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Price Discounts Continue in the Streaming Wars and Other Contenders for Most Important Story of the Week – 22 June 21

As The Stranger told The Dude, sometimes you eat the bear and sometimes the bear eats you. 

Such was last week’s weekly column for me. (By the way, check out this great article on the origins of the quote above.) I had a lot of thoughts percolating about the most popular topic in streaming–rightly Netflix–so I went long trying to tamp down expectations just a pinch on what Netflix’s big 2020 means in context. But Netflix wasn’t the only news story of the week. So here’s my quick run through of what else happened in entertainment last week.

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Other Contender for Most Important Story – HBO Max and Apple TV+ Extend Discounts/Free Trials

The news: Apple TV+ is extending their one-year free subscription, which started in November of 2019 to July of 2021. HBO Max, meanwhile, is extending their price discount of 22% ($11.50 per month) until “mid-2021” as well.

If you want to know why Netflix is the king of streaming, it’s these contrasting pricing decisions. In late 2020, Netflix raised prices. It’s competitors, HBO Max and Apple TV+ , are going the opposite route. They are still in all out growth mode, whereas Netflix has locked in a huge chunk of customers. So it can increase prices  and still see a growth in the US/Canada region of 800K customers.

The fun question is, “Who is this a worse sign for?” and I’d have to opine Apple TV+. HBO Max’s price discount is actually just explained as the easiest way to avoid the Roku/Fire TV/Apple TV 10-30% deal tax on streamers that devices/operating systems charge when you sign up through their application. The industry leader (again) is Netflix who doesn’t let you sign up via your TV, and basically forces you to their website. But they have 67+ million subscribers in the US, so they can get away with that.

HBO Max needs subscribers, but it also doesn’t want valuable, multi-year subscribers forever locked into the Roku or Apple or Amazon payments, so they offer a discount for folks signing up at their site for 6 months or more. That makes sense. 

Apple, on the other hand, just may not be able to get people to pay for their TV offering. Frankly, at $5 per month for only originals, it’s clearly the most expensive service in terms of content for price. At this point, it’s more likely that Apple extends the free price point until the end of 2021 than that they finally start charging customers.

Other Contenders for Most Important Story – The Latest Round of Theatrical Delays

Coming to a theater near you…not new films in Q1.

The news started dropping at the end of last week that the latest round of films due for 2021 are moving. The biggest casualty was probably A Quiet Place 2. Frankly the studios are not optimistic about theaters being open through March. This isn’t unexpected, and the biggest wildcard for theatrical exhibition is when the pandemic finally abates. Personally, the five numbers I’m watching are these, from the Covid-19 Tracking Project and Our World in Data.

IMAGES Covid

IMAGES Covid 2

You could be optimistic or pessimistic on these numbers, depending on your constitution. On the negative side, we have a long way to go before deaths drop to zero. And that will take weeks and weeks.

On the positive side, the drop in cases is the fastest yet of the pandemic in the US. Further, I think we’re going to see the impact of mass vaccinations on the US/EU accelerate faster than the general consensus thinks. (Most public health officials are providing what seems to be very cautionary/conservative estimates of vaccination rates.) The US is now giving out 1 million shots per day, and the rate of growth is doubling about every 10-13 days. For example, the US has already tripled the amount of shots it can give per day in January, and the month isn’t done. If we can see the same growth in February, the US could be vaccinating 3-4 million per day. At which point vaccine production becomes the next bottleneck to smash.

The current date to watch is May 7th for Black Widow. Disney could stand to gain by being the first film to “reopen” theaters and theaters would be hungry for a known commodity, like an MCU film. But we’ll they be open? Remains to be seen.

In other theatrical news, as expected the global cinema industry lost 32 billion dollars due to theatrical closures down from around $45 billion in 2019 for a $13 billion box office year in 2020

IMAGES omdia-cinema-

That’s a good number to keep in mind that if streaming ends all theaters long term, that’s a lot of revenue that streaming may never make up. As Omdia itself point out:

Screen Shot 2021-01-25 at 10.17.57 AM

In other words, theaters declined by 71% and lost 32 billion, but streaming only made up for a fraction of that, increasing by 30% with 8 billion in gained revenue. So that leaves studios/producers down 8-12 billion (minus 35-50% roughly for the split with theaters).

Entertainment Strategy Guy Update – The Pac-12 Fires Larry Scott

It turns out that the presidency wasn’t the only office changing hands last week. The Pac-12 fired it’s long-term commissioner Larry Scott. Normally, conference hirings and firings don’t rate a spot in my column, but this gets an exception for two reasons. First, as a fan of a team in the “Conference of Champions” this could help the Pac-12 return to glory. Second, I wrote about whether the Pac-12 made the right call in not signing a strategic partnership for Athletic Director U last year. This is a super mathy, but fun look at opportunity costs, valuing strategic options and decision making.

Patrick Crakes on Twitter laid this out more succinctly here:

Other Contenders for Most Important Story

And now for the quick hit stories that caught my eye…

Disney Leads in Indonesia

One of my more controversial positions in the streaming wars is that we should analyze the war battlefield by battlefield. While global numbers are easy, they often obscure smaller trends that matter. To change a famous political aphorism, all streaming is local.

Take Disney+. They’ve already taken a lead in India and, according to a new report, Indonesia. How the smaller countries and regions fare going forward is a fascinating, and under covered, element of the streaming wars. 

The CW New Shows Headed to HBO Max

A few years back, The CW signed a big deal that delivered all their current shows in the “Pay 2” window to Netflix. (Pay 2 is after a one year holdback.) This deal was mostly a win-win, with The CW getting a billion dollars per year, and Netflix getting a lot of content that repeatedly made their top ten list in America (and likely around the world) including Supernatural, Riverdale and the Arrow-verse shows. Last year, we noted that the CW was ending this arrangement, because in the steaming wars you can’t arm your competitors, and the question was where does the content go, Paramount+ or HBO Max? The answer is the latter. (Read my story of the week on this here.) 

Assuming the price makes sense, this is another good content decision by HBO Max. Pairing more CW shows, HBO, and Warner Bros content will increasingly make the HBO Max library one to envy. It’s deep. Few customers will switch to HBO Max for these shows on their own, but it could help HBO Max keep folks in the ecosystem. And that’s the name of the game: keep folks on the platform to reduce churn.

Caveat: Batwoman had already gone to HBO Max last year, but this announcement confirms all new CW shows will end up on HBO Max through 2021.

Last caveat: Netflix will continue to air shows that started under their old deal, which could incentivize The CW to end shows sooner than they would have otherwise. That will be a subplot to watch.

Paramount+ Launches on March 4th

The name change officially starts on March 4th, with a new product roll out announced the week before. Expect that to be the story of the week when it happens.

Did Netflix Have a Strong Q4 For Content? And Other Thoughts Before Netflix’s Earnings Report

This year marks a pretty significant upgrade in the amount of data we have available about streamers. At the start of the year, we had to rely on Netflix to tell us during the quarterly earnings (or selectively on Twitter) how well their content is doing. Since then we’ve added regular Nielsen reports, Netflix’s daily top ten lists, and multiple different analytics companies selectively releasing data points for us to chew over. 

With all that data, we can begin to analyze how well each streaming company is doing in any given quarter. If you believe, like I do, that…

Popular content —> Higher Usage —> Higher retention —> Higher subscriber totals

…then this seems like pretty valuable information. And this is the first earnings report (Netflix publishes their Q4 2020 report tomorrow) where we can really unpack all that data.

Initially, I had hoped to make some quantitative predictions about Q4 2020 compared to past years and quarters. But frankly I don’t have enough information to do that confidently. (We’re firmly in small sample size territory.) What I can do is provide a quick look at Netflix’s Q4 content. Then we can try to do what analysis we can, and make some inferences. 

What Does Nielsen Say?

Nielsen’s data has been the most useful new data source we have this year. Specifically, because it shows the volume of consumption for a given show, week by week. 

The limitations are time frame and the total minutes viewed. Nielsen has only been providing a public top ten list since August. They provided me with data back to April—and I found three data points in March—but that still only provides us three quarters of data. Thus, we can’t compare to Q4 of last year. 

Further, since the top ten list only has ten spots, we don’t get a full picture of Netflix’s original films and series. In particular, since Nielsen measures at the series level, some licensed titles are overrepresented. For example, four shows have made up a huge portion of Netflix’s viewing and three of them make the top ten list every week. Meaning, at most this is a top seven list for new Netflix shows/films, at best. Usually less.

With that in mind, how does the picture look for Q4, given that we are missing two potentially big weeks of data (the last of the year)?

IMAGE 1 By Week

I tried to play around with this data in a lot of different ways to show the average by month and quarter, but given that Nielsen starts at different times of the month, it made March—the crucial month—look funky. Here’s the average per week by quarter:

IMAGE 2 - By Quarter

So if we use Nielsen data, that means that Netflix is having a better quarter than Q3, but still dragging way behind the end of Q1/start of Q2 peak. I can’t stress how good Netflix’s March in the US was with Spenser Confidential to start, Tiger King on 20-March and Ozark on 27-March. Remember, Ozark would be the most watched original in Netflix for the whole of 2020. Compared to that, though, November was good for Netflix. Both The Crown and Queen’s Gambit simultaneously did well.

Is viewership of the top ten correlated with viewership of the platform as a whole? In my experience, absolutely. Though I can’t quantitatively prove it here.

What Does Netflix’ Datecdotes Say?

As a reminder, these are…

The total number of subscribers who watched 2 minutes in the first 28 days, globally.

