Most Important Story of the Week – 22 May 20: Apple Caves and Buys a Library

Some weeks, you barely have any news to cover. Then, other weeks the deluge comes. Buzzy stories. Executive movement stories. Sneaky scoops. And then Barstool drama.

To help settle the issue, I polled the audience. Everyone wants to talk about Joe Rogan at Spotify. But that’s a $100 million dollar deal. When I look for big moves, I mean big. For new followers, that often means adding up the potential dollar figures involved (and if they’re long term/speculative, discounting them for the cost of entertainment capital, about 8%). So a big streamer potentially dropping billions fits that bill.

If this week’s column has a theme, it’s that many of the biggest moves in entertainment are NOT about adding value for customers. I see that with two big tech titans in particular. That contrasts with a third, Netflix, who is doing right by customers. 

This is good for me, since I’m going to praise Netflix repeatedly. I’m a Netflix bear because the stock price makes no sense. Strategically, though, they do a TON right, with a few key mistakes. The world isn’t black and white and neither should be my Netflix coverage. On to the analysis.

Most Important Story of the Week – Apple (Almost) Caves and Buys a Library

I should bust out my Nikki Finke “Toldja” air horn. (Are there new folks to entertainment who don’t get this reference anymore? Showing my age.)

Anyways, my consistent strategic complaint with Apple has been the lack of library content. To just quote myself:

My theory of the case is pretty simple:

It is BANANAS to launch a streaming platform–and charge $10 a month for it–without library content.

It might be unprecedented. We’ve had subscription services launch without original content. (Netflix, Hulu and Prime Video in the early days; some movie platforms too.) But we’ve never had a service launch the opposite way. All originals–and not even that many–but no library? Truly, Apple is zagging while others zig.

Besides the rumored $10 price point, that was dropped to $5/free with purchase, the rest of that column from last August is spot on. Here’s right after they announced the price and most journalists went nuts on the hype:

The counter is that customers value a discount, so a stated price gives it a stated value. Maybe. But the content offering is so sparse—and could be such a dud at launch—that a discount of nothing is still nothing. If you really have no plans to add a library to make this a business that can stand on its own, and it truly is a loss-leading business, just make all the losses explicit and don’t charge for it.

Want another one? Here’s my take in Decider just that last month after Tim Cook told us that for sure they wouldn’t get licensed content:

Screen Shot 2020-05-22 at 8.58.49 AM

The news this week out of the Bloomberg leak machine is that Apple is in serious conversations to acquire a licensed content. And maybe a library. (How could Tim Cook lie to us like that back in February? Remember, executives lie ALL THE TIME!) 

Apple is finally on the licensed content train. What do we make of this?

M&A May Not Solve This Problem

At least not this year. Most libraries worth owning are locked up in multi-year deals. The time to buy MGM/Sony was in 2016. Then, when they launched Apple TV+, all the licensed content would be ready. Now, if they buy one of those two studios, they either have to buy out all the current licensing deals–which is what Disney+ did–which could skyrocket the costs or they have to wait a few years. Hence, the licensing deals to get whatever is there onto the service quickly.

There is Always a Lot of Content Available, but…

We’re not going to run out of content. That said, the top content is still the top content and more and more of it is locked up into multi-year deals at the soon to launch streamers of Peacock and HBO Max, or Hulu. For a good look, this article by Mike Raab uses a few categories to determine a pretty good list of the top shows of the last few decades.

Apple basically has to pick from the last column on the “Potential Libraries”. And already South Park and Seinfeld are off the list. (For a look at quick value, here’s my article talking about FBOSS top series here.)

Screen Shot 2020-05-22 at 9.11.41 AM

Source: Mike Raab on Medium

Does Apple stay prestige and get Mad Men? Broad with That 70s Show? I don’t know, but I doubt it stands up to the potential Hulu, Peacock or HBO Max licensed juggernauts. 

Does Licensed Content Matter Compared to Originals?

Yes. This comes up on Twitter. It absolutely matters. I don’t have time to prove it, but trust me.

Apple TV+ Still Doesn’t Solve Any Problems for Customers

I said this was the theme of the week, and I’ll start with Apple. It’s still tough for me to figure out what Apple is really doing that adds value for customers. Especially with Apple TV+. They’ve just launched another streamer that does mostly what every other streamer does. And they’re losing mountains of money simply to seize market share.

Some of you, will offer this I’m sure: But EntStrategyGuy, it’s free!

Remember, offering something free isn’t the same thing as creating value. Instead, it’s capturing value via predatory marketing pricing. It’s the sign of a non-functioning market. (My primer on value creation is here.)

Contrast this to Netflix. When Netflix started streaming, it really was creating value. Library TV was undervalued, so it streamed it on-demand whenever customers wanted. That is a huge value add. Then in 2012, they started losing money to grab market share. But at the start, Netflix clearly solved problems for customers.

Other Contender for Most Important Story – Joe Rogan Moves to Spotify

To understand the importance of Joe Rogan moving to Spotify, I have two analogies, each with a current story. And I’d call it the “malevolent” versus “benevolent” views.

The “Benevolent View” Talent Gets Paid: Joe Rogan to Spotify; “Call Her Daddy” Deal Terms

The analogy for this is Howard Stern in 2005. In that year, he moved to Sirius XM for a whopping $500 million deal that he subsequently renewed.

In a lot of ways, this current story is no different. Spotify is launching a new product, and is signing up top, top talent for it. Rogan is the 2010s Howard Stern. And note the difference: Stern got $100 million per year whereas Joe Rogan got $100 for 3 to 5 years. (It’s unclear the length.) Earlier this year, Spotify paid $250 million for all of Bill Simmons’ company in perpetuity.

That’s what I also see in the other big podcast story of the week, which is the “Call Her Daddy” drama. For those not familiar, the two hosts of a podcast on Barstool called “Call Her Daddy”–Sofia Franklyn and Alexandra Cooper–started negotiating a renewal. It didn’t go well. The shocking part is that the head of Barstool went public with the dispute, revealing deal terms in the process. Some of them are eye popping for podcasts, in the millions of dollars for two podcast hosts. So Barstool is doing well.

All these cases have something in common, which is they show just how much power talent has in entertainment. What Andrew Rosen has been calling the “curse of the mogul” from the book by the same name. In other words, when cash flow is mostly due to specific talent, the benefits flow to that talent who can help you capture them. (It’s worse when the financials are more apparent, like advertising driven content.)

This is the “benevolent” view. Spotify wants to make money from podcasting, so it’s hiring people to get it there. I don’t complain about studios or networks paying for top talent. That happens all the time in the TV industry. HBO wouldn’t pay John Oliver his millions if he show also went up simultaneously on every other channel. Some exclusivity is needed to justify owning channels and producing content in the first place.


The “Malevolent” View

Let’s stick with the radio example, and compare it to the current situation. In the case of top talent for FM/AM radio, all the providers are competing with each other in the same distribution format. So if one radio channel pays it’s top talent more to woo them to its station, they’re simply taking market share from someone else, who can pay likewise.

That’s the Barstool/Call Her Daddy kerfluffle too. In this case, the talent just wants to get paid more. The option, though, is to go to another podcasting service. But they’d still be distributed in all the same places, just taking more of the revenue.

Not so for the Stern example. Sirius XM’s goal wasn’t just to get ear balls on its service, it was to take over radio. (Indeed, it merged with XM in part because they couldn’t replace all terrestrial radio.) They didn’t succeed, but if they had, the goal would have been to use that newfound power to crush suppliers.

Spotify isn’t just trying to get podcasters to help it make money. It wants exclusive podcasts. Why? So that it can take over the podcasting market. And then when it does, it can use that power to crush suppliers. How do you beat the “curse of the mogul”? Be a monopoly. Then talent has no other choice.

Some of you don’t believe me, so I encourage you to read Matt Stoller’s latest newsletter on this. (He’d written about Spotify before.) The example he uses brilliantly is what Google and Facebook did to local news. Before, if you wanted to advertise on The New York Times, you had to pay the Times. Now, you can advertise to NY Times readers when they leave the site. For cheaper.

That’s essentially the Spotify playbook here. (Once I read Stoller’s take, I couldn’t get it out of my head.) Now if you want to advertise to Bill Simmons or Joe Rogan’s audience, you had to do that on their podcast. In the future, Spotify can serve those ads to anyone else when they are listening to something else. Is that good for podcasts individually? Obviously not. You lose your “exclusivity” value when Spotify can sell your customers elsewhere. Ask local newspapers and their massive extinction event how much dynamic advertising via Google/Facebook has helped their businesses.

By the way the New York Times example is very telling. This week they stopped allowing third party data because they know how bad it is for them overall. Owning the data is the key to monetization. Spotify knows that and that’s their goal. Except…

The Reality: Spotify’s Quest to Take Over Podcasting Is Not Guaranteed

If your goal is to become the monopolist of podcasting, getting Simmons and Rogan is a great start. 

That said, the theme of the week is customers. What is Spotify doing that helps customers? I keep hearing about “dynamic ad targeting”, but I skip ads all the time. If I can’t skip ads on Spotify, and I can on iTunes, I’ll use iTunes. Especially if only a handful of podcasts are exclusive to Spotify. Meanwhile, will Spotify police ad reads for podcasts that premiere on its platform? How could it even do that?

So the problem is that Spotify isn’t solving for any customer pain points. Maybe their UX is better than iTunes, but it’s worse than many other podcast applications. 

Worse, they’ll likely cause pain for their suppliers. Meanwhile, there are enough big media companies that will never go exclusive to Spotify. It just won’t be worth it at one third or less of the audience. So if ESPN, NPR, WNYC, Wondery, etc are all on every other platform, the edge just isn’t there for Spotify. That’s my gut thinking.

(Last point, Luminary is also continuing to prove that subscriptions won’t work for podcasts. It also proves that having a parent in private equity/finance is great at funding news business ventures.)

Other Contenders for Most Important Story

We have more stories. Let’s go quick to wrap things up.

