Tag: Disney

Did Raya And the Last Dragon Sell 1.18 Million Copies in the US on Its Opening Weekend?

Let’s start by what question I’m NOT answering today:

Should Disney keep releasing films to “premiere access”?

Ultimately, yeah, I want to answer that question. It’s really important. (For those who don’t know, Premier Access is the movies released at the same time as theaters that cost $30. I’ll call this PVOD, or premium video-on-demand for the rest of the article.) Presumably, if we know how much money Raya and the Last Dragon made in PVOD, we’ll have an idea if Disney should release its future films on PVOD.

in addition to PVOD, we need to factor in different release styles, Covid-19 and the quality of the films that were released. There are so many variables to these release strategy equations, along with so few examples, that evaluating success would be more about justifying our prior beliefs than finding truth. 

What can I tell you? 

That I think Raya and the Last Dragon sold about 1.18 million units on its opening weekend, with a low end of 840K and a high of 1.48 million. Ultimately, that means I think it will make about $150 million PVOD sales globally, in addition to $94 million in box office, with $32 million domestic.

That took a lot of math. Which I’ll explain. But before we can go forward, let’s go backwards.

How Many People Bought Mulan?

Given that the release of Mulan was so unique, multiple analytics/streaming measurement firms jumped into the fray to provide data about how many folks watched it. I summarized this in three articles last fall, ultimately landing (initially) on about 1.2 million folks ordering Mulan during its opening weekend. Here was a table that acted as a “poll of polls” on Mulan:

IMAGE 1 - Poll of Polls

(Really, you should read all three articles on Mulan to understand how I work though a data problem like and to learn about film economics.)

A few weeks later, Nielsen came out with their estimate, and it was notably higher. Using some calculations, like the number of people in the household and the completion rate, I came up with a range from 1.4 to 1.8 million people watching it according to Nielsen. Combining the two, I’d say 1.2-1.8 million folks purchased Mulan on its opening weekend in the US.

That led to this projected revenue from Disney Premier Access window for Mulan. This estimate includes the decay for the next two months, along with global purchases:

IMAGE 2 - Mulan Revenue

The Lack of Data for Raya and the Last Dragon

Because Mulan was so unique, lots of folks tried to figure out how many units it sold. And they told us publicly. Which meant I could make that kick butt analysis chart with several estimates.

Raya is no longer the shiny new release strategy on the block. Heck, Warner Bros. decided to release ALL their films to HBO Max. That’s the big headline now. And it meant way fewer people were paying attention to Disney’s PVOD ambitions. Also, each week new films are releasing in theaters. When Mulan released on Disney+, it almost had the theatrical calendar to itself.

Which meant that fewer firms leapt into the “How did Mulan do?” sweepstakes this time around. But not everyone, so we can take some stabs at the data. 

– First, Nielsen provides their weekly three top ten lists, which has been the most consistent and reliable data set I use. (In fact, I don’t mention data websites that don’t release regular data anymore to bias towards regular data releases.) 

– Second, Antenna also released an estimates of purchases by Raya. They have released a few charts of PVOD and TVOD sales since 2020, so we can use this to make estimates.

– Third, Google Trends is available.

Meanwhile, I scoured the interwebs for anyone else making estimates, and couldn’t find any. Reelgood released a top opening weekends in film in Q1 2020, but Raya didn’t make the cut. As far as I can tell, Samba TV and 7Park didn’t provide updates either.

Luckily, three data sources is enough to make some estimates.

How Popular was Raya and the Last Dragon?

Um, middle of the road. As I wrote in my streaming ratings report yesterday, a good rule of thumb to determine if something is popular is whether it makes Nielsen’s combined “top ten” list for Nielsen. (Nielsen provides three separate top ten lists, sorted by Originals, Acquired and Films. I then combine them by total hours viewed into a refined top 30.) In terms of hours, Mulan was watched for 8.8 million hours during its opening weekend, but only 5.9 million hours for Raya and the Last Dragon.

You can see this in the Antenna data as well, which gives a good clue that both Nielsen and Antenna are measuring the same impact:

IMAGE 3 - Antenna - Raya Sign Ups

Finally, we can put these films into Google Trends as well. Again, similar story:

IMAGE 4 - Google Trends

So Raya was a fine film. It was definitely not a blockbuster, but did just well enough that it probably isn’t a total flop. (Notably, for Disney an “average” film is probably a flop for their expectations. But that’s because they are so far ahead in feature films.)

So How Many People Bought Raya and the Last Dragon?

To figure this out, first, I made a table comparing the estimates by their various different measurements:

Image 5 - Demand Comps

For a simpler look, here are those numbers in percentage terms:

IMAGE 6 - Percentage of Demand

Google Trends is the outlier, and Antenna and Nielsen are extremely close in their estimates, which makes me trust them both more. If you take nothing else away from this, you can say, 

“Raya was about 80% as popular as Mulan on PVOD.”

Lastly, using some math, I estimated the different potential units sold:

IMAGE 7 - Estimated Units Sold

There is a lot of math on this, so some quick notes on my assumptions:

– I used both my 1.2 million and 1.8 million units sold for Mulan to estimate the sales for Raya. I used both because both are reasonable estimates. I trust Nielsen most as a data source, but I also trust the poll of polls. 

– For Google Trends and Antenna, I multiplied their percentages by both those numbers. That gets numbers 1, 2, 3 and 5 above.

– For Nielsen, I did the same analysis as Mulan, dividing viewership by the length of the film, which helped Raya in this case. However, I think Raya as a kids film has a higher completion percentage than Mulan. Actually, it could be dramatically higher, given that kids watch films over and over. My completion percentage is 125% for the low case. It is 100% for the regular case. This gave numbers 4 and 5 above.

– For both Nielsen numbers, I used 2.25 as the number of viewers per household.

With that math in hand, it gave me these numbers for the potential revenue in PVOD for Raya and the Last Dragon, which you can compare to Mulan above. 

IMAGE 8 - Revenue Estimates

How Did Raya Do At the Box Office?

Lastly, Raya also came out in theaters. While Mulan made nothing at the domestic box office, Raya did okay, and netted $93 million it its global run so far and $32 million at home. Here’s how that compares to other pandemic released titles, according to The Numbers:

IMAGE X - Theatrical

In Conclusion…

Those are the numbers. Again, what do they all mean? I’ll be honest, the initial draft of this article had, oh, a thousand extra words and I still didn’t answer that question as well as I wanted. So I’ll have more to say in the future. But for now we can say Disney again sold about a million units (plus or minus several hundred thousand) for its latest Premier Access title.

WandaVision and Coming 2 America Both Smash the Streaming Competition – The Streaming Ratings Report for 7-April-2021

If you’ve been reading my “Steaming Ratings Report” for the last few weeks, you might have noticed it has been fairly Netflix-centric. Netflix is the 600 pound gorilla in the streaming wars. Heck, it is more like a Mighty Joe Young or Rampage-sized super gorilla, marauding over the globe, buying sequel rights for half a billion at a pop. 

But if the movies have taught us anything about super gorillas, it is that nature always finds a way…to give them a worthy foe. In King Kong’s case, Godzilla. In Netflix’s case, that’s HBO Max, Disney+ and, this week, Prime Video, dropping formerly intended-for-theaters now straight-to-streaming blockbusters. Like Coming 2 America and Raya and the Last Dragon, which was Disney+’s latest “Premier Access” video.

Today, we’ll look at Coming 2 America in depth, and tomorrow I’ll do a special article on Raya over at my website. In addition to Coming 2 America, I have some unique insights on WandaVision now that it has finished its run.

(Reminder: The streaming ratings report primarily covers data from Nielsen’s latest report, which covers the week of March 1st to 7th and is United States-focused. However, we also consider Netflix datecdotes, daily top ten lists, Google Trends and IMDb data in evaluating content. Also, to get this report in your inbox, sign up for my newsletter.)

Film

IMAGE 1 - First Film

Let’s start with the good news for Prime Video, which was that their film did really, really well. It broke the “20 million hours” of total viewing threshold, which only three other films have done on their opening weekend going back to March of 2020.

Here’s the first week numbers for all films on Nielsen, going back to March 2020:

Screen Shot 2021-04-07 at 3.35.17 PMIMAGE 3 - Chart

What’s the biggest takeaway from this? That Disney+, HBO Max and Prime Video can compete for viewership as high as anything Netflix can deliver for a single film. Impressively, Coming 2 America joins this list as a film released on a “Friday” meaning it only had 3 days of viewership in the Nielsen ranking.

Of course, blockbusters aren’t made just by opening weekends, but staying power. What can we expect from Coming 2 America in its first full week of release?

According to the Nielsen data, the average film loses 63% viewership per day from week one to week two. Meaning, if Coming 2 America performs to the average, it will have 15.1 million hours of total viewership next week. Anything over that means its decay rate is beating expectations; anything lower means it is decaying faster than streaming films on average. You could convince me either way: on the one hand, Prime Video doesn’t release nearly as much content as Netflix, so folks may keep watching it; on the other, folks don’t watch Prime Video as regularly. In our one Prime Video data point, One Night in Miami decayed by 70% week over week.

All of which leads to the question, “Was this a good investment for Prime Video?” Industry reports put the price tag for Coming 2 America at $125 million for Amazon. In general, you’d have to say it is pretty good to get nearly as much viewership on an adult comedy like this compared to what Disney and HBO spent on their top two titles in December. (Both of which run into the hundreds of millions of dollars, versus the merely $125 million price tag of Coming 2 America, a film which cost $60 million to make.)

Or think of it like this: Prime Video spent about 33% more, reportedly, on Coming 2 America ($125 vs $80 million) than Borat, but got more than twice as much viewership. 

