake. An implicit prediction about the future given the facts…

From Variety about CBS All-Access:

IMAGE 1 - CBSAA 50 percent

From Fierce Video about Roku:

IMAGE 2 - Fierce Video Roku

From Decider about Hulu:

IMAGE 3 - Hulu Decider

In each case, a new company is growing wildly. Not just wildly, but 40-50% growth. Which is excellent growth if you can get it.

Implicit, though, is optimism about this growth. This high growth will continue. And the growth is specifically compared to Netflix—entertainment’s boogey man—usually to (again) imply that these companies will overtake or match the streaming giant because of the double digit growth.

This is wrong!

But it isn’t unusual. Frankly, as humans, we tend to believe that patterns continue at their current rate. We like our trend lines to be linear. Stated in layman’s terms, we like straight lines on graphs. Unfortunately, reality is often curved.

Fortunately, though, we know what the curve should look like. One key shape shows not how unique those three companies mentioned above are, but how very, very ordinary that type of growth is. That shape, though, isn’t linear. It’s a double curve and it is one of the most well studied models in marketing and business.

It’s called the Bass Diffusion Model. Today, I’m going to explain what it is, how it works and show a few examples. My goals isn’t to teach you how to use it (we don’t have that type of time), but to recognize it when you see it. Then, over the next week or so, on other outlets and social, I’m going to release some examples. 

To start, though, let’s dig deeper into the problem above.

The Problem – Growth Doesn’t Work This Way

A few years back, I sat in a company-wide “all hands” meeting, and I saw the head of our entertainment group roll out a slide. Our streaming venture was pretty new overall. But we’d had fairly strong growth in the last year, building off growth the year before. Our growth was growing! Here’s a version of the graph he showed, and the numbers have been changed to protect the innocent. 

Image 4 - The Hypothetical

The key numbers are the growth rates between periods 4 & 5, and 5 & 6. Initially, customers are growing slowing. But then the numbers double in year 5. That’s great. And then they increase by 15 units in period six. Again, sixty percent growth, which is even better. The next part stunned me. The executive literally added a dashed line into the future which looked like this.

IMAGE 5 - Exec Projection

That’s pretty incredible, isn’t it? Your growth isn’t just growing, but accelerating as your business matures. To emphasize—because as I type this I shake my head so hard in disbelief I may throw my neck out—this was an executive setting expectations for his entire company/business division, and he expected his subscriber base to double and then triple in the next few years.

As soon as I saw his graph, though, I drew my own chart mentally in my head. I’d seen that sort of growth before in text books and business case studies and in the press, and far from watching growth accelerate further, I thought it would slow down…

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Introducing the Entertainment Strategy Guy Newsletter

Wait, do you REALLY need another newsletter. Probably not. Peak newsletter baby!

Let me defend why you should add just one more email to your already considerable deluge. Then I’ll give you the details.

In My Defense – Why You Need Another Newsletter

Here’s my guess as to how 95% of my readers start their work day. They come into the office, go to their desk, and turn on their computer. Then they open their email program of choice.

Then they read and answer emails. All damn day.

Am I wrong? Maybe. I’d love to imagine a small sub-segment who says, “Nope, I review my to do list, then complete my most important work task before turning on email.” But that’s not happening. If I’m wrong, it’s more likely that a lot of people woke up and the first thing they did was open their phone to see if they had any emails from work to read. (Then, Twitter.) 

That’s why newsletters have taken off among a certain psychographic set. They deliver news via the (dark) social media platform of necessity and convenience. This is especially true with the professionals—across entertainment, media, tech, academia—that I consider my core target audience.

Without a newsletter, I have to rely on folks 1. Stumbling across articles in their never-ending Twitter or Linked-In scroll, or 2. Remembering that good website they read once and hopefully bookmarked. (Do people even still bookmark websites?)

Even if you remember to return back to my website regularly, did you know I published at Decider or Linked-In or The Ankler? Probably not. Instead, let’s just be sure you can find all my stuff every week. And a very short newsletter is the best way to deliver on that promise. I’ve also heard from a few readers who want this service.

