Read My Latest Guest Articles at Whats On Netflix and Decider

In lieu of a big article this week—I was a pinch busy on some other projects and I’m also digging through a lot of viewership data from Nielsen—I wanted to shout out two guest articles that I never linked to on this website.

– First, I wrote about Netflix’s viewership over the summer at What’s On Netflix. I also continue to think Netflix is leaving “awareness” on the table by not releasing one series per quarter as a weekly series.

– Second, I wrote my extended thoughts on Quibi’s demise in this obituary for Decider. As always, the key art is tremendous at Decider.

How Google’s Antitrust Case Explain Quibi’s Demise – Most Important Story of the Week – 23 Oct 20

Honestly, it’s either feast or famine with news in entertainment. Some weeks, I look at all the stories and can’t figure out what is the most important. Then other weeks, I have a plethora to choose from. This week fell on the “plethora” end of the spectrum.

Two stories led the pack. Quibi raised and lost $2 billion dollars. So that’s a big story. Yet, splitting up Google could have tens of billions of market moving ramifications. How do I pick when Quibi is so juicy, but Google is so important? Why, by combining the two! 

(As always, sign up for my newsletter to get all my writings and my favorite entertainment business picks from the last 2 weeks or so.)

Most Important Story of the Week  – Google’s Antitrust Lawsuit and Quibi’s Demise

The background, in case you didn’t hear: 

– The Department of Justice under Bill Barr filed a lawsuit with 12 state attorney’s general arguing that Google is an uncompetitive monopoly in search. This lawsuit makes lots of similar arguments to the Microsoft case of the 1990s about using their power to exclude competitors. 

– Quibi is exploring options to shut down, as reported in the Wall Street Journal.

So how does the former relate to the latter?

To explain that, consider a thought experiment. Imagine that along the way, Jeffrey Katzenberg pitched Susan Wojcicki (the head of Youtube) the plan for Quibi. And she loved it. (Hypothetically.) She replies, “Jeff, don’t launch Quibi as a standalone service, we’ll buy it! And you run it as a standalone venture.” Then assume they keep everything else the same. The same budgets. The same product. The same everything.

Would Quibi still be around? 

Yes!!!

And the explanation is fairly simple: Google can afford $2 billion in losses over three years. In fact, Google can afford to lose $2 billion dollars every year on one business. And maybe more. 

My favorite example to show this is the money pit that is Youtube TV. When it launched, Youtube TV cost $35 per month. After adding some more channels, it bumped up its price to nearly $60. And that’s every month. For nearly 2 million subscribers. The thing is Youtube was likely losing money every month on Youtube TV, and potentially still is losing money every month on that service.If Google is losing $20 per subscriber per month, then they could easily be losing half a billion dollars per year. If not more. 

In other words, Google will easily lose billions on a speculative streaming venture.

This gets to the realization I’ve had debating the streaming wars over the last year or so. And it started with Apple TV+. Essentially, I’d find myself talking past folks when we discussed our opinions on Apple TV+. I’d say that I thought the lack of a library, lack of ownership in original content and unclear pricing were strategically bad decisions. Then folks would counter that it didn’t matter because Apple could afford the losses. The same arguments are made for Amazon and Google in a number of businesses as well.

But these are two different arguments. One is about the quality of the strategy. One is about the access to resources. These two questions help frame the streaming wars. And they are two questions we should ask about every major player (from both entertainment and technology) in the streaming wars:

  1. Does a streamer have a good business strategy?
  2. Does the parent company have immense resources to allow deficit financing?

For example, I’d say that Apple TV+ has a bad strategy overall, but they have a parent company that can shield those losses. And while Prime Video has eventually clawed its way into second or third place in the US streaming rankings, it likely has lost lots of money in the process. But who cares because Jeff Bezos is the world’s richest man.

We could go on, or I could make a quad chart to give you my take on this equation:

Screen Shot 2020-10-23 at 9.00.56 AM

For Quibi, a questionable strategy meant they ran out of business. For Apple TV+, who has arguably the same bad strategy (if not even more cash burn), it doesn’t matter because they can burn cash unlimitedly. Disney likely can’t afford perpetual losses. Netflix is the only firm in the middle because it’s strategy clearly worked, but it also lost tons of money. It also needs to make some money, because it doesn’t have a wealthy parent, yet some would argue the equity markets do that for them.

The lesson here is really for practitioners. The business leaders out there. Draw lessons from those with good strategy, not those who have cash resources you may or may not have the ability to match. Good strategy is still good strategy. (What is good strategy? Books are written on it, but for me it’s a product that matches the needs of a targeted customer segment that creates value over the long term, by leveraging a competitive advantage.)

Society could also take some lessons from this. The market should pick winners or losers because they have good strategies. Because that means companies are creating value. When external factors support money losing enterprises, it’s usually because they are trying to acquire monopoly power, which is bad for innovation and customers.

These are trends that Quibi tried to fight against, but ultimately failed. Too many folks are spending too much in ways that don’t require earning money for it to have a fighting chance. Whether or not Jeffrey Katzenberg and Meg Whitman should have seen that coming is an open question. And likely their business model was flawed, as I’ve written about before. But the reason they went bankrupt, ultimately, is because they didn’t have a parent company support massive losses. 

This is the power of Big Tech and while the current antitrust lawsuit isn’t about this price gouging specifically, it’s still about the power of Big Tech. 

Additional Google Antitrust Thoughts

– Does this impact M&A by Big Tech? Especially when it comes to big tech snatching up smaller entertainment companies? I constantly read that Amazon should buy Viacom-CBS. Heck, just last week I wondered why Netflix doesn’t buy Sony, since they license all their shows. A source said he’s heard a lot of rumors that Netflix wants to buy Viacom-CBS. All of a sudden, mergers for vertical integration purposes look a lot dicier.