Tentatively, yeah I’d say this deal worked out for Amazon, though I still think that Coming 2 America would have done pretty well at theaters, a counter-factual we’ll never find the answer to.

Other Quick Notes on Film

– Fare thee well to Nomadland and The United States versus Billie Holiday on the film list. I was hoping this could be the week that we feature four different colors on the same top ten, but we’ll have to wait, maybe until Nielsen adds HBO Max viewing to their tracking.

IMAGE 4 - Nielsen Top 30

– What about Raya and the Last Dragon? Well, it was in the 17th spot on the top 30 list, which has to be a disappointment for Disney. (Mulan, for context, was 10th.) But not a huge disappointment, because getting folks to buy a movie for $30 is fundamentally more valuable than just watching it! But this is a complicated topic, so I wrote an entire article on it for tomorrow.

Bigfoot Family is a good example for why looking at both “total hours” and “viewership per day” is instructive. (The latter is also a metric you’ll only find here!) It actually rose in total viewership week-over-week (going from 5.6 million hours to 6.1) but still decreased in per day viewership by 52%.

– Netflix had some other new films make the list, including Moxie from Amy Poehler and Biggie: I Got a Story to Tell, a documentary, at 4.3 million and 3.4 million hours, respectively.

Television

IMAGE 5 - TV Ratings Last Six(Spoiler warning: I intend to make some jokes about WandaVision’s plot.)

We spent a lot of time on film today, since it was pretty fun, but you know what? We have a fun story with TV to tell too. Specifically, today is the day that WandaVision gets its turn in the spotlight (or should I say “reality altering bubble”).

As you can see above, WandaVision is unique compared to most streaming shows because it actually grew viewership week-over-week. It debuted a new episode weekly and grew the audience along with it. Now that the series has ended, we can compare viewership during its entire run to the entire run of some other Netflix series. The total viewership of WandaVision actually compares favorably to other shows on Netflix. Over 8 weeks of time, as opposed to one weekend, WandaVision was the twelfth most watched show in my data set:

IMAGE 6 - Total Viewerhsip

(This chart was made by sorting all “first run original” series on their respective streamer, through the first 8 weeks of viewing.)

But let’s not stop there. It isn’t very fair to compare WandaVision with only 9 episodes released over 8 weeks to some of these shows, like The Crown, Ozark or Cobra Kai which have 40, 30 or 30 episodes released to date. So let’s trot out our “viewership per episode” metric I’ve been using. And we get this…

IMAGE 7 - VPE

Suddenly, WandaVision and The Mandalorian are now up to the fourth and fifth most popular shows according to this bespoke measurement. And these would probably hold up even if we had more data from 2020. (The Queen’s Gambit likely would have added additional viewership during its weeks seven and eight, if we had the current reporting system of three top ten lists.) 

Admittedly, this metric biases for series that have recently launched, since they tend to have many fewer episodes. Still, among that class of show, WandaVision and The Mandalorian likely outperformed most Netflix Originals.

But can we go one step further? As long as we’ve taken over an entire town via mind control, we may as well bring back our dead robot-husband, right? 

Let’s magic into existence one more metric. Unlike the other shows on this list, WnadaVision episodes were short. The first episode was only 30 minutes. Half an hour! And a lot of the run time is just dubbing credits. (Literally, like five minutes worth.)

So could we account for that? A “viewership per available hour” metric, meaning it accounts for the total viewership for the total amount of content folks could watch? Why yes we could!

IMAGE 8 - VPAH

There you have it. An analysis of the Nielsen data you won’t find anywhere else. And yes, in this metric, WandaVision leaps to the top spot. The meaning? I believe that more unique viewers likely tuned into this show than any other Netflix Original released this year, except for maybe Bridgerton. Or The Mandalorian and maybe The Queen’s Gambit in Q4 of 2020.

By the way, this shouldn’t be too surprising! The two most popular franchises in America—after Knives Out of course—are Marvel and Star Wars. And when you look at Google Trends, yep, these are our two highest ranked shows for longest. First, without The Mandalorian, and then with it:

IMAGE 9 - Without Mando

Image 10 - With Mando

So I just dropped three different, totally valid, metrics to judge TV show performances. (Technically four with Google Trends.) Which metric is “best” to judge a show? Well, that depends! Entertainment isn’t like sports, which have clear winners and losers. Instead, it depends on what your business metrics are how the various shows support those metrics.

For Disney, these numbers are fantastic. It means using their weekly release model, they really can drive as much subscriber tune in as the top Netflix series. Of course, Netflix in some cases is launching four or five series at this level every quarter. Really it is a question of tradeoffs: is it better for one series each quarter to keep people subscribed, or multiple series every month that drive higher usage? That’s a business strategy question we’ll see play out this year.

Other Quick Notes on TV

-As I speculated last week, Ginny & Georgia went on to grab the top spot in the streaming ratings. If the weekly top ten list is to be believed, it could hold onto that spot for a few weeks.

– The latest crime documentary is Murder Among the Mormons, which launched to 9.8 million hours viewed. Which is good, but behind some other recent launches.

– Since Nielsen separates out “originals” into their own top ten list, we’ve seen some older Netflix originals finally show up in the top ten viewing. The latest is Orange is the New Black, with 4 million hours of viewing.

Competition

The most popular piece of non-streaming content during the week of March 1st was fairly clearly the Meghan Markle-Oprah interview that aired on Sunday March 7th. Unfortunately, Paramount+ isn’t tracked by Nielsen, so we don’t have streaming ratings. But 17.1 million people tuned in live for this one show, which shows you how much room some the streamers still have to grow.

Coming Soon! 

– The big story of the week, to continue the gorilla theme, is that HBO Max is out touting that Godzilla vs Kong did very well for them. Which is notably more than they said about Snyder Cut. (Others said that the new Justice League did well, but not HBO PR.) Fingers crossed we’ll get more data on this in a few weeks, though so far Nielsen hasn’t released any HBO data since Wonder Woman 1984.

The Odds and Ends of the NFL Media Rights Deals – Most Important Story of the Week – 19 Mar 21

Last week the NFL media rights story went from “potential” to “actual” news. (The latter happens, the former is rumors.) Not to toot my own horn, but I wrote last week that the Disney-NHL deal would set the template for the NFL deal (and all future rights deals). And I was right.

That’s our story of the week. Which is a bit delayed because, frankly, March Madness basketball slowed me down.

(Sign up for my newsletter to get all my writings and my favorite entertainment business picks from the last 2 weeks or so. Next issue goes out early next week.)

Most Important Story of the Week – The NFL Media Rights Grow 5.9% Per Year and Go Digital

Editorially, the NFL didn’t help me out. I had hoped the NFL would take a few more weeks to finish these deals, so my weekly column wouldn’t cover sports two weeks in a row. Last week’s column explored the strategic issues for all parts of the digital video value chain. This week, I’d like to provide a bit of context to the specific numbers for the NFL, speculate about the two remaining wild cards in the NFL media rights package, and give my overall thesis. In short, a bit of an “odds and ends” column.

Bottom Line: This Deal Isn’t “Earth Shattering”, But “Evolutionary”.

The NFL signed a big rights deal that we all knew was coming, and most observers assumed that all the major linear channels (Viacom, Fox and Disney) would insist on digital rights as well. Which is the deal we got. Did this stop some outlets from hyperventilating that this deal would “end the bundle as we know it”? 

Of course not.

Will it? Not really. If “earth shattering” means to figuratively have the Earth break apart like Alderaan in Star Wars, then this deal is not that. Unfortunately for narratives, most business trends resemble the slow but steady movement of the continents rather than earth-destroying super lasers.

For the vast majority of customers, they can (and will) watch TV mostly how they have before. Amidst this, TV consumption is slowly changing, as more Americans cut the cord. More but not all. As I often remind readers, though, this rate is still in the single digits percentage-wise. In 2021, cable “only” lost 6 million subscribers. Yes, this is a shrinking business, but the majority of TV viewers use cable or satellite to access TV.

This deal matches that slow evolution, not the online narrative. Since many customers are digital only, the NFL needs to reach them and ESPN+, Paramount, Prime video and Tubi provide that reach. But there are still so many traditional customers that the NFL can’t blow up the linear bundle entirely. Again, think “tectonic shifts” not “earth shattering”. 

(This is the “aggressively moderate” take versus the “headline grabbing soundbite” take.)

Whither Sunday Ticket?

Partly, I’m a bit disappointed that Sunday Ticket, the subscription service that lets DirecTV customers watch every NFL game, hasn’t been awarded to a suitor. Given the sorry state of DirecTV’s finances–they were just spun off from AT&T–it is unlikely they will renew this extremely expensive and exclusive contract.

So who grabs it? Amazon is often rumored, but likely the NFL has concerns that Amazon alone doesn’t have the reach to justify a deal. Neither would any one cable company, since no one cable company covers all of America. (That’s why the deal made so much sense for DirecTV, since every house was a potential customer.)

Hence Sunday Ticket is a “wildcard”. I think that the NFL could actually generate more revenue by letting multiple MVPDs and OTTs sell it as an add-on, for a given up front fee and splitting per customer revenue. (Say ESPN+, Apple TV+, Peacock, and Prime Video, plus any cable provider.) But that is much riskier for the NFL overall. The NFL prefers a big upfront paycheck, which may lend itself to one big (likely tech) player going all in. We’ll see which way they go.

Whither NFL Network?

One of the rumored sticking points in Thursday Night Football to Amazon was whether the deal was totally “exclusive”, meaning on every platform, or “digital exclusive”, meaning the only digital provider, as it was the last few years. The answer is the former, as TNF will leave its sometime home on the NFL Network. Losing an actual live sporting event will hurt the NFL Network’s negotiating position in the future, so conceding the point likely means the NFL knows the smaller linear sports channels days are numbered. Plus Amazon doubled the price tag, which likely makes up for the loss.

