(Welcome to the Entertainment Strategy Guy, a newsletter on the entertainment industry and business strategy. I write a weekly Streaming Ratings Report and a bi-weekly strategy column, along with occasional deep dives into other topics, like today’s article. Please subscribe.)
Like I did last year, I want to close out this year by sharing a few of the “biggest myths” I debunked in 2024. That will mean re-running last year’s article on the twenty biggest myths in the entertainment industry, adding in four new myths and two new overrated genres. (One of which is probably really, really controversial…)
I think way too many media members herd around narratives or repeat what other people say without questioning the underlying assumptions or looking at the data. (It’s not like I don’t get stuff wrong either; I’ll have another edition of my“What I Got Right/Wrong” series in a couple of weeks…) The entertainment press often describes the entertainment business in simple, easy-to-digest binaries, combined with heaping dollops of futurism (that all tech is good/“winning”), a simplistic heuristic that often ignores how long it takes for things to change or how unpredictable change can be.
What we really need is a media that embraces disagreeing with each other. And a difference of opinions. So with that in mind, onto the new myths!!!
Myth: Theaters Are Dead, Dying or in “Structural Decline”
Reality: Theaters Have a Supply Problem
Countless analysts and pundits have been arguing, post-Covid 19 lockdowns, that theaters are “dead” or “dying” or, in more business-y jargon, “in structural decline”. They’ve been replaced by big screen TVs (the same big screen TV that many well-paid analysts themselves own) and “no one goes to the movies anymore”, especially “kids these days”. Because they’re on YouTube or Roblox.
And yet Hollywood keeps cranking out both blockbusters and surprise hit films. Especially family-friendly films.
Yes, US box office is down 3% from last year, but what matters is why: movie theaters have a supply problem. I broke this down at my website here and for the Ankler early last year. The big six studios went from releasing 80 per year (or over 100 twenty years ago) down to 65 or so for the last two years. Wide releases are down from 120 films per year to 90 or so.
Why? The strikes stopped production last year, the traditional studios have been consolidating (Disney bought Fox, Amazon bought MGM), and tech companies are choosing not to send films to theaters to avoid negative PR. IP-driven films like Road House and Axel F would have likely done solid-to-great business in theaters, plus I think that Damsel, Carry-On and Rebel Ridge would have made their budgets back, if not more. (Remember, my future of film series shows that theatrical films do better on streaming.)
I’m actually sympathetic to the argument that ever-increasing ticket prices have covered up flatlining ticket sales over the last decade, but parents are still taking kids to see movies, creating the next generation of movie-goers, teenagers are still going to the movies, and older movie-goers still love going to the cinema.
Movie theaters aren’t going away, which is what “structural decline” means, and if they have a problem, it’s not a demand issue.
Myth: The NBA Doubled or Tripled The Value of Its Media Rights Deal
Reality: The Yearly Rate Increase Went Down, The NBA Had to Sell 33% More National TV Games, and Local Sports Rights Are Still Declining
Over the last month, the narrative about the NBA has shifted…the ratings are in free fall!!! What’s wrong with the NBA?!?!?! But almost everyone, in the same breath/sentence, says that the ratings don’t matter because the NBA signed a huge, decade-long media rights deal earlier last summer.
But let me put it this way:
If you had a contract that grew at 12% each year, then your next contract grew at 10% per year, even though you increased your output by a third, that’d be a bad deal. You’re making less money than you were before.
When it comes to the NBA, you never hear this. The NBA rights are going up by less per year, even though they sold a third package of TV rights. And a major source of revenue (local TV rights) is shrinking! Local rights brought in about a fifth of the NBA’s annual revenue.
Few NBA observers/reporters/insiders discussed the NBA’s declining ratings before they signed the deal, possibly as a favor to Adam Silver and the NBA. Now, post-deal, they’re free to point out the decline in ratings. That’s journalistic malpractice, right?
Other NBA fans are in denial that there’s any issue at all. As one of the rare sports fans who had the NBA on TV more than the NFL on Christmas Day, I’d rather the basketball community tried to figure out what’s going wrong sooner rather than later.
Myth: There’s Something Wrong With IP
Reality: Viewers love IP and Franchises
The old adage goes, “Nobody knows anything”, but as far as IP goes, it’s more like nobody wants to know anything. Like the fact that audiences like watching franchise films, superhero movies, and films based on “IP”.