Kevin Mayer Moves to Tik Tok; Rebecca Campbell Takes over Disney Streaming

Say it with me, “We can’t judge executive hires in the moment.”

That doesn’t mean we don’t try. We do all the time. But we’re pretty rough at forecasting executive hit rates.

Still, I want to give a moment of credit to Kevin Mayer and what he can do. His skill set is dealmaking. And that’s what Disney+ needed to launch. Yes, the Mandalorian was a huge hit, and credit to the creative team for that. But Disney+ needed to launch on every potential device. And it did. And Disney needed to claw back rights for all of Star Wars and Marvel and Disney and Pixar movies, which it did! Mayer was the driving force behind these deals. 

Will that skill set help at Tik Tok? Maybe. We’ll see what they acquire. It’s an interesting hire for sure.

As for his replacement? I won’t pretend like the coverage in the trades gives me a clue. Campbell has lots of TV and international experience, but not a lot of development experience. I can’t guess either way.

Netflix Is Helping to Cancel Inactive Accounts

Which really is the right thing to do by customers. It can definitely engender good will. And I’ve long praised Netflix for making it very, very easy to cancel.

That said, some credit goes to Wall Street. Every so often, Wall Street decides they like free cash flow negative business propositions with huge growth. Like Netflix. If Comcast could lose $3 billion a year in pursuit of growth, can you imagine what it could build? Same for Disney. 

If Wall Street collectively changes its mind that losing money is a bad thing–say when subscriber growth stalls–we may see different behavior at Netflix if it isn’t reward.

M&A – STX mergers with Eros

Since STX launched, their goal has always been global. (This New Yorker read is a case study in a confused business model, which even then talks about getting China money.) In total dollars, this is small, but it reflects who in a global buying market even US studios need global power.

Fake Data of The Week – Datecdotes Spread!

Thanks to Andrew Wallenstein for flagging our latest datecdotes. On Hulu, Solar Opposites is huge! On Apple TV+, Defending Jacob is huge! How big?

Screen Shot 2020-05-22 at 9.37.19 AM

Some quick takes on that:

– Damn, Outer Banks is crushing this quarantine in America.
– Sorry, Mythic Quest fans. That show is not. Still.
– Rick and Morty is doing worse than I thought.
– Sure, Solar Opposites is probably doing well. For Hulu. And when I’ve looked at THe Handmaid’s Tale before, it does worse than you’d guess.
– Defending Jacob is probably Apple’s best launch since their premiere, but they have a long road to haul still.

Coronavirus Impact on Entertainment – Film and TV Production

Over the last few articles, I’ve avoided the “C word”. Not that one, the Covid-19/Coronavirus words. If some of you are like me, you both devour coronavirus content, but sometimes find yourself sick of reading any more of it. (Every so often I just delete all my news podcasts that mention Covid-19 or the economic impacts. I need a break.)

I’ve been trying to strike the right balance between ensuring we cover one of the most important events of American history, but also focusing on all the other stories as well. Since my column last week was mostly non-Covid-19, let’s pull out the crystal ball to ask: how will the coronavirus impact the production of filmed entertainment?

Before we get any further, you can read my two previous analyses of the future of entertainment in a post-Covid-19 world.

The Entertainment Recession
Feature Films and Coronavirus
Pay TV

Compared to many analysts, I’m very uncertain about the future. If I could predict the future accurately, I wouldn’t be writing articles. I’d be trading stocks. (Read my first article to understand my methodology and approach.)

Still, we can sketch out some details and try to separate some overreactions from the proper reactions. And since we don’t have clean “demand vs supply” issues the way other parts of the value chain have, forecasting production changes should be a bit easier. (Customers are usually the problem in forecasts.) I’ll break out my analysis into two time frames, long and short term for how Coronavirus could impact production.

(By the way, I use “Hollywood” as a stand in for all global film production in this article.)

Long Term – Somewhere Between Two Extremes

Given my uncertainty, I’ll review all the scenarios using the good old Hegelian method. I’ll explore both extremes and try to guess where the middle of “the impact on production” could land.

Thesis – Coronavirus will make “Youtube-style” the norm.

I’ve seen a narrative that since Covid-19 has enforced universal lockdowns, this somehow represents the triumph of self-produced content. In the future, we won’t need fancy set ups and teams of people to produce content. It turns out that a celebrity sitting in their home can put out a content in HD that looks pretty damn good.

Call this the “triumph of Youtube/Twitch” narrative. (Yes, I loathe narratives.)

In some cases, constraints become the style. With lots of folks watching vlogs and Youtube videos from home, and everyone staring at Zoom cameras, people are used to this style. It permeates the culture.

We’ve already this style invade traditional broadcasting. The broadcasters have mostly embraced the Youtube style for live shows. Disney’s Sing-a-longs in particular had fairly strong production quality, all from at home. Same for Saturday Night Live at Home editions. And Hollywood Game Night’s special worked really well for a remote production.

Expand this view to Instagram/Snap Chat/Tik Tok influences on video, and you could argue there is no future for traditional Hollywood-style production.

I’d emphasize why “filmed from home” productions look so good. While I’ve used the term “Youtube style”, the distribution method has nothing to do with it. Instead, the reason why filming from home looks so good is because cameras have gotten so, so, so much better than even ten years ago. Or more precisely, they’ve gotten much much smaller. 


This was fueled by the push to have phones on everyone’s cameras and the push to shrink the technology down. In turn, Go-Pro made fantastic cameras that are also incredibly small. And surprisingly easy to use in production. Like an actual camera. Or to mount in different places. As a result, professional cameras have also gotten cheaper and cheaper to rent or buy.

Combined with increasingly powerful home computers, anyone can shoot, edit and produce their own TV shows or films from their own home. Even do post-production work in many cases.

So that’s that. Everyone can shoot from home and it will look great.  

Antithesis – At home productions still have some key flaws.

How can you tell a production is cheaply made nowadays? Well, the sound is no good. 

For all the advances in video recording, the advances in audio have been much slower. As a result, poorly made student films tend to have bad audio, but can still look fantastic.

Some of the at home productions have solved this, but a few have run into issues. (The musical ones have also likely featured a lot of recording at home separately from the video with high quality equipment. It is fairly easy to do audio recording—ADR—at home with the right investment in equipment.) 

Lighting is another issue. Properly lit films are hard to do well, but make a genuine difference to the final quality. And folks can tell. Make-up is another hurdle. Folks just aren’t great at putting on “TV make up” and that shows up every so often.

Finally, and obviously, the limitations on the number of people in one place has been stark. And no one has loved that experience. It’s still really hard to overcome issues of lag, which are functions as much from computing power as they are functions of raw physics, in some cases. So while everyone is making it work, it just works even better if two people are in a room talking to each other. Or even better a whole group of people.

It also helps to have a team of people behind the camera too. Even with the advances of camera technology, having someone behind the camera to dynamically move it just looks better. That’s why productions in many cases have stubbornly held on to teams and teams of people. Reality shows taught everyone two decades ago that you could make a show with a limited crew of a producer and some cameras. Same for independent productions that have made it by on shoestring budgets for years.

So why do armies of people still exist? Because in most cases they add value. The grips get better lighting and the sound folks record better audio. Add a camera man to free up the director. Then an AD to balance the demands of the lighting and camera. Then add another AD to organize it all. Plus makeup, costumes, sets, props, special effects, actors, craft services. And producers to you know “produce”. Suddenly, you have an army of people. 

So that’s that. Eventually traditional production will return.

Synthesis – The Longest Term Impact is Somewhere in Between

Likely, the future is somewhere in between. Which is the “aggressively moderate” take on it.

When studios can get people back together in the same room, they will. That’s a no-brainer. If studios decided years ago that they preferred smaller teams, they could have made it happen. Guerrilla filmmaking or independent filmmaking isn’t new. Again, reality TV has been making very cheap shows for two decades now for cable in particular.

Contrariwise, Hollywood can see change but not embrace it. Until it is forced to. (Example: streaming.) Will coronavirus cause a complete rethink for how many folks are really needed on set to make a TV show?

In the long term, maybe. Hollywood—and Bollywood, Nollywood, Hong Kong, European and anywhere that makes movies—production isn’t monolithic even now. My gut is this will further expand the divide between huge blockbuster productions—super hero, sci fi and fantasy films and TV series—and everything else. If dramas can be made with less people, they probably will be. Meanwhile, most reality production is probably about as cheap as it can go.

In most cases when production can go back to what it was before, it will. Broadcast multi-cam sitcoms will go back to multi-cam and single-cam will stay single-cam. All the folks making their own shows from home will continue to do so. And when it’s safe to go outside, the low-budget productions of the world will return too. And the blockbusters will be blockbusters. Some folks may try to innovate on the margins, but it’s uncertain if they’ll succeed.

Short Term Impacts on Production – Definitely Smaller Productions in the next 3-9 months

That’s the higher level impact, in the near term there will be some inescapable impacts on productions, whenever they get the green light. You’ve probably read about these impacts, here’s my take on who will benefit.

– Less shooting on location, which is good for production hubs. I don’t think talent will want to travel for fear of airplanes. While I mostly think worries about travel will be overcome quicker than folks expect, in this case, an over-abundance of caution will limit travel. (For instance, traveling on an airplane is actually a low likelihood of transmission.) This will be good for Los Angeles and New York in the short term, assuming demand returns. Potentially Montreal as well, but likely not as much for New Orleans, Georgia or eastern Europe.

– More shooting in soundstage and controlled environments, which is good for studios. If you’re not traveling, and worried about moving around, studio lots provide a controlled environment with centralized testing. While this is generally good for the studios, owning a studio lot isn’t a cash cow business anyways.

– Limited number of people on set, which is bad for support staff. Given the demands for testing everyone on a production, studios will likely limit the number of people to keep headcount down. This should limit costs slightly. (And studio execs/producers won’t be allowed to just hang out on set as much.)