That said, there is the caveat that in their Press Release, the NFL said the NFL Network will carry some games. Hmmm. It will be fascinating to see what and how often these games show up on the calendar:

Screen Shot 2021-03-23 at 12.55.46 PM

Amazon Will Syndicate Airings to Local Broadcasters

That said, here’s a fun point: Amazon must syndicate rights to local markets for Thursday Night Football. That’s a footnote with big implications I didn’t see highlighted in the coverage!

Screen Shot 2021-03-23 at 12.56.17 PM

In other words, if hypothetically the Los Angeles Rams play the Kansas City Chiefs, a local broadcaster like KTLA could buy the rights for Los Angeles. In fact, Amazon must sell the rights to someone. Same for Kansas City. Everywhere else? They have to go to Prime Video to watch that week’s games.

How much does this decrease the overall value? Somewhat. Diehard NFL fans will tune in to Prime Video.  But the casual fans who only follow their team will have a non-Amazon option, which does decrease the upside for Prime Video. Does this make it a bad deal for Prime Video? Probably not. They still need to convince people to use Prime Video on a regular basis, and sports offer that opportunity.

This isn’t a “108%” increase, but a “5.9%” per year increase.

Whenever a big sports deal is announced, the league loves to celebrate the huge increase in price. Often announcing it “doubled” the previous deal. What they fail to mention is that the previous deal took place ten years before, so it doubled over ten years, which is less impressive. Since 2010, the S&P 500, for example, has gone up 249%, so if a sports right deal doubled in value, that’s less impressive than the just basic growth of the stock market!

I wrote about this before, here or here. How does this apply to the NFL? Well the previous deals were signed in 2014, roughly, meaning 9 years. Using the prices per year–from this great Sportico article–the actual per year increase is from $5.67 billion to $9.46 billion. That’s a combined annual growth rate (CAGR) of 5.9%, or an average growth rate of 7%.  Still really, really good to grow revenue by 5.9% per year! But not nearly as eye popping as 108% growth sounds.

For new readers, here’s the picture of what I call the Video Value Chain in all its glory.

The last two weeks, I’ve written about the Digital Video value chain. Here is that laid out in all its glory for those who don’t know:

image-7-video-value-web-1

What did the Twitterati have to say?

Every so often I collect your thoughts on Twitter. Here are the best hot takes I found:

Context Update – Antitrust Heats Up as Biden Appoints Lina Khan to FTC

Mergers & acquisitions are fun to write about. You get to imagine two companies putting together their combined business heft and dominating a new industry, or presenting a unique new value proposition. Ignore how often the mergers fail to deliver the expected value in real life; on paper they’re fun! (Especially compared to building a real strategy, which is often much harder.)

This game was especially fun over the last four decades, as US and global regulators mostly allowed every deal to pass through. (There are a few exceptions, like Comcast and Time-Warner Cable and AT&T and Sprint, but they are vastly the exception.) But has the tide turned on antitrust? And does the business community have an accurate gauge on that yet?

Maybe not. That’s my outlier hypothesis right now. As I wrote last November, whether or not Democrats will fundamentally change antitrust enforcement (from lax to aggressive) depends on President Biden’s appointments. On this front, he has been mixed. Some appointments are traditional (meaning lax) corporate lawyers. Others are strong advocates for renewed antitrust enforcement. Some advocates for stronger antitrust enforcement were disappointed when Biden nominated Rohit Chopra for head of the Consumer Financial Protection Bureau, since he was very aggressive on antitrust as a member of the Federal Trade Commission. Then Biden nominated Lina Khan to the FTC. She’s just as fierce of a critic, and a protege to Chopra, . Khan helped write the House Subcommittee on Antitrust report on Big Tech last year, and is a rising star. She’ll likely be a strong advocate for increased scrutiny on future mergers and acquisitions. 

Toss in economist Tim Wu joining the White House Council of Economic Advisors, Chopra’s commitment to enforcing rules at the CFPB, and the Senate weighing new antitrust bills that may–but likely won’t–have bipartisan support, and I see a changing landscape. Heck, when a Republican Senator writes an op-ed in favor of unions, anything is possible!

Yet the business community isn’t ready for this outcome. After a down year in deal-making due to Covid 19, they’re ready to get back on the merger train. (Speaking of, two big train companies want to merge.) Writing in his newsletter, Matt Stoller noted:

Screen Shot 2021-03-23 at 1.06.32 PM

So what is the most likely outcome? Well, deal making won’t slow down until the Biden Administration sends even clearer signals that it will stop deals from happening. I expect this will start first with increased scrutiny on “megadeals”, those over $5 billion in value. 

As for entertainment, this biggest potential impact is that Big Tech will be a pinch more worried. (Big Tech being at least Apple, Google, Facebook and Amazon, maybe Microsoft, maybe Netflix.) Sure, maybe increased antitrust scrutiny won’t come for train companies, but clearly Big Tech is in the crossfire. This could hamper the long hoped for M&A spree of Big Tech on smaller media companies. That would change a lot of potential strategy.

Other Contenders for Most Important Story

Netflix May (Huge May) Crack Down on Password Sharing

To continue the game of the last two weeks, is this “actual or potential” news? Every few months something about password sharing and Netflix circulates on the Twitter (and then news websites) rumor mill.

Is this one different? Maybe. On the actual side, Netflix is genuinely running test messages telling customers to not share passwords. On the potential side, Netflix hasn’t actually limited password sharing to one household yet either.

Tubi May Produce Original Programming

Because of course they will. Everyone is making originals. However, paired with the news that Tubi will carry Fox NFL games, clearly the remaining pieces of Fox post-merger with Disney (Fox broadcast, Fox Sports and Fox News) see Tubi as the future.

Alibaba May Have to Sell Media Businesses

For a perfect example of a “potential” news story, see this Alibaba news out of China. Sources say that Alibaba may have to spin off media businesses to stay on the Chinese government’s good side. Let’s wait until this actually happens, but China seems to be cracking down on media consolidation by Big Tech in their backyard.

Walmart Considering a Smart TV Device

Walmart has a confusing approach to the Digital Video/Big Tech “dust up”, as The Economist recently described it. (Tech is having a dust up whereas entertainment is having a war.) A year after buying Vudu and then selling it to Comcast, Walmart is back exploring if they should manufacture/brand a streaming stick under their brand.

The WME IPO is Back!

Buried in the news coverage was the return of the WME IPO, derailed by Covid-19 and a weak economy last year. Will it stick this time?

Lots of News with No News – March Madness

I’m sure I’ll stumble across articles either bemoaning, celebrating, worrying or any other emotion over the ratings for March Madness this year. Whatever they are, folks will likely use them to justify their preexisting beliefs on the future of TV, digital videos and the streaming wars. (Apply this to awards shows too if you’d like.)

I, meanwhile, will enjoy the tournament and how well the Pac-12 is dominating, especially my Bruins. Let’s hope they don’t delay any more columns!

How Big Were Firefly Lane and Crime Scene for Netflix? – The Streaming Ratings Report for 17-March-21

As often happens in scientific/data endeavors, sometimes you work for hours/days on a project with no results, then, all of a sudden, it comes together and you make tons of progress rapidly. And usually the “tons of progress” doesn’t happen without the days of drudgery. 

That’s what happened to me over the last week or so. After a few days of struggle, yesterday morning I had a breakthrough. Which delayed publishing this article. Unfortunately, most of the benefits won’t be immediately obvious, as they’re updates to my backend system to help me analyze more data better and faster. (Don’t worry, a few juicy tidbits make sneak in this week.)

(Reminder: The streaming ratings report primarily covers data from Nielsen’s latest report, which covers the week of February 8th to 14th and is US viewing only.)

Television

IMAGE 1 - Nielsen TV Ratings Last Six

If three words define my goal for this report, they are “Context, Context, Context”. You can go to the trades to find a summary of Nielsen’s data. This week you would have learned that the top two series (again for the week of February 8th to 14th) on Netflix were Firefly Lane and Crime Scene: The Vanishing at the Cecil Hotel with nearly identical 21.4 and 21.5 million total hours viewed.

So the question is: are those good or bad numbers?

Well, thanks to the data work of the last week or so, I think we can start to provide some answers. Context!

Let’s start with the new launch. Using my Nielsen database, I collected all Netflix “first run”—meaning Netflix Originals—series in my database going back to March 2020. Why season one/limited series only? Because it just isn’t “apples-to-apples” to compare The Crown, which has 40 episodes as of this writing, to a show with only four. (This was only one of the data projects of the last week.)

According to Nielsen’s data, 23 TV series netted a spot on a weekly top ten (in 2020) or top ten “originals” spot (in 2021). Of those, Crime Scene did phenomenal. It had the third strongest opening in total hours viewed and the second strongest opening for series in the “viewership per episode” metric I also calculate. Here’s the total viewership of those 23 series:

IMAGE 2 - total by day week dayPretty good!

But there’s a catch. (With data, there always is.) In addition to the “season” launched, I added the day of the week. Thus, I can cut the data in quite a few different ways. In this case, see if you can spot my thesis:

IMAGE 3 - Table by DayYep, I arranged the new series by release day of the week.

Why does this matter? Nielsen’s data covers a week worth of viewing, but that means that shows released earlier in the week have, by dint of time period measured, more of a chance to succeed in the rankings. Thus, we need a new metric, one I’ve used before called “average viewership per day”. Here’s that look in chart form:

IMAGE 4 - Chart Viewership by DayTakeaways? Well, yeah Crime Scene is one of Netflix’s bigger hits. More impressively, it did that with a very small number of episodes. But the extra few days of viewing definitely helped. Toss in the small number of episodes, and it will likely decay quickly. (As have past true crime documentaries.) We’ll watch for that. That said, Netflix does have a true crime niche that clearly is working. And it is likely much cheaper to make true crime docs than big budget scripted TV.