Fortunately, since changing from “who watched 70%” in Q4 of 2019, Netflix has stayed consistent on using this metric. Thus, by my measure, Netflix has released 66 datecdotes from Q4 2019 to Q3 2020. Notably the number of datecdotes are increasing every quarter:

IMAGE 4 - Netflxi Datecdotes

Using this metric, how did Netflix do? Let’s start with film. The challenge is that there are so many different ways to cut the data. So here’s Netflix’s films that netted over 38 million subscribers globally over time:

IMAGE 5 - Netflix Films

You can see a few of the problems with this data. To start, we can’t use it to predict Q4’s performance since Netflix has only released one movie data point for Q4 so far. Further, it’s noisy and it’s not clear it’s correlated with adding subscribers. For example, Q3 had a number of 70 million plus viewed films, but it didn’t help Netflix grow subs in Q3.

This is also a “tale of two data measurements” problem. If films are measured simply in total numbers, Netflix is growing each quarter. Measured by the percentage of folks tuning in, it’s shrinking. 

Let’s switch over to TV. In this case, Netflix has released three datecdotes so far, and the picture looks slightly better:

IMAGE 6 - Netflix TV Datecdotes

In both cases, though, the big performance of The Queen’s Gambit and Bridgerton will likely pull up the content performance of this quarter. The Crown did very well in Nielsen’s rankings so it could pull up the average as well.

How Do the Q4’s Compare Over the Years?

Interestingly, Netflix has tended towards a similar release strategy the last few years: release a big Christmas film in the middle of November, release the awards bait at the same time, release a big movie to close out the year and a big TV show as well. Here’s the last 3 Q4 release plans:

IMAGE 7 - Last 3 Q4

So can we learn anything here? I’d say not really, until we learn the rest of the Netflix datecdotes to round out 2020.

What Datecdotes Could We Learn Tomorrow? 

As you can see, we don’t have the data points for this quarter. (Which I just mentioned above!) We only have four, and they’re lagging their analogues from previous quarters.

Looking at the films that made the Nielsen Top Ten, we can see the trend with the films Netflix has provided a datecdote. 

IMAGE 8 - Table of FIlm Nielsen

Looking at this, we can say fairly reasonably that Hubie Halloween and Christmas Chronicles 2 will likely get the “datecdote” treatment this quarter. Hillbilly Elegy would be a good bet too. A California Christmas is on the border line.

However, with Nielsen’s data, this doesn’t have to limit us as much as the past. Specifically, we can also have a range for what we think Netflix’s datecdotes will be. Let’s be clear, this isn’t the most complex data analysis in the world. I’m basically making a scatter plot and having Excel draw the line through it for me. Still, the correlation is fairly tight (.85):IMAGE 9 - Correlation tableIn other words, I’m guessing that we’ll hear data points about Hubie Halloween at around 74 million viewers, with The Christmas Chronicles 2 potentially well above that (92 million). Hillbilly Elegy would be around 50 million viewers. Here’s the ranges:

IMAGE 10 - Forecast

With this, we could update the Q4 comparison above to see the potential growth in total viewers:

IMAGE 11 - Comparing Q4

As for the TV side, forecasting there is a mess, because of different seasons. The most likely datecdotes for Q4 are The Haunting of Bly Manor, Virgin River, and The Crown. The Office could be a wildcard flex by Netflix as it leaves. Emily In Paris and Selena are less likely but possible.

Add It All Up: What Do We Have?

Since Netflix dropped Bird Box’s rating on us in Q4 of 2018–what I’m calling the “Netflix Measurement Era”–here’s my quick take on how well Netflix has added subscribers, along with some of the biggest content per quarter:

IMAGE 12 - Table with Subs

Looking at that table and focusing on 2020, I’d spin this story:

Netflix started off the year 2020 strong with The Witcher being one of the most popular series around the globe. (It was released in the last week of 2019.) Then, when people entered lock-down for Covid-19, Netflix also happened to have some of it’s most popular content of the year at the same time, Money Heist (3-Apr), Ozark (27-Mar) and Tiger King (20-March). This led to big subscriber growth after the first quarter and into the second. However, Q3 didn’t have any breakout hits to drive significant new subscriber growth.

Indeed, this weak slate in Q3 led to the smallest US growth since Q2 of 2019, the smallest global subscriber growth 1.1% of the last two years, and missing the estimate.

So looking at the data from today, does Q4 return to Q1 levels, or merely hold steady? 

I’d guess hold steady. 

Subscriber growth isn’t solely driven by content. The Covid-19 lock down definitely drove growth and price increases (like this last quarter’s in the US) can also slow it down. That could be as much the story of Q1 and Q2 as anything else. (Q2 in particular felt light for content after March.)

Looking at the Nielsen data, the datecdotes so far, I’d say Netflix is definitely having a better quarter than Q2 and Q3, simply because Q4 was trending upwards and Bridgerton/The Midnight Sky will likely finish very strong for Netflix. 

That said, this doesn’t look like Q1’s big subscriber growth, does it? The March slate for Netflix happened to come right when folks were binging like crazy. A perfect storm of good content for the right time. 

Nate Silver Wasn’t Wrong…We Were: What Hollywood Can Learn from the Election – Most Important Story of the Week 6-Nov-20

Let’s not kid ourselves. This week was about one story. Everyone in America–and around the globe–was watching for the results of Tuesday’s election. I didn’t get any work done on Tuesday or Wednesday because I was distracted by following the news.

So it’s our story of the week!

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Most Important Story of the Week – What a Electoral Polling Mistake Says About Decision-Making

I won’t discuss the impact of the election from a political perspective. That is for political pundits, which I am not.

If I’m anything, though, I’m a Nate Silver fanboy. Silver has been incredibly influential for this site. I regularly cite him and his work. I use the phrases “signal and the noise” a lot. And I try to build forecasting models for entertainment. That’s my political affiliation: data truther. 

Which is why the narrative bothers me. Imagine this scenario.

Pennsylvania’s legislature allows votes to be counted several days before the election, whereas Florida votes to end early counting. 

Then, on election night Joe Biden is declared the winner in Pennsylvania. 

Would the narrative have been different? Heck yes.

(To be clear, while Biden leads in Pennsylvania, the race hasn’t been called by networks or the AP nor have final votes been tallied, the latter being the true “count”.)

But the “narrative” is not reality. The narrative is the collective chattering of talking heads, social media conversation, and news coverage. But notably, the narrative is not reality. Reality is reality. See how easily the narrative changes if just two states count their votes differently?

On top of the narrative are the “expectations” that came into the election. These were set, overwhelmingly, by Nate Silver and his 538 model. His model is based on the polls, which had another error like 2016 that underestimated Donald Trump.  (We don’t know the true magnitude yet, which I’ll get to.) This set up a lot of optimistic expectations for Democrats. This set up another narrative, that Silver screwed up his models or that polls are irrevocably broken, or both. Even more than the results, this could be the narrative driving Twitter, “How did 538 lead us so astray?!?!?”

Let me provide just one example from my experience. In my previous role at a streamer, I gathered all the data to help the key decision-makers decide what shows to order and renew. Yet, the data wasn’t mine alone. Often, executives wanted the data immediately. Meaning a streaming show premieres on a Friday morning, and the executives wanted email updates for how the show was performing. Sometimes hourly! Several times, a show would start slow, for whatever reason, and finish strong. Or vice versa. But executives checking every hour would often use their first impression as the takeaway for how the show did.

In other words, I routinely saw the mistakes being made for this election at  a big company in America.

If you’re a decision-maker, your goal is to focus on reality, not the narrative. And where they diverge, you take advantage. If you’re an investor, you invest to make money when the narrative clashes with reality. If you’re in business, you build a competitive strategy off it. And if you’re in politics, you win future elections.

In general, the biggest “error” was not from the polling. The biggest error was how we consumed election night information. (And I’m guilty here too.) Understanding that will help us all–and especially business leaders–make better decisions.

What Nate Silver’s 538 Is Trying to Do (And Other Modelers)

Before we can understand what went wrong, we have to understand what both polls and models of polls are trying to do.

The goal of a poll is to forecast the feelings, opinions or thoughts of potential voters for upcoming elections. It’s a survey! Of course, the goal of this survey is to be accurate. If you could, you’d survey everyone in America. But that would be really expensive! The compromise is to survey a sample and draw conclusions from it. 

The challenge is how pollsters gather that sample. If their sample is biased, the survey won’t be accurate. That is why pollsters get paid the big bucks. Eh, big is too high. Let’s say “some bucks”. Surveys are easy to do, but really hard to do well.

In America, recent technological developments have weakened the ability to survey various populations. Specifically, the rise of cell phones with caller ID has decreased the number of respondents who talk to pollsters. Unlike the past when landlines were ubiquitous, many homes do not have a landline. The potential replacement–internet polls–come with their own sampling problems.

The solution is to adjust the sample population and weight it by various demographic categories. Like age, gender, location, income, past voting history and now educational attainment. Various pollsters use different methods to adjust these results and have done this for decades. Yet, this introduces its own uncertainty. It means that polls are models of what they anticipate the electorate to look like in a given election. 

This brings us to Nate Silver. He makes a model based on polls. Or a “poll of polls”. But since the polls are models, really he makes a “model of models”. The logic is that the average of multiple data points will be more accurate than picking any individual poll by itself. (He’s right here, by a long shot.) And his model crunches tons of additional data and historical evidence to make it as representative of potential outcomes as possible. 

Yet, if all the polls Nate Silver uses have the same correlated error, his model won’t be accurate.