– Fewer shows in front of live studio audience, which is bad for the vibe. Which you know if you watch any late night show. But shooting in front of live audiences will follow the reopening of live events. I’m more bullish on theaters, but could see studios being more risk averse than theaters. 

Bottom Line: So When Are TV Shows Coming Back? 

The question is how long these changes last. I’m more bullish in the upside case then most, but if you expect lockdowns to last for 18 months—which would ensure a depression as deep as the 1930s—then that’s how long they will last. However, like lots of things as people get used to opening up, as long as new outbreaks don’t flare up, they restrictions will gradually decrease. 

Again, this is just my read on the situation, given the huge amount of uncertainty. And studios/productions will keep innovating under restrictions to get as much done as possible.

Will this hurt content output? It’s tough to say for sure. 

Given how many different countries and how many different time frames for when lockdowns could be lifted, it’s tough to know when the slow down will end. (Everything being shut down is definitely delaying shows being made in America.) Meanwhile, other countries are figuring out how to restart production, which will encourage others to start back up.

Most Important Story of the Week – 15 May 20: Does It Matter That Hulu is Delaying International?

This week’s column started out as an extended essay on the future of TV and Film production in the age of coronavirus. It went long, so expect it early next week. (Next week’s article already written? Check!)

Before we get to the news, a quick set of housekeeping. On Twitter, I put out the offer to build my network with any of my readers. If you’d like to chat, send me an email and we’ll see if we can set something up. I’m in particular looking for new opportunities to grow my audience or partner with businesses (be it consulting or writing or what not). Even if you don’t have an opportunity, but just want to chat, let’s do it.

Meanwhile, my website is still free. So if you want to support my work, the best way is to follow on social media (Twitter, Linked-In, newsletter) and share any articles you like with friends, peers and colleagues. Seriously, forward my column to everyone in your company. Why not? 

Most Important Story of the Week – Hulu International Launch Delayed

Sometimes, I wonder why everyone in media leads with the same headline after certain events. This goes from politics to sports to entertainment journalism. Take post-debate coverage. Somehow CNN, The New York Times, the Washington Post and Politico all take the exact same quote as the most important of the debate. How is it that dozens of political reporters can watch the same event and all come to the same conclusion?

(The answer? Group think and herding. As soon as one outlet goes with something, the rest copy it so they don’t look like outliers. Or “biased”.)

Personally, I think you’d get more credit by zigging while everyone else zags. Which is what I try to do. So when everyone else focused on Disney’s earning report for the losses to theme park–which were totally expected–I saw this line about Hulu’s International roll out from Bob Chapek:

Screen Shot 2020-05-15 at 9.34.33 AM(Credit to Twitterzen TMTonka for reminding me of it.)

In the short term, aggressive Hulu international expansion is on pause. At first, I was ready to write about how bad this was for Disney. But then I paused and thought about it. While it is a bad sign for Disney’s cash flow, the Hulu international rollout is less of a surefire hit than Disney+. It’s more important that Disney figures out Hulu’s international brand than launching it quickly.

Frankly, as bullish as I am on Disney+, I understand it’s limitations. Disney+ is like the best children and blockbuster content from Netflix, stripped out into its own service, and taken to the max. Yet that has a ceiling. Even four quadrant content (industry lingo for broadly appealing to men, women, young and old) still doesn’t do it for everyone. Some folks don’t like superheroes. (“Some folks” being code for critics.) Or don’t have kids.

Which is why Hulu is there to fill in the gaps. It features prestige dramas from FX and day-after air broadcast fare for everyone else. (If I were advising Disney’s head of streaming Kevin Mayer, that latter category is where I’d tell him to lean into. See my last article on ignoring “middle America”.) If broadcast TV “does multiple jobs” for customers, Hulu & Disney+ reaches pretty much covers all those bases. Add in ESPN+ and Disney recreated a great bundle.

As an added benefit, with three sets of subscribers to count, Disney is hot on Netflix’s heels in “total subscriber” count. My guess is Disney will soon match Netflix in the United States for total subscribers. And will tell us when they reach that milestone in a future earnings call. (Disney doesn’t yet break out by territory, but I still think a majority of customers are US.)

The shiny object, though, is for Disney to catch up with Netflix internationally as well. That’s the downside to delaying Hulu international expansion. Now it will take that much longer to match Netflix.

Or will it? I’ve long been skeptical about arguments about “global scale”. Not that being international doesn’t confer some advantages, but that most valuable content doesn’t travel globally. You see this in Netflix’s Top Ten lists, which feature some outliers, but for the most part feature local content. Does global scale really exist if you still have to buy local originals for every territory?

Of Disney’s catalogue, Hulu is the brand that will travel the least well. Lots of Hulu/FX originals, while lauded at home, are fairly esoteric for foreign audiences. International audiences don’t get subtle humor about life in New York by/for millennials. (Again, neither do many audiences in the United States.) The best traveling content is animated kids movies and Marvel films. Both of which are on Disney+! So Hulu’s upside globally is probably more limited than we suspect. Which means even if it did launch internationally, I’m not sure it has nearly the same growth prospects as Disney+.

Disney will still try, of course. The rewards for a global streamer are too big to ignore. Which gets back to the delay. It is a really bad sign that cash flow has dried up so much they can’t invest in growth. Whether or not I think Hulu will thrive internationally, that was their next major capital expenditure. Which is still bad.

Other Contenders for Most Important Story

Quibi Blames the Pandemic

This week Jeffrey Katzenberg blamed the pandemic for Quibi’s soft launch. Let’s play out both sides, and you can decide how right he is.

On one hand, situations absolutely matter. The role of luck in life is increasingly apparent. At its core, if Jeff Bezos graduated in 2000, instead of being a VP at an investment bank during the 1980/90s, he doesn’t start Amazon. Is he still successful? Yes. Is he Jeff Bezos? Maybe not.

Same for the pandemic. If the pandemic started a year from now, it would likely still wreak the same havoc on the economy. But HBO Max, Quibi, Peacock and Disney+ would all be safely launched. And likely benefit due to their established services. (It’s hard for HBO Max to benefit when it isn’t even launched.) 

Quibi’s core value proposition was damaged by the pandemic. It was meant to be watched on the go, and we as a society aren’t going. Katzenberg is right about that. 

On the other hand, come on. I’d long believed that Quibi needed to be on living room TVs to succeed. This was regardless of a pandemic or not. Quibi didn’t have a big hit to lean into, and that means that they’re fundamentally at a disadvantage. And no library content. Even with no pandemic, I could see Quibi having the exact same number of subscribers as it does now. Maybe a little more, maybe a little less. 

Either way, I think we can say that Quibi is in trouble. How much will require some scoops by some intrepid journalists.

Potential Original Trouble in Netflix-Land

While all other studios and TV producers announce their schedule will be impacted by Covid-19, Netflix insists all it’s content is produced and there won’t be any impact to their schedule. But then, despite having a policy to release all content day-and-date dubbed in original languages, the Unbreakable Kimmy Schmidt special came out in English only.


Entertainment Strategy Guy Update – Coronavirus Edition

Theaters – Studios/Theaters Locking in Schedules

That’s my take on Warner Bros and Disney both reaffirming their late July release schedules. At some point, films can only be pushed back for so long without hurting the bottom line. If theaters will only be partially reopened from July to December anyways, you may as well recoup what you can. My read of the coverage is that Tenet and Mulan are increasingly likely to stick at the end of July. As THR wisely points out, blockbuster films are likely to do okay post-pandemic since theater chains can flex them into as many theaters as necessary. 

This gives theaters 8 weeks or so to get customers ready to go back to theaters. My guess? The return of library films like Star Wars or Wizard of Oz or John Wick or you name it will allow a bunch of fun experimentation in June.

Meanwhile, Solstice Studios (a new independent production house) grabbed the July 4th weekend with its Russel Crowe thriller Unhinged. If people start returning to theaters in June, part of me still wonders if another studio jumps up to July 4th. Usually, long lead times for advertising campaigns would prevent this. But given the pain in linear TV for advertising, I think the networks would make an exception. (Ad prices are so low that a film could quickly get share of voice.)

Still, all of this is incredibly uncertain. So we’ll see. 

Pay TV – Losses Continue in MVPDs in Q1 (in Context)

The quarterly Moffett-Nathanson report is out on the status of cord cutting and the results are expectedly grim:


Of course, the funny thing–as I tried to warn you on Twitter the week before–is that this isn’t proof that Covid-19 is accelerating the trends underlying economics. I know, I know. You read everywhere–I mean everywhere–that coronavirus will “change everything” and “accelerate all the underlying trends in entertainment”. Seriously, I won’t link to them, but I’m the only entertainment biz analyst NOT making this unfounded claim.

So where do I get off challenging them?

Well, I start with the numbers. Frankly, adoption of new trends is a well studied phenomena. Usually summarized by the “Bass Diffusion curve”, a topic I went deep into last fall.

Cord cutting is following the same pattern in reverse. So should we have expected growth of cord cutting to accelerate this quarter, as even more streaming options launch? Absotutely. To be clear, we expected the “growth to grow” this quarter if cord cutting is an adoption trend. Which is exactly what happened!

In other words, where everyone is ready to give Covid-19 credit for hurting Pay-TV, I see a trend that is continuing at the same pace. Which is still really, really, really bad for the Pay-TV business. But it would have been bad whether or not Covid-19 happened. Meanwhile, if coronavirus did temporarily accelerate teh trend, when sports return it could reverse itself.

Still, all of this is incredibly uncertain. So we’ll see. 

Data of the Week – Did Coronavirus Save Fortnite/Epic Games?

I’m a bit more bearish on Fortnite’s future than a lot of others. I get it; they’re about as buzzy as you can get. And like Tik Tok, they’re also mysterious to adults. That’s a double whammy for hype. 

Instead of relying on hype or their datecdotes, I look for the data. The news from last week is they passed 350 million registered players. The last update was last March when they had 250 million subscribers.

So what should be the narrative of Fortnite? I’ll give you two options. Then we can look at the data.