What about our second big series, Firefly Lane? It had a big second week. Again, the question is, how good is 21.4 million viewers in the second weekend? 

To answer this, I pulled the second week of data for the 30 first run Netflix series with Nielsen data in their first or second week of release. That gave me this table:

IMAGE 5 - Drop Off TableOf the 15 new series (season 1 or limited) launched since March 2020, Firefly Lane had the eighth best second weekend. However, unlike many other series which grow their audience into the second weekend, Firefly Lane was essentially flat. Using “viewership per day”, it declined 30%, when the average series drops only 23%. Bottom line? It is a good show, and maybe a great one. But it isn’t “elite”, like Bridgerton.

(For those who are curious, I have data for 33 first-run TV series. 7 series in the data set had an opening weekend in the top ten, but then dropped off week 2 and 8 series didn’t make the list in their first week, but did for the second. Two didn’t have numbers until week 3 and one series I don’t have data for its second weekend, Tiger King.)

Also, using the weekly top ten data, do we think these two shows will hold on? For Firefly Lane, yes; for Crime Scene, no. Crime Scene could, though, outperform Firefly Lane during the week of February 15th.

IMAGE 6 - Weekly Top Ten 2 SeriesAs I said above, we’re just scratching the surface here. As Nielsen continues to publish three weekly top ten lists, our ability to judge successful launches (and bombs/busts) will only grow.

Other Quick Notes on TV

WandaVision added it’s sixth episode, and grew its total viewership to 9.9 million hours from 9.8 million the week before. That’s impressive, and it will be fascinating to see if Falcon and Winter Soldier mimics that growth. In other words, part of my thinks that something like 7-9 million folks are watching just one episode on Disney+, which would make it one of the most watched series by unique viewers.

– In the sign of a down week besides the top of the charts, Lucifer made its first appearance on a top ten since new episodes came in August, showing up as the tenth series in the “Originals” top ten list, with 3.2 million hours viewed.

– Looking at the releases by weekday, you can see above that Wednesday really is “true crime” documentary day on Netflix, with releases like Fear City, Jeffrey Epstein: Filthy Rich, Night Stalkers and Crime Scene.

– Regret the Error 1: When new episodes of Cobra Kai premiered, I changed the label from “second run”, meaning episodes premiered on Youtube TV first, to “first run”, because new episodes premiered on Netflix first. But I didn’t update weeks three to five, so my data table made it look like it dropped to zero. That’s been fixed this week.

Film

IMAGE 7 - Film First and Second Run

The big Netflix original launch for this week was the third part of To All The Boys I Loved Before. I’m not ready to deliver as much context for film as TV this week—trust me, we’re getting close—but since Netflix released it on a Friday, To All The Boys will likely take the top spot in next week’s Nielsen rankings. (For this week, I cut all films released in 2020 to focus on new releases in 2021 so far.)

As for the third weekends of the two films we monitored last week—The Dig and Finding ‘Ohana—both are still on the list, but decaying week over week as expected.

As for films we didn’t expect, the top film on streaming wars…checks notes…looks it up on Wikipedia…squints eyes in confusion…checks notes again…War Dogs. Yes, the Miles Teller and Jonah Hill helmed, Todd Phillips directed, drama from 2016. It was new to the platform and got the “new to Netflix” bump.

Here’s the consolidated top 30, which shows how light film was compared to TV this week:

IMAGE 8 - Nielsen Top 30

Other Quick Notes on Film:

– We had another international film to make the top ten film list, Space Sweepers from South Korea with 2.3 million hours viewed. According to my data, this is the first South Korean film to make the Nielsen rankings.

– Oh, and we have one of the first non-kids Disney+ films to make the list, Avengers: Endgame, also with 2.3 minion hours viewed. This reinforces one of my working theories that, when they were on Netflix as part of that huge output deal, the Disney films drove tons of repeat viewership.

– Regret the Error 2: I jumped the gun on Malcolm & Marie (M&M), but luckily I wasn’t too wrong. During Super Bowl weekend, I made a note to myself that M&M was going up against that big sporting event. But then, researching for my database, I saw on Wikipedia that M&M had a limited release in theaters on January 29th, and somehow recorded that as its release. In reality, Netflix released it on February 5th, the Friday before the Super Bowl. Thus the Nielsen ratings from February 8th-14th cover M&M’s second weekend of release and I previously wrote that Super Bowl weekend was its second weekend of release.

To compound the mistakes, my article last week was confusing in that I transitioned from a bullet point on M&M into a bullet point on The Little Things, without clarifying that I had switched films. For clarity: Malcolm & Marie was a Netflix film, but starred the talent from HBO’s Euphoria (lead actor and director). Meanwhile, The Little Things was Warner Bros’ second release on HBO Max and theaters simultaneously. With that context, here’s the Google Trends chart I showed last week:

IMAGE 9 - Film Trends

The unfortunate thing is that we don’t have data on either film—Malcolm & Marie on Netflix and The Little Things on HBO Max. Nielsen doesn’t track HBO Max yet and M&M likely didn’t have enough viewership. We can extrapolate that for M&M its interest/buzz (as shown by Google Trends) clearly exceeded its actual performance (as shown by the lack of Nielsen data).

ESPN Grabs NHL Rights, Setting the Sports Media Rights Template – Most Important Story of the Week – 12 Mar 21

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I love when a weekly column like this ends up having a “theme”. This week, that’s the difference between “actual” and “potential” news stories. The former are things that happen: a movie opens, a company launches a new product, or a studio head steps down. “Potential” news stories are all the things in the news that may happen: a company may be putting itself up for sale, a studio head is considering leaving or, most commonly and consequently, two companies are negotiating and are close to announcing a deal.

In the last few weeks, we’ve seen the difference between actual and potential stories play out with sports rights in particular. The NFL had quite a few “potential” stories, from a potential deal with Amazon (still not finalized) to potentially poor negotiations with Disney for Monday Night Football (also not finalized as of this Monday morning the 15th of March). Then, in the middle of last week, with no forewarning–that I saw–Disney and associated sports entities (ESPN, ABC, Hulu and ESPN+) and the NHL announced a 7 year, 2.8 billion sports rights deal with the NHL. That’s actual news! And it’s our…

Most Important Story of the Week – ESPN Grabs NHL Rights for Pay TV and Digital

Gosh I love this story. It combines sports with almost every part of the “digital video value chain”. First, I’ll go over the basics–if you missed them–and then the ramifications, from the most disrupting digital to the most disrupted linear.

First, Andrew Marchand delivered the basic facts in a tweet:

Marchand later adds that Disney is going to raise the price of their bundle from $13 per month to $14 upcoming, partially my guess is to pay for this deal. As John Ourand points out, this deal only covers some of the NHL’s content output. Potentially up for grabs are the NHL Network, NHL.TV, their digital OTT service, more national games for broadcast (about 20) and whatever happens to regional sports networks (RSNs).

The remarkable thing, overall, is how close this deal is to what I expected for the next round of sports rights. The rights are shared between linear and digital. And the deal is with a partner who can offer both linear and digital distribution, Disney. Some games will air exclusively on digital, but the crown jewel playoffs will air on ABC (and maybe simulcast ESPN+). Moreover, the rights aren’t on a league-owned platform, but part of the Disney bundle.

I can imagine that some of you won’t think the NHL is that big of a deal. But frankly, it is one of the four major sports leagues in the US, even if it is clearly fourth. Or fifth if you put college football ahead of it. Which is barely amateurism anyways. (Commentary!)

Let’s review the impact on each part of the value chain and speculate about what this deal may say about the future of sports rights.

Digital Streamers – ESPN+ is the first third-party streamer to grab sports rights for a major professional sports league. 

The non-NFL professional sports leagues had dabbled with owning their own streaming sports applications and channels “over the top”. Indeed, an MLB subsidiary, MLBAM, created the application for baseball.  The MLB then spun off this into BAMTech, which Disney bought to become the backbone for Disney’s streaming business. However, most of those league-owned applications are niche streamers at best. Because the true power of sports is in a bundle of sports in a bundle of content. 

Clearly, ESPN wants to deliver that sports bundle in the 21st century, the way they delivered that content for linear cable in the 2000s. I expect this trend to continue and most league-owned streamers will eventually fold or get purchased by larger sports streamers, as ESPN and Peacock have already done.

Traditional Broadcast – Still Not Dead…Yet.

I thought the sports leagues would avoid going “digital only” because the risk is that you lose quite a bit of eyeballs in the process of collecting extra revenue. As I wrote when Peacock secured the WWE streaming network, the risk of any league is that if only the hardcore fans follow you to a very small channel, your brand suffers as casual fans drop out. 

Hence, most leagues are looking for a partner who can offer both digital natives and traditional viewers content. As big as cord cutting is–a point I’ll make repeatedly–more folks have traditional cable than do not have cable in America. (See below) As a result, the traditional players still seem best positioned to secure sports rights for this round of negotiations. 

A traditional player and Big Tech company could partner to offer both digital and linear rights. But given that Comcast, CBS, AT&T and Disney all own streaming platforms, they won’t partner with a tech platform. That leaves Fox. The challenge then is “exclusivity”. Since having exclusive content drives so much of the value, splitting rights doesn’t traditionally work. Even then, it would make more sense for DAZN or Amazon to buy a linear channel than vice versa.

By the end of the decade, this could change. For now? I’d keep betting on most major sports deals to happen with the traditional players, but with digital rights included.

Traditional Cable – ESPN is still the behemoth.