In other words, garbage in, garbage out. But garbage is too strong. So “slightly biased data in”, slightly biased data out. (As it stands, his model predicted 47 of 50 states, but we have to wait to find the margin of error, which is more important.) A model is only as good as the data going into it.

The Models Weren’t Wrong…We Were

Yet, the most misleading thing about the election wasn’t polling errors. The bigger mistakes are still being made.

  • A lot of folks saw the results on Tuesday night, and then rushed out to provide their takes.
  • Worse, even more  folks consumed a lot of data about the election on election night. And then they stopped. (Or they will stop when the election is called.) 

If you’re a voracious news consumer, you’re actually more at risk of this. For example, can you tell me what the polling error was in California in 2016? Did you know that polling actually underestimated Democrats in that election? (If you listen to Nate Silver’s 538 podcast, then yeah, you probably heard him say this, which is where I got it from.)

Yet, because California wasn’t a swing state and folks didn’t check in for final results (which take weeks, unfortunately, to get) most folks never internalized this lesson. They only internalized the miss in Rust Belt swing states. In other words, most folks were not properly informed about what happened politically in 2016 if they focused on election night. Meaning if they had to draw conclusions from 2016, they were more likely to make the wrong conclusions. 

Let’s explain what these decision-making errors are (via their logical fallacies if possible) to correct these mistakes.

Using biased samples/Drawing conclusions too early

This is perhaps the biggest problem with drawing any conclusions from the election:

We don’t have all the data in!

As I write this, California only has about 74% of its vote counted. Many other states are like this as well, and states are still certifying their results. Frankly, you can’t draw conclusions until you have a complete data set, otherwise you risk a biased sample size. 

Which is really ironic, isn’t it? 

The problem with the polls is they have some correlated error which makes them biased…and we judged that on election night with a biased sample size!

Specifically, many urban centers are very slow in counting ballots since they have orders of magnitude more votes to count. Yet, that definitionally makes conclusions biased towards rural communities. This is definitional bias in the “poll” of current vote tallies.

This happens outside of elections. For example, folks evaluate a feature film’s performance on its opening weekend box office. Which is pretty correlated with final performance, as I’ve written. But the two week box office numbers are even more correlated with performance. If you wait two weekends, in other words, you can have a more accurate recall of box office numbers.

The “Temporal data fallacy”/Drawing narratives from sequential data drops.

Obviously, the order of revealing the data shouldn’t impact our conclusions from the data as a whole. What matters are the final results. I’ve taken to calling this the:

The “Temporal Data Fallacy” is drawing a narrative based on the sequential release of data, when the timing of release is uncorrelated with the outcome.

And it doesn’t just happen for elections. In sports, we often weigh what happens at the end of a game much more strongly than what happens in the middle. But a missed basket in the second quarter impacts the outcome just as much as a missed basket at the end, for example.

Availability heuristic/Rare events are easier to recall than common ones.

If you watch all of election night, but have to go back to work the next two nights, then when you recall the election later, you focus on events in the moment, but not the outcomes that happen later. Moreover, the stronger the emotions you feel (like despair at losing) means you recall those events with even more alacrity. Which is why Biden could wind up winning with a greater margin than George Bush in 2004, yet it will feel like he lost because he lost Florida early on Tuesday night.

Folks like to mention Capital in the 21st Century as the most common book that is purchased but not read by intellectuals. I’d offer that Thinking Fast and Slow by Daniel Kahneman as the book that was most read but least applied. We all know the availability heuristic is a thing, but we still are walloped by it on a regular basis.

The curse of small sample sizes/Overconfidence in results.

Elections are a pretty small sample. Which Nate Silver repeatedly tries to tell us, but we usually forget. (They only occur every two years, and Presidential elections every four.)

That’s why his model had everything from a close Biden win to a big Biden blow out in their range of outcomes. With small sample sizes comes greater uncertainty. While Silver has tremendous uncertainty in his model, most folks only focus on the average outcome.

Valuing Process over Results/Expectations

This also relates to the penultimate problem, which is the focus on results over process. Maybe this is philosophical, but I’d rather be wrong for the right reasons, then right for the wrong reasons. The former means I’m still making accurate predictions; the latter means I don’t know. In Nate Silver’s case, his model only gets tested one out of every four years. Sure, sometimes he’s going to miss, but the value is in the model, not the results.

Meanwhile, we often only care about results in terms of the expectations. Thus, Biden will likely win, but since folks thought Democrats would win the Senate too, it feels like a loss. (Winning the Senate, House and Presidency had about the same odds as Hillary winning in 2016, 70-77% in 538’s model.) But the Democrats will likely win an election against an incumbent, which is really, really, really hard to do! That’s worth celebrating, though folks won’t. 

This happens in entertainment even more often. Say two films have the same budget. One is expected to gross $300 million and gets $280. The other is expected to gross $100 and gets $180 million. Sometimes the narrative praises the latter film, even though it made less money. But it beat expectations.

My Advice

So I have recommendations. To make you slightly better at analyzing data in your everyday life and professional role:

– Get rid of dashboards. Dashboards are the election night of data. They take a stream of data in and folks can check them whenever. Even if they don’t need the data or the data is wrong or a decision doesn’t need to be made.

– Determine what numbers are your signal, what numbers are noise, and don’t check the latter. Checking data that isn’t tied to key outcomes will only jumble the narrative and pollute your thinking.

– Check data less often. And check later. This is the hardest thing in the world for decision-makers. A new TV show comes out, so everyone wants to see the ratings. But if you don’t have a reason to check the data–and reason means a decision to make–then checking the data could mean you’re absorbing misleading data. Which the availability heuristic shows will be tough to forget later. 

– Have a “data” plan for your company. (And a communication plan while you’re at it.) This plan should explain what numbers your value and when you check them. And that should be tied to decisions.

– Lower or raise your statistical significance. One of the crazy parts of statistical analysis is how much we still rely on the 5% threshold for statistical significance. This is an artifact of pre-computer calculations. But for some measurements, we need more confidence, and others we actually need less. You should analyze your data with this in mind.

– Ignore most headlines with statistics you haven’t tracked. And please don’t repeat them if you don’t know how they were calculated. Those are likely datecdotes.

Entertainment Implications/Entertainment Strategy Guy Updates to Old Ideas

Entertainment is Filled with Small Sample Sizes

If you take away nothing else, remember this. Much data in entertainment tends to be annual, and that means your sample size is only as big as the number of years in your sample size. In other words, when drawing conclusions, be careful about overconfidence.

(Think box office year over year. Most folks will willingly tout all sorts of reasons for why the box office declined year-over-year or raised, but most likely it’s just statistical noise.)

Surveying Customers Is Still Valuable

One result of the election is folks questioning all political polling. Or asking if this is the end of quantitative data. It isn’t.

 In general, I’m a fan of more data in general: surveys, polling, quantitative, behavioral, even focus groups! They al have a role.

The key is finding which data matters and when it matters. But will “qualitative” data replace quantitative? Hardly. Surveys will still be better than relying on anecdata or datecdotes. 

(In TV in particular, if you get rid of ratings, and rely only on making TV shows using “qualitative” data, that could mean making TV for folks like you. Since you aren’t a representative sample size, this is a bad decision.)

The Presidential Race is Logarithmically Popular

My favorite chart returns! The spending/awareness for Presidential races is orders of magnitude larger than dozens of senate races, hundreds of house races and thousands of state legislatures. That’s logarithmically distributed!

Image 8 - without additionsStreaming Analytics Firms Have Polling Error…But What Is It?

This is a lens I plan to analyze all the streaming analytics companies through, some day. Some firms have potentially biased sample sizes (all users of their service is not representative), others have limited sampling (potential bias), others are limited by their own data (streamers know exactly how many folks watch their content, but not other streamer’s data) and some firms have models with unknown weighting (so you can’t judge the process).  

Given they are the best data we have, I will use their data. Heavily. But I’m aware of its limitations, which lots of news coverage doesn’t seem to be.

Netflix Is Raising Prices Because It is Shifting Strategies: Most Important Story of the Week – 30 Oct 20

As of Wednesday, I was flailing for a story of the week. Well, thank you Thursday! And happy Halloween to everyone. Stay safe.

Lots of stories, but we have to go with Netflix…

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Most Important Story of the Week – Netflix Raises Prices. But Why?

Not a lot is truly surprising in the streaming wars. Take the recent service launches. First, a pivot to streaming is rumored. Then confirmed. Then details are leaked. Then when they roll out, for the most part they are what we expect. 

Or take Netflix. They usually telegraph price hikes a few months early to help prepare us. In their last earnings call, for example, they hinted that with all the content coming in the second half of 2021, maybe a price hike was due. So we set our watches for the once every two year price hike.

And then they announced on Thursday it’s coming in November!

What happened?

Well, increasingly Netflix is shifting from a company focused on growth to one focused on making money. This is a typical transition as a company ages. Netflix is “entering middle age” as I recently wrote. The challenge for Netflix is to manage this transition while sustaining their stock price.

Which is hypothetically the point for every company, but seems even more important for Netflix. My feeling is that the debate between the bulls and the bears is really about what financial metrics we’re looking at. Some analysts only focus on the subscriber growth, either US or global. Some toss in revenue, which has grown with subscribers. Then a select few focus on the free cash flow and subscribers. 

The tough part for any company is getting all of the metrics to go up simultaneously. I’m reminded of a story the Manager-Tools founder Mark Horstmann would tell. Some executives are sitting around looking at a set of inputs for an engineering project. If you add weight, you decrease speed, but maybe save costs. If you cut costs, the quality goes down. And one exec says, “Well it would be great if all the numbers would go up simultaneously!” Yeah it would! That’s the tough part of engineering. And strategy.