Tons and tons of critics, filmmakers, tastemakers, reporters, analysts, pundits (even political pundits), writers, directors, whiners on social media, and more hate franchises and superhero films, viewing them as a symptom of whatever they think is wrong with Hollywood, be it decadence or late-stage capitalism or antitrust or woke leftists or the culture today or what-have-you. Really, these people (which are like 90% of the chattering class, if not more) are wish-casting their beliefs against the overwhelming signals of what the audience wants to watch.
IP is fine. Franchises are fine. And it’s okay that audiences like watching these movies. People like Hallmark Christmas films, Shark Week, true crime documentaries, police procedurals, soap operas, professional wrestling, and so on; there’s nothing wrong with that.
Most importantly, from a business rationale, I have to tell you: IP works. If you’re running or working at a Hollywood studio, you have to know this and ignore the mostly online chatter complaining about it. Figure out how to make successful franchises and IP-based projects (which is harder than you think!), and use those to keep launching new franchises.
Myth: This Was the Podcast Election
Reality: No, It Wasn’t.
I just wrote about this, but wow, I keep hearing people calling 2024 the “podcast election”. Read this whole article for my very thorough debunking of this idea.
In short, the media these days is very complex, segmented and nuanced. Modern day campaigns have to do more, across more channels, than ever before. And this applies to media organizations as well.
Adding Two Overrated Genres…
Last year, I wrote out a list of overrated and underrated genres. (You can scroll to the bottom of this re-post to find that list.) Today, I’m adding in two more, including one very-not-timely, contrarian take…
Musicals are overrated: Fairly or unfairly, you could put me in the “musical skeptical” camp (Sorry, Scott!). In 2021, the musical genre was my bomb of the year. And I wrote about it again earlier this year.
That said, I mean, Wicked, amiright?
Does this one blockbuster film debunk my take? Not at all. Even when I called out musicals for being overrated, I still predicted that Wicked would be a big, big hit.
What matters is what types of musicals are hits. Family-friendly musicals do big numbers (Think Wicked, Wonka, The Little Mermaid, Mufasa, and animated musicals like Sing 2 and Moana 2), and so do musicals based off of pre-existing IP. (Again, think Wicked, Wonka, The Little Mermaid, Mufasa, Sing 2 and Moana 2.)
When it comes to other types of musicals, I’d be very, very wary. On the one hand, mega-hits from Broadway can do very well (I think film versions of Book of Mormon or Hamilton should go into production tomorrow), but even Cats and In the Heights bombed recently, so it’s by no means a sure thing.
A new musical either needs to appeal to all ages and either have great IP or terrific songs (think The Greatest Showman), but this is much, much easier said than done.
Faith-based IP is overrated: Man, I really dislike the hype cycle. When Sound of Freedom did well two summers ago, everyone was talking about Angel Studios as the future of Hollywood. Since then, they haven’t had another hit or even another film that likely broke even, as I wrote about for the Ankler.
Sure, some faith-based films can come out and do well (like how The Best Christmas Pageant Ever is Lionsgate’s biggest hit this year, which probably says more about Lionsgate’s bad 2024 than this genre), but mostly, this is a niche genre with a few big hits every decade or so.
The takeaway? Faith-based films can work at the right budget (below $10 million), but they’re not coming to transform Hollywood.
Okay, those are the 2024 updates. If you’re new to EntStrategyGuy or just want a refresher, here are twenty more myths that I called out last year. There are some updated links below.
Myth 1: Films Should Go Straight-to-Streaming
Reality: Films that Go to Theaters are More Popular
Perhaps my favorite thing I got to write this year was the start to my big ‘ol series “The Data Is In: Theatrical Films Massively Outperform Straight-To-Streaming Films” which I even conveniently subtitled “That’s Right…I’m Debunking One of the Biggest Myths of the Streaming Wars”.
In short, every entertainment company, even massive tech conglomerates, should be sending their movies to theaters before they go to streaming, not just to make more money (and help keep theaters alive) but because it makes the movies more popular. And yes, I’m taking marketing costs into account.
For years, a ton of people argued the exact opposite, mainly because Netflix became the dominant player in streaming without sending their films to theaters. (As if this choice, and not a whole bunch of other, way important factors, led to their rise.) Just this month, in one week, six streamers released seven straight-to-streaming films, at least three of which could and should have gone to theaters.
Yes, some of you are asking, “Hey ESG, didn’t you promise us part four of that series?” I did! And there will be a 2023 data update in the new year, along with some strategy thoughts.