– What about entertainment mergers? That’s a good question. The ire of antitrust litigators will likely stay focused on Big Tech for the foreseeable future. If the DoJ casts their eye of Sauron around, though, Comcast and AT&T are the next in the crosshairs, given their mutual penchant for mergers, the local and national monopolies and vertical consolidation.

– Is this bad for Youtube? Potentially. One of the easy remedies for the government to insist on is that Google divest Youtube to diversify the advertising market. Given that Youtube makes almost as much money as Netflix each year in revenues, this is a reasonable request. However, the current case makes no mention of breaking up big tech, and neither did the Cicilline report. 

– What about price gouging/predatory pricing in entertainment? This is much more of a stretch, but a potential spinoff branch of antitrust. In other words, under scrutiny, the DoJ could say, “Hey, if you run a video service as part of a vertically integrated firm, you can’t lose money simply to gain market share.” This is the least likely outcome of these questions, but if it were enacted it would have the largest ramifications on streaming video of any other decision.

(I had more thoughts on Quibi too that will be up at a different outlet later.)

Data of the Week – What Happened to HBO’s 88 million International Subscribers?

When I spent weeks trying to figure out how much money Game of Thrones made for HBO, it required understanding HBO’s subscriber totals. Unfortunately, Warner Bros (now Warner Media) never made it easy. Before 2011 they didn’t report anything, so I had to rely on news sources. When AT&T acquired Warner Media, it stopped reporting HBO subscribers at all. Meanwhile, they combined Cinemax and HBO subscribers in the same total, even though most Cinemax subscribers were subscribed to both. To top it off, Warner never actually broke out subscribers in a table, you had to search the narrative to find the totals.

Last earnings report, AT&T decided to bring back HBO subscriber totals. So I updated my long term tracker. But AT&T decided to only report domestic/United States subscribers. Huh. Then in the latest earnings report, they added international subscribers, but claimed it was only 21 million. Double huh. So here’s my updated chart for HBO subscribers:

Screen Shot 2020-10-22 at 9.11.17 PM

What happened to the 94 million at peak and 88 million as of 2017? And how high did it get in 2019 as Game of Thrones debuted?

I’ve reached out to HBO for comment, and will let you know if they reply.

Other Contenders for Most Important Story

Netflix’s Earnings Report

If you want my initial thoughts, here’s the Twitter thread:

Reflecting on it, I’m surprisingly sanguine about Netflix’s earnings. I thought the content was more of a drag than it ended up being. For example, the films did pretty well with three besting the 70 million households watched by 2 minutes viewed total (55 million at 70% completion by my translation). Here’s a chart:

IMAGE 3 NFLX Viewership

Caveats abound, as I like to say. First, the challenge is that the shift from 2019’s 70% completion to 2020’s 2 minutes viewed just crushes the narrative. As Netflix has said, this conversion usually means a show gains about 35% more viewers. That’s a lot. And if you took all the Netflix shows down to the 70% threshold, the numbers look less impressive.

Second, the weakness may have been in television more than anything else. Really, Netflix’s top three series are Stranger Things, The Witcher and Money Heist (La Casa de Papel), in that order. And the last of those does very poorly in the United States. Given that binge-worthy TV series drive time on Netflix, not having one of those really does hurt Netflix, and that’s why they likely missed subscriber targets in Q3. 

The End of the Fast and the Furious

All things must come to an end, but even Universal’s biggest money maker of the last decade? As others said, we’ll see if Universal can hold to this promise.

A New Contender for “Next Game of Thrones”

The big question for 2022? Which series will be the “next Game of Thrones”, as I wrote about here. More than anything, every streamer is trying to mimic the success of HBO, even though it’s not clear to me audiences are clamoring for more fantasy series. (Contrary point? The Witcher did great numbers for Netflix.)

The news is that Disney+ is adapting 1988’s Willow into a TV series. This series immediately has more importance than many Netflix’ series. Mainly because Disney+ needs quarterly hits to drive subscribers and this is in “white space” that isn’t Marvel or Star Wars. (Netflix has tons of TV shows to bank on.) Plus, it could appeal to adults. Also, full disclosure: I loved Willow as a kid but haven’t rewatched on Disney+, so guess I’m doing that this weekend.

Charlie Brown Heads to Apple TV+

Well, how about that for a licensed content acquisition? All my hatred on not having a library, and then Apple grabs the Charlie Brown holiday specials, which are a tradition in many homes, exclusively for their service. 

I love this move for Apple. (Caveat: price is everything, and I don’t know the terms.) For a service that needs growth, this is a great move. Honestly, I think it will drive more subscriber acquisition than Borat or Coming to America 2 for Amazon Prime Video.

Read My Latest “Why Did Netflix Cancel ‘Away’? (Hint: The Company’s Going Through A Midlife Crisis)”

It’s fairly clear Netflix is cancelling more shows sooner than they have in year’s past. The latest victim is the space epic Away. This move is more than a streamer cancelling an expensive show that underperformed, it shows that Netflix is embracing (some) cost discipline as it enters its third decade.

Read about that at Decider. This one is short, but it packs in a lot of biz thoughts.

Visual of the Week – Netflix Top Ten Series by Total Minutes Viewed

One of the big questions every quarter is whether or not Netflix will hit its quarterly subscriber growth estimate. This leaves analysts scrambling to read the tea leaves from app downloads and what not to try to figure out if they are on track or not. Tomorrow (Tuesday Oct 20th) will tell us one way or another.

My contribution to this is to note that often having valuable content drives adoption and usage, and hence subscriber growth. This sounds relatively benign, as a statement, but has profound implications for whether or not Netflix has a “moat”. Or indestructible defensive position. If Netflix is simply another content creator whose success depends on producing good content, well they’re as mortal as the rest.

So my data of the week is one look at content. There are lots of ways to do this (Hedgeye Communications used Google Trends to brilliantly show this in a newsletter last night), and the data set I’ve been playing with recently is Nielsen’s top ten streaming shows each week. Here is the total minutes viewed for Netflix from Nielsen by week for the United States from end of March to present, with a big gap:

Screen Shot 2020-10-19 at 10.45.22 AM

And here’s the table for folks who want the raw numbers. I also included how many titles they had in the top ten.