  1. Fortnite has grown consistently and will consume the world via it’s metaverse.
  2. Fortnite was declining, then Covid-19 freed up a lot of time for kids.

For the data, start with my article on Fortnite from last year on Linked-In. I projected they’d end up with 300-325 million registered users. So they passed my expectations. (To be fair to me, given the very limited data points my margin of error was fairly wide. I was overfitting the curve to the data.) Here’s my chart of updated Google Trends. See if you notice what happened.

Screen Shot 2020-05-15 at 9.32.12 AM

The explanation? Well, kids are the ones consuming the most content–video and video games–during the Coronavirus. Parents are trying to work from home where possible, but schooling is for the most part not happening. (Is this bad for society? Yes.) Look at this excellent Nielsen chart on it.

Screen Shot 2020-05-15 at 9.33.07 AM

To finish, here’s my line chart of Fortnite registered users. It looks pretty “Bass-y”.

Screen Shot 2020-05-15 at 9.30.24 AM

Without reliable traffic numbers, we’re limited on what we can judge externally about Epic Games. But I will say this: they are one of the winners of Covid-19. 

Lots of News with No News and M&A Update

AMC Theaters Acquisition Target

Yes, a giant tech company is considering buying AMC Theaters, though we have no idea how real this is or if it will happen. Amazon is an unrepentant tire kicker on new businesses and acquisitions. They’ll run the numbers on any acquisition and they’ve been circling entertainment–while largely building their own–for decades. (They own IMDb!) AMC is in huge financial straits, which makes it doubly attractive. 

Could this deal happen? Sure. Could it not? Just as easily, if not more likely.

All The Earnings News

Usually, I walk through the earnings reports news but this quarter is such an outlier that, besides the Disney news above, it just doesn’t make sense this time. Ad sales are down everywhere. Customers are dialing back spending. I’ve called this the “outlier earnings report” and I hold to that. Until things calm down, it’s worth accepting they are and will be bad everywhere.

Netflix is a Broadcast Channel – Implications, Insights, Strategic Impacts and Criticisms

My most popular article of the year is clearly this buzzy headline titled,

“Netflix is a Broadcast Channel”

Why? Since Netflix is the sexy topic in entertainment—a titan of digital subscriptions—my article probably got some clicks because it’s an “aggressively moderate” take on Netflix. (A lane I’ve decided to lean into as heavily as I can.) Most headlines go the opposite direction. 

If your thesis is that Netflix “will become TV”, I basically say, “Uh, not really.” Netflix won’t become TV, they’ve become a broadcast channel. Take a look for yourself.

Image 1 - EstimatesBut that last article was missing, in my mind, the most important part of any in-depth analysis. Which is all the implications from the data. Today’s article will fill that gap. I’ll start with the implications and strategic impacts of this data look. Then, I’ll discuss some potential criticisms of the approach.


Implication – Netflix is a Broadcast Channel…So They Can Launch Shows

That’s the upside take. A show like Love is Blind or Tiger King doesn’t just become a hit, it becomes buzzy sensational show that seemingly everyone is talking about. When you’re a broadcast channel, your top shows can do this. Fox can launch The Masked Singer or Lego Masters that still gets a lot of coverage. Or NBC can have This Is Us.

This is why being one of the top players provides so much of an advantage to incumbents. When you do put out something good, it is immediately amplified. This is why Netflix can drive so much of the conversation, while Amazon/Hulu seemingly can’t. (No matter how many times Bosch super fans recommend it.)

IMAGE 3 - Total Viewing Q4

Implication – On the other hand, Netflix is *only* A Broadcast Channel

If I took this list of broadcast Primetime ratings, you’d likely shake your head and say, “Hmm, decline of TV is right!”

Image 11 Anonymous 1

Image 12 - Anonymous 2Honestly, did anyone else know that Altered Carbon season 2 came out? Me neither. Talk about a season 1 to season 2 decline. (Read my take here for why this is important here.) Obviously, the difference is growth. Netflix and Amazon are growing, whereas linear TV is decaying.

But we can learn something from these ratings. They explain why even some “buzzy” Netflix shows can stay anonymous in the conversation. Take Outer Banks right now. If you polled a majority of Americans, I bet they have never even heard of it. Which is fine for Netflix. If you polled a majority of Americans, another big chunk wouldn’t know that The History Channel has a successful show in The Curse of Oak Island. 

In other words, even being a successful broadcast channel in today’s day-and-age is just enough to launch some shows. The rest fade quickly, even for streamers. And even “hits” can be unknown by most of the population.

Implication – Amazon Prime Video is a Cable Channel

That’s just what the data says to me. Besides their most recently launched show—Hunters, about Nazi hunters in New York—every other show is pretty old. In other words, based on their ratings they’re a decent cable channel. The question is if providing one decent cable channel is worth the potential billions Amazon is spending. 

(Side insight: Hulu is a cable channel too.)

(Side insight: How many Amazon series are about Nazis? The Man in the High Castle. Hunters. At this point, I’m worried Hitler will show up in The Lord of the Rings.)

Implication – The Broadcasters Aren’t That Far Behind and Netflix May Be Losing Marketshare

Which could be good news for all their streaming services. The folks at Hub Research do some pretty good surveys on a quarterly basis and one slide in particular caught my eye. 

Hard not to see how valued the broadcast channels still are. Which begs this question: Is Netflix worth more than ABC, CBS, Fox and NBC put together? Moreover, can all the new streamers based around those broadcasters compete to take more Netflix market share? I think it’s possible. If not likely.

Meanwhile, as Netflix has told us before, they are 10% of TV viewing in the United States. (From earnings report in 2018 and 2019.) Here’s my Tweet from when I first saw the Bloomberg article:

Yet, this analysis only has them at 5.9%. While the difference is likely chocked up to different measurement systems, it could be a trend. We’ll monitor.

Strategic Recommendation: Understand Segments Better

My favorite strategic frameworks of all strategic frameworks is the 4C-STP-4P marketing framework. Specifically the middle part where business leaders evaluate “Segment-Targeting-Positioning”. My read on the landscape is that a lot of the streamers are targeting the same segment: coastal elites.

Looking at these Nielsen ratings, though, there is a big untapped segment. Overly-stereotyped, I’d call it the “middle America” segment. (A real segmenting would need more data than this cursory look.) They’re still watching broadcast TV. But as the streamers spend more and more money competing for the same segments (Hulu, Netflix, Prime Video, Peacock and HBO Max all arguably are), it gets more and more expensive. Peacock made the most noise about being broad, but even their originals are light on typically broadcast shows. Same for HBO Max.

Implication: The decay is super real in linear TV

To pull off my analysis, I collected 4 years of annual Nielsen ratings. (Collected every year by Michael Schneider of Variety.) Despite adding more and more channels tracked every year, the ratings are declining as you’d expect:

Screen Shot 2020-05-13 at 11.40.42 AM

And that decay looks like it’s accelerating. Of course, this complicates the “Covid-19 will accelerate all changes” thesis, since the rate of decay was already growing. Meanwhile, as I mentioned last time, if you add streaming and linear, you get to 94 million, so the folks watching TV is growing with population. This makes me trust the Nielsen data more. 

Content Implications: Original versus Licensed Battles

The biggest open question—the debate point that riles up the most folks online—is whether or not Netflix’s original content strategy is working. Does this Nielsen data settle the issue? 


First, as Andrew Wallenstein pointed out on Twitter, when it comes to TV series, the Netflix “Originals” win hand down. 

Or do they?

As I wrote in my weekly column, some Nielsen data came out about the top ten licensed series on Netflix in the first quarter. (Here’s a “What’s On Netflix” article on it.) The gist is that licensed shows are still the most consumed TV series when you account for the entire quarter, not the most recent day’s viewing. As Kasey Moore points out, That 70s Shows has never made a Netflix top 10 list, yet it was third in total viewing. Clearly, new shows get lots of viewers initially, but series with lots of episodes drive more total viewership.

Second, when it comes to movies, the picture is out of focus. The top film in early March was Spenser Confidential. The top film in May, so far, is Extraction. So original films can claim the top spot and not let it go. (I’m writing a deeper dive on Hard R action films on Netflix for another outlet.)

That said, unlike the TV series, a bunch of licensed movies make up the rest of the Nielsen list. And have continued to do so. This makes me a little nervous for Netflix’s strategy. Especially considering that they launch something like 20 original movies every month. Their hit rate for those movies looks low, and licensed films are leaving the platform. (Also, kids films do show up on this list, which I’ll discuss later.)

Content Implications: The Decay Is Real

This is something I mentioned last time, when trying to calculate how much additional primetime viewership happened. (I made an estimate for every series not on the Nielsen top ten.) Netflix Originals drop quickly out of the top ten after premiere. Usually within two weeks or so from launch. The oldest show on this list is Locke & Key. This isn’t because folks are consuming all the content, but because they’re switching to something else. (Unless Netflix top ten lists exclude TV series that are older than one month from release, but I don’t know that for sure.)

Justification: Everyone Should Estimate Netflix

I can hear some silent critics out there. “Hey, EntStrategyGuy, you’re just guessing here, right? This is an estimate? Not facts.” The answer is yes, this is an estimate.

Of course, when you hear someone in the media commentariat opining about Netflix, they’re making estimates too. I’m thinking specifically of hyperbolic talk about Netflix on podcasts by so many reviewers or opinion makers. They’re making estimates of Netflix’s size, power and reach, just not explicitly. 

But because they don’t have an actual estimate, they use their gut. And often that gut goes wild. By some of the discussion, you’d think Netflix was 100% of TV viewing in the United States.

Meanwhile, there is a strategic rationale for making this type of estimate. Especially if you work in a strategy or content planning or marketing or any role in the business of studio, production company, streamer or network. If you don’t know how well your competitors are doing, you can’t properly plan. Unfortunately, I’ve seen more firms that don’t make well grounded estimates than firms doing proper competitive analysis.

So I fill in the gap. For free!