Indeed, that’s the goal of a good strategy: to increase all your performance metrics simultaneously. But that’s really rare!

We see this with Netflix. Essentially, they’re shifting from one strategy to their next stage of life, but that comes with lots of tradeoffs. To see this, let’s start with the inputs Netflix can control. Roughly, I’d say there are three big buckets:

– Prices for customers
– Short-term content spend (licensed content)
– Long-term content spend (library)

These lead to a few key metrics that relate to the strategies:

– Subscribers
– Revenue (the top line amount of money someone makes)
– Free cash flow (the amount of money a firm actually makes, as distinct from profit.)

(Why not use profit? Because content amortization plays so much of a role that it’s hard to evaluate. Some folks use EBITDA as a proxy for profit, which cuts out some of this.)

Those financial outputs also tie to the lifestage/strategy of a company, neatly summarized by Salil Dalvi in this tweet, which inspired this article:

Thus we can summarize it like this, with each stage/strategy having different inputs that drive the strategy and different financial metrics:

– “Growth” phase:
Key financial metric: Subscribers.
Key Inputs: Low prices, lots of short-term content spend.

– “Building” phase:
Key financial metric: Revenue and Capital expenditures
Key Inputs: Wholly-owned content spend.

– “Make money” phase:
Key financial metric: Free cash flow
Key Inputs: High prices, lower content spend.

Netflix started life in the “growth” phase. That’s what allowed the stock price to explode. And they rode that, while pivoting to the “building” phase, that meant spending more than the rest of Hollywood combined on content. The goal was to build a library/moat to sustain their subscriber advantage. (The challenge is how much of that content they own, even now.) If they are now pivoting to a “make money” phase, how does that impacts their stock price?

I’ve been deliberately using “tradeoffs” as the word to describe this because for the most part it is a different combination of inputs for different strategies. Netflix would love to grow subscribers and revenue and free cash flow, but it can’t/never has. It could do two of those simultaneously (revenue and subscribers, for example or revenue and cash flow), but not all three. The huge growth of the last decade came with a big price tag, losing $10 billion in cash in the last 12 years, and more in opportunity costs. 

Ironically, the “Covid Caveat” times may have forced Netflix to move to “make money” sooner than their plans. The Q2 immense lock down growth pulled forward future growth, which hurts the growth narrative for Wall Street. Meanwhile, shutting all productions basically will allow them to be cash flow breakeven to positive for the year without seeming impacts on subscriber churn.

Once you realize Netflix is no longer focusing on growth, a lot of recent decisions make a lot of sense:

– Raising prices in the United States? All about boosting revenue and cash flow.
– Ending free trials? Reduces churn and boosts revenue per new subscribers.
– Cancelling underperforming shows? Reduces overall content spend.
– Rearranging the entire TV team? Actually, no this isn’t explained by the goal to drive revenue. (Listen, some grand theories can’t explain everything.)

In other words, in some territories growth is running out. And meanwhile Netflix is constantly worrying about what Wall Street thinks. If they show positive cash flow one year, but then lose $3 billion the next, does that crush the price? Or if they show stalled global subscribers without higher revenue, does that lower their multiple? Or just low single digits revenue growth? What does that do to the valuation?

 When you’re one of the highest price stocks in all history in terms of profit or cash flow, you worry about what will make the market finally change their mind. 

Some final implications:

– First, you really see that the traditional conglomerates have a different tradeoff. They’ll hemorrhage current cash flow by going to streaming, but they won’t have to worry about building long term libraries. They already have those. After they catch up in the growth phase, this could be an advantage.

– Second, this shift isn’t necessarily global. Some territories will mature at different rates. Most of this story is a United States story. But, despite the narrative, by most metrics the United States is about 50% of Netflix’s business. (Like in revenue.) 

– Third, this is what puts the Netflix stock in a different category than it’s fellow “FAANGs”. The others see booming user, revenue and cash flow growth simultaneously. Netflix has to choose.

– Fourth, this chart from Evolution Media Capital tells the story of the price hikes perfectly:

unnamed

Other Contenders for Most Important Story – AMC+

AMC+ was announced in June as a bundle of AMC streaming services for one price of $5 on Comcast. The news earlier this month was that it expanded to the Amazon and Apple Channels programs for $9. (The streamers include AMC content, Shudder, Sundance TV, iFC Films and BBC America.) 

I’ve been meaning to dig into this news for a pinch, since it’s a big strategy shift for a smaller strategy player. But it really deserves its own 2,000+ word deep dive.

In the meantime, I like this move for AMC, with the caveat that they’ll never win the streaming wars with it. Essentially, this is admitting that AMC knows their strategic limitations. (Analogies: this is the Frey’s allying with the Lannisters. Or Canada in World War II joining the winning team.) They don’t have the cash flow to build a technology platform. So let Apple, Comcast and Disney do that, and accept lower profit/cash flow with it. Meanwhile, the new AMC+ isn’t quite a bundle, but it is broader than the niche services. That’s smart.

Data of the Week/Entertainment Strategy Guy Update – The Straight to Streaming Market

Each week for the rest of the year, maybe for the rest of time, will be a referendum on whether or not films should go “straight-to-streaming”. This week had some fun updates on that. The big caveat is that one film doesn’t prove the thesis either way. Sort of like how no individual poll in the current election is decisive. Take the average.

Let’s start with the success. Borat 2, or whatever it’s long title is. Borat did what any film hopes for, which is to get tons of earned media exposure by becoming a national news story. (Thanks Rudy!) As such, it did really well for Amazon Prime/Video/Studios/Channels/IMDb. Here’s the quote Apptopia sent me:

Today’s finding: Amazon Prime Video just achieved its highest number of single-day installs (on mobile) on record (our data goes back to 2015) with about 520K on Sunday. 

This is backed up by the Google Trends:

Screen Shot 2020-10-30 at 10.35.36 AM

(The caveat is we can’t untangle how much folks were searching for news on Borat versus viewership. That said, I expect it will make it into Nielsen’s top ten in three weeks.)

Of course, a deal isn’t good just on performance alone. What matters is the price for that performance. Or return on investment. (Lebron James isn’t the best because he’s the best, but because he’s the best and his salary is capped at $30 or so million per year, when he could be worth double that.) The news via Deadline is this film cost $80 million to acquire directly from Sacha Baron Cohen

So did Amazon Prime/Video/Studios/Channels make any money on it? I honestly don’t know. Folks have asked if I could run my “Great Irishman” model on it, but we cannot. Because we don’t have the Prime Video inputs. We know how many Prime subscribers there are as of January, but not how many folks actually watch the service, let alone value it. At $80 million, we’re definitely on the “needed to be a big hit” side of the ledger, but this looks like it got there. (We’re closer to running this analysis with Disney+ than Amazon because at least Disney gives us subscribers every quarter.) 

(I’d add, we also don’t know the full terms for Borat 2. How long does Amazon have exclusivity? Do they have ownership later? We don’t know.)

Speaking of pay days, the best rumor of the week comes from The Hollywood Reporter (and others) that MGM was asking for up to $600 million for the rights to James Bond for some period of time. Which is eye-popping on one regard, but also eminently reasonable in the other. James Bond films make bucks at the box office, which means they make money in home entertainment and in subsequent windows:

Screen Shot 2020-10-30 at 9.45.11 AM

The best summary of the landscape comes from Brandon Katz at Observer:

What I’d say is there is a ceiling to straight-to-streaming releases, and it’s right around $100 million production budgets. (If not a bit lower.) Every so often a streamer will go over–Netflix with The Irishman and Triple Frontier/6 Underground; Prime Video with Coming 2 America 2; Apple TV with the next Scorsese budget pit–but those are the two biggest, and even then they’ll likely lose money.

(This is why I wrote in the Ankler that the straight-to-streaming move could end “blockbusters” as we know it. And talent would lose a lot of money too.)

Most importantly, using my “need to make money” framework, MGM is the type of firm that needs to make money. If MGM spends $200 million to make a film, they can’t just lose money on it and make up some imaginary source of data/subscriber retention to justify it. They have Private Equity guys breathing down their necks to make a return.

So yeah, they explored selling to streamers, but at that price tag only theaters can make money on it.

Other Contenders for Most Important Story – Comcast Earnings Report

Comcast made the most “news” with their earnings report. So let’s rank the insights in order of importance.

  1. Content doesn’t have one home, it goes to the best platform.

With this quote alone, Comcast/NBC/Universal/Peacock has moved up my power rankings. I’ve been advocating this position for awhile, and loved it when CBS started airing The Good Fight on CBS. Essentially, you can easily overvalue “exclusivity” for streaming, and the goal is to make a good piece of content and make as much money on it as possible. This doesn’t apply to Netflix or Prime Video, since they don’t have other channels, but for NBC, Disney and HBO this absolutely should be the plan: make content, find the best first home, and then the second best home and so on. (Essentially HBO Max is already doing this with HBO shows.)

  1. Peacock has 22 million users.

Caveats abound. (How many active users? How many paid?) But at least they provided a number.

  1. Touting the executive reorganization.

If I were in Afghanistan, I’d hate it if my boss changed every six months in relentless reorgs. Instead, we simply changed the entire leadership every year. (Wait, that was fairly bad too. Truly an awful organizational decision.) Let’s hope this sticks and they finally have a streamlined organization with clear spans of control.