Screen Shot 2020-10-19 at 10.50.29 AM

Ramifications/Thoughts/Insights

– Hits drive the ratings. Again, this is so obvious and has been true for decades it sounds silly to restate it, but in the “digitally disrupted” world, we have to relearn old lessons.

– Man, look at March! It turns out Tiger King and Ozark drove huge viewing to the platform. Almost 2.5 times more viewing to the top ten.

– Likely this means that content in Q2 was much more popular than Q3. Tentatively, this would portend a drop in US and Canadian subscribers in the next earnings report. (Some application sign-up and download data is presaging this outcome as well.)

– Yes, the last three weeks have seen 1 to 2 non-Netflix shows make the list, making this time series not totally apples-to-apples over time. That said, I ran the list with the Amazon and Disney shows, and it looks mostly the same. Meaning that the top 3-5 shows tend to account for most of the viewership, so having one or two small shows with 500 million minutes viewed doesn’t radically change the numbers.

– I have a ton to unpack for these Nielsen numbers to learn/prove more insights about how content behaves on Netflix and other streamers. (Trust me, I know a ton from my previous role about how the content behaves, but I want to show/prove it in the data. And for the most part, it behaves the way I expect.)

– Long term, I hope to compare Nielsen’s data to Netflix’s Top 10 data (provided by Flix Patrol) to Netflix’s own datecdotes to Google Trends and more, but that takes time. Also, if you have a data set you want to share, my email is on the contact page!

– Specifically, I’m on the look out for the missing weeks of top ten data from this Nielsen data set. Someone sent me the April and May numbers, I’d love to have March, June and July if anyone has them. Your confidentiality assured.

Most Important Story of the Week – 16 Oct 20: Dueling Re-Orgs by Disney and Netflix

This felt like a light week on the big stories. In entertainment at least; in politics, well good luck keeping up. 

My eye was drawn, then, to the Disney news of Tuesday that they’ve re-organized to focus on streaming. Meanwhile, another Netflix executive left the original side of the house. By most measures, Netflix is the global and US leader in streaming, and frankly I think Disney+ is second.

So let’s look at these org chart changes for the two most important streamers and what they mean for their respective strategies.

(As always, if you enjoy this column, consider signing up for my newsletter to get my articles delivered to your inbox every two weeks.)

Most Important Story of the Week – Dueling Re-Orgs by Disney and Netflix

Disney Re-Orgs the Chart To Focus on Streaming

There is nothing like re-organizing the org chart to prove that you mean business in a given strategic pursuit. Thus, The Walt Disney Company–under all sorts of stress, from theme parks to sports ratings to a letter from Senator Elizabeth Warren about firing employees–has re-organized their business units and leadership to focus on streaming. 

Or so they said. In reality, I’m not sure. 

Let’s start with what we know, and what we know about who reports to whom. Kareem Daniels, who used to head consumer products, video games and publishing, is taking over all media operations and distribution, that includes both the US TV networks business, the US direct-to-consumer business and worldwide P&L. His title is ostensibly “head of distribution”.

Notably, it doesn’t include the movies studio (and subsidiaries), the TV production, the sports group, or the theme parks and merchandise group. Further notably, the head of international direct-to-consumer (Rebecca Campbell) will report to both Daniels and CEO Bob Chapek. Daniels has worldwide P&L, but Campbell reports to both.

The problem this is supposedly supposed to solve is that the TV groups will finally forget about all that cable revenue from ESPN and broadcast ad revenue from ABC and focus on making TV for the streaming future. It also may bury some of the losses from media networks and streaming in the same org chart, making it unclear how Disney is or isn’t making money on media.

My worry is first with the dual org chart part. If streaming is the future, it should have one leader who is responsible for it on a global basis. Which is really Disney’s goal here. Instead, my gut is Campbell will end up thinking in international terms whereas Daniels will focus on the United States. (Which still is the majority of Disney’s current revenue, mainly driven by ESPN.) Meanwhile, can US based production studios really think globally for content? Especially on the TV side?

The biggest driver of success this decade at Disney–feature films–remains independent. Though, I don’t hate that. If anything, this acknowledges that while home entertainment, Pay 1, Pay 2 and Pay Infinity are collapsing, the box office isn’t quite dead. Which means Disney’s films will still plot a course through theaters…whenever they come back. Of course, does Daniels have control over theatrical distribution too? Meaning that even the studios are just glorified production companies? Maybe there are more questions in this re-org than answers.

Long term, this change reinforces another constant struggle at Disney to differentiate between “the United States” and “the rest of the world”. If anything, it looks like Disney will have one streaming strategy for the states (America is Disney+, Hulu and ESPN+) whereas the globe is Disney+ and Star (with a TBD on ESPN+). As I wrote a while back, I don’t hate this. The jury is still out on producing global TV content holistically versus buying good local programming. 

Netflix Loses a Third Content Executive in a Month

When Netflix promoted Bela Bajaria to head of global TV content, this seemingly foreshadowed Disney’s move. Netflix had bifurcated content teams and they want all content decisions made by the same person, but this time the person previously focused on international content. This aligns with their global strategy, which is good.

But that’s old news. What drew my eye this week was the departures at Netflix. Last week, Channing Dungey, Vice President of Original Content and Drama, departed. This week, the head of original series followed her out of the door, as Jane Wiseman left

Those departures are not necessarily good news. If you’re Netflix, though, they’ve managed to spin every firing, or even wave of firings, as insanely positive. You “fail the keeper test” and they let you go.

That explanation doesn’t pass my own test, “the smell test”. In other words, I smell BS.

What is happening at Netflix right now isn’t some clever, new tech, disruptive approach to human resources. Nope, this is an old school Hollywood power struggle. A new executive takes over (Bajaria, by the way, trained in the classic dark arts of Hollywood politics) and then cleans house to bring in “their” people. 

