Most Important Story of the Week – 4 October 19: Broadcast (and Streaming) Frightening Fall Numbers

Last week was “Fall Broadcast Premiere Week”. But I waited to judge everything until the numbers were in.

What do you mean, EntStrategyGuy? We had the day after air numbers. What did you need to wait for. Read to find out…

(By the way, have you subscribed to my newsletter? It’s the best way to ensure you never miss the EntStrategyGuy’s writings.)

The Most Important Story of the Week – Fall Broadcast Premiere Week & Netflix’s The Politician

Before we get to the most important takeaway, let’s ground this conversation in what we know:

– We know broadcast TV ratings.

– We know cable TV ratings.

And what we don’t:

– We don’t know Netflix (or other streamer) ratings.

– We don’t know digital and other VOD ratings.

Let’s dismiss one other fiction before we get going: ratings absolutely matter to streaming. As much if not more than broadcast and cable. In an age where people can churn in and out of streaming video platforms, having shows customers want to watch will determine who wins the streaming wars.

With that out of the way, today I’m floating a trial balloon; testing out a very sexy (for traditional broadcasters) theory. We don’t know Netflix’s numbers, but we know that broadcast ratings are going down. Ipso facto, we extrapolate from this that Netflix’s ratings must be higher than broadcast. My crazy new theory is…

Maybe this isn’t the case; maybe peak TV just means that everyone everywhere has lower ratings. And hence everyone’s business model is failing simultaneously.

In other words, in “The Streaming Wars”, can everyone lose? Let’s go to the evidence. First, let’s start with the gory details of what we know about broadcast ratings. Here’s from Rick Ellis’ “Too Much TV Newsletter”:

IMAGE 1 - AY Rick

I tend to focus on “total audience” because, well, so do the streamers. (Has Netflix ever broken out the 18-49 demo?) The downside is that the best new series only took in 6 million views. And since most shows only lose viewers after launch, that’s not great for the future.

Beyond just the new series premiering, the rest of the lineup hasn’t done much better. I am in love with THR’s “TV Long View” column by Rick Porter. Here’s the key quote from his article on premiere week:

IMAGE 2- Quote Rick Porter Premiere Week

Rick detailed the longer term slide broadcast ratings in general in the previous week’s issue. An issue I’ve touched on too.

It’s funny, though, to think about what Rick Porter–and some of the other TV reporters–do on a weekly/daily basis. They report overnight and C+3 ratings. As soon as they get them. As a result, part of the reason Porter et al can even write a weekly “TV Long View” column is because they have all the data. If broadcast ratings were secret, well what would they write about?

Let’s pivot to the streaming wars. If I or Rick Porter or Josef Adalian asked, “Is the average Netflix series growing or shrinking?” could we even answer that question?

Nope.

Instead, we have to triangulate an answer based on second hand sources. So take Parrot Analytics. They analyze all TV series globally for demand. Sure enough, Stranger Things is on top of the list. That’s a Netflix series. But up next is Game of Thrones. That’s an HBO series. The rest of the list isn’t so Netflix friendly:

IMAGE 3 - Parrot Analytics DemandNow this is from the week of September 28th, and they didn’t release a table for after broadcast. And given past looking at their data, I doubt any broadcast series made the list. (It skews a little genre, from what I can tell.) The point is if broadcast shows were declining for streaming in a one-to-one relationship, we’d expect Netflix to dominate this list. Instead, it’s a broad cross section of cable, premium cable, broadcast and streaming.

We could even ask about Netflix’s premiere week. I mean, they have one almost every week, right? So while all the broadcasters debuted their shows on the same week, Netflix released a bunch too (courtesy of AllYourScreens and Rick Ellis again):

IMAGE 4 - AY Rick Premiere TableClearly, The Politician was their focus. To reframe the topic, did The Politician “beat” all the broadcast series for viewers? Maybe? We don’t know? Because we don’t have ratings and won’t get them unless Netflix graces us with them on October 16th (Q3 earnings report day). My gut is most observers of TV believe The Politician won the ratings week. Meanwhile, I doubt either Bard of Blood or Skylines will rate…anything. Still, I took The Politician, and put it up against The Unicorn to see who won the week, with some comparables:

IMAGE 5 - Google Trends

If we know Stranger Things did a “40 million subscribers” number, did The Politician do 5% of that? So…2 million viewers? And if the other series flatlined in the US, are those numbers even lower? Again, we’ll likely never know, but looking at this chart, it’s hard to justify higher. Oh, I forgot. That 40 million was a global number. If half are US viewers, well then did the The Politician do 1 million viewers? 

I don’t know!

We could take this one step farther. While we’ll monitor The Unicorn and Sunnyside for the rest of the broadcast season, we’ve hit the high point of The Politician. As every Google Trends image shows–and this is backed up by the streaming data–these shows decay at a phenomenal rate. Short of a subsequent season or award win (Golden Globes or Emmys), this is The Politician’s high point. 

Looking at all that, can we say that this new show on Netflix–and the several other shows and films launched last week and the week before and this week and so on–are growing in the ratings? I wouldn’t bet my life on that.

Let’s bring it all back to my theory. If I had to guess, the competition across broadcast, cable and streaming isn’t good for anyone. Costs are going up while ratings are going down. Which means it’s more and more expensive for everyone to compete, while getting less and less profitable. Which isn’t necessarily breaking truly new ground, except that I think this applies to Netflix as well as broadcast. In the common discussion, I think we’ve taken it for granted that if broadcast and cable lose, Netflix wins. I think everyone may be losing simultaneously.