  1. Comcast is holding to their theatrical/PVOD plan, regardless of theater closures.

Which makes sense. They can’t delay forever, and at some point these costs are sunk.

  1. Cord-cutting continued, but decelerated.

Which is interesting. Here’s the best chart from Evolution Media Capital:

Lots of News with No News – Rest of the Earnings Reports

Congratulations to Amazon, Apple and Google for providing very little insight into their streaming video businesses. Their earnings reports are a credit to a lack of transparency. We should break them up if for no other reason than because they make billions in cash but can’t bother to provide details into any of their business units.

4 Insights on Disney’s Content Strategy from the Last Summer

My last few weeks have been spent digging through all the data I could find on the streaming wars. What makes this different than the past is that we finally have a lot of data to parse. Firms like Nielsen, Reelgood, 7 Park and even Netflix themselves have started releasing insights into the streaming wars.

And for the first time, I started to get some insights into Disney’s streaming adventures. Since I was searching for the answer to “How well did Mulan do?”, naturally I found a lot of Disney+ viewership data. And some clear trends emerging about that platform. 

Without further ado, 4 insights on Disney’s streaming content strategy. (By the way, these insights are almost exclusively American since we still don’t have great global data.)

Insight 1: Disney is a Hit Driven Business

In entertainment, you don’t win with doubles and singles. You win with grand slams, since grand slams aren’t worth a bit more, but orders of magnitude more. The top film at the box office earns as much as hundreds of other films, for example.

Streaming hasn’t changed that. Hits are as important as ever. In the last quarter, Disney arguably had the most popular streaming release of the year with Hamilton. Check out Google Trends to see how much more interest there was than any other film in over the last three months:

Image 1 - G Trends with Hamilton

That’s the power of a traditional entertainment studio to find top IP and market it successfully. Going back to launch, arguably Disney+ only succeeded because it launched what is by many metrics the most popular new series in America, The Mandalorian. In other words, in less than a year of existence, Disney launched a show arguably as popular on steaming as Netflix’s top shows (either Stranger Things or The Witcher) and the most popular film of the last quarter. This is a look at just the last week to show how eagerly awaited it still is:

IMAGE 2 - Parrot Analytics Recent Demand

Moreover, as you’d expect, this drives adoption. Here’s Antenna’s sign ups by day chart:

IMAGE 3 - Antenna Longer Time Period copy

No surprise, but big events drive sign-ups. (And the Covid-19 lock down clearly drove signs up in early March, along with Disney releasing Frozen 2 and Onward early.)

Ramifications

The trouble with a hit driven business is you need to keep producing hits. Something Netflix has learned and worked to address in having a big hit each quarter. Disney will need to do the same, and their approach seems two fold: 

– They are building up to a Star Wars or Marvel TV series releasing roughly every quarter.
– Meanwhile, they’ll have their blockbuster films release on roughly a monthly schedule across all their brands likes Disney Animation, Pixar, Star Wars and Marvel. 

Of course, the coronavirus-field production shut downs are mauling this plan. Black Widow was delayed into 2021 and the first Marvel TV series—Falcon and Winter Soldier—due in August still hasn’t had a release date announced. As such, until Disney gets the hits rolling, their new subscriber additions will suffer.

Insight 2: Disney+ Is a Kids Platform First and Foremost

In other words, the vast majority of the viewership on the platform comes from kids watching and rewatching Disney films. To emphasize, rewatching popular content. Look at this chart from 7 Park analytics on the most popular content in Q3, through the second weekend of September:

IMAGE 4 - 7 Park Long Time Period

The shiny object is Hamilton. Again it was a beast. But ignore it.

Instead, look at the next film on the list: Frozen 2. Then 5 and 6: Frozen and Moana.

Yep, Frozen 2 is a juggernaut. Kids don’t just watch it, they rewatch it and rewatch it. But notably, this table is of all audience figures, meaning that the largest majority of customers for Disney+ are families streaming kids content. 

Ramifications

Disney has successfully grabbed grabbed audience share from Netflix in the kid’s space. Arguably, as one of the most trusted brands in entertainment, they had never completely lost it. But instead of letting Netflix build its brand with kids, Disney now owns that part of the relationship. Indeed, in 7 Park’s data, kids content never shows up for Netflix, but it routinely shows up for Disney+ content.

As for the strategy going forward, even Disney will need to refresh its kids content, releasing new films and TV series to keep kids engaged. You’ll also notice this list is all content released this decade. (I assume this is the Aladdin live-action film.) As strong as Disney’s library is, you need to constantly build new franchises. 

Moreover, Disney+ will need those superhero and sci-fi series and films to avoid a reputation as “just” a kids channel. If it is seen as that, that fundamentally limits its global upside.

Insight 3: The Straight-to-Streaming Strategy is Working

You might think I’m talking about Mulan, which would seem to contradict my article from a few weeks back explaining why PVOD didn’t work for Disney. I’m not.

Nor am I talk about straight-to-streaming or quick-to-streaming releases such as Onward (from Pixar), Artemis Foul, or Soul, coming in December. (Also from Pixar.) Those aren’t deliberate choices by Disney, more “best option in a sea of bad options” decisions forced onto them by Covid-19.

Instead, I’m talking about this film in particular…

IMAGE 5 - One and Only Ivan

Again, let’s look at that 7 Park data from above:

IMAGE 4 - 7 Park Long Time Period

The One and Only Ivan held its own against other Disney titles with theatrical releases and in some cases major marketing campaigns. Now, some of this is the impact of marketing the film within the app. Shows and films that get “banner” placement on a streaming app naturally get more clicks. Ivan got lots of that love. And content has been light on Disney+ over the summer, so there were banner spots to be had. Still, looking at the summer as a whole, this film did well.

Ramifications

Well, straight-to-series can work, if you satisfy the number one criteria: keeping budgets in-line with potential SVOD revenue upside.

As well as Ivan did, you can’t attribute lots and lots of customers to it. Instead, this is a solid single that keeps families engaged with Disney+. But it doesn’t drive tons of new acquisition (like Hamilton) or tons of retention (like Frozen/Frozen 2). 

What does this mean? Well, it means you need to have budgets that match that level of demand. In other words, straight-to-streaming video needs to have straight-to-streaming budgets. That means that $150 million budgets are out. $50 million production budgets are out. Even budgets about $25 million are dicey.

Disney both understands this and has experience working in this milieu. High School Musical, The Descendants, and Kim Possible are examples of Disney Channel TV movies, some of which were very successful. I’d add the Hallmark Channel and Lifetime have worked in this budget range for decades. 

The challenge is understanding budget limitations despite the pressure to compete by spending LOTS more money on content. Activist investor Dan Loeb wants Disney to deficit finance to acquire subscribers. Netflix routinely shells out big, big bucks for straight-to-streaming films. And I’ve said they are losing money on some of these flops twice now. First the Irishman and then their big action films.

Image 6 Netflix Hard R Financials copy

Disney needs to invest in streaming without forgetting that theatrical really drives extra revenue. Or they risk losing as much money as Netflix.

Insight 4: Hulu has not Had the Same Success as Disney+

When I talk streaming and Disney, most folks immediately talk about Disney+. And likely it will be Disney’s largest streamer in America soon. But it’s not Disney’s only streamer! Hulu still exists.

When I reviewed all the potential winners of the last two months, Hulu was notoriously absent. I checked in on season 2 of Pen 15 and Woke, but they barely moved the needle compared to Amazon and Hulu’s champions. Here’s my Google look:

Image 7 - G Trends Hulu

Yep, Hulu’s big releases are the nearly flat yellow and green lines on the bottom. This matches my perception via 7 Park’s data too:

Image 8 - 7 Park Summer Data

In other words, Hulu didn’t have a great quarter. Hulu’s best content is still library content or second window shows. Which is fine for retaining customers, but not for adding subscribers. Moreover, Hulu runs the same risk that when deals with big traditional studios run out–like Comcast or CBS–they’ll lose those shows.

Ramifications

Frankly, the fewer hits someone has, the likelier their service is to not be used, which means the higher churn will be. That’s the game in the streaming wars. So take a gander at Reelgood’s comparison of Q2 to Q3 performance by it’s users:

Image 9 - Reelgood

Hulu and Netflix were the services that saw declines; Prime Video and HBO Max saw gains; Disney+ was flat. Hulu is aggressively positioning FX as the brand for that platform. We’ll see if that works, but they need some buzzy shows that drive lots of viewing, and fast. I’d also recommend they focus on crowd pleasing shows—procedurals and sitcoms—which may not win awards or critical plaudits, but that lots of folks watch.

Who Will Win the Battle for the next “Game of Thrones”? : Where We’ve Been

 

(This is another entry to a multi-part series answering the question: “Who will win the battle to make the next Game of Thrones?” Previous articles are here:

Part I: The Introduction and POCD Framework
Appendix: Licensed, Co-Productions and Wholly-Owned Television Shows…Explained!
Appendix: TV Series Business Models…Explained! Part 1
Appendix: TV Series Business Models…Explained Part 2
Appendix: Subscription Video Economics…Explained Part 1
)

A trope of genre fiction is the character with unfinished business. The lone wolf who harbors a grudge against someone or something that harmed his family, destroyed his life or stole his (or her) kingdom. 

July was “unfinished business” month at The Entertainment Strategy Guy headquarters. I’ve started quite a few series and let news or time distract me from finishing them.  Having checked back in on “Should Your Film Go Straight to Netflix?”, “Coronavirus Impact on Entertainment” and “The Star Wars 2019 Business Report”, it’s time to return to a series that’s over a year old, diving into a deliciously provocative topic: which TV series will make the most money for its streamer, the next Game of Thrones or the next Lord of The Rings?