If the strategy is going great, then firing a wave of executives responsible for that strategy seems…foolish? No? But then again, this is Hollywood and it wouldn’t be the first time an executive came in and cleaned house even when things were working. (For instance, Alan Horn leaving Warner Bros after winning the 2000s to go to Disney…why did they let him go?!?!?) 

If the departures gain steam, then serious questions are raised with only two negative explanations: Either Netflix is firing quality execs in a power struggle, or they had a content strategy that wasn’t working (despite press to the contrary). 

Do Executive Reshufflings Matter?

Yes and no.

(A point I’ll keep making until I die.)

They do matter because structure is one of the pinnacles of internal strategy exemplified by the McKinsey 7S framework. (I haven’t “explained” this framework yet, but I do love using it.) 

Screen Shot 2020-10-16 at 10.35.08 AM

Often we focus on external strategy and disruption. But having an internal strategy (skills, structure, shared value, systems) to execute that external strategy can be as important as the value creation business models. So critiquing whether or not Disney and Netflix have got that right makes sense.

But you’ll note I haven’t commented on the personal qualities of any of these executives. This is the no side of the equation. We don’t have a lot of good “metrics” for executives. So judging whether or not Kareem Daniels or Rebecca Campbell is better than Cindy Holland or Bela Bajaria feels like a fool’s errand. And half the time the celebrated new executive flops in their new role.

So these moves are critical, but it remains tough to judge if they’re doing the right thing.

Other Contenders for Most Important Story

Netflix Ends Free Trials

The masters of PR are at it again. And I don’t say this begrudgingly for a Netflix “bear”: I genuinely consider their press relations to be a source of competitive advantage. (I’d add their deal teams are particularly creative too.)

Thus, in August, Netflix announced they are making some content free for everyone, and got praise in outlets across the spectrum. Then in October, they shut down free trials in the United States–following a global trend–and no one reported on it until friend of the website Hedgeye’s Andrew Freedman asked about it on Twitter. For two weeks, no one realized Netflix had stopped free trials. Not a single article!!!

Ending free trials is fairly smart for Netflix, though it’s a warning sign for the streaming wars. It’s smart because increasingly customers are signing up to a service simply to binge the wares and bounce to the next streamer. Given that more folks know what they are signing up to watch and when, allowing this sampling is unnecessary for Netflix. 

(Anecdotally, I’ve heard that Starz, Showtime and HBO saw much, much higher churn numbers on Amazon Channels, which is one driver for HBO insisting that HBO Max stay off that platform. Amazon promotes churn, which is bad for the SVODs.)

The worry, for Netflix, is that the behavior is still there where folks churn in and out of streaming services. Netflix is as close as any service to the “universal” streamer. The “must have” everyone must own. But even they are seeing customers opting in and out of Netflix after customers have binged most of the stuff folks want to watch.

If you’re looking for numbers for the streaming wars, churn is in the top 5. Arguably the most important number. If churn goes up for everyone–including Netflix–that’s bad for everyone. My favorite theory of the streaming wars–from Richard Rushfield–is everyone is losing the streaming wars simultaneously. Churn is how that could happen.

(By the way, Apple TV+ is extending free-trials for some customers into February 2021. So maybe they really need free trials.)

Coming 2 America 2 is Coming to Amazon for $125 million joining Borat 2

Amazon is on a movie buying spree. Frankly, they’re taking advantage of films that can’t get distribution in the shut down theatrical landscape, but it doesn’t make sense to hold until 2021, which will be brutally crowded. Of course, they can overpay for this privilege because we don’t know how much money they make on streaming. I tend to agree with others that I don’t see how they break even on this film. (Past math on streaming video economics here, here, or here if want to see why.)

Context Update – Stimulus This Year Looks Unlikely

Which is bad for the economy. That’s plain and simple. The more stimulus going to consumers and businesses the easier it is to handle lockdowns while shortening the recession. Even waiting until January will likely cause the recession to deepen sharply. This is easily the biggest economics story to monitor.

Data of the Week – HBO Max Saw a Rise in Downloads

If Disney is in “hit-driven business” club, well HBO Max wants to join. This week, they featured a read-through of an episode of The West Wing with the original cast and it drove new downloads according to Apptopia:

This in particular solves HBO Max’s biggest business problem, which is converting HBO users to HBO Max users. So adding a few hundred thousand new users is a win. Future events like The Friends reunion–in particular–should help further.

M&A Updates – The DoJ Is Preventing a Dish and DirecTV Merger

Not all M&A deals are getting approved. (Though it likely doesn’t help AT&T that they angered the current administration by owning CNN.)

Visual of the Week – Netflix Produces 3.3% of Its Top Streaming Shows

Over the last six weeks, Nielsen has released a top ten list of the most streamed series/films by total minutes viewed. I’ve been taking this data and adding a layer of detail on top, specifically who produces and who distributes what shows on Netflix, Amazon and so on. Now that we have six weeks of data, we can start to parse some insights. 

(Thanks to Kasey Moore of Whats-On-Netflix for saving the Nielsen lists for me.)

The visual of the week for this week is just a look at who owns what in the streaming wars. Of the 52 billion minutes of TV tracked by Nielsen, here’s who produced what and what shows they own (by parent company):

Screen Shot 2020-10-14 at 8.48.12 AM

And here is the table if you want to see how the sausage is made.

Screen Shot 2020-10-14 at 8.48.19 AM

Now some insights/details.