ESPN was a must carry channel in the cable ecosystem. As such, it commanded the highest prices for customers in the traditional bundle. When it added the SEC Network and Longhorns network, it only entrenched this position further.

Traditionally, the focus is on the value of games. What is more fascinating is how ESPN did and does drive coverage outside of games. Frankly, with the NHL owned fully by NBC, ESPN downplayed its coverage of hockey. It covered Stanley Cups and the playoffs, but highlights took a backseat to the other sports. Some have speculated that this hurt the NHL’s brand and I agree. Will ESPN’s coverage of hockey increase after his deal? Probably.

As a result, any league, professional or amateur, needs to have some presence on ESPN. To have that share of voice. That said, I like having a second partner as well to keep prices honest. Take the NHL on NBC. That still gets a ton of publicity from NBC to drive the coverage. If I were advising sports leagues, I’d say your best bet is to be on ESPN in some capacity, but have a back up partner who is incentivized to drive your product, like either NBC/Peacock or TNT/HBO Max.

The NHL Network – At risk.

John Ourand covered this best, so I don’t want to steal his point and will just quote him:

…if you read between the lines, the future of that network does not look so rosy, especially since Disney’s high-respected affiliate team no longer will be handling its carriage deals.”

Meaning it could go away. Speaking of disappearing cable channels…

Regional Sports Networks – Unclear, but potentially very bad.

A big wild card for me is what happens to the regional sports networks now. Most  NHL, NBA and MLB teams own their local viewership rights. (The NFL controls national broadcasts since their supply is much more limited.) Regional sports networks first disrupted local broadcast channels by buying these rights, with some college rights throughout the 2000s. Ultimately, several teams disrupted the RSN disruptors and launched their own channels. (The Yankees and Lakers being arguably the two biggest.) As the bundle starts to collapse, RSNs will likely be one of the first casualties. (Though don’t guess when. Predicting the future can be easy, predicting when is very, very hard.)

My question about this deal is how many of these ESPN+ games are inventory previously dedicated to RSNs. If the answer is “all of them”, that’s a lot of lost content for RSNs to lose. My guess is that ESPN+ will have out-of-market rights. That obviously dampens a lot of the value for customers, since most fans still care about their local team first and foremost.

Was this a good price?

Uh, I don’t know? It was definitely a jump in price, the way all multi-year deals are. Specifically, the deal from 2013 with NBC was for about $200 million per year for seven years. This price alone doubles that price, and the NHL still has more games to sell. Overall, though, I’d say this is inline with past price increases. As for whether ESPN+ can make that back for Disney, maybe, but not by itself. Meaning this is a stepping stone deal in some ways.

What’s Next?

First, ESPN+ has a head start on everyone, including DAZN. They’ve managed to leverage their power position as ESPN to start securing OTT rights. That’s a big deal. But they can’t and likely won’t stop here.

Second, all eyes turn back to the NFL. Seriously guys, make a deal for something! My best guess is Disney and the NFL do a similar deal for Monday Night Football, and it likely mimics the key components of this deal, with digital and linear rights. Though don’t put it past Disney and friends to do something crazy with NFL Sunday Ticket.

Third, Amazon still wants NFL rights. The most likely outcome is they get more Thursday Night Football, but they could be the first digital only deal. But I doubt it. The NFL Network is more valuable than the NHL Network, and the NFL doesn’t want to hurt that value prematurely. Likely, a split-deal (not exclusive to digital) is still the likeliest outcome.

Fourth, since most biz executives are naturally conservative–in temperament, not political leaning–I expect most leagues will copy the NHL and ultimate NFL deals in their rights deals. However, between Disney, Comcast, AT&T, ViacomCBS, DAZN, Amazon and any wildcards I may have missed, the leagues should all drive higher prices for their content.

Lastly, customers will see all this in their digital streaming bills. As Andrew Marchand pointed out, the Disney bundle will be up to $14 after this deal is done, for Hulu with ads. In other words, as Disney bundles sports, some of that cost will be passed along to customers.

Entertainment Strategy Guy Update – Should Netflix License Its Content?

If you want a perfect example for why I wait to call a story news until it actually happens, here’s a headline from this very website last May I stumbled upon this week as I was updating my website:

Screen Shot 2021-03-15 at 3.07.04 PM

But you’ll notice, since that headline, Apple hasn’t actually bought a library. I jumped the gun. The premise was so sexy, I wrote an entire column on it. But I was wrong! (The strategic logic though is still spot on.)

I feel the same way for the huge headline dropped by The Information this week:

Screen Shot 2021-03-15 at 11.51.14 AM

First, The Information is definitely filling the void by the general move of the trades away from breaking stories. Since The Information is subscription-driven, not FYC advertising driven, they can drop a few bigger tidbits every so often. Credit to them for this scoop in a series of scoops.

That said, I don’t want to go too far in calling this actual news, since, notably, we haven’t actually seen the goods. Netflix may ultimately license their wholly-owned series into second windows, or they may not. Or this story may be something less groundbreaking, but still interesting. Until we see a big series arrive on another streamer and/or linear channel, this is just a “potential” story.

But I had some quick thoughts.

– This may be cover to explain why some “Netflix Originals” will end up on other services/channels. For example, Orange is the New Black. That’s a show owned by Lionsgate. Essentially, Netflix has to pay to keep it streaming after a certain number of years pass. (We don’t know specifically.) Earlier shows like OiTNB had shorter hold back than some recent series, so it’s a show I’m keeping my eye on. Netflix could have leaked this story to help explain why more and more licensed shows end up elsewhere.

– The math here is pretty simple. If a show is worth more to someone else than it is to you, you sell it to them. Netflix benefitted from this for years; it was worth more to Netflix to license big movies to its service than it was for movie studios to keep them in the vault or on cable/home entertainment. 

– The converse could also be true now. Some linear channels or streamers could benefit more than Netflix by leveraging the buzz/awareness Netflix built for a show like Grace and Frankie or OiTNB to get some subscribers. Given the volume of new releases on Netflix and how most shows seem to disappear into their morass of library content, I could see content being more valuable off Netflix.

– The Marvel angle. Does everything revolve around Marvel? Maybe. The story to monitor here is when all these series with “Marvel” in front of them return to Disney, who owns them outright. Do they end up in the Marvel tab in Disney+? That’d help flesh out the Disney+ offering. I’d have said DIsney wouldn’t do this, since they could want a coherent MCU offering, but then they put the X-Men films onto Disney+, and even a Fox X-Men character–spoiler alert–in WandaVision. Given the commanding negotiating position of Disney in all negotiations, these Marvel shows could leave Netflix sooner than you’d guess.

– This article only referenced selling subsequent windows of content, but you have to wonder how far a revamped theatrical window is. Given that all the streamers have different windows, something could be worked out with one of the theater chains for some content.

If this happens, I’d call it both a big deal and the right strategy by Netflix. Clearly, this is a firm focused on cash flow positivity from here on out. Nothing is more cash flow generating than joining the content licensing biz. We’ll see if it happens.

Other Contenders for Most Important Story

Disney Investor Day: Disney Passes 100+ Million Subscribers; Will Close Some Retail Stores

The Disney streaming business chugs along, and they announced that they passed 100 million subscribers. I don’t have a lot of strategic takes on that big news, but Disney is also shutting some of their Disney stores across America. Likely, the explanation is what you think: Covid-19 crushed retail stores, especially malls. Lastly, Disney is planning to reopen Disneyland in California in April as California emerges from lock downs. Taking the balance of these two stories, theme parks have a higher upside than merchandise going forward.

Peacock Joins Hulu and Netflix in Losing Money

What if no one can actually make money in streaming? We know that Netflix lost money for a decade plus, that Hulu lost money for all its owners and all streaming is losing money for Disney. Now we know that Peacock has joined the money losing streaming crowd

Listen: all new businesses lose money at the start as they gain customers. But the key to valuations is accurately estimating how much money a business will make at full-strength. There is still the chance that streaming video is just much less lucrative than traditional cable. The sooner everyone can make money–and for Netflix go beyond just breaking even–the better for industry valuations.

Pay TV continues Its Losses According to Moffett Nathanson

Every year, Moffett Nathanson produced one of the definitive estimates of cable subscribers in the US, and recently it has highlighted the trend in cord cutting. 2020 was no different, though I will note that the potential acceleration of cord cutting presaged by Covid-19 didn’t really come to pass, as customer losses was about the same as 2019, a non-pandemic year.

AT&T Investor Day

AT&T announced they are expecting 120-150 million subscribers by 2025 and HBO Max’s AVOD option will come in the summer. The AVOD news interests me more, as it really seems like it will complicate their offering for customers. Previously, HBO Max had an easy value proposition to communicate. Well, actually they didn’t. Customers didn’t know if they had it, or if they had to pay and how. Now, customers may end up seeing a bunch of ads. So I’m hesitant to call this a good idea.

M&A Updates – Roku Acquiring Nielsen TV Advertising Biz

This is a small, but fascinating deal. Roku is acquiring Nielsen’s smallish smart advertising business. But in the acquisition, they’re also incorporating Nielsen into their TV measurement, which should make Nielsen numbers more accurate in the future. Axios has the details.

Covid-19 Tracker: What Should Disney and Universal Do with Black Widow and Fast 9?

Week to week, other stories may be the “most important”, but that doesn’t mean that Covid-19 isn’t still the biggest story. As I wrote in a very long article on February 19th, we’re moving away from “lockdowns” as the story to “the reopening of society”. However, that article was limited in that I mostly focused on theaters, not movie studios. The trends that may allow for theaters to reopen are different from the business rationale for studios to release their tentpoles in theaters. They’re related (correlated even), but not causal.

But that still leaves the open questions: will Disney release Black Widow in theaters? what about Universal and Fast 9?