Why didn’t this series get finished? Two reasons. First, I got severely distracted by explaining all the math behind my models as I was building them. This resulted in five articles that were essentially “appendices”. (Seriously, if you want to understand the economics of streaming TV, check them out.) Second, pulling the data on past fantasy TV series and movies took longer than I anticipated.

No more! Today I’ll review:

– A summary of this series so far.
– An update on the news in “fantasy TV” since last summer.

Summary of Where We Were

Cue the narrator voice for a genre series returning after a two year hiatus: “Previously, on GoT vs LoTR vs Narnia”. My challenge is about as difficult: explain a several thousand word series in a few hundred words. 

This series was inspired by the general rise in fantasy programming at all the streamers. It wasn’t just Amazon that wanted the next Game of Thrones, so did Netflix and Disney+ and even HBO itself. I framed the question as:

Which franchise will make the most money for its streamer in the future, Game of Thrones, Lord of the Rings or Chronicles of Narnia?

My initial assessment—what I call a “Blink” look—is that HBO will win. Frankly, they paid way less than Amazon. (Initially described as a $250 million dollar deal for Amazon.) Then I heard that Amazon guaranteed 5 seasons! That’s at least $1.25 billion, and maybe more. That only gives the edge even further to HBO. At first, I didn’t really consider Netflix a viable competitor. (I was wrong.)

Then I moved onto the analysis. Which means building models to see what they tell us. The basic formula is pretty simple:

(The probability of success X The revenue upside in success ) — Costs = Likelihood of money made

The tricky part is calculating all that. To explain it, I’m using the “POCD” framework: 

People
Opportunity
Context
Deal

It’s a framework from the venture capital world, but I’m applying it uniquely to TV series. Essentially, people, opportunity and context describe how much revenue a company can make, and the deal explains the costs. 

I’ll make a bespoke model for every series under consideration using the various POCD inputs to change the probabilities or potential revenue/costs. I explained the TV profit model here and here, and also explained the tricky nature of streaming video economics here. (Those last two articles laid the ground work for my series on “The Great Irishman Project”.)

Then came the distraction. Since I had built this kick-ass TV series business model, I decided to use it on the original Game of Thrones. In a big piece published on Decider, I estimated how much money I thought GoT had brought in for HBO. (A whopping $2 billion plus.) This provides terrific context for the “upside” of all these fantasy series. (I wrote a few “director’s commentaries” for this article too.)

So that’s where my series left off. But the news didn’t end just because the series was delayed.

All The News Since Last Summer

When I started this series, I focused on three fantasy series based on arguably the three most influential fantasy books of all time…

Game of Thrones prequel (HBO)
Lord of the Rings prequel (Amazon)
Chronicles of Narnia (Netflix)

 Since then a few fantasy series have come out…

The Dark Crystal: Age of Resistance (Netflix)
Carnival Row (Amazon)
His Dark Materials (HBO)
The Witcher (Netflix)

And more have been developed or are in production…

The Wheel of Time (Prime Video)
Sandman (Netflix)
– Untitled Beauty and the Beast (Disney+)

If all those qualify for this battle, we’re up to 10 potential contenders for the replacement for Game of Thrones. And that doesn’t include potential series (Disney’s Book of Enchantments and Lionsgate’s The Kingkiller Chronicles) that died in development. And I haven’t even looked at Syfy’s lineup to see what else could qualify. (The incomparable Magicians just ended after their fifth season. Pay attention to that data point for later.) 

The Specific Updates

HBO and Game of Thrones prequel

In one of the more fascinating single day development moves, HBO both cancelled one prequel series (The Long Night/Bloodmoon) and announced another prequel series about the Targaryens (set about 300 years before GoT) called House of Dragons. I could spin this as good or bad for HBO, but either way their series is still happening. Right now, HBO is saying the prequel will arrive in 2022.

Amazon and Lord of the Rings prequel

Amazon meanwhile is furthest ahead, having started production this spring in New Zealand, only to be another Covid-19 casualty. (Though I believe production is set to start production soon or already has.) Amazon was under time pressure to get a TV series in production within two years, and that appears to have motivated the streamer.

Netflix and Chronicles of Narnia

If you search for Chronicles of Narnia and Netflix, you run into a series of articles asking, “Is this thing still happening?” And no one really knows. Netflix insists it is, and Entertainment One has hired a “creative architect”, but there is no release date or known shooting schedule. Which means we’re going to drop this series from our main contenders for another lower down.

The Dark Crystal and Carnival Row 

I’d describe these two series and “came and went” at Netflix and Amazon (respectively). Like the Magicians, these two series demonstrate that not every fantasy series is a guaranteed blockbuster. Though the former was arguably more popular due to the “Netflix Effect”. Still, neither is set to be the next Game of Thrones. 

HBO and His Dark Materials

As one of HBO’s first “Monday premieres”, this series was overwhelmed by Watchmen in terms of buzz. It has a better chance than either of the two previous series at being a future Game of Thrones, but the odds of that are pretty low.

The Witcher on Netflix

And now we have a legitimate contender! Lots of folks pointed out that I should have dropped Narnia for The Witcher when I first started this series. Indeed, The Witcher may have single handedly helped Netflix meet subscriber targets by releasing right at the end of 2019. It is arguably Netflix’s first or second biggest show currently on the air. (With the acknowledgement that “on the air” is an anachronism.) In other words, The Witcher has a great chance to be the next Game of Thrones.

Meanwhile, I’m going to monitor every other fantasy series that pops up in development or production. (For example, Amazon’s Wheel of Time series has promise.)

Now that we know where we’ve been, and what’s happened since, we can move into our four-part framework for predicting which of these series will win the battle. Tomorrow, we’ll continue with the first letter in our framework, P for People.

Most Important Story of the Week – 8 Aug 20: Hotstar, Star, Hulu and the Perils/Promises of International Growth

We’ve ended the “Asterisk Extraordinaire Earnings Season”. Giant tech companies did well; lots of other folks did poorly; what happens in the future is up in the air. 

One company that did particularly poorly was The Walt Disney Company, which wasn’t much of a surprise, given that all their theme parks were closed, so were the theaters they use to release their big budget films and their flagship channel ESPN didn’t have live sports. No company was more exposed to “quarantine of everything” than Disney. Well, maybe Live Nation. (Of course, since Disney beat their “expectations” their stock price went up.)

The story that caught my eye–and many folks on Twitter as well–was the news about Disney’s plans for Hotstar. Which is unique enough to be my…

Most Important Story of the Week – Star (nee Hotstar), Hulu and the Perils/Promises of International Growth

The news is Disney plans to turn Hotstar into a global streaming service.

For those who don’t know, Hotstar is an Indian SVOD company that was part of 21st Century Fox and the Murdoch empire. It is owned by Star in India, which is a wholly-owned subsidiary of Disney. Lots of insiders noted at the time that while Fox had a lot of buzzy assets (Simpsons, X-Men films, FX), Hotstar could have been the secret, undervalued asset since it’s the biggest streamer in India, despite fierce foreign competition.

Indeed, when Disney launched Disney+ in India, they used Hotstar to give it a boost. To simplify, Hotstar is to India what Hulu is to America: a broad general entertainment service. India, then, is another example of Disney using multiple streaming services to provide a general entertainment bundle. (Star also has lots of sports rights.) 

The news this week is that Disney plans to use Hotstar–referring to it as “Star” in their earnings report, presumably the new global name–as its new global, general entertainment brand. Many assumed that Hulu would have this role, partly because even Disney said Hulu would eventually roll out internationally, sometime in the 2021 calendar year. And when they clarify “calendar year” that means Q4, since their financial year starts in the fourth quarter of the calendar year. (I had thoughts for how they should optimize their next round of streaming launches here.) 

This news is a bit surprising. With the onset of Covid-19, Disney said they were delaying Hulu’s international rollout. Presumably that meant all global streaming ambitions.

Apparently not!

In other words, Hulu is out and Star is in. It wasn’t about saving money, it was about changing strategies.

Star has some advantages over Hulu. First, Hulu is still partially owned by Comcast for a few more years, and that means they have some input into how it operates/makes/loses money. Second, Hulu doesn’t have an international footprint, so it doesn’t have any advantage over Star in branding. Third, since Hulu isn’t global, it doesn’t have international rights for most of its content, which means again it has no advantage in launching globally.

Whether it’s Star or Hulu, clearly Disney wants to be not just a US or Indian only streamer, but a global streamer like Netflix or Prime Video. And the reason is to take advantage of what Netflix (and its boosters) call “global scale”. The idea that if you make content and sell it globally, you can amortize it over a broader swath of customers, hence increasing return on investment. For this strategy to work, it means content in one area has to travel well globally. 

The complication is that not all content travels well. In fact, I’d estimate 90-99% of content does NOT travel well. Yes, this clashes with the rhetoric coming from Netflix and Netflix analysts that tout the streamer’s global scale. This frankly just isn’t supported by the economics or the data. (Do I have a half-written article on this that I haven’t published yet? Yes, I’ve been working on it for two years.) 

The content that does tend to do well globally is relatively narrow, with some outside exception: 

– Big feature film blockbusters produced in Hollywood
– Animation (Because the voices can be easily dubbed.)
– Some procedurals produced globally (Think police dramas.)
– Some soap operas produced globally. (Think telenovelas or K-Dramas.)
– Some broad comedies (The key is not niche or culturally specific humor.)