— Some shows were co-productions, in which case I split ownership between the two companies. Meaning, the percentages won’t add up to 100%, since some shows were counted in both owners’ percentages.
— Two films/series were not on Netflix (The Boys and Mulan), but that only boosts Netflix to 3.3% in “Netflix-only” series.
— I focused on major producers only. The traditional conglomerates. Usually, any of these shows has a bunch of smaller producers attached; I counted who likely paid the production budget.
— I use Wikipedia to determine producers with another source who tracks everything on Netflix by copyright ownership. The closest call was Umbrella Academy, which is also co-distributed by Netflix. However, NBC Universal owns the copyright outright so Netflix will not own it in perpetuity. Moreover, they aren’t listed as a producer, so didn’t make this list.
— That’s really what I’m trying to get at by focusing on producers versus distributors. The idea that who “owns” a piece of content so they can eventually maximize the value of it.
— I can hear the criticism, “Well this list is mostly library content.” And that’s true, but not 100% correct. Even the list of first and second run content by Netflix is almost entirely licensed content.
Seriously, don’t use “Netflix Originals” as a descriptor. It really doesn’t capture the key parts of ownership in content.
— I will run this same analysis on the FlixPatrol data for Netflix’s Top Ten list, but I haven’t had time to do that yet.

Bottom Line: A core thesis of Netflix’s content spend has been to build a “moat” of original content they own in perpetuity. Clearly they have a ways to go before they truly own their content.

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

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

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

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

Insight 1: Disney is a Hit Driven Business

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

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

Image 1 - G Trends with Hamilton

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

IMAGE 2 - Parrot Analytics Recent Demand

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

IMAGE 3 - Antenna Longer Time Period copy

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

Ramifications

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

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

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

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

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

IMAGE 4 - 7 Park Long Time Period

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

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

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

Ramifications

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

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

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

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

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

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

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

IMAGE 5 - One and Only Ivan

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

IMAGE 4 - 7 Park Long Time Period

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

Ramifications

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

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

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

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

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

Image 6 Netflix Hard R Financials copy

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

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

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

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

Image 7 - G Trends Hulu

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

Image 8 - 7 Park Summer Data

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

Ramifications

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

Image 9 - Reelgood

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

Most Important Story of the Week – 9 Oct 20: Movie Theaters…What Comes Next?

Seeing this Sonny Bunch tweet over last weekend was probably the most disappointing news I’ve seen in a while:

Is this the final nail in the theatrical coffin for 2020? Probably. So let’s once again check in with theaters.

(As always, if you want the Entertainment Strategy Guy in your inbox, sign up for my substack newsletter, which comes out every two weeks. Or connect on Linked-In.)

Most Important Story of the Week  – Movie Theaters…What Comes Next?

This seems to me like an unforced economic error. California and New York simply won’t reopen theaters or theme parks until an extremely efficacious therapeutic (meaning lowering death to below 1 in 10,000 for all ages) or vaccine is developed. And since California and New York are high-wealth and high-population states, it’s keeping studios from launching any films in America. And since America is at least 25% and sometimes 50% of a film’s gross, it’s keeping new films from launching anywhere globally.

So here is the specific news, if you didn’t see it last week:

– Jame Bond’s latest installment No Time to Die moved to 2021.
– Disney’s Black Widow moved from November 6th to May 2021. 
– Dune moved to 2021. 
– Universal then moved the next Jurassic World film to 2022.
Soul is going straight to Disney+.
– Wonder Woman 1984 hasn’t moved from Q4. (Yet.)
– Since those films are moving, Regal closed theaters again to all films. As of this publication, AMC and Cinemark have not followed suit.

Is this bad for theater chains? Yes. Most forecasts at the beginning of the pandemic said they could last for 3-6 months, and a few could survive to 2021 as long as some films started returning to theaters. The last quarter of the year was the backstop…and now that backstop is gone. 

The question, then, is what comes next? I haven’t seen that answered. Instead, I just see eulogies for theaters. Well, if you want a job done right, you got to do it yourself. First, some thoughts on the industry. Then the potential outcomes.

Thought 1: The Theatrical Distribution Industry is NOT Theater Businesses

The theatrical industry is made up of AMC, Regal, Cinemark and countless smaller independent theaters and smaller chains. But the industry will exist even if/after those chains go bankrupt or disappear. In other words, the business model is not the business, if that makes sense. We need to discuss two different questions:

– First, will theatrical filmgoing survive?
– Second, will the current theater chains survive?

We should keep those two questions separate as we forecast the future.

Thought 2: The smaller chains will have different outcomes than the giants.

Yes, AMC, Regal and Cinemark own a vast majority of theaters in the United States. But many smaller chains exist, and in some cases have better flexibility to survive in a post-Covid 19 world. In other cases, they have even tighter financials and will struggle to survive.

Thought 3: This is Disruption We’ve Never Seen

Meaning, I don’t have a lot of great comps for this business situation. Amazon disrupted retail, but that took years to take place. The internet disrupted daily newspapers, but again that took two decades to take place. Blockbuster was replaced by Netflix, but again that took years. (And Redbox and iTunes don’t get enough credit for their role too.) Same for cell phones, cable, and other disruptive technologies. 

I honestly can’t think of a business situation that compares to the situation facing certain industries right now. Thus, all forecasting is that much more uncertain.

Thesis: The Theatrical Industry will Survive.

In some form. I would bet heavily on this outcome and invest heavily if I ran a hedge fund, private equity or conglomerate with cash to invest in media and entertainment.

The logic is fairly inescapable. A good portion of customers want to see films. I’ve written before that theatrical filmgoing has been remarkably resilient. For all the “death of theaters” narratives, the data frankly doesn’t support it. 

Think of this like a Porter’s Five Forces analysis to ask if this is a good industry to enter. We just showed customer demand. Competition will wipe out some theaters, meaning competition is reduced. Meanwhile, theaters are unique buildings that don’t lend themselves to easy re-use. That means the land has a limited set of buyers. Plus studios still want box office. 

If you have customer demand, weak competition, low barriers to entry, and cheap supply, then that’s a market to get into!

To top it off, if you’re the type of person who wants an innovative new theater experience, you could do that too. I’m not sure what this will be and how much innovation is possible, but if tons of theaters are left vacant, a clever venture capitalist will have lots of inventory to play with.