Evidence/Arguments Against My Thesis

Here’s is another great public service I provide that separates me from some other media analysts: I’m willing to criticize my own work! How rare is that?

Kids viewing vs Non-Kids Viewing

A huge variable this analysis doesn’t/can’t account for is kids viewership. Kids are such a small portion of the audience that they won’t crack Nielsen’s time specific viewership. This has historically been true on broadcast and cable too.

Yet, as others like Richard Rushfield have speculated before, a huge portion of Netflix viewership is kid driven. Even has high as 60%. Traditional TV, I don’t believe, has ever seen viewership percentages that are that large. Which could throw off the entire comparison I’m making.

All of which would imply that my argument that “Netflix is a broadcast channel” is too generous. I assume that Netflix’s percentage of all streaming TV viewership is the same as its percentage of all primetime viewership. If Netflix over-indexes on kids viewership, then it’s percentage of primetime viewership would go down. 

Without more data, though, we can’t know either way.

Or the Reverse: Netflix Has Higher Primetime Viewership

This is another argument I saw. Basically, some folks thought Netflix actually does better with adults so the day-part to primetime analysis doesn’t make sense. I couldn’t find any any data to support that, but the great thing about my estimates is if you want to tweak them, you can.

How Do Sports Impact This Analysis?

It does and doesn’t.

(This great comment from the excellent sports mind Steve Dittmore asking this question:

Yes, a TON of broadcast ratings are due to sports. Here’s the top 15 highest rated shows in broadcast from last year:

Screen Shot 2020-05-13 at 12.11.49 PM

It’s a lot of viewing. 26 of the top 50 shows in primetime were sports. And you can see the orders of magnitude higher viewership for something like the Super Bowl. Unfortunately, I don’t have the specific Nielsen data to answer this question for Steve.

On the other hand, Netflix doesn’t have sports. Which means it will never get these ratings in the first place. That’s a potential advantage fro DAZN or ESPN+ to get mindshare for Netflix. (In other words, it’s hard to become TV without sports or news.)

This Data is Out of Date From a Pre-Coronavirus World

True and sort of irrelevant as far as I can see. If you told me a vaccine was delivered by aliens tomorrow, and you wanted to know how viewership would look post-lockdowns, I’d rather have data from before the lockdowns started than during them. It’s more representative of what a viewership world will look like after the fact.

Also, why certain industries are gaining during lockdowns, it appears as if the market leaders are actually gaining less than their smaller competitors. In shopping, Target, Walmart and Shopify users are up more than Amazon. And it looks like Disney+, Hulu, linear viewing and Prime Video are up more than Netflix in terms of overall growth.

Read My Latest at Decider – Why Is Comcast Declaring War on Movie Theaters?

I finally cracked why Comcast is doing all the things it does. I explain it over at Decider, but quickly:

  • They can’t buy any more cable companies, so they money needs to go somewhere.
  • If you become a tech company, you can get a higher valuation. 
  • Also, Brian Roberts loves buying things.

So how does this relate to fighting theaters? Because tech titans hate the whole idea of “windowing” and sharing profits with others. Comcast is just the latest to get in the game.

So head to Decider and check it out.

Most Important Story of the Week – 8 May 20: Two Stories for the Price of One Column

Welcome back to my weekly column! Each week I try to suss out the most important story in entertainment. Since I have several weeks worth of news stories to cull through, this week I’ll have to take care of some house cleaning to start. First,I’ll cover my thoughts on the coronavirus. Then, I’ll briefly touch on the biggest story of last week (the one ending May 1st), since it spilled into this week. Then, we’ll get into the other biggest story of the week.

As for dealing with the Coronavirus, I’ll encourage everyone to read my previous takes on the potential impact of the virus. In short, I’m fairly bearish on the long term impact since it seems like everyone else is so negative. The current hypothesis–this will accelerate underlying trends–doesn’t really seem to be supported by the evidence, as I laid out here and here. It could; it could not; but acting certain seems wildly over-confident. If you want more of these aggressively moderate takes, read about the future of theaters on Twitter here. Or the future of Pay-TV here. (I’ll get to streaming, sports, live events and production soon.)

On to this week.

Most Important Story of the Week (May 1st Edition) – AMC Theaters Goes to War with Comcast

This is the biggest story of the last two weeks. And I have a patented “EntStrategyGuy unique take on it”, but it will be going up early next week at Decider. (It’s not really about the theaters, but why Comcast is waging this fight.)

Still, I have a few thoughts that didn’t make it in there.

– First, as Andrew Rosen has been emphasizing, a lot of this is negotiating in public. So the individual declarations and public relations moves are posturing to get a better result when the negotiating is over. Which means we shouldn’t hyperventilate over some of the specific moves.

– Second, Comcast is going to keep pointing out their great digital sales. But that’s not why they’re making this move. They don’t actually think they replace all their former theatrical revenue with TVOD/EST. They’re real motivation, though, will be explained in my guest article.

– Third, the current through-the-roof digital sales are still a red herring. The Covid-19 crisis is an outlier in historical terms. Meaning we won’t know what the new “normal” is for months. Maybe years. So yes, it’s better to have renewed interest in VOD, but it’s unlikely to stay at this level.

– Last, theaters just make a ton of money. As I wrote here, at least 35% of the total revenue for a given film. That’s not changing, which emphasizes how much is at stake here. Not just for Comcast, but all the studios.

Most Important Story of the Week (May 8th EditionThe Top HBO Max News, Ranked

By the end of this month, the long awaited “HBO Max” streaming service will be released. Will it be much different than HBO? Or just HBO with Friends? We’ll have to wait to judge until it launches. (I’ve said before I’m fairly optimistic it will be a permanent part of the entertainment landscape. And that’s a risk for Netflix.)

As you’d expect, the execs at AT&T have been as busy. Which led to a stream of stories over the last week or so. While each story feels minor, on a whole I’d give all the HBO Max news the crown for the most important story of the last week. Here are the major stories I came across, with them ranked in terms of most important to least important.

  1. HBO Max Gets Apple Distribution
  2. HBO Max Gets Youtube Distribution
  3. HBO Max Gets Hulu Distribution

Distribution is the ignored battlefield in the streaming wars. As I’ve written before, though, it’s the “key terrain”. That’s why Apple and Amazon are fiercely battling for it. Why Comcast wants to get in on the game, and likely Disney too. 

Why? Because if you don’t own the pipes, you’re fundamentally at a disadvantage. This is why Amazon and Apple went to battle for years about who pays whom as they both tried to create the pipes. For a streamer, though, it’s key to getting your service in front of as many people as possible. Which cannot be underestimated. Many services have tried to launch without broad distribution, and they usually don’t succeed. 

HBO knows this, which is why HBO Max is likely going to get broad distribution.

  1. HBO Offers A Price Discount

This was probably the most hyperventilated of the HBO Max stories. Particularly for the skeptics, who view any AT&T news negatively. (Is that position wrong? I mean the name is still terrible.) Will HBO Max pricing be confusing for lots of folks? Definitely.

Is there a simple method for HBO’s madness, though? Yep. As I’ve tried to keep emphasizing when it comes to distribution, the “bundlers” take a cut of streamers revenue. This can range from 30-50%. Which means if a new streamer can get you to subscribe directly through their application they make 30% more money. Which means any slight confusion for customers is easily outweighed by the extra revenue. Not to mention, all the data that comes with the direct subscription.

Given that AT&T is well experienced gouging cable channels  with distribution fees, it understands how to play this game.

  1. HBO Will Have Anime

This news is fairly minor, but still notable in that anime is the one sub-genre of content that it feels like every streamer thinks they can get an edge on. Netflix? Got it. Hulu? Got it. Prime Video? Got it. Crunchyroll-into-HBO Max? Got it. Qubi? Not yet. But wait.

By the end of the streaming wars, every service will have a show by Anna Kendricks and a library of anime series.

  1. Randall Stephenson Is Leaving

One of the biggest forces in consolidation in telecoms is leaving. Stephenson tried to acquire any and everything, from Time Warner cable to T-Mobile to Time Warner entertainment. He successfully got some and was denied other deals.

As a result, is AT&T better off? It’s unclear which is why him leaving is likely a “lot of news with no news” story. We knew it was coming, and if AT&T can get to a post-Stephenson future with an operator focused on customers, the better for them. Whether or not that’s John Stankey, I don’t know. 

Data of the Week – Netflix’s Most Consumed Shows (By Hours) Are Still Library

I came across a press release from a TV producer with Nielsen data on streaming. It turns out the top three TV series on Netflix by total viewing in the United States are:

  1. The Office
  2. Parks and Recreation
  3. That 70s Show

Each racked up over 181 million episode views.

What’s the takeaway? Well, library shows will continue to have big value in this marketplace. Certain great shows drive lots of repeat viewing, which is great for retention for a service. Meanwhile, if those are the three biggest series by viewership, clearly the “Top Ten” metric only tells a portion of the picture.

Other Contenders for Most Important Story

Viacom Tweaking Strategy (Again)

I like to imagine frustrated traditional media executives. They put out a strategy. They get criticized for it. They pivot to the strategy everyone wants. They get criticized for it. 

That’s SuperCBS in a nutshell. Having a multi-tiered streamer would have been confusing for some customers–though I do like having 3-5 different services if they’re differentiated enough–but SuperCBS has decided to launch a larger, more consolidated streaming service. Of course, details are still light. So wait and see continues. 

WME Lay Offs

I’m of two minds about the layoffs at WME. When it comes to “beta risk”, those risks that impact the whole industry, WME is probably representative. Their income streams have dried up during the Coronavirus, especially dealmaking since all productions are paused, and WME has quite a bit of overhead ot pay off.

But the second mind is all about the “alpha risk”, which is the unique factors of WME. And WME, like lots of PE backed companies, is loaded up on debt. Arguably, WME is just crushed by its own bad decisions, not forces bringing down the whole economy.