Now, if Netflix was hugely profitable, I’d change my tune. But frankly, they’re losing money every year. That’s not usually a sign of growth or success. (Are Youtube or Amazon Prime/Video/Studios/Channels/Twitch making money? We don’t even know if they’re making or losing money!)

One final point: while I would not predict broadcast ratings to start growing anytime soon, you can’t help but wonder how the deluge of huge news events impacted the premiere week ratings. As Josef Adalian pointed out, cable ratings leapt up after the news that the House would start impeachment investigations into President Trump broke. As I cautioned after the NFL season kicked off, week one of broadcast season is just one data point, which means it’s noisy.

Other Contenders for Most Important Story

The Streaming Wars Get Hot

This week featured a deluge of fighting between the streamers:

– First, Amazon is at loggerheads with Disney over ad revenue on its apps on Amazon devices. I’d give the advantage to Disney here, simply because their brand is stronger for streaming video.

– Second, Disney will stop airing Netflix advertising. I’d give the advantage to Netflix here because they’re already so entrenched.

– Third, Apple dropped Prime Video from its app store mysteriously. We’ll wait to call advantage until we learn what the heck happened with this one. (It may also “just” be a technical glitch, but it could also be a subtle shot in those two companies’ constant negotiations..)

I wrote back in July that the device wars would be the new battlefield of the streaming wars. I’d add, we’d have less disruption–and frankly customer hurting silliness–like this overall if each of the tech behemoths were smaller and hence the streaming landscape was more competitive. When businesses compete, customers win.

(By the way, Alan Wolk discussed this more here.)

Quota Impossibilities

One of the advantages for Netflix and Amazon is that they aren’t just buying local rights, but using their global size and power to buy global rights for local productions on a scale that local-only broadcasters can’t compete with. While I doubt this business model long term–I tend to trust free markets to price things accurately–another regulatory issue is coming for this model: content quotas!

I couldn’t find who flagged this for me, but the thesis of this Variety article is that Disney is well behind the Netflix and Amazon in making their content quota in Europe. My question is simpler: will Netflix pay for too much content? Let’s imagine a world where either Japanese customers insist on or they follow Europe’s lead and pass a local content quote. And say Brazil does too. You’d get a world like this:

IMAGE 6 - Netflix Quotas

If you bought global rights for all those series, by definition, something would have to give. Either you’d buy content only for that local region–at which point they’re competing on the same footing as locals–or you’d have unequal content catalogues in foreign territories. In the scenario above, America would get the biggest content catalogue since they don’t have quotas. But Japan and Brazil wouldn’t get the extra European content and vice versas. If Netflix bought global rights for those European shows to meet the quota, that’s dead money.

Will this happen? Right now, from what I know, only Europe has content quotas. Yet, media has historically been a political issue and I could see lots of local industries from Bollywood to Nollywood to South Korea implementing similar matters. Another issue to monitor.

Streaming Wars Start in Australia

Actually, they’ve been going on for some time, but going through old newsletters for last week’s column, I stumbled across this pair of articles in Kirby Grine’s Streaming Wars newsletter. Australia will essentially play out a lot of the same way Spain and Brazil will play out as global powers enter:

– They have “Stan”, an Australian only streamer.

– The biggest broadband provider (Foxtel) has their own streaming service.

– Disney will likely be the most popular content.

– Netflix has a huge head start, and maybe Amazon too.

I should do a long term project looking at countries around the globe and the future battle lines of the streaming wars. Shoot me a note if you have any recommendations.

#HBOMaxodus – PR veteran Nancy Lesser Leaving

Again, one executive is never the end of a company. But the stream of departures from HBO has been a worrying trend for sometime now. As the NY Post reports, expect layoffs to continue.

M&A Updates – M&A Hits 3 Year Low in Q3

This headline about summarizes my theory (see long series here and Ankler guest spot here) about how the “impending tsunami of M&A” may never happen.

IMAGE 7 - Reuters M&A Sinks

 A three year low!

Meanwhile, Vice bought Refinery 29 for $400 million, which values the combined entity at $5.6 billion, according to Variety. Which is higher than I would have guessed they’re worth, but private markets tend to be, um, high in these things.

Context Update – Net Neutrality Can and Can’t Go Forward

A court ruled that the FCC can indeed end net neutrality, but also clarified that states and cities can step into the void and write their own net neutrality rules. The end state? Expect more litigation, with an increased chance that net neutrality will indeed end, but not in California and New York. This will expand the “streaming wars” to the telecoms, who will battle the streamers over data fees.

Entertainment Strategy Guy Update – Esports: Some NOT Crazy Numbers

I loath articles hyping esports without digging into how the numbers were calculated and especially if they don’t cast an eye for how they could be overhyped. A Morning Brew newsletter was the example from my inbox for this week.

But!

The Morning Brew linked to an article where Nielsen is building out their viewership numbers to align with their traditional average minute audience. That’s great! And it’s now a lot more reasonable.

Meanwhile, I’m not the only person bemoaning the numbers in esports, as this great Digiday article makes clear.

Lots of News with No News – Stranger Things Renewed for Season 4

Does this mean it wasn’t renewed when we got the breathless datecdotes of last summer? That boggles my mind. Meanwhile, the “nine figure” news is just typical Netflix/Amazon now: someone makes one good series, they get a huge paycheck. Maybe they’ll earn it, but I’m consistently skeptical now. Instead, the better way to look at this is as the “new back end”. The contracts don’t have guaranteed back end, but the streamers step up.

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