Let’s first review the upcoming theatrical slate, then get to the specifics for those two studios.

The upcoming theatrical calendar could help theaters reopen.

Notably, I didn’t put any specific timelines for when and at what levels theaters could reopen. The variables are too many. States have different criteria and regions have different rates of outbreaks. However, the models do show that a clear majority of folks will have access to vaccinations by the launch of Black Widow on May 7th. Other models back this up. Here’s data scientist Youyang Gu’s look:

Screen Shot 2021-03-02 at 11.20.25 AM

Why wait so long? We’re vaccinating folks so quickly and cases are still generally dropping. Could the reopening take place even faster? Especially with news out last week that New York is reopening theaters at 25% capacity? Could both New York and Los Angeles be open by March? And what would that mean? 

For context, here’s The-Numbers upcoming theatrical calendar:

Screen Shot 2021-03-02 at 11.23.50 AM

Interestingly, these are films that are locked into the calendar. Raya and the Last Dragon will be in theaters and available on Disney’s Premiere Access program. Warner Bros is releasing all their films both on HBO Max and in theaters, including Tom and Jerry last weekend, King Kong vs Godzilla on March 26th and Mortal Kombat in April. In other words, for the big films in March, they aren’t going anywhere, because of the dual release strategy.

Ironically, for as much as theaters hate losing exclusivity in the long run, in the short term this could give them some confidence they will have movies to play if theaters are open at either 25-50% capacity by the end of March. In the fall, there was a chicken and egg problem with theaters: they didn’t want to reopen without big movies to play, but studios didn’t want to give them big movies to play until they were open. The Warners and Universal films being released anyways may solve that problem. Or take this fun quirk: Tenet will premiere in New York this weekend since it never was officially released in theaters in New York. Same will happen in California eventually.

For a few months now, I’ve been focused on Black Widow as the tentpole that was needed to bring theaters back. It’s Disney and, even better, it’s Marvel, so that’s as close to a sure thing a studio could have. But my focus on Black Widow may be too late. If Los Angeles and New York are open for business by March 26th, Godzilla vs King Kong may claim the title as first “blockbuster” of the post-pandemic era.

(And if I were at a studio? I’d be looking to move films up into April. If you get rid of the (largely artificial) constraint of needing a full six to eight week marketing campaign, something like James Bond could slot into April 23rd and have two weeks by itself in theaters. But this is risky/aggressive, which isn’t usually how you’d describe movie studios.)

Despite this, Disney may not open Black Widow on May 7th

As bullish as I am on the “return to normal”, I am not confident Disney will open Black Widow on May 7th, as it is currently slated. There are as many good reasons as bad ones for Disney to keep or move the date. Some of them are qualitative and some are (or could be) quantitative.

Reasons to Move:

– The “expected value” of moving the film may still be positive. Here’s that quick math. The total domestic box office haul of Black Widow (or Fast 9) is in the hundreds of millions. Call it $500 million. (Above the other top individual hero films, but below everything with the Avengers or Black Panther.) Right now, with theaters at 50% capacity or closed altogether, the worry is that Black Widow will only get some percentage of that. Say 75%. If Disney could move the film back just a few weeks to get 100% of that domestic box office, then you’re talking about making an extra $125 million. If you want to quibble with these assumptions, go for it. This is why modeling is tough! But the basic shape of the problem–moving back guarantees higher returns–is in studio executives’ heads, and why they moved all the 2020 films to 2021 in the first place.
– Culturally, especially the progressive/liberal side of the culture, it is seen as irresponsible to be associated with anything that involves leaving the home. Every late night host I saw equated opening theaters to killing folks. The studios can/do worry that they will get lots of negative PR for helping theaters reopen.
– Disney has to make the call soon. Related to the expected value decision, Disney has said they’ll make their decision in the next couple of weeks. Even if the numbers continue in the right direction, there will be plenty of uncertainty about how the situation will look in May. There is lots of speculation about variants and a spring surge. Cases could easily spike in a “spring surge” that shuts down society again. (Though deaths won’t spike with them.) 

Reasons to Keep the Date:

– The entire Disney MCU calendar needs to starting hitting theaters to tie in with the Disney+ TV series. At some point, even Disney can only wait so long. Moreover, the “expected value” of moving the entire calendar back may not be worth it. In other words, say you think Black Widow will still get 90% of the potential domestic box office, that could be worth airing so that Disney can still release Shang-Chi in July and Eternals in November. Getting ninety percent return is much better than getting 0-25%, which was what would have happened if Black Widow premiered last November.
– Disney and Comcast could both try dual release strategies, allowing their films in both theaters and Premium VOD windows simultaneously. That would allow Disney to keep their MCU schedule intact. (This is actually the best argument for keeping the date.)
– The sooner Disney gets MCU films in theaters, the sooner they come to Disney+. Since theatrical films are great at attracting new customers, this would really help Disney+ drive subscriber growth.
– PR-wise, there is also the story to sell that Disney was the film that brought folks back to theaters. That could be a story as positive as it has risks. Especially if the mood of the country shifts and the narratives about getting vaccinated to return to normal are seen as positive.

Add it up? And I have no idea (nor inside info) on what Disney plans to do.

Neither keeping the date, nor moving it would surprise me at this point. While there seems like enough evidence that going to the theater has much less risk than indoor dining, the latter will likely restart soon, but theaters remain in reduced limbo. And so will big tent pole films.

Nothing Compares to Bridgerton in January: The EntStrategyGuy Streaming Ratings Report for 24-Feb-21

[Editor’s Note: Today, I am testing a new website feature, a weekly report on streaming ratings. One of the biggest pain points of the coverage of the streaming wars seems to be that no one knows what is doing well, what is doing poorly and, frankly, what customers want. For example, folks saying that here, here or here for just three examples. 

As this website enters its fourth calendar year, I’ve been looking for ways to expand my coverage. Solving the ratings problem seems like a pretty good way to do it. I’ll be explaining more in the future, but for now, I hope you enjoy and let me know what you think.]

One of the challenges in reporting on ratings is the lag time from when a show premieres to when we get actual data on it. If we rely only on Netflix, for example, we can get results sometimes after the first weekend, but sometimes delayed up to nearly eight weeks. Nielsen is the most reliable and regular reporter on streaming ratings, but they delay ratings by four weeks to double check their data.

So yes, this is a ratings report for the week of “February 24th”, but it covers mostly the data through January 24th. Confused? Yeah, welcome to the streaming wars. 

[Another Editor’s Note: My analysis will be only of the United States to start. We have the best data in the US so far. As data expands, so will my coverage.]

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Television

IMAGE 1 - TV Ratings Last Six Weeks

The biggest winner of January is Bridgerton, which continued its dominance of the Netflix top ratings charts. Notably, new releases such as Cobra Kai, Disenchanted, and Lupin all failed to knock Bridgerton from the top spot in the US. This type of performance is really what separates truly “elite” TV series from simply “good” series.

As for competition, Disney+ remains the best competitor to Netlfix in streaming. (Since the fall, Disney has had two original series on the list, and the last non-Disney was Prime Video’s The Boys.) And the total viewing hours might actually undersell how popular the Disney shows are. For example, here’s the January release chart by “Hours viewed per episode”. 

IMAGE 2 - Hours Viewed per Episode

Hours viewed per episode is a temporary metric I’ve been using to gauge how well new series are launching. It isn’t perfect—for example, WandaVision is half as long as some of these other series, so arguably this even undercounts WandaVision viewers—but for now it works as a proxy for demand per episode. The takeaway continues to be, like The Mandalorian, Disney has high “bang for the buck” when it comes to viewers per series.

[Another Editor Note: Yes, this first edition is Nielsen heavy. Going forward, I will add additional data sources to my analysis, including top ten ratings, Google Trends, and new metrics/scores for how well content is doing. It will be a process.]

Other Quick Notes on TV

– Library TV series continue to do well on Netflix, but the departure of The Office provided an opening for other series. For example, Jenni Rivera: Mariposa del Barrio made the top ten list, and that’s a licensed show (originally from Telemundo, produced by NBC Universal) that has been on Netlfix since 2017. New Girl also seems to be a regular feature on the acquired TV list.
– New content still drives Netflix viewership, showing that even more than library, customers flock to what’s recently premiered. Henry Danger for kids and L.A.’s Finest are examples of library or second run content doing well in January.
Lupin is the first French title to make a Nielsen list, but it wouldn’t have made the top ten in either week. Given that Netflix announced it will have an estimated 70 million global viewers in the first four weeks, this is another data point that international titles just don’t perform as well in the US as they do abroad, despite narratives otherwise.

Film

IMAGE 3 - Film first and second

Outside the Wire is Netflix’s latest big action film and it bucked the trend of big declines from the first opening weekend to the second. However, it also launched much smaller than Extraction (18.5 million hours) or The Old Guard (16 million). We’ll see if it can sustain this into a third weekend. 

Otherwise, the story is similar to the one I described in my last “visual of the week” in that the film list is the home from kids content. Frozen 2, Moana and Soul look set to stay well streamed going forward. A fun question will be if We Can Be Heroes drops down like other Netflix titles or acts more like the Disney stalwarts.

Other quick notes on Film

– Amazon Prime Video’s Oscar candidate One Night in Miami didn’t have a big opening, but it did have minimal week-over-week decay. The question going forward is whether all Amazon titles act like this (due to a smaller catalogue, hence more promotion on the home page) or if this represents some genuine growth via word of mouth praise.
Pieces of a Woman on Netflix did experience the likely expected big decay from its opening weekend, dropping off the list after it’s opening weekend.
The White Tiger actually got a Netflix datecdote with an estimated 27 million global viewers in the first four weeks. With presumably 1-2 million or so viewers in the US—dividing the two hour run time with a 70% watch rate—this likely shows that the film under-indexed in US viewing, as most intentional titles do.