(Is there a chance the model is fundamentally broken and we’ll just stream from now on? Maybe. But the competitive logic makes it very unlikely. As many have noted, the industry earned over $11 billion in America last year and $42.5 billion worldwide.)

What Comes Next for Theater Companies?

To repeat ground rule 1, just because theaters will survive, doesn’t mean the same companies will. This is where all the uncertainty comes in. When we’re uncertain, our range of outcomes should be wide. Therefore, this is a list of many potential. Some of these will work together, while others are contradictory.

  1. Bankruptcy. This is simple. Some theater chains will declare bankruptcy to survive in some form or sell off assets. A few of the chains have quite a bit of debt, so this could be the precursor to everything else which happens.
  2. The chains squeak by. Yep, it sounds inconceivable, but, some of the theater chains could manage to survive despite everything. As I showed before–and the theaters themselves mentioned–they’ve cut costs to the bone and a lot of their costs are variable and tied to the exhibition of films. The biggest fixed costs are leases, but if their lessors play hardball, then the landlords are cutting off their nose to spite their face. (If your biggest tenant leaves, it could depress revenues for months or years until a new theater chain takes over.) Still, banks could provide loans or new ownership groups could buy ownership shares to help survive this downturn.
  3. The government bails out theaters. (Sonny Bunch inspired me with this idea in his newsletter.) How likely is this? Who knows? This is the type of scenario that is wildly tough to estimate probabilities. On the one hand, bailing out theaters will be much cheaper than bailing out airlines. On the other, no one likes bail outs, especially to over-leveraged theater chains that are both monopolies and private equity playgrounds. Conversely, given that over 150,000 folks are employed by theaters, it could be a popular case.
  4. Studios buy the theater chains. That’s legal now, remember? If the price for say Cinemark drops to below a billion dollars, maybe Disney says, “Yeah, we’ll do that.” That would be a better use of their dividend than more streaming content, in my opinion. And you know Comcast will buy anything.
  5. A big tech company buys one. Big tech has bought 500 companies in the last 20 years, what’s a few more theater chains? The only caveat? The big tech firms are finally under scrutiny for monopoly power. (See context below.)
  6. Private equity buys a chain or pieces of a few chains. This seems as likely as anything. Once firms go into bankruptcy, they’ll need cash and private equity has cash to invest. Whether in whole or in part, this is likely.
  7. Smaller theater chains move up the value chain. Whether this is a smaller company like Arclight or Alamo, or a new company set up to buy theaters or something else entirely, the big chains could be replaced by a series of smaller chains. This could be powered by private equity too.
  8. A new theater chain is born. Again, if AMC goes bankrupt, its theaters across the landscape are suddenly empty. Depending on how many it actually owns versus leases, these are now assets to be acquired. While monied players are more likely to swoop in, a clever new business could buy the theaters and start a new chain with an entirely new business model.

This Process Won’t Be Pleasant

Let’s be clear about that. Going through bankruptcy, or needing a bail out or barely squeaking by means lots of economic pain.  Even if new companies buy theaters, that will cause immense disruption, hurting studio profits and closing many smaller theater chains too. And it could take years for the situation to shake out. 

Data of the Week – Sports Ratings Are…?

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The Content Battles are Competitive in the Streaming Wars

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

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

Wars tend to have their own cadences. Some start quickly and one side gains an advantage, and wins the war. Sometimes in months. (The Franco-Prussian War, for example.) Some wars bog down into stalemates, that take years, with neither side getting an advantage. (The first World War, for example.) And in some wars, one side gains a huge advantage, everyone assumes they will win for sure, only to find that the initial leaders lose the war. (The Axis in the second World War, for example.)

For years, a lot of folks have assumed the streaming wars are the first type of war. Netflix started streaming in 2008, and got out to such a commanding lead it looked unlikely that anyone would catch them. And as I’ve shown in charts before, Netflix really is far ahead.

IMAGE 1 Netflix a Broadcast

Netflix is so far ahead, some analysts say the war is over. (You know who they are, so even though I’m not linking to them, this isn’t a straw man argument.)

Of course, this begs the question: what type of war is this? Is this a Franco-Prussian War that is already over before it starts? Or a World War II, where Germany and Japan are doomed, they just don’t know it yet? 

Over at Decider, I’m writing a recurring feature where I’ll take stock of the last month (or so) and declare a “winner” for the most popular piece of content. (The latest went up last Friday.) I’m in love with the concept, because it forces me to check in regularly with how well shows are actually doing. In last week’s edition, I got a TON of insights that one article couldn’t contain them all. So here is one for today:

The streaming wars are increasingly competitive.

In other words, I think the streaming wars will look more like World War II than the Franco-Prussian war. (Fine, enough with the war metaphors.) 

If you want to know what separates the “bulls” from the “bears” on Netflix’s strategy/future/stock price, it’s this view of the war. If the streaming wars are already over, then Netflix is priced too low. If new entrants can gain audience share, then it’s a genuine competition. The last two months of data show an increasingly completive content landscape, and it’s a trend which will likely pick up stream. Let me explain why.

To start, we have more and more data to understand (American) streaming viewing.

Back in July, I mostly used Google Trends data to estimate what was the most popular film in America. I used some of the customer ratings too, but not much more. The problem is that each of these data sources can be noisy. Since then, though, the data situation keeps getting a lot clearer, as I wrote about in August:

– FlixPatrol is having their data consolidated by Variety VIP. FlixPatrol has shared their data with other folks as well. (They count Netflix, Amazon, Disney and other top ten lists around the world.)
– Nielsen started releasing SVOD Top Ten lists (though four weeks delayed) by total minutes viewed.
– And after Mulan came out a few companies gave peaks at their data, including 7 Park, Reelgood and Antenna. (They all measure in slightly different ways.)
– Parrot Analytics has been releasing their weekly top ten since last year.