Subscriber Rebates for Live Sports

I’ve seen the push in my Twitter feed for cable channels to return subscriber fees for not having live sports since the live sports are cancelled. While I’m sympathetic to this argument, most of the money being returned to customers is legally mandated refunds. Not the generosity of spirit of State Farm or USAA. (Though you’d think State Farm was donating this willining.)

Likely, given the multiple complications between sports leagues, force majeur legal interpretations and more, this issue is far from settled. Especially if sports return soon.

The 2019 Star Wars Business Report – Toys

This is part III in a multi-part series estimating how much money Disney made off “Star Wars” in 2019. Go here for my larger series on Disney purchasing Lucasfilm in 2012.)

Introduction and Feature Films

I started this series in January. Do you remember back then? Before the world turned upside down? Reflecting on how much money Star Wars made in 2019 feels almost like a waste of mental energy. Who cares how much Disney did or didn’t make in 2019 when the whole company may go bankrupt by the summer time? 

Perhaps, if we understand the underlying drivers of Disney’s business model, we can better understand how quickly they may go bankrupt or return to normal. And what they can do in the meantime to prevent it. Previously, I’d estimated the performance of the feature film and television business units in dollar terms. Today we move onto “licensed merchandise”, which is my term for toys, apparel, games, and anything sold in stores. 

I’ll discuss the narrative around licensed merchandise, review my top and bottom line estimates, and briefly touch on the impact of coronavirus on toy sales.

(Nomenclature: I’ll use consumer products, licensed merchandise and even “toys” interchangeably in today’s article. Yes, when I say toys I mean everything from shirts to furniture to video games to actual toys. Also, when I use “licensing” I don’t mean content licensing, but licensing for consumer products.)

Licensed Merchandise: The Missed Opportunity of 2019?

If Star Wars fans had a complaint in 2019, it’s that this little guy…

IMAGE 1 - Baby Yoda

…wasn’t available to purchase. I saw quite a few tweets speculating that this spectacular failure was worth potentially BILLIONS to Disney. (Don’t worry, toys are on their way…so long as Covid-19 shutdowns don’t delay them.)

Well, it wasn’t. Which you’d have known if you read my first article on “licensed merchandise” for Star Wars back in 2018. Star Wars on the whole generates between $2-3 billion total retail sales for Disney every year. (With a one time boost in 2015 due to The Force Awakens.) It’s unlikely that one—admittedly excessively “toyetic”—character would have doubled that. 

Even if he had done really well as a toy property, the whole “Baby Yoda” saga reveals some important learnings about toys in general and in the Star Wars universe specifically.

– First, toys in particular aren’t a quick game. It takes Disney (or any toy licensee) months to design, approve, and then manufacture toys. And then put them on a boat and sail them from China (mainly) to the United States. This is why even as Baby Yoda blew up, Disney couldn’t spin out new toys quickly.

– Second, toys (and lots of merchandise) aren’t as lucrative as the headlines usually suggest. Take those retail sales I just mentioned. Those become the “revenue” line for retailers. The toy companies only get the “wholesale” line, which is about half the retail take. Disney, on the other hand, only books 5-10% of the wholesale total. Which is still a lot! But an order of magnitude less than the total retail numbers suggest.

– Third, Star Wars merchandise had already burned retailers in the 2010s. Even if Disney had made Baby Yoda merchandise despite Jon Favreau’s desires, retailers would still have been skeptical. The huge boost in toy sales in 2015 when The Force Awakens came to theaters, burned retailers when Rogue One had anemic sales. I heard from quite a few retailers they were stuck with excess merchandise after Rogue One—when the $5 billion in sales didn’t repeat—so a lot of merchandise sat on store shelves. As a result, retailers dialed back orders for Solo and The Last Jedi.

– Fourth, is Star Wars merchandise for kids or adults? On one hand, kids. Obviously. Look at all the toys and young children wearing Star Wars shirts. On the other hand, look at all the adults wearing the shirts too. Adults are tricky for licensees, as I’ve mentioned before, because they aren’t as lucrative as children. And more finnicky/less reliable. Lots of folks speculated that the reason The Force Awakens generated such a one time boost in merchandise sales was because a lot of adults snapped up merchandise, but didn’t continue into Rogue One.

All of which leads into another “best of times; worst of times” summary of licensed merchandise. Star Wars is huge in the consumer product game, but it’s uneven and possibly trending downward.

Licensed Merchandise – My Estimates on The Top and Bottom Lines

Merchandise sales tend to be one of the harder business lines to estimate for a specific franchise or property. Studios don’t usually release the specific numbers, but the industry trade License Global does release an annual ranking of top content licensees, with some data for companies. Sometimes, specific franchises are called out. This historically happens in May, but last year was delayed until August. (It looks to be delayed again.) In the interim, I’m usually left to guess based on historical data.

The good news is that for toys and merchandise, they don’t have quite the lumpiness that you see in films for evergreen franchises like Star Wars. Other film-driven franchises like say Minions or Trolls see peaks and valleys for when new films come out or don’t. Non-film driven toy properties have similar steady state or peaks and valleys depending on whether they are evergreen or not. However, Star Wars has had a few decades of steady, multi-billion dollar retail sales. Its a safe assumption to assume that continues.

Thus, my toy model is fairly simple. Not a lot of bells and whistles and mostly extrapolating the trend line based on whatever has been publicly reported and then assuming it holds steady. There is still some uncertainty even in the publicly reported numbers because the inter webs have quite a few toy numbers for Star Wars, many of which are contradictory. (Wikipedia for example is wildly inaccurate.)

Let’s start at the top line, total retail revenue:

Screen Shot 2020-05-04 at 12.10.31 PM

First, there were quite a few estimates, as I just mentioned, that The Force Awakens saw a boom in retail sales to $5 billion. However, I lowered that number dramatically after reports that retailers were burned by Rogue One over-ordering. Indeed, even in Disney’s annual reports in 2017 and 2018 they blamed lower sales of consumer products partially on Star Wars.


The question is whether or not I think 2019, with The Last Jedi and The Mandalorian, saw a huge boost in sales. Based on the handwringing about Star Wars not resonating with kids, and the fact that another Disney property got most of the attention by stores (Frozen II) I think it did, but nowhere near the 2015 level. And yes, Disney said in their last earnings call that Star Wars and Frozen helped contribute to a big Q4. Hasbro—whose fortunes partially rise and fall on Disney’s fate—said the same thing. So we can’t untangle Frozen from Star Wars, but likely both were up fairly well.

Add it up and here’s my take. 

Screen Shot 2020-05-04 at 3.02.18 PM

The total revenue for retailers was likely around $3 billion dollars. I could see it swinging 20% either way. Of that, Disney likely took home $150-300 million. My estimate is towards the lower end—5% of retail sales—but some folks have said that Disney with its dominant position can demand better royalty rates on wholesale goods. More like around 10% of retail sales. So that’s why the range exists. The good news for Disney is that $300 million is basically a successful blockbuster domestic box office. That’s a great revenue stream to have! (And consumer products have pretty healthy margins as well. The costs are mainly for making the films and TV series in the first place.)

The worry, for Star Wars watchers, is how this fares going forward without another movie until at least 2022 (if not longer with the Covid-19 impact on production).

The Impact of Coronavirus on Licensed Merchandise

I should do a deeper dive like my other two looks at Coronavirus, but I’ll say quickly that I see two hold ups. First, if factories are shut down in China or elsewhere, that will delay toy production accordingly. Many toys have pretty long lead times, especially when bought in bulk, so I could see some delays impacting this process. This is even more true for plush or stuffed animals, that have stringent safety measures. Apparel can churn faster since laser printing has decreased run times considerably, and even on-shored a lot of US production.

Second, if films are delayed, their tied in toy sales need to be delayed too. This makes all the tricky scheduling complications even more difficult.

The question is whether the coronavirus impacts toy sales more broadly, and that I have no clue. I could see arguments on both sides:

More toy sales. With kids stuck at home, parents buy them toys as a distraction element. And they’re still consuming content like they were before, just not feature film content.

Less toy sales. Well, the lack of birthday parties could be killing the toy industry. That’s where lots of toys are purchased. Plus, despite Amazon/Walmart’s dominance, the closure of retail sales isn’t completely offset by digital shopping. Add to that a potential global depression, and toy sales could easily be a victim. (Just losing 5% of sales is enough to really hurt the industry.)

Add them up and I’d be more worried about toy sales than optimistic. But like all my Covid-19 thinking, I am incredibly uncertain.

Consumer Products Impact on Brand Value

As a reminder, as well as calculating the money made in 2019, I’m putting it into context of the Lucasfilm deal from 2012, and the future brand value of Star Wars.

Money from 2019 (most accurately, operating profit)

Well, I just covered that. Another $225-300 or so million added to the ledger for toys, apparel, video games, and such. 

Long term impacts on the financial model and the 2012 deal

I will point out my “discounted time value” though, because it’s the part people forget the most often when saying, “Man, what a great deal for Disney.” It was, but not just because the box office was high. What I’ll point out is that, in terms 2012 dollars, making $225 million in bottom line revenue “only” translates to $142 million in 2012 dollars. In other words, about 3.5% of the total price of the deal ($4.05 billion) was earned back in toys just this year.

Moving forward, the fact that Star Wars won’t have another film until 2022 (at the earliest), could cause an even steeper drop off in licensing revenue going forward.

Brand Value

The last question is whether the merchandise business as a whole built brand equity or detracted from it. This is almost all value judgement, and I have to say I don’t think the brand was hurt by not having Baby Yoda merchandise. Did Disney miss an opportunity to build some brand equity? Yes, but that’s not the same as hurting the brand equity. 

A Final Caveat

When I put these numbers out there, I should put a caveat on how to use these numbers. These aren’t actual sales or profit and loss statements from Disney. If I had those, I’d say so. (And if you have them, please share!)

Instead, these are my estimates. Which some can and have dismissed as “just my estimates”. I can also imagine the strategy teams inside Disney saying, “Oh man, he’s so off on this or that number in the analysis.” Sure! Of course I am. Any estimates are more wrong than they are right.