[Yet Another Editor Note: My goal with this weekly report is to keep it to 800-1,200 words, which is short for me.]

Competition

My big question for the streaming wars this year is simple: will this fight be competitive?

Looking at the last year, you’d say it isn’t a fair fight. Netflix is far and away the biggest streamer in America, whether you measure by subscriber or by total usage. That’s why I’ll be tracking a few metrics to determine whether Netflix is pulling away from the pack, or whether the pack is catching up to Netflix.

Here are the top ten pieces of content in film or TV series by streamer going back through the last six weeks:

IMAGE 4 - Streamrs Share Top Ten

The good news if you’re not Netflix? Well, when the traditional studios went all in, they took quite a bit of market share from Netflix. Christmas was the Soul/Wonder Woman 1984 deluge, and frankly it got a lot of eyeballs to Disney+ and HBO Max.

The good news if you are Netflix? As soon as the studios stopped releasing their big guns, Netflix went back to owning the entire list. For example, in the past a show like WandaVision, with only 3 episodes generating 6.3 million hours watched, would have dropped off our radar. 

IMAGE 5 - Top 30 List

The goal for the Amazons and Disneys of the world is to move up from owning the “film” portion of this list to owning more spots on the top ten and fifteen. We’ll see if they can do it.

[Last editor note: I hope you enjoyed the first installment of the EntStrategyGuy ratings report. I’d love to hear from you on what you liked, what you didn’t and what you want more of. Thanks in advance!]

Kids Programming is “Easy Strategy” – Most Important Story of the Week – 19-Feb-21

Last week got away from me. Fine, I got away from it by diving down a data hole. Specifically, a Covid-19 data problem. For all the forecasting being done, few people are answering the query, “Hey, when will all this end?” I’ve seen answers ranging from “Never” to “2022” to “maybe a few weeks”. Hence I dove deep into the data to make my own guess, especially as it relates to theaters. Check it out here.

It was a good week to be distracted, since the week felt light on big news. (Unlike this week, which is already trending upwards in big stories.) The most consequential story was actually spread out between a few different streamers, who all announced new forays into producing kids programming.

(Sign up for my newsletter to get all my writings and my favorite entertainment business picks from the last 2 weeks or so. Next issue goes out early next week.)

Most Important Story of the Week – Why Every Streamer is Investing in Kids Programming

Take a gander at these headlines:

“Apple/Skydance Animation Set Multi-Year Feature & TV Deal”
“Warner Media Kids Debut Cartoonito Preschool Programming Block”
“Youtube Announces 2021 Slate of More than 30 Kids Originals”
“Netflix Plans Six Animated Feature Films Per Year”

That’s a lot of kids content. And with it a lot of hyperbolic headlines and coverage. Kids content is a key part of the streaming wars, but it deserves more nuance than most coverage provides.

Consider an actual war. Many battles are important, but they aren’t all equally important. In the Civil War–since I use too many World War II analogies–the main event was the Army of the Potomac fighting the Confederate Army of Northern Virginia. That’s the adult content battlefield. The main event. The showdown that truly decided the war. But the campaigns to retake the Mississippi River, Sherman’s March through Georgia and the naval blockade of the South were all crucial to winning the war as well. All were important, but none were the main event.

Why Kids Content is a Pinch Overrated

Often, explanations for why a company gets into kids programming is treated as obvious. As if it’s a no-brainer decision that every streamer is right to pursue it. I don’t buy that for a few reasons that don’t get nearly as much press:

– First, there are way less kids than adults. This seems obvious, and yet it’s worth pointing out to make it explicit. Given that I just pulled a bunch of demographic data, it’s worth reminding everyone that these are the number of kids in America. In other words, if the “total addressable market” for adult TV in the United States is 130 million households, by definition the market for kids is a fraction of that. If you target preschoolers–5 and under–then your market is, by definition, 6% as large as the entire US viewing market.

IMAGE Kids

– Second, licensed consumer products (toys, shirts, what not) aren’t as lucrative as some casual observations make it seem. In the past, I’ve said that on average they make up 5-10% of a film’s total revenue. Further, it’s not like licensed products are a growth industry. If anything it’s the opposite. There are a few factors driving this, from Disney’s dominance on one end to consolidation in sellers (Amazon, Walmart and Target) on the other to disruption by digital in the middle. In all, yes, if you have a Spongebob, Mickey Mouse or Peppa Pig, you can generate billions in retail sales, of which you keep 5%. But if you aren’t in that top tier, you make much, much less. Toy sales alone cannot justify kids programming.

– Third, competition is fierce, as the headlines suggest. There are a lot of folks competing for a limited number of kids eyeballs.

– Fourth, replacements for TV are legion, from video games to social media, which makes it even harder to compete.

Add those four variables up, and it doesn’t scream out that kids content is a business you want to be in. It seems as competitive as adult competition, with only marginally better upside. Using Porter’s Five Forces analysis, arguably every variable is against you. It’s easy for competitors to enter, the competition is fierce within the field, sellers of toys offer poor margins, and there are lots of replacements to kids TV competing with you as well!

As a result, we probably have too many firms competing for kids’ attention right now. There is an old saw that there are always six major film studios. They may change names, but there are always six. (I’ve been meaning to write an article on this since I launched.) Well, given the smaller market size, then I’d say there are only 3-4 major kids content producers. In the 1980s, this was Disney with the three broadcast channels. By the 1990s to 2000s, this shifted to Disney/Dreamworks in movies and Disney Channel, Nickelodeon and Cartoon Network. (PBS also has had a place for preschoolers. Again, it’s complicated.) As streaming took kids attention, this has shifted to Disney, Universal (Dreamworks/Illumination), Netflix and Youtube.

Can HBO Max, Viacom CBS, Prime Video and Apple all break/rebreak into that and succeed? Probably not.

Why Kids Content is Valuable

Still, I’ve presented a bit of a conundrum. Clearly kids content is a tough biz to be in, yet everyone wants in! What do they see that I don’t?

Going back to the Five Forces, it’s not an insurmountably tough business to be in. In technical terms, the barriers to entry are low, especially once you’ve set up a streamer. The marginal costs of adding kids programming to general entertainment is fairly low, once you’ve set up a streamer in the first place. Animation tends to be much cheaper than producing full-episodes of live-action television. Moreover, kids, especially preschoolers, don’t know what legacy brands are. Except for Mickey Mouse, new preschool brands can and do break it. Just look at Peppa Pig.

And if it works, it’s sticky. Sure, kids are a small population, but they’re influential to their parent’s decision-making process. If kids want the content, and the content passes the parental approval test, it can be very sticky. The kids who watched Frozen every week weren’t going to just stop watching it when it left Netflix.

However, if I’m being cynical–and if you’ve read me for any length of time you know I am–then partly it’s an easy strategy. Which isn’t “good strategy”. Easy strategy is when there is an opportunity in front of a company and they take it simply because they can. It can sometimes allow business leaders to “empire build” as well. Going into kids programming lets you hire a brand new direct report and team of people. That’s easy strategy, like mergers & acquisitions or getting into original content.

Who Will Win The Kids Space?

Not everyone can win in kids programming. There are only so many preschoolers and elementary schoolers to bring into your ecosystem to justify the costs. Some folks will quietly dial back their investment. Indeed, some streamers seem to have realized there is already so much kids programming out there–and again kids don’t need new content to be satisfied–that you can rent all the programming you need, instead of making originals.

Still, if you do want to win, I have two (fairly obvious) recommendations. First, building a defined brand really is a differentiator. Disney has this. Netflix does too. Quietly PBS also has one of the stronger brands (and fairly high viewership on mobile devices). Even those brands need constant renewal to stay fresh. Nickelodeon lost brand equity rapidly in the last decade. But a brand is valuable.

The second way is to make hits. It seems obvious, but sometimes the best strategy is obvious. Disney is “Disney” because of three immensely lucrative time periods, driven by three innovative development executives: Walt Disney in the 1930s and 1960s, Frank G. Wells in the 1980s and John Lasseter from the 2000s. John Lasseter, the creative force behind Pixar before he was fired and then hired by Skydance, just signed the big deal with Apple. Indeed, of all the headlines above, the Apple/Skydance partnership interest me the most.

If I had one overwhelming recommendation for everyone except Disney, really, it would be to not just produce kids content or have kids content, but to have a kids strategy. This battlefield will be fierce coming up, and simply dabbling in it won’t be enough.

Entertainment Strategy Guy Update/Lots of News with No News – Roku’s Push Into Originals?

Based on one job opening, the speculation mill was unleashed last week that Roku may be starting a big push into “Originals”. Like I said, originals are an “easy strategy”.

When they announced earnings, Roku splashed cold water on this idea. Likely they are evaluating originals as a space to be in. There is a great reason to make original content, but just as good of a reason to skip it altogether. Let’s explain each:

The Best Reason for Roku to Make Originals: To Sell Targeted Advertising

One of the profit drivers over at Roku has been The Roku Channel, which is their version of an advertising streamer. (Either AVOD or FAST, whichever acronym you prefer.) Unlike other FASTs, the genius of Roku’s platform is that they can sell advertising targeted to any streaming service’s customers. Think of it like this, you’re an advertiser. You want to sell ads to folks who watch The Queen’s Gambit. With Roku, you can do that, since Roku knows everything a customer watches.

This is why Roku is so insistent that they get advertising share for any ad-supported service on their platform. Because they can charge higher CPMs (cost per thousand) to advertisers with this unique targeting. (This demand notably held up Peacock and HBO Max launches. Amazon demands something similar.)