This is my big worry for Disney’s global plans. Both for Hulu when it got delayed and now for Star. Essentially, they’re building a global service off primarily American originals and American productions. Don’t take my word for it, here’s Bob Chapek:

Star Content

The worry is that FX prestige dramas don’t play in Indonesia. Same for Searchlight indie darlings. And the same for broad-based comedies produced by Disney-ABC Television. As an American, I’m in for these types of shows. But I understand, and have seen, that different cultures want content produced by that culture.

Does Disney have broad, tentpoles for a service like this? Yep. If you want global content, nothing better than this:

disney-plus-layout copy

And toss in the wildly popular globally Simpsons. But that content is already on Disney+. So what does Star offer to customers if Disney+ is really the globally appealing service? Sure, it can bundle Disney+, but then why would customers who aren’t in India want/need Star?

My Recommendation: Take The Middle Ground: A “Regional” Streamer

If I were advising Disney, I would ignore the not-actually-working-in-practice theory of “global scale.” It’s a mirage. Instead, I’d focus on content that travels “regionally”. My suspicion is Disney knows this and that’s what Star’s actual mission is.

See, between content that doesn’t travel at all and content that is globally popular is a third type of content: “regional” content. This content travels within certain language groups or cultural areas. 

For example, Bollywood dramas play well globally. They just don’t travel to markets like America or Europe. But they perform across South Asia, the Middle East and larger Asia. If this type of content was paired with TV content from America that does travel well, you could begin to see a service that targets those regions fairly well. Then you could top it off with Fox/Disney blockbusters that don’t fit on Disney+.

Of course, then Disney would need European-focused content for Star in Europe and Spanish content for S Star in Latin-American focused service and so on. In other words, no global scale.

Long term, this strategy would get about as many subscribers as Netflix has globally, but would be more sustainable from a cost perspective. (While having less upside from the perceived advantages of global scale” for the stock price..) Instead of repeatedly overpaying (sometimes by 100%) for global rights, Disney could slightly overpay for regional rights, focusing on the territories most likely to actually watch a given show. (Again, I’ll prove this argument in a future article.)

Let’s bring this back to Hotstar/Star. I’m by no means an expert on their content, but from what I can tell, they don’t have a lot of original programming to act as the driver of even regional content growth. Here’s from the Wikipedia page.

IMAGE wiki

On the flip side, its parent company Star does have original production studios. Presumably with some content they can leverage globally. Again, I’m not an expert in Indian TV production, but Chapek mention it in their plans.

Final call? For the big news of the week, if the question is “good strategy or bad strategy?” for the moment I have to say, “It depends.” Disney is clearly launching something globally and Star seems to be an easier brand to do that with than Hulu. But it’s far from a sure bet.

Data of the Week – Peacock has 10 Million US Sign-Ups; Disney+ Has 60 Million Global Subscribers

Peacock’s 10 Million “Sign-Ups” 

Is this a good number? Like last week, I don’t know. More than any other streamer, Peacock is a work in progress. It’s biggest tent pole–the Olympics–was delayed a year. Hopefully Comcast will keep releasing these sign-up numbers every quarter.

Likely NBC-Universal saw a big jump in sign-ups at both launch (Comcast/Cox in April, national in July) based on the advertising campaigns. My guess is new sign-ups will slow until the Olympics and look like a shape I’m calling “the substack curve”. The question is when they can get their next big leap in subscribers. Unfortunately, that’s probably not until next year, at the earliest. 

Disney+ Subscribers: Did Hamilton Help?

Disney announced a Covid-19-driven boost in subscribers. Here’s how Disney’s subscribers have grown over time:

Screen Shot 2020-08-06 at 1.38.49 PM

Thankfully Disney wants to keep winning headlines, so after each earnings report they provide updated Disney subscriber numbers. This enables us to see a nearly monthly growth in subscribers for the streamer.

Someone pointed out that for all the buzz of Hamilton–here’s one analysis saying more folks have streamed it than seen it in person–it didn’t actually move the needle in subscribers. (For instance, I said it “won” July over at Decider based on this assumption.) From June 27th–when the earnings report came out–to Tuesday’s earnings call, Disney “only” added 3 million subscribers. Some points on this interesting theory:

– My guess is 3 million is still quite a lot to add in one month. As their subscriber chart shows, the only other time they’ve beat this number of additional subscribers is when they launch in new territories.

– As Hamilton was one of only a handful of shows to launch in July, it’s a lot easier to triangulate how many new subscribers it acquired than it is for any given Netflix show. (We also don’t have official monthly subscriber numbers for Netflix.)

– Some of the subscribers likely did “churn in and churn out” of Disney+. Meaning they signed up for a month, watched all they wanted and cancelled. That’s the new reality for streamers, and I include Netflix in that. 

– We don’t know the “null hypothesis” meaning we don’t know how many subscribers Disney+ would have had if they didn’t move Hamilton. Essentially, this isn’t an “experiment” because the control group can’t exist. If Disney hadn’t released Hamilton, maybe Disney+ would still have ended up with 60.5 million subscribers or maybe they’d have stayed at 57.5 or somewhere in between. We don’t know.

– The blockbuster strategy is still the key for Disney. Those blockbusters need to be successful TV series based on their IP. I’m looking at you Falcon and Winter Soldier.

Other Contenders for Most Important Story

AMC Networks Announces Earnings

The headline is that ad sales are down, which isn’t surprising. The sub-headline is that due to Covid-19–asterisk extraordinaire–AMC is ahead of its goals for its multiple niche streaming services. 

Screen Shot 2020-08-06 at 3.51.04 PM

For a good take on the state of AMC, I recommend this recent episode of TV Top Five about the departure of Sarah Barnett.

CBS All-Access Expansion is Coming! And globally.

News continues to slowly leak out about SuperCBS’s plans to revamp CBS All-Access into a broader, Viacom-centric service. Notably, lots of episodes of Viacom programming are now available in CBS All-Access, though in many cases not current seasons due to ongoing licensing output deals. (Read the details in this long interview by Scott Porch at Decider.) Meanwhile, it’s collection of various niche streaming services does not seem to be going anywhere either. 

Then late yesterday, CBS announced its new plans for a yet to be branded Viacom-CBS global service. It’s a combination of Showtime, CBS and Viacom content, sort of like what you’d expect CBS All-Access to become.

Overall, the Super CBS strategy continues to not be well-defined, to not focused vision and to not build a competitive advantage. (That’s bad.)

Pluto TV and Verizon Deal to Offer PlutoTV

According to Deadline, the partners in this deal consider it ‘game changing”. And I can see their point: Pluto TV will be preinstalled on plenty of new phones and TV devices. (Notably not Apple devices.) That said, Pluto TV is and has always been “free”–it’s the F in FAST–so it’s not like as much money is changing hands as the Disney+/Verizon deal.

Lots of News with No News – Tik Tok Sale & Instagram Reels

My favorite hobby is pointing out that America’s tech giants are fairly poor at innovation. Indeed, most of the news businesses launched by Google, Facebook, Microsoft, Apple and Amazon are shockingly similar to smaller companies’ business models. The latest is Facebook taking aim at Tik Tok by launching “Instagram Reels” a thinly veiled video copy of Tik Tok. 

Meanwhile, Microsoft is negotiating to buy Tik Tok for somewhere between $30 billion to a trillion dollars. (Last number is fictional.) Judging by my newsletter feed, some folks consider this clearly the biggest business story in America. I’m not there yet, but will monitor if a sale happens.

The Flywheel Is a Lie! Distinguishing Between Ecosystems, Business Models, & Network Effects and How They All Impact the Streaming Wars

(Welcome to my series on an “Intelligence Preparation of the “Streaming Wars” Battlefield”. Combining my experience as a former Army intelligence officer and streaming video strategy planner, I’m applying a military planning framework to the “streaming wars” to explain where entertainment is right now, and where I think it is going. Read the rest of the series through these links:

An Introduction
Part I – Define the Battlefield
Defining the Area of Operations, Interest and Influence in the Streaming Wars
Unrolling the Map – The Video Value Web…Explained
Aggreggedon: The Key Terrain of the Streaming Wars is Bundling

This is probably the most popular image for business school students about Amazon. Heck, anyone describing Amazon has probably used this image. 

Amazon FlywheelIf we’re supposed to be neutral observers of businesses, you can’t help but notice after a moment of reflection how insanely positive this take is. Man, Jeff Bezos can really sell his positive vision and have it repeated universally.

If you were really cynical—hey, I am—what would the pessimistic version of this flywheel look like? The “Flywheel of Evil” if you will…

Screen Shot 2020-06-24 at 9.21.08 AM

What changed? Well, first, the idea that you “sell more things” is great, but if you lose money on every transaction, that’s “sub-optimal” in business speak. Or bad in human speak. And Amazon does in many cases. 

To fund these losses, you need to start a really successful company that is totally unrelated to your retail business or its membership program, which is where Amazon Web Services comes in. There’s an alternate history where an Amazon without AWS (cloud computing) doesn’t take over retail because it doesn’t have a cash flow engine driving its growth. (In that timeline, Ebay becomes our overlords.)

Even more potent, though, is combining already low prices with Amazon’s decades long refusal to pay local taxes. Could you point to the continued imprisonment of poor Americans to online companies not paying local taxes? Maybe! (As local tax bases erode, some communities turned to police forces to extract rents, like in Ferguson, Missouri. Seem relevant to our current times?) Amazon does pay some local taxes—now—but only after it became an advantage to them in furthering their monopoly power.