My defense is that this is my strategic estimate. When I was doing military intelligence, it’s not like Al Qaeda in Iraq or Jaysh Al-Mahdi or the Taliban gave us their number of fighters and locations. Right? That’s for them to know and us to estimate, and plan accordingly.

This estimate is the type of estimate I’d hope—but doubt they are—big studios like Universal or Warner Bros are making about their competitor Disney. In the battle of franchises, it’s worth knowing who’s doing well and who isn’t. That’s the type of analysis I’m trying to put out here.

Final point: I also provide my estimates in real numbers, unlike some other prominent strategy voices. You win and lose on the bottom line, and that’s the estimates I’ll give you. Strategy is numbers after all.

Most Important Story of the Week – 10 April 20: Some Quick Bites on Quibi

The common wisdom of the Coronavirus may have calmed down slightly. The hyperbolic take that “Everything has changed”–see Politico here. Or Deal Book this week. Or countless others–has given way to the narrative that, “Recessions/pandemics accelerate trends that were already occurring.”

At first, I bought into this little bit of folk wisdom. Then, as I reflected, I realized I was basing a lot of assumptions on a bit of common sense that frankly, has no evidence to support it.  It’s rebutted mainly with this key question:

Wait, what data/research/experiments/history have shown that recessions or pandemics accelerate trends?

My goal is to arm folks with antidotes to narrative-based thinking. Sometimes that just means calling it out when I see it. The above narrative absolutely falls into that category. Just because some trends may get accelerated in a recession doesn’t all trends do. Then, consider that we don’t have enough data points to justify this thinking. (We’ve had two pandemics and only a handful of recessions in the last fifty years. 5 data points does not a trend make.) Finally, since we don’t actually have any data to support this, it’s mainly used as a tool to reinforce pre-existing biases. (If you’ve long predicted tech/digital will disrupt everything, the above saying simply reinforces your priors without any additional evidence.)

If some of the thinkers/forecasters/soothsayers out there led their pronouncements with “I believe this will accelerate trends”, then I’d have less of an issue. But instead, it’s put as if it’s a proven law, “Since we all know recessions accelerate underlying trends…” 

Now more than ever, predicting the future is incredibly hard. So be careful out there folks. Especially when you come across fortune tellers disguised as experts. On to the story of the week.

Most Important Story of the Week – Quibi Launches. Success or Failure TBD.

Over the last two weeks, if you squint through the news, you could just make out a front page of a website that entirely ignores Covid-19. For example, this week I was able to stack up a series of important stories, none of which are directly Coronavirus related.

The most important story this week has to be Quibi, a big bet in a time when everyone is making huge bets in an age of tremendous disruption. You almost (but don’t) feel bad for Jeffrey Katzenberg and Meg Whitman when they planned a huge $1.7 billion content war chest…and then Apple just quadrupled that on a TV service that is their sixth most important priority.

Yet, this week we all finally got a look at Quibi. And I read a ton of great takes. Here are my favorite insights I came across:

My Favorite Insights from the Interwebs

Quibi has news…which could be an edge by @TZM

Here’s that thought in Tweet form:

As I wrote in my column on live TV a few weeks back, television is a bundle of five different types of programming: scripted TV, reality, news, sports and kids. Actually, scripted TV, reality TV and films all serve roughly the same purpose: general entertainment. Most streamers are entirely focused on general entertainment and kids.

Which leaves a gap for sports and news.

This is another sub-tweet at Netflix. “Neverflix”, as I’ve called them before, has decided that certain content categories will never appear on the service. Like news and sports. Which means there is white space for people to carve time into consumers viewing habits. Quibi having a good supply of quality news could help drive customer adoption. (Peacock could benefit from this too.)

Quibi Needs to Be On TVs by Variety (and others)

Everything in the subscription game comes down to “total addressable market”, an often wildly inflated estimate used to justify skyhigh valuations. Quibi could point to everyone who owns a smartphone and say, “That’s our addressable market.” This would be wrong.

The addressable market is really people who watch TV. BUT! People tend to watch on certain devices. And despite the rise in mobile viewing, a huge majority of TV viewing is still via television screen. Even for kids! This means that the actual targeted segment for Quibi is a fraction of the total addressable market compared to every other streamer. That’s a huge disadvantage right out of the gate. Why artificially shrink your addressable market?

(BTW, this problem just plagued Spectrum, which rebooted Mad About You and plagued AT&T’s Audience Network. And it doomed Microsoft Studios before it started.)

My benefit-of-the-doubt guess is that Quibi prioritized launching on mobile only (Android, iOS) before providing functionality to all living room viewing. Again, I hope that’s the explanation. But it still feels like a miss.

Is Quibi’s 90 Day Free Trial is Too Long? by Kirby Grines

Yes! Especially since all their content is particularly short to begin with, there’s a very good chance customers will be able to watch all they want in those 90 days. Churn is the name of the game in subscription streaming. Notably, Netflix is moving away from free trials globally. 

This seems risky.

It’s Too Soon to Bury Quibi by Andrew Freedman/Alison Herman

I’m giving Quibi a shot and putting them in my ten part acronym for the streaming wars:


Why? Because with the content spend and hype, I think they have a chance. Should they be above Showtime and Starz? Maybe not. But those apps don’t seem to be gaining in customers. Honestly, my upside case for Quibi is 5 million subscribers in a year. Or they could run out of money well before then. Or get acquired. But it is too early to bury them. They have a shot.

My Insights

Another Platform…Another Lack of Library Content

The solution to not having a library seems to be to focus on just having a lot of originals. As opposed to Apple TV+, that didn’t even have a lot of content.

From what I can tell, Quibi is going to start with lots of essentially movies. (An estimated 7,000 pieces of content in year one, but it’s unclear if that counts the 10 minute episodes or not.) If it is, that’s 1,000+ hours of content. Which is good…but that’s over one year. And up to half could be news stories, which isn’t quite the same thing. Add in the fact that lots of content won’t appeal to lots of people and I could see it running out quickly.

Mobile May Just Be a Music/Kids Platform

That was my take earlier in the week and I stand by it. If you look at this quick glimpse at Youtube’s most subscribed channels, then it seems pretty clear that mobile video is not-so-secretly “mobile music videos”. 

The Content Deals…

Quibi has also let it leak that it’s deals with talent are very talent friendly. As in after a few years talent can walk away with their shows scot free. I don’t know if that’s genius or madness, but it’s one or the other.

Is the content good?

I don’t know! And honestly don’t trust any analyst who says they can tell. Critics can tell you what is critically acclaimed, but evne that doesn’t hold much sway with customers. Let’s wait a few months for the IMDb, Rotten Tomatoes and Metacritic customer ratings to roll in before we judge quality.

Other Contenders for Most Important Story

Meanwhile, there was a lot of other news! 

Jason Kilar joins Warner Media

The trouble with predicting executive performance is two fold. First, there are so many variables we often fail to account for. Sometimes great executives work for terrible companies and other times terrible executives happen to work in great companies. And sometimes, it’s a bull market so everyone looks good. Second, when it comes to most executives, except for those at the tippity-top, it can be tough to figure out exactly what they did versus what they took credit for. To add a third fold, there is also the complication that some executives are great with the media, and get glowing praise regardless, and others aren’t. (So they succeed, make money for shareholders, just never get heaping praise in the press/trades.)

The hiring of Jason Kilar–of very early Hulu and then Vessel–by AT&T to run Warner Media is a big swing. He’s not a content guy, which could either be a big deal or a nothing burger. He ran Hulu well, but he was also sitting on literally the best asset of all streamers in the 2010s, day-after-air television. I could argue that the fact he didn’t keep pace with Netflix despite having that asset–and have no doubt it was/is a huge asset still–is as much an indictment as a credit.

But then the context. Sure, he had those great assets, but he was also stuck in a super messy joint venture, trying to please multiple masters in a cash burning industry that is streaming. Could many executives have thrived in that context? 

Then he launched Vessel to acclaim, but it was eventually acquired by Verizon and shuttered. That point about acclaim should give us the most pause. (And a bit of worry for Quibi too!) 

To top it off, well his press is too good for the accomplishments. I’ve heard his praises sung for years, but again he ran Hulu 8 years ago. Now, it could be because he is the real deal and watch out Netflix, Disney and Comcast, Kilar is coming. Or…it’s just really good press. (He could be the “Kenny Atkinson” of the NBA, for the Bill Simmons super fans.)

We’ll see. My 95% confidence interval in predicting his success or failure is pretty wide.

Disney+ Launches in Europe; India…then Gets 50 million Global Paid Subscribers

Well, Disney+ is firmly ahead of all analyst estimates. Notably, after launches in India and Europe, they’ve now passed 50 million subscribers globally. Someday, they’ll add Hulu subscribers to these numbers too. 

Frankly, even as a Disney super fan I didn’t think they’d do this well this quickly.

Apple and Amazon Strike a Deal

Someone called them frenemies. I think that’s actually too close. I wouldn’t have called Russia and Germany “frenemies” in the lead up to World War II. They were just two enemies who had paused hostilities temporarily.

That’s the same situation for Apple and Amazon. Both run platforms (iTunes/Amazon Video) that sell VOD. Both have streaming TV sticks. Both have streaming platforms that want/need to be on the other’s streaming devices. And they fight like cats and dogs to take as much money from the other as possible. But for now Amazon Prime users can buy shows and movies on Apple devices. Presumably Amazon doesn’t have to pay as high of a bounty as Apple usually demands for in-app purchases. (Normally it’s 30%.)

Still, a big deal for distribution purposes. That Amazon lack of in-app purchases has been a thorn in Amazon’s side for a while. (Now we’ll see if Amazon can get the next Fire Phone right…)

M&A Updates

Sprint/T-Mobile Closed

Going from three to four cellular phone providers is a big deal for customers. (Mostly bad.) Given the role mobile plays in connecting customers to streaming–and the fact that they all provide free streamers too–this is a key move for America. We’ll see how it works out.