Are any of these data analytics firms perfect? No. In fact, I have issues with each of them, ranging from questions about their methodology to questions about their sample size/make up.  Be assured, when the Entertainment Strategy Guy is reviewing a data set, I’m looking for outliers which make me question the data. If I see them, I’ll try to call them out.

Thankfully, most of the data sources are directionally aligned, meaning they are all likely measuring signal, not noise. 

Next, all of the sources are showing the trend of more and more “non-Netflix” shows/films in the top ratings

I noticed this first when reading Variety VIP’s write up of 7 Park’s subscriber data from August and July. 7 Park analyzes wether a unique customer watches a piece of content, so it’s gives some insight into how many different shows are being watched by various customers. Here’s the data from August and September that 7 Park shared with me. This is measuring “audience share” meaning it doesn’t account for how much customer watches, simply whether a unique customer engaged with a piece of content:

IMAGE 2 IPB Streaming Content Battle

That’s four different streamers in both charts. Hulu, Amazon and Disney+ each put a top show into the measurement. AA year ago, it would have been all Netflix red. Even Amazon wasn’t breaking through. 

(A note on 7Park data: I do have some questions about their sample size. It may over-represent avid streamers, as the Apple TV+ usage is higher than I would have guessed. This applies to some of the other folks as well, such as Reelgood.)

Like I said, though, directionally this lines up with other sources. Yesterday Nielsen updated their latest Weekly SVOD Top Ten. For the first time since they launched in August, a non-Netflix streamer made the list. And not just one, two!

IMAGE 3 - Nielsen Data

Again, Netflix is still the king. This is because usage makes it even harder for the smaller streamers to catch up, so Netflix owns 80% of the list. But the story isn’t about who is currently leading, but who is catching up. Here’s Parrot Analytics look at the current most “in-demand” series.

IMAGE 4 - Parrot Analytics

In this case, since they measure demand not simply viewership, the spread is much broader. This is driven by the popularity of a lot of traditional firm’s IP. 

(Regarding Parrot Analytics, I have concerns their data overrates the conversation around super heroes and genre. It also lags a bit too much for my taste.)

The Viewership Wars are Joining the Streaming Wars

Overall, this change shouldn’t be too surprising. The battle for viewership and dominance of ratings has been the quest of TV channel executives since the dawn of TV. And the battle for the dominance of box office has been even longer. 

Over both those battles, various channels and studios have taken leads. In the 1990s, NBC looked unstoppable. (Must See TV) CBS took over broadcast ratings in the 2000s by launching a series of “acronym” shows and Chuck Lorre comedies. In film, Disney took over box office in the late 1980s, then again in the 2010s. Even as most executives can’t sustain permanent advantages, everyone so often someone does.

Netflix is currently the leader. Can they retain it indefinitely? Probably not. 

Even now, as far ahead as Netflix is in viewership, it doesn’t own a majority of all TV viewership. In fact, it doesn’t own a majority of streaming time. This is why when you look at Parrot Analytics demand measurements for all TV, the view features even fewer Netflix shows, since streaming is still only 25% of all TV time.

IMAGE 5 - Parrot Analytics

This shows up in the Reelgood data as well. Reelgood tracks audience behaviors on a range of services, but inevitably their customers seek a wide range of shows and films. Take this look from the week Mulan launched.

IMAGE 6 - Reelgood

That’s everything from Disney films to films only on TVOD to Netflix Originals. In short, viewership is diverse in America. Netflix doesn’t own it all, even if it owns the mental headspace of many critics, analysts and decision-makers in the United States.

It seems clear that as more traditional broadcasters, cablers and studios launch their own streamers, they’re going to fight more and more for the streaming viewership audience. Ideally, if I had Nielsen’s data for the last two years, we’d be able to chart this rise. Ideally, I’d have Nielsen data for the last two years, and show that August or maybe last November was the first time a show made the top ten list.

But I don’t have that data and Nielsen just started releasing weekly top ten lists. Instead, I’m speculating here, but increasingly, it seems like the Disney’s, Prime Video’s and HBO’s of the world are launching the most popular shows in the world.

What Does this Mean for the Future? What Should We Look For?

Well, the streaming wars are going to be competitive. That’s what this means. The more shows that become “must watch” means the more services folks will need to own. Game of Thrones and Lord of The Rings prequels will fit this bill. Same for Disney’s big shows. And I think Peacock has the best chance of developing new additional shows that fit this bill since they have a track record of doing that. (Their library with HBO’s is also the strongest.) Don’t count out Hulu or Paramount+ nee CBS: All Access either.

This means that split wallets are likely to be the case in the future. I don’t think anyone should have a model that implies that Netflix owns 50% or greater of a customer’s wallet. Probably even less than 25%. 

Obviously, this means that Netflix will be fine for the streaming wars. No one should say “Netflix killer” because they are clearly such an indispensable part of the streaming diet for so many customers.

Unless, of course, you care about the stock price. This competition means that Netflix can’t pull back on spending, because then the top shows chart will only feature more shows from other streamers. It also means they can’t raise prices or can only do so slowly. Given that Netflix has one of the mostly highly valued stocks compared to underlying economics, any situation where it fails to conquer all TV has a lot of downside.

If content is king—it is—this is a battleground to continue monitoring in the streaming wars. Looking at the colors on these streaming charts is key. If they stay all red, that’s great for Netflix. If they look like—pun intended—a peacock’s feathers, that’s good for the traditional players.

Most Important Story of the Week – 2 Oct 20: Google’s New Chromecast (And Netflix Offer)

This week my head has been deep in the data of the streaming wars for my latest article for Decider. I reviewed multiple different data sources to sort through the content of the last two months. Go read that article if you haven’t yet to know who won September!

Overall, the political news of the week overshadowed major entertainment stories. But one story has intriguing long term implications.

(As always, make sure you subscribe to my newsletter, which goes out every two weeks. It’s the best way to make sure you don’t miss my writing.)