The Newsletter – What It Is

Here are the details on the newsletter:

Distribution – Substack

I looked at a few options and liked their combination of features, volume and pricing the best. 

Content

The newsletter will have links to all my writing of the last week. This is across all the outlets I’m writing for, including my website, guest articles, Linked-In articles and really good Twitter Threads. 

Plus, it will have the “media” related recommendations from my weekly column. So my “long read of the week”, “listen of the week” and “newsletter of the week” will end up here. This should hopefully make my weekly column a bit shorter.

As a result, the “Most Important Story of the Week and Other Good Reads” will drop the “good reads” portion to focus on news and opinions including, “Most Important Story of the Week”, “Other Candidates”, “Data of the Week”, “Entertainment Strategy Guy Updates” and “Lots of News with No News”. 

Timing?

Once per week, weekly. No more. It will go out Monday in the AM covering the previous week’s stories. 

Price

Free. 

Is this locked in stone?

No. I wish I could say that my newsletter will be free for always. I debated making that bold claim.

But I need to make a living writing. With my guest articles for certain outlets, I’m getting there and I hope to add advertising in the future (FYC related), but if my weekly column is getting enough traction, I can’t rule out monetizing it. In the near future, though, this is the plan.

How do I subscribe?

Go here, and sign up. Hit me up if you run into any trouble. There is currently one sample draft from this week to review. I plan to keep about 4 to five emails up in the archives at Substack.

How do I help out?

Tell your friends. When the newsletter comes out, since it is free, forward it to everyone you think will find it interesting. Reply to a company wide email chain with the link and say, “Hey you should all read this.” (Kidding. Don’t do that. And never reply “Unsubscribe” to an email chain.)

I do appreciate everyone who has spread the word so far and will keep doing so.

Most Important Story of the Week – 6 September 2019: Quibi, Quibi, Quibi

Welcome to September. The kids are back in school, football is starting, and award season is bearing down on us like the Huns invading Rome. Meanwhile, the streaming wars will have their first battles, “The Invasion of Netflix-Land” by Disney’s 4th Army across the land will be joined Apple’s Airborne Channel Brigades. 

Meanwhile, one of the most talked about companies isn’t launching until…I still don’t know? And since I haven’t mentioned them, they get the top spot.

The Most Important Story of the Week – Quibi, Quibi, Quibi

Let’s take the Quibi story and change the name.

“Starting next year, NBC-Universal is launching MeeshMosh, a subscription short-form video on demand service designed for mobile. They have signed deals with top tier talent like JJ Abrams, Jordan Peele, and Greg Daniels. This will cost $5 a month with ads and $8 without. NBC-Universal plans to spend billions on this content in just the first year.”

To be clear, that is NOT true. I made it up. But if I presented that business model to you a year ago, would you have been ready to declare it the next champion of the streaming wars? No, right?

But that’s just the Quibi pitch with a different company. I can’t prove it but I don’t think that the current crop of Quibi fans would be as supportive of the NBC-Universal version of Quibi as the Quibi version of Quibi. What does Quibi have that NBC-Universal doesn’t? 

I can think of two things. First, NBC-Universal is legacy media and entertainment. And some observers just disdain anything that reeks of old Hollywood. The future is new and tech and disruptive, which is hard when you’re run by a cable company.

Second, is the “who”. You can’t read an article about Quibi without the inevitable mentions of Jeffrey Katzenberg. He is Quibi. Followed closely by Meg Whitman (of eBay, Hewlett-Packard and gubernatorial campaigns fame). Clearly a lot of the fandom of Quibi doesn’t reflect optimism over the product or content, but a bet on the founders being able to make good content and release a good product.

That’s why the news of the week is just a tad concerning. Over the last two weeks, the head of partnerships (Tim Connolly) and the head of news (Janice Min) left Quibi before it even launched. Listen, I don’t value any individual employee, even CEOs, super highly. Usually, the data is too noisy to draw judgements. But I don’t like “exoduses”. Two isn’t an exodus, but any more and we’ll start to wonder if Quibi is going HBO on us. 