Univision Was Sold

This happened right before all the Coronavirus news, but is worth noting, given how popular Univision is, and how far it has fallen in value. Being a broadcast only option just isn’t valued by the markets anymore, and for good reason.

Read My Latest at Decider “Is Anyone Watching Apple TV+?”

My latest article is up at Decider. The simple answer to the headline is, “No, not really.”

I had mentioned in my weekly column a few weeks back hearing rumors that, well, no one was watching Apple TV+. This article allowed me to dive a bit deeper into the subject then that article, plus talk about the largely disappointing debut of Amazing Stories.

Which is a point I’ll digress on a bit before moving on. If you recall back to the time period of last April, when Apple announced Apple TV+, Stephen Spielberg was a BIG part of that announcement. Like central. The thinking being “They got Spielberg. That’s huge!” But it was just another show he executive produced, like so many other flops in TV, and now it came and went. I’d say the same for Oprah. Another huge get, but is anyone tuning in to her book club?

Read the whole article for the details. 


Netflix is a Broadcast Channel: Comparing Streamers to TV Channels in an Age of Nielsen Data

One of my big frustrations with the “debate” over Netflix is how little we know. That’s a gripe I share with a lot of folks. 

One of my big frustrations with coverage of Netflix is how seldom folks try to step into the gap and estimate data points for Netflix. In this gripe I’m mostly by myself. I understand that some journalistic outfits can’t do this. They can only report facts or estimates from other established firms.

But I won’t settle. If Netflix won’t tell us how many folks watch their programming, then I’ll take things into my own hands. (See Ted Sarandos’ latest on Reliable Sources. All he said was “Viewership is ‘up”.) I just need enough data to make my estimates reasonable.

And guess what? Over the last three months I think I’ve collected enough. 

Normally, at this point I’d launch into a bit of a strategy lesson. I mean, it’s right there in the name of this website. Instead I’m getting right to my results. I’ll put my “Bottom Line, Up Front”, what this is, why it’s a good look and then how I calculated it. Then in my next article, I’ll analyze some implications from all this data, and finally my strategic lesson for folks out there.

Bottom Line, Up Front  – My Estimates for Primetime Viewing

The breakthrough for this project came from three summaries of viewing. All came from Nielsen, which means the measurement system is “apples-to-apples”. Even if you’re measuring subtly different things, at least having the same person measuring is better than multiple different measurement systems. 

Here’s my prediction of the top 20 “channels/platforms”—across both linear and streaming—in Primetime (8-11pm) in the United States, as measured by “Average Minute Audience”. 

Image 1 - Estimates

To be clear, this is the “average minute audience” during primetime in 2019. The best way to explain “average minute audience” is that it is the average number of people tuned in or watching during primetime. It can be different people who tuned in for only part of a show in traditional linear TV. Notably, it does include delayed viewing of shows, so it’s better described as “shows that debuted during primetime.”

Why use “average minute audience”? 

First, because it isn’t subscribers, which is the numbers we most often see reported. (And duly covered by me, for example here or here or here.) 

AMA is pretty damn useful because it captures actual usage, not just folks who are subscribed to a service, but don’t use it. While AMA can have wild swings—for example live sports skew ratings heavily—over 365 days it absolutely evens out. In other words, it’s a pretty good sample of the average amount of usage.

I’d add, the business rationale for tracking both usage and subscribers is because they are a chicken and egg problem. If you have lots of subscribers, but they don’t use the service, they’ll quit being subscribers. And if you have lots of usage, that ends up getting more subscribers. (Meanwhile, coronavirus is going to screw all this up as the old models of usage to sub growth will be pretty inaccurate during this time of crisis.)

Here’s a fun example. Who has more subscribers, CBS or Netflix? Well, CBS obviously. Through all the linear cable channels. (If you count those as subscribers, and they do pay a monthly fee, even if they don’t know it.) But since usage is declining, so is linear channel subscriptions.

How the relationship between usage and subscribers evolves overtime will have a big impact on how the streaming wars progress. We have subscriber numbers for the most part; AMA balances it out nicely in the interim. (Though if I had a preference, I’d just prefer total hours consumed by streamer and linear channel.)

The other main reason I used it? Well, it’s the data I have. So you use what you have.


How did I pull off this feat of estimation? Let’s go step by step through it.

First, gather your sources. 

One. Every year Michael Schneider releases a roll up of every channel by average primetime minute audience. This means for the 3 hours of prime-time (8pm to 11pm) he averages how many folks watch by every single channel. That gave me this chart of the last four years, since he linked to his past columns at IndieWire: 

IMAGE 2 - Top 25 Channels

Two. In February, Nielsen released their “Total Viewing Report” for 2019 Q4. They then released some juicy nuggets about streaming and Netflix’s share of viewership. Covered in every outlet possible, here’s the pie chart from Bloomberg converted to a table:

IMAGE 3 - Total Viewing Q4

Three. In another scoop, Michael Schneider in Variety got the weekly Nielsen streaming data on a show-by-show, top ten basis, which we hardly ever get:

IMAGE 4 - Nielsen Originals March

Second, make an estimate between the first two sources.

This actually just becomes a math problem. To start, I calculated the total viewing of primetime shows each year. You can see on the top line of the 2016-2019 chart that I calculated total viewership year over year, and it’s decline. With Nielsen’s estimate that streaming is 19% of viewership, we can combine these two estimates:

IMAGE 5 - Total Viewership

Once we have that, we can just multiply the percentage of streaming by percentage of viewing. Assuming that the percentage of prime-time viewing on Netflix is on average the same as broadcast and cable channels—which seems reasonable—we get this updated table:

IMAGE 6 - Updated Implied Total Viewership

That gave me the table above, which I’ll post again because I love it so much…

Image 1 - Estimates

Third, make some margin of error.

See, Netflix has in the past estimated they are 10% of TV viewing. So I wanted to give them their due and put the number out in case that’s closer to reality. So that number made it in as the “high case”. In this case, Netflix would surge past CBS and NBC to 9.4 million AMA on average. 

Of course, I’ve also heard that Netflix has something like 60% of their viewing is kids or family content. While this doesn’t show up often in their season data, you see this in their film viewing. So if I were estimating total Netflix usage, I’d consider lowering the primetime ratio down a bit, say to 4%. This would mean that Netflix severely under indexes on primetime viewership because it is essentially a kids TV platform. This would make Netflix’s primetime AMA around 3.7 million.

I’d call those two numbers our high and low case for Netflix in 2019. So 3.7 million to 9.4, with a like 5.5 million average AMA.

Fourth, sanity check your estimate.

This is where Michael Schneider’s latest Nielsen scoop in Variety comes in. In his latest scoop, he got the top ten ratings by “average minute audience”  from the first week of March for both Amazon and Netflix across a range of originals and films. 

We can use these weekly snapshots to evaluate our previous estimates. Because if the top ten had multiple shows in the high 8 digits of viewership, then obviously way more people are tuning in nightly than *just* 5.5 million per night. And since I unveiled this article, well you know the math doesn’t add up. First, here are Nielsen/Variety’s charts, converted to Excel so I can “math” it.

IMAGE 7 - Raw Tables

If we add up each of the 30 Netflix data points, we get 34.8 million AMA. Which is way higher than my 5.5 million per night. But…this viewing was spread out over 7 days. Someone could have watched multiple series each night. On a streamer, there isn’t a constraint on viewing. Since this is 7 days of data, at a 5.5 million AMA we’d have expected about 38.8 million. That’s pretty close to the 34.8 we actually had. This is why overall I think my methodology is pretty accurate.

But I have some huge caveats.

First, this is seven days of around the clock Netflix viewing. Which is way more than what Michael Schneider was tracking in his “top channels” run down which is strictly a primetime measurement. (8pm to 11pm) So if we’re trying to balance the books, we’d need to draw down the Netflix numbers to account for non-primetime viewing. Try as I might, I couldn’t find a good data source showing Netflix viewing by time of day.

Second, you could also point out that these 30 shows weren’t the only things available on Netflix. What about all their hundreds of other shows?

Good point. So here’s a table of the Netflix shows whose data we do know.

Image 8 - without additionsWhat should jump out at you right away? The logarithmic distribution of returns. In other words, in the content game, the winners aren’t just a pinch better than the others, but they are orders of magnitude bigger. We see that starkly here. Of just these 30 pieces of content, a plurality had less than 500K AMA and a majority had less than 1 million.

But we know that’s far from all the content Netflix has. They’re a machine churning out, according to Variety’s estimates 371 new TV series in 2019. That’s in addition to a hundred plus original films. 

Why does this matter? Well, I made my own estimate of the rest of Netflix’s viewership based on these trend lines. Here’s how that looks:

IMAGE 9 - with additions

In other words, even though Netflix has hundreds of other shows, they don’t really impact the ratings after the launch. Likely the majority of series launched on Netflix last year average a ratings-wise insignificant number of views. (Say 10-25K per week. Or less.) If you have 300 shows earning 10,000 views a week, that’s only a 3 million AMA. Which would bring the estimates above right in line.

In other words, after my sanity check, I think my nightly AMA number for Netflix looks pretty good. Arguably the primetime only numbers would bring it down—meaning I was too high—but the other not included shows would bring it back up. And likely still a majority of adults watch Netflix at primetime, regardless of anecdote about binge watching at all hours of the night.

So that’s my data estimate of the day. But what does it mean for Netflix? 

Next Time and My Data

Let me be honest: if you unleash me on a data set like this, I generate way more insights than just this one article. In my next article, I’ll run through some implications and provide a piece of strategic advice. 

Also, I built a fun Excel for this. It’s not super complicated and you could go get all the data yourself if you wanted. But like I’ve done a few times before, I’m going to give it away. The price? You have to subscribe to my newsletter at Substack. It goes out weekly if I don’t have a consulting assignment; once or twice a month if I do.

Email me from the email you subscribe to the newsletter with, and I’ll reply with the Excel. (Email is on the contact page.)

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