Most Important Story of the Week – Google’s New Chromecast (and Netflix Offer)

Google’s first Chromecast is probably underrated for its role in the streaming TV revolution. Instead of needing a fancy new box or “smart” TV, you could plug in a small device into the back of your television and stream Netflix to your living room TV. Even if a majority of cordcutters opted for a better solution long term (usually a Roku), I think Chromecast was the hook folks used to sample streaming on TV. (It was also cheap.) 

It’s been rumored that Google was working on a next generation Chromecast or TV device/operating system, and this week we got the announcement. Here are the key details, with the caveat that I haven’t actually used the new device, and am going off reporting on the announcement:

– Google TV is the interface built into the new Chromecast.
– At launch, HBO Max, Disney+, Netflix and Youtube TV are available, with Peacock coming soon.
– The ability to search for content is the pitched differentiator of this service.
– They are bundling the service with a Netflix subscription for one year.
– You will still need to watch content in the streaming applications themselves, like with Apple or Amazon. But the new Google TV app puts all the content in one place.

So what do we make of this? A few things. Here are my hot takes and some others.

Devices Are Key…

Thanks, Captain Obvious. 

In TV, someone is always going to be the rent seeker, placing themselves between customers and content. Previously, it was cable providers. But now Roku, Google, Amazon and Apple are playing that role. Hence why Peacock and HBO Max are still fighting to get on Amazon at terms they can agree to.

To truly grab the attractive profits, these device makers are desperately trying to control the user experience. They’ve all started with similar/identical abilities to search for content and have it all aggregated on the home page. While they tout it as revolutionary–Google pitching search–it’s still mostly the ability to search content from a variety of channels/apps in one place.

..but the True “Aggreggedon Scenario” Hasn’t Happened Yet

That’s the scenario where you watch The Mandalorian in Google TV and then Stranger Things autoplays right after without the user needing to leave Google TV. Why is this such a hurdle? Because it is the whole value proposition. And the streamers know it.

If Disney+’s content is branded with everything else in streaming, then given shows no longer build Disney’s crucial brand equity. If Netflix can’t have its algorithm sell on you another show, then it loses all the value of its honed algorithm. If Peacock can’t offer you their linear channels while you’re watching Parks and Recreation, then their value proposition takes a hit.

The big tech giants know this, and want to take all that value for themselves. The golden goose is to be the sole provider, which makes all the content providers simply commodity brokers. So far, Netflix, Disney, HBO and others have held off on this, and it will be curious to see how long it lasts.

Will Folks Criticize Netflix for Getting Cheap Subscribers?

They won’t. Though the narrative would be more accurate if they did.

Netflix has been as aggressive as Prime Video, Disney and HBO Max in courting subscribers with free subscriptions bundled into other services. (Notably T-Mobile for years, a subscription many customers didn’t know they had.) This is a bad thing for Netflix; without knowing the deal terms, my gut is Google is paying nearly full-freight on this deal because they have money to lose and market share to gain. If this helps keep Netflix subscribers stable through 2021, it’s a good idea for the streamer of record.

From Parqor: This is the Search Engine Interface

I like this take, because no one uses Google search data more than me. And while it isn’t perfect, it is a great signal for “interest” in a given topic. Moreover, Google’s extremely big advantage in search–over say an Apple or Amazon–they really could make a smarter search at driving to shows folks want to watch. As such, I’d give them a leg up over Apple in the smart TV race. (Though behind Amazon and Roku, who have been doing better for longer.)

Entertainment Strategy Guy Update/Data of the Week – Mulan’s Data Update from Nielsen

The other contender for most important story of the week was Nielsen’s SVOD Top Ten list this week. (Did I write it up? Yes. Will it be an article on Tuesday next week? Yes too.) 

Because one detail in particular shocked me:

Mulan made the top ten list!

(As a note, Nielsen delays their SVOD rankings for four weeks while they calculate. And no, I’m not a Nielsen skeptic. Their data is very useful.)

For a single movie to go up against shows with dozens of episodes really does show the demand of Mulan. On one hand, this matches the Google Trends data, which showed that Mulan was really popular. Look at this take from my recent Decider article, where Mulan is multiple times more popular than Enola Holmes, which is the current Netflix popularity champion:

Still, when I did some quick math (like LOTS of folks on Twitter), I got really worried. If 525 millions minutes were consumed of Mulan, divided by 120 minutes as the rough length of the film, then that means it was watched over 4.5 million times. If each household purchased it per viewing, that’s 4.5 million purchases, nearly 4 times what I calculated.

Yikes!

Calm down, calm down. See, like all things, we just need to get everything back to apples-to-apples. Nielsen is measuring minutes viewed, but we were estimating purchases. That’s essentially two different ends of the customer journey.

To think through it, it’s worth first considering the user behavior that influences how many folks actually watch a show. (Some of which I thought of, some of which users on Twitter pointed out.)

– First, customers have to buy it. That’s what we’re trying to estimate.
– Second, they have to watch it all the way through.
– Third, they can choose to rewatch it or not. If they loved it, they will.
– Fourth, they can share their account with others, who can also watch the film.

When I analyze data, I alway think back to the customer use case first and foremost. It helps ground the data thinking in the real world, as opposed to number cherry picking. In this case, all these factors could influence how much the 4.1 million viewers actually relate purchases.

The next step is understanding how Nielsen got to their number. They measure the average minute audience, the way they always have. Then they multiply that by the length of the film, and boom they get the total minutes viewed. 

But there is one more key: Nielsen estimates how many folks are watching a given minute of television at home. So if two folks are watching, that counts twice. (2 people watching 1 minute is 2 minutes viewed and so on.) (I reached out to Nielsen and they confirmed this analysis on background for this article.)

Combine these two and we have a way to estimate purchases. After we calculate the rating, we then estimate the completion percentage (which accounts for folks watching it multiple times or not finishing it) and then we estimate how many folks watched simultaneously. Here are my back of the envelope maths on it:

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