Myth 2: There’s No Ratings! No One Knows What a Hit Is Anymore!
Reality: We Have Streaming Ratings Now!
After “The Data Is In: Theatrical Films Massively Outperform Straight-To-Streaming Films” my most popular article of the year (and actually, all time) was “No, That’s Not a Hit Show: And Other Thoughts on Why So Many People in Hollywood Don’t Realize That We Have Streaming Ratings Now” which I think reflects a very common source of frustration among a lot of news consumers:
We know which shows are hits! We know which shows people like!
But there’s still a disconnect between these very basic facts (which I describe each week in the Streaming Ratings Report and other columns, like my bi-annual articles on the flops, bombs and misses, or the updates on renewals and cancellations) and the news coverage. At this point, (almost) every entertainment journalist acknowledges that ratings exist, but…
- Many writers (especially for pop culture websites) still want to argue that the unpopular shows that they personally like are actually popular.
- Many analysts still pretend like it’s impossible to figure out what TV shows are hits or claim that it’s impossible to figure out why streamers like Netflix cancel or renew shows.
For 90% of renewal or cancellation decisions, it’s fairly obvious why decisions get made. Sure, there’s always been edge cases or hard decisions (especially when you take into account budgets) but many people’s borderline epistemological nihilism (“We don’t/can’t know anything!”) just doesn’t square with reality.
Related, it’s probably too extreme to say that “no one” has ever canceled a popular show, but as I wrote in my third renewals and cancellations update, popular shows don’t get cancelled.
Myth 3: All Content is Global Now
Reality: Foreign Content Still Isn’t Popular in the US, Most Countries Prefer Content in Their Native Language/From Their Region, But the Global Market Place Still Matters
Ever since Squid Game, many, many, many pundits and reporters proudly proclaimed, “All content is global now!” when…no, it’s not. I’ve written about this for years (six times actually since Squid Game first came out)
In this case, reality is nuanced and complicated. Two things are true:
- Due to technological changes, media companies can compete across the globe now, which means that they’re competing for a bigger potential market.
- But content doesn’t scale globally nearly as easily as everyone was led to believe.
Again, go back to what I wrote in the introduction: things changed from a 1 (foreign content never played in America) to a 3 (foreign shows make up 1-3% of streaming viewing), but the media pretended like it was now a “ten” (“All content is global now!”). And nearly every media company followed the hype and invested globally…and now a bunch are pulling back.
Myth 4: Netflix’s Formula 1: Drive to Survive Made F1 Popular in the US
Reality: Actually, It Was ESPN But Also, F1 Still Isn’t That Popular
For years, I’ve been pointing out that Netflix’s sports docu-series, F1: Drive to Survive didn’t make F1 popular in the US. (It helped, but if anything airing races on ESPN drove the most gains.) But people are still saying this all the time. (I could cite half a dozen examples since Netflix’s big PR push at the end of November to publicize Swing to Survive, which I just wrote about flopping this week in the Streaming Ratings Report.)
I mean, Formula 1: Drive to Survive didn’t even make the Nielsen charts earlier this year. It’s just not that popular.
This matters. Liberty Media reportedly spent a half billion dollars on the race on the Las Vegas strip. And how were local business owners rewarded for this? With half-empty hotels, during a week that’s normally really busy, and the tickets for the event got marked down by 60%.
(I did a giant update on Formula 1, its ratings, and popularity earlier this year.)
Myth 5: The “Algorithm” Picks Which Shows Netflix Makes
Reality: Humans Pick the Shows
I’ve written about this twice, in both “The Algorithm is Still a Lie” earlier this year and in “The Algorithm Is A Lie” from last year. In short, despite tons of people complaining about the “almighty algorithm”, there’s no algorithm that picks and chooses shows; humans do. (Netflix has a recommendation engine, but that’s a totally different thing.) Read both articles for all the details—I think the case is pretty iron tight—and it’s pretty obvious that many people (especially creatives) don’t really understand the data limits at play here; there’s just not enough data to make the conclusions that many people think.
In reality, a lot of development execs pretend to have data that they don’t so creatives don’t get mad at them. Yeah, data can help identify certain genres to invest in, but that’s been the case since the advent of cinema.
Indeed, as I cited last fall, in June, Bela Bajaria told a conference, “Algorithms don’t decide what we make…There’s not an algorithm that would probably say, you know what’s a great idea? A period show about a woman playing chess.””