Now that it has this “flywheel” rolling, Amazon uses its size to both crush new entrants who want to compete and to punish suppliers, capturing all the value from their product creations.

Which flywheel is “right”, then? Well, both actually. Both describe valuable methods for how Amazon grew to the size it did. Some of those methods were good for customers; some were bad for society. You can’t tell their story without both.

Screen Shot 2020-06-24 at 9.21.39 AMWhat’s the lesson? Flywheels are simple whereas reality is complicated. As tools, flywheels are fairly inexact. They’re not even really tools, but narrative devices we use to help make sense of a complicated world. In other words, a “heuristic”. As behavioral economists like Kahneman and Tversky taught us, heuristics are useful, but can carry pitfalls if we aren’t careful.

What’s the point for the streaming wars? Well video has become a spoke on multiple company’s supposed “flywheels”. Everyone from Disney to Amazon, but most critically Apple last fall. Whether or not these were actual flywheels was less important than merely invoking the term and using it to justify nearly any amount of spending. 

Let’s call this another key piece of “terrain” in the streaming wars. The “Forest of Flywheels” if you will. The problem is the business and entertainment press has been fairly sloppy with our language when it comes these types of endeavors. Due to this sloppiness, we’ve allowed a lot of companies to launch video because they’ll “lose money on video to make money on X”. 

Today, I’ll explain the key terms. In my next article I’ll critique deficit-financing in particular. And then I’ll finish it off with an analysis of some of these business models to show their potential strengths and weaknesses. 

Summary

– Flywheels are the most overused term in business, and it’s important to know what different terms mean.
– Ecosystem is probably the most commonly confused term with flywheel. Ecosystems are also rare.
– A true flywheel is a self-perpetuating cycle of growth that is incredibly rare in practice.
– As such, in pursuit of flywheels, we’ve seen many digital players launch money-losing video efforts. I call these “deficit-financed business units”. And they’re one of the biggest factors in the streaming wars.

Defining Traditional Business Strategy Terms

You’ve read articles bemoaning jargon in the workplace. (This New York Magazine piece is the latest in hundreds on the subject.) Even I just denigrated “sub-optimal” above, a term I really don’t like. Still, I don’t take that extreme of a position on business nomenclature. Often, jargon really does have a role in explaining new concepts.

The problem comes in overuse. That’s what is currently happening with “flywheel”. It’s almost become synonymous with “successful business”. But it’s much more specific than that.

So let’s define our terms, so we can better understand what is and is not a flywheel.

Business Model 

It turns out if you want to stymie business school students, just ask them “what is a business model?” Indeed, they’re taking classes called “Strategy and Business Models”, but answering, “What is a business model?” can stump them. I’ve seen it.

At its most basic, a business model is a plan or process to make a good or service and sell it for more than it costs to make. Make a widget for $1, market it for $1 and sell it for $3. Or replace widget with service. The model is how you make money. On a financial statement, this is usually called the income statement. When I build a “model” for this website, that’s usually what I’m building. 

How do business models relate to flywheels? Well, you can have a successful business model that isn’t a flywheel! It’s just a good business. In the olden days, you would have probably described the dividend producing stocks as just good businesses. They don’t have huge growth prospects, but they still generate a return on investment. Cable companies in the 2000s fit this bill. They had good business models, but were absolutely not flywheels.

Where it gets complicated is usually a given company is actually a collection of many business models. Arguably for every product they sell. Or you have distinct models for different business units in the same conglomerate. Which is actually a good transition to our next definition.

Business Unit

Most companies on the S&P 500 aren’t just one business, but multiple types of businesses lumped together. This is the reality for most conglomerated businesses. When analyzing a compnay, it’s key to differentiate between its overall success and the success of its various pieces.

Amazon is a perfect example here. Retail is one business unit. But then it also has media businesses from live streaming to streaming to music. Then it also sells devices like Amazon Echo. Oh, and it has Whole Foods groceries too.

And then there is the cloud computing (AWS). Which I called out above. And it’s worth noting just how distinct that wildly financially successful enterprise is from the rest of Amazon’s consumer-focused retail efforts. It’s a business-to-business service that is powered by lots of fixed capital expenditure data warehouses. It barely relates. Yet, it’s part of Amazon.

How do business units relate to flywheels? Well, flywheels often fail to take into account entire business units. Take the Amazon flywheel of success…it totally ignores AWS! For years Amazon survived because it had an incredibly high margin business in cloud computing that could provide necessary capital that enabled Amazon to continue building its retail business. This also kept Wall Street happy.

That makes the Bezos flywheel not just wrong, but almost negligently wrong. 

It’s business malpractice to point out that a flywheel helped Amazon to succeed if you don’t include AWS’s role in propping up the balance sheet!

I would add, many of the “flywheel” charts you see out there are often just describing a company with multiple business units. (I’ve seen this with Disney and Epic Games.) Every business can benefit from owning multiple business units, from lowering costs or providing learnings. That used to be called “synergy”. Now we call them “flywheels”.

Ecosystem

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A TV Murder Mystery: Who Killed Game of Thrones?

Most of the time, when Hollywood kills off one of its TV shows, we know why. The ratings had been sinking or the talent asked for too much money. (Or recently, it was produced by a rival TV network/conglomerate.)

And yet, HBO killed off Game of Thrones, a TV series that was getting more popular with every season and making its parent company billions in the process. Meanwhile, other long-running series—with worse ratings—from The Simpsons to Grey’s Anatomy to The Walking Dead march on like, well White Walkers. The corpse of Game of Thrones is now—spoiler alert—as cold as Jon Snow’s after season 5.

Why? Who had the motive? And who issued the order?

We Officially Have a Murder Mystery

Frankly, there isn’t a great explanation for why HBO cancelled this series. In the past, I’ve estimated that this series was making an estimated $300 million a season for HBO. (And potentially much more. Read the original, and my director’s commentary here, here and here.) Sure, HBO has a great (on paper) slate premiering the rest of this year and next year, but you know what helps launch a great slate? The biggest show on TV.

Have no doubts this series was growing. The number of viewers rose in every territory that I could find that releases data. Over 44 million were tuning in per episode in America alone, up from 9.3 million in season 1.

GoT Viewership

Of course, in some circles—like HBO creator circles—the story is what matters. Maybe the creators wanted to wrap it up nicely. Except most of the criticism of the last season related to the fact that the series felt rushed. Here is just a sampling of critics and fans complaining that season 8 felt rushed. More episodes and more seasons would have solved this problem, and who knows, by a hypothetical season 9 maybe 50 million people are tuning in in America each year!

Who kills off a money making show? Who are our suspects?

The Suspects

HBO

The buck stops there. So we should start with HBO. Their motive in killing this show would be simple: It’s the most expensive show on television. And since it is already insanely profitable, any additional profits have to be split with talent who are negotiating tougher and tougher deals with more and more back end. Each additional season is less lucrative for HBO, and if the marginal benefits meet the additional costs, well economically HBO should cancel the series.

George R.R. Martin

Listen, George, you’re a part of this. You probably didn’t finish the plot of A Song of Ice and Fire, because if you had, you’d have published that book. Which you haven’t. Maybe you told HBO to stop the series. Or you never provided enough details to fully flesh out 3 to 5 more seasons of the show.

The Actors

When in doubt, blame temperamental actors. Am I right? “Talent” is what you bitterly mumble in Hollywood when you can’t control the situation.

The motives for these suspects—and really I’m talking the big five actors of Jon nee Kit, Cersei nee Leda, Jaime nee Nikola, Daenerys nee Emilia and Tyrion nee Peter—is pretty simple: they’re sick of working on this series. Or more precisely, as artists, they’re ready to make other movies about Greek Gods, Han Solo and Terminators. (Too far?)

Further, even if you don’t mind working on a TV show for the rest of your life—including shoots in both scorching deserts and freezing tundras—you do know how valuable you are. You can’t have a GoT without a Daenerys and Jon Snow/Stark/Targaryen. Knowing that, the actors negotiated phenomenally expensive payments per episode, over $1 million per actor. They also likely demanded higher back end percentages.

The Showrunners

If the actors are sick of this series, imagine the two people at the lonely top of the creative pyramid, David Benioff and D.B. Weiss (D&D in Reddit parlance). I can’t describe adequately how insanely time consuming this series was for these two individuals. They wrote a majority of the episodes, supervised the entire production from set design to costumes and oversaw all the editing and post-production; and oh by the way (NFL announcer voice), it was the largest TV production in history. 

Meanwhile, they had plenty of opportunities to do other things, from Star Wars to a new overall deal to ideas in their notebooks we can only imagine. If you’re worth hundreds of millions of dollars (my tentative figure for D&D once they collect GoT royalties), do you want to keep spending your winters in Iceland and dealing with the most demanding fans in television history? That would be enough to say, “Eight seasons and we’re done!”

AT&T

Is there a thing that AT&T hasn’t managed to screw up since it acquired Time-Warner turned into Warner Media? Since taking over, they’ve lost the head of their movie studio, the head of HBO and plenty of other executives. Meanwhile, they named their new streaming service HBOMax, which was universally derided, and DirecTV is hemorrhaging subscribers. Oh, and AT&T is the most indebted company in America. Maybe they killed GoT to keep the losses from piling up. 

Netflix

When you discuss TV on the internet, you’re contractually obligated to mention Netflix at least once. While we give Netflix a lot of credit and blame for, they’re not involved here. 

The Evidence

Like a detective in Law & Order, it’s time to interview the witnesses. Which in this case means various articles that describes the suspect’s state of mind. Supply your own “dum dum”.

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