Would folks have a reason to leave? These quotes from Dylan Byer’s scoop in his newsletter worry me:

Min had frustrations with Katzenberg’s management style, the sources said. The Hollywood mogul, though widely respected, is also known for being headstrong and relentlessly opinionated…

So if the strength of Quibi was its team, but that team isn’t actually functioning, what is its strength? Short form content? Do we not remember Vessel? Or Go90? YoutubeRed? Sure, a subscription for Hulu, Disney+ or Netflix at $8 makes sense–that’s long-form video–but do people want to pay for short form content they can mostly get for free?

Of course, Vessel, Luminary and Youtube all had/have different content strategies and pricing. Maybe Quibi will be the right mix of price and content to drive subscribers. But I’m skeptical.

(Josef Adalian has a good long read on Quibi’s plans here.)

Entertainment Strategy Guy Retraction Watch – Disney+ Vault Edition

Since I’ve called out others for potentially bad data, I should do the same self-reflection. Last week I heavily speculated that when Disney+ launches, it may be missing a few of its classic films and quite a few Pixar films. I did this based on a list of confirmed films at the LA Times and Bob Iger’s statements in the last earnings report. 

A few readers pointed out some other sources of information contradicting this assessment. In particular, at Disney’s Investor Day, they said the 13 “signature” films would make it on the service. I updated my Part II last week this data. Then, as the week went on, I discovered a few new data sources…

The New Data

On last week’s TV Top Five, Lesley Goldberg said that Disney said at D23 that the 13 signature films would be available on Disney+. If they repeated the 13 films at launch at D23, that’s pretty definitive, though it still leaves the newer Pixar and newer Disney films in the air.

Then, I read this great article from The Verge’s Julia Alexander reviewing Disney’s UX and platform from a D23 demo (which is worth a read). It doesn’t have any screenshots of films that weren’t in the LA Times announcement. Which could mean nothing, or could mean some of those films won’t be available at launch, as I initially speculated. 

The Chasm of Silence

The other data is the “dogs not barking” scenario. Which is I put up an article–and though my readership is small–I haven’t heard anything from Disney’s communications people. If they know I’m wrong, why leave out bad information? To further the silence piece, if Bob Iger knew that Disney’s 13 most important animated films will be available at launch, why not mention that along with the 8 Star Wars and 4 Marvel films? It seems like an obvious point to make.

My Explanation

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If “Content is King”, who is everyone else?

As soon as you start learning about the business of entertainment, you learn this aphorism.

“Content is King”.

I yell this from the rooftops too. I learned it so early that I can’t even credit one specific class or book or article with it. Searching my articles, I found that I wrote it on 5 different occasions in just the last year. It feels so true for me, that I won’t ever bother to quantify it or prove it analytically. Principally, I don’t think it’s something you can “prove”, but more importantly, it doesn’t matter. 

However, it makes a great question: if content is king, what the heck is everything else? 

That’s what I’m going to try to do today. To explain which different business functions are who on the entertainment chess board. Chess is a game of war, and these are the streaming wars, right?

King – Content

The obvious first choice. Or is it?

If the chess analogy is true, the King on his own can’t win you the game. In fact, he does hardly anything in a typical chess match. He runs from his problems, just hoping to avoid getting trapped in a corner.

Yet, content is fundamentally an offensive tool. It’s on the attack, conquering viewership in box office, ratings points or whatever streamers feel like telling us. That sounds a lot like the Queen, the unstoppable killing machine moving any direction she damn well feels like on the board. As I thought about it, in terms of power/influence, the Queen is best analogue to content’s ability to shape the competitive landscape.