Myth 6: Celebrity Production Companies Are Valuable
Reality: Celebrity Productions Companies Are Overvalued
In another one of my favorite articles of the year, both here and at The Ankler, I wrote about how celebrity production companies (like Reese Witherspoon’s Hello Sunshine, the Obama’s Higher Ground, and LeBron’s The SpringHill Co) are really, really overvalued right now, especially with tons of high profile investments from a ton of private equity firms like Candle Media and RedBird Capital. Towards the end of the year, there were a few news stories about cash flow troubles at celebrity production companies for their private equity owners, bearing out my concerns.
(I briefly wrote about this for the Ankler last month, since the big news was that SpringHill Company lost $30 million last year and has never made money, and I’ll be writing about it again in a few weeks.)
Myth 7: Most Viewers Binge Watch TV Shows.
Reality: Some (probably 30% to 50%) of Viewers Binge Watch TV Shows
The “binge versus weekly” release battles aren’t as fierce as they once were, but you still see folks arguing that customers “love binge releasing”. I’ve pushed back on this for a while.
Samba TV regularly publishes charts on binge-watching and the most interesting part of their charts is that the most binge-watched shows usually are only binge-watched by about 30% of customers.
But don’t take their word for it. There’s a reason Netflix is releasing some many of their most popular shows in batches now. Over time, I suspect those batches will get smaller and smaller and more and more spread out.
(I wrote about this in the Streaming Ratings Report early last year. The only other major update is that Netflix started batch releasing many of its hit returning shows last year.)
Myth 8: Social Media Represents What Most People Think
Reality: Most Americans Don’t Regularly Use Social Media
This especially applies to TikTok and Twitter/X. Just check out this graph…
Most people don’t use social media all day. It’s not real life. It’s just more accurate to say that the conversation on social media represents what people on social media think. Studio heads, take note.
Myths 9 to 16: The Following Genres Are Overrated:
Okay, there’s a bunch of myths here, so let’s knock them out in one list. The following genres are overrated or overvalued, which isn’t to say that you should never make them, but you should know that the hype doesn’t match the reality and spend/invest accordingly:
- Prestige TV shows. Elaine Low, at the Ankler, just reported that “No one wants any ‘homework’ projects,” says the first TV agent. “Esoteric pieces that were awards bait aren’t popular right now.” I agree, as I’ve been writing for years now.
- Anime. There’s some very loyal anime fans out there in America, but it doesn’t match the hype or constant prediction that anime is the future. Plus, this is a really competitive marketplace. If I were an executive, I wouldn’t recommend competing in it.
- Horror. Horror films can have a tremendous ROI, but they’re not nearly as popular as other blockbusters/franchises. This is especially true on streaming. Frankly, a lot of people don’t like scary movies, but they can definitely put butts in seats for an affordable budget! Two things can be true: young people like seeing horror films in theaters and grandmothers never watch horror films.
- Adult Animation TV Shows. One of my favorite shows on TV is an adult animated comedy. But this genre is still perpetually overrated by the Hollywood entertainment press.
- The Kardashians. I’m not saying the Kardashians aren’t popular, they’re just not as popular as a lot of people think.
- Concert films. Post-Beyonce, I think it’s clear that Taylor Swifts: The Eras tour concert film was a one-off event, despite many think pieces arguing otherwise. It’s hard to see any other musician pulling off the same feat.
- Sports Docu-Series. The sports documentary and docu-series genre is really, really overrated right now. Outside incredibly popular sports (think Quarterback) and stars (think Beckham), very few break out.
- Basketball TV Shows and Films. I’m a diehard basketball fan saying this. I can separate my personal opinion from the trends I’m seeing in the data. And basketball movies and TV shows just aren’t that popular.
Myths 17 to 20: The Following Genres Are Under-Rated:
- Superhero films. Listen, I just wrote two articles on the MCU/Marvels struggles, but five of Marvels’ last seven films made over $700 million globally. Two of the top four and three of the top eight films in North America this year were superhero movies. Again, this genre is dipping, but it’s not dead.
- Sitcoms/Comedies that are actually funny. Even though its ratings dipped later in the season, the Night Court reboot was the breakout hit of the year. Meanwhile, as Elaine low reported in the Ankler, people in town want funny comedies now. I couldn’t agree more.
- Procedurals. Thanks Suits! Now everyone realizes (again?) that many, many viewers like procedural dramas.
- Animated Movies. I think a lot of people are burying this genre, when it’s still really popular and, really, it’s just Netflix and Disney who are struggling.