Let’s use the King for something else then. The endgame for a chess match is check mate. If the King dies, you lose the game. You’re out of business. What’s the one thing if you don’t have, you go out of business? Cash. Money. Financing. So…

King – Content Finance

Finance shouldn’t run any company—that’s the player moving the pieces in this super-extended analogy—but they are the rulers, usually, at the end of the day. And lots of great companies have succeeded simply through clever financing. Even if the finance folks don’t run the business, they’re usually second or third in charge. So the King is finance.

Queen – Content

Content is what enables everything else. If you don’t have great content, no matter how well you leverage the other pieces, you’ll be at a disadvantage, just like losing your queen in an unequal trade. And if you ever doubt if content is powerful, well, look at Disney’s movie slate. So the Queen is content.

Bishop – Distribution

After you learn that “content is king”, you learn that it is locked in a war with distribution. The battle gets phrased as the question, “What’s more important, content or distribution?”

In a classroom, both sides can be right trying to answer that question. Even if you end up deciding content is more important, you can’t deny that distribution can make or break your strategy. Right from the start. That’s why I made distribution “the Bishop”, the piece who is the most valuable at the start of a chess match.

Distribution isn’t the most powerful piece remaining—that’s the Rooks—but it sits next to the Queen of content and King of finance in the middle of the board. If you get down to just a one Bishop at the end of the game, you’ll have a damn hard time trying to checkmate your opponent. The way you can have great distribution, and bad content, and hence no viewership.

I also like it because Bishop’s are incredibly useful, in a misdirection sort of way. The Bishop never comes at you straight on, but from the side. Distribution is the same way. Most consumers don’t think about the deals a major studio signs to distribute their content, but happen to stumble upon it on their streamer of choice. Netflix convincing the studios to give it library content or the Pac 12 failing to get DirecTV distribution are examples of how distribution can make or break business models. Consumers may be aware of these squabbles, but often times they are oblivious to these conflicts.

I also like the historical symbolism of the chess board. For much of human history, power was a battle between rulers and religion, monarchs and bishops, like content versus distribution.

Knight – UX [Technology]

Before we go too much further, I should admit I’m not very good at chess. If you’re a former military officer, this is like admitting you don’t like running or short haircuts. But there, I said it.

I’m not a good programmer either, but I know good user experience (UX) when I see it. In fact, everyone does, if a current survey by PwC is true (and yeah, just one survey). But despite that survey and the blaring headline, UX isn’t more powerful than the money or the content or the distribution of said content. 

But once you have a platform—especially in the internet age—understanding how consumers engage with your technology is key. If that experience sucks—fine, is “suboptimal”—than customers don’t want to come back. Sometimes even the best content can overcome this, but only so much. 

Knights are thus the UX or technology of the chess match. They can really screw up your strategy by taking the queen off the board. But they can only hop two spaces forward and one to the side, so they aren’t the most flexible weapon. And they are slow to escape from a battle, like how UX is hard to update once you’ve screwed it up.

Rook – Marketing

You can’t watch a show you’ve never heard of. That seems simple enough. Usually, the best way to overcome this is brute force spending of marketing dollars. Marketing is a blunt tool. It fires straight at consumers, despite the dreams of targeted addressable marketing, it is still usually one trailer for everyone. 

Which is as blunt as a rook marching straight ahead or to the side. Moreover, Rooks get most of the action at the end of the game, the same way that marketing only starts once the content is finished and ready to roll out of the gate. 

And yet, the power! A great marketing campaign will ensure a TV show or movie gets launched. (Check out the buzz around The Mandalorian–in my opinion a well-made trailer–to see how good trailers can make a show or film.) And that trailer will make or break the content it is supporting. Good marketing can build buzz and bad marketing can end it. Losing your rooks recklessly can end your game too. Marketing is the Rooks.

Pawns – Research, Business Affairs, Business Development/Sales

It takes a village to be a studio, but I only had five major pieces to work with. (I guess I could have split the board in half, but eh.) 

Everyone else is a Pawn. Which sounds bad in our nomenclature—being someone’s Pawn means being manipulated—but yeah most of the other groups are manipulated for content’s ends.