Of course, this genius system only works if customers aren’t watching Netflix. Which is where the free Roku Channel comes in. It’s basically a vehicle for Roku to sell extra, highly targeted ads. But it only works if folks are watching it. Hence, the need for programming. Mostly, this has been library programming.

This is where original programming could (big tentative could) come in. If the higher CPMs provide a true edge, Roku can outbid for AVOD programming since it will have higher margins. Hypothetically this could even include original content. Except…

The Best Reason for Roku NOT to Make Originals: They are limited by distribution.

Every so often some cable, satellite, cellular or device maker contemplates getting into the originals game. The logic goes: if originals work at driving customer acquisition, and since our customers are really valuable, maybe we should make originals. Think AT&T Originals, Spectrum Originals, Verizon’s Go 90 and Microsoft Studios. In the end, they all get shut down.

Why? Because unlike a streamer, who is available in at least 90% of connected households, devices and MVPDs are not as widely available. A simple thought exercise shows why. If someone wants to watch The Mandalorian, they can find a way to download Disney+ to their iPad, iPhone or connected TV. Then they can watch. Literally, almost anyone in America with broadband. On the contrary: if you didn’t live in an area with Spectrum cable, you couldn’t watch the Mad About You reboot. (Yes, they rebooted that.)

In other words, a device-based original has an upside directly tied to the market share of its device. As big as Roku is in connected devices, it’s far from a monopoly. Roku is only 30% of connected device sales in the US. If you factor in the folks not watching streaming at all, those on mobile devices, and those with connected TV sets not using Roku’s operating system, then the vast majority of TV viewing is not on Roku. That’s always going to limit Roku’s upside in producing originals, since their distribution footprint is that much smaller.

That will be the key element in whether or not Roku does get into originals: The trade off between reduced distribution (which will constrain costs) and higher CPMs with targeted ads (which could boost revenue). We’ll see which side wins out.

Other Contenders for Most Important Story

Theaters: China’s Big Theater Weekend

An Avengers: Endgame milestone–albeit a slightly obscure one–was taken down last weekend. Detective Chinatown 3 launched in China and surpassed Endgame as the biggest single country opening weekend of all time. In other words, theaters are back! (in China)

By the way, if you missed it Soul as well did really well in China too.

Streaming: Disney+ Launching First European Originals

Given that all the major streamers are US-owned (mainly), there was a concern in Europe that local productions would begin to be overtaken by foreing content. So the EU passed a law mandating that streamers would need to have a minimum amount of locally produced content available. Thus Disney+ is staying in line with this law by releasing European produced originals.

I do love the one potential ramification of this law, which is that if every country around the world passed a similar law, it would basically end global originals. If 30% of your content has to be European in Europe, and 30% has to be Brazilian in Brazil, and 30% has to be Indonesian in Indonesia (the last two are hypothetical), then Netflix would only have 10% of their content left to make for global originals! Obviously, they wouldn’t do that, but by definition a market quota will inhibit truly global footprints.

Why I Think Theaters Will Return in May: Forecasting When Society Can Reopen

A character in The Sun Also Rises described going into bankruptcy as happening “gradually and then all at once.” This apt description has been applied to everything from debt insolvency to failed democracies. 

The US recovery from Covid-19 will likely feel the same way.

Right now, most of the coverage I read is fairly pessimistic and cynical. On one hand, I get it. The US just had an awful winter. Covid-19 will claim 500,000 deaths in the US alone, and that number is growing. Even positive coverage is framed with caution:

IMAGE 1 - Calm Variant Storm

IMAGE 2 - Experts Still Worried

IMAGE 3 - Reopening v03

On the other hand, doesn’t the US have a lot of good news on the Covid front? Is this pessimism still warranted? Forecasting doom and gloom could be as inaccurate as forecasting sunshine and roses. Where are we really headed as a society? Given the huge implications for the economy, this is a tremendously important question that very, very few people are answering:

When will society reopen after the vaccine rollout?

For my purposes, a lack of forecasting about the future is particularly painful. While lots of entertainment is consumed at home (TV, streaming, video games) lots more is experience live and outdoors (theaters, concerts, sporting events, theme parks). As I usually do when I can’t find an answer to a question I need to know, I tried to answer it myself. 

So here’s a report on what I found. The outline of this (long) article is roughly:

– Bottom Line, Up Front
– The Problem: the legal/regulatory thresholds for society to reopen
– The Assumptions/Inputs: the key assumptions/inputs to build a reopening model
– My Hypothesis: Effective vaccines widely distributed will crush the death toll
– The Model: My results!
– The Key Metrics To Track Going Forward

Let’s get to the results.

Bottom Line Up Front

I’m optimistic that theaters will be open by May 7th across the US, including New York and Los Angeles, the day Black Widow is set to premiere in the US. Black Widow itself may not premiere on that date, though whether or not it moves dates in the next few weeks will be driven by uncertainty, since Disney will have to make the call in about four weeks.

After building a vaccine distribution model (with three scenarios), I’m confident that by early May, between 33%-44% of the population will be fully vaccinated, and up to 61% will have had a first dose. Given the initial data that even one dose provides nearly full efficacy, this level of vaccination will likely decrease deaths and hospitalizations by 76% or more.

It is much more uncertain what the volume of cases will look like by May 7th. The key metrics to focus on, for studios and other entertainment companies, will be the pace of vaccinations, the current case loads, and the rate of death.

(Initially, I had a series of caveats to this controversial article. I can hear the skeptics, “You’re not an epidemiologist so why should we listen to you?” To save space, I’m moving those to their own future article. To address the key caveat, yes, I’m not an epidemiologist. 

Frankly, most companies cannot afford to hire epidemiologists to forecast disease outbreaks. And even if they could, as we’ll see, their models have their own uncertainty. Instead, many companies will likely have their strategy teams doing this analysis themselves and/or rely on models from companies like McKinsey/Goldman Sachs, which are, you guessed it, put together by people like myself. The difference is I make my models/methodology public.)

The Problem: When Will Theaters Open Specifically?

Today, I’m focused on the movie theater problem. (Hopefully, I’ll get to sports and concerts in future updates.) The problem for big studios is distribution: when they release a big tentpole film, they want it widely available. Specifically, this means Los Angeles and New York, and other big cities. They’d ideally want theaters at 100% capacity, but would likely accept 50% capacity constraints.

Thus, the question is whether those specific cities (and America broadly) will be mostly reopen by May 7th, which is when Black Widow premieres. (Or Memorial Day weekend, 28-May-2021 when Fast 9 is set to premiere.) The studios will need to make this call about eight weeks prior, so that they can schedule promotional advertising campaigns. Disney has said they’ll likely make the decision on Black Widow in the middle of March.

To reopen theaters, local counties will need to have Covid outbreaks under control, using whatever guidelines local states have established. In California, for example, this is a series of “tiers”, of which Los Angeles is firmly in the first, most restrictive tier. From the Los Angeles Times:

IMAGE 4 - Reopening v01

And our status under those definitions:

IMAGE 5 - CA Status LA Times

(Though, like all things Covid-19, there is actually a more restrictive tier of “stay-at-home orders”. California’s stay-at-home order was lifted in January.) 

Tying this to theaters, in California, “red/tier 2” counties can have theaters at 25% capacity or under 100 people, whichever is lower. “Orange/tier 3” counties can have 50% capacity or 200 people, whichever is lower. “Yellow/tier 4″ presumably would be fully open.

Covid Act Now, uses a different set of guidelines, and you can see how various metro areas stack up:

IMAGE 6 - Covid Act Now Metro

No matter which numbers you use, the same basic correlation is the same: The lower the number of cases, the more indoor businesses which can be open, which includes theaters.

As cases decline, so do deaths, after about a three week lag. Crucially, as vaccines are widely distributed, deaths may decline even further and faster than cases. If deaths drop and stay low, even if cases come back, some folks could argue that the values of reopening society outweigh the risks of disease spread. (In short, if a pandemic is raging, but no one is dying, is it a pandemic?)

So really there are two scenarios for reopening. One is the “public health” requirements, which means eradicating cases. The second is the “demand side” requirement, which is that deaths and hospitalizations are low enough that society wants to reopen.

The Key Assumptions/Inputs

The reason I couldn’t build a model before 2021 on Covid-19 was that forecasting the pace of the disease was nearly impossible. With so much uncertainty and unknown variables, most models have failed to effectively forecast what will happen in the next two to three months. 

Vaccines, on the other hand, are an easier modeling challenge. We have fairly reliable data sets on distribution and fairly robust (and growing) knowledge about how effective they are. Let’s explain those inputs/assumptions.

Input 1: The pace of vaccination is increasing in the US, and could accelerate further.

No matter how you slice the data, the rate of vaccinations is growing in the US, and it’s a story that most outlets mention, but with the pessimistic caveat that everyone wishes they were even higher. (Yes, we do.) But they’re getting higher every week. In a few weeks, they will be shockingly high. Here’s Our World in Data’s look:

IMAGE 7 - OWiD Vaccine Rate

Or take Kevin Drum’s take, looking at peaks:

IMAGE 8 - K Drum Update

The US was able to double vaccination capacity in ten days starting in January 4th (350K per day, seven day average) to January 14th (700K). I start with January 4th, since that’s when most healthcare workers returned from Christmas break, and all state and local governments focused full-time on the vaccination program. Then, it took 26 days to double again (from January 14th to February 9th). Depending on when we get to 2 million doses, it may have taken only 30 days to have doubled from 1 million doses to 2 million. (We’re currently at about 1.7 million per day.)

We will likely be delivering two million doses per day, as this week the Biden administration committed to delivering 13.5 million doses to states at a minimum. On top of this, the Biden administration is delivering two million doses directly to pharmacies and one million doses to community health centers. If all those doses are used next week, we’ll exceed 2 million doses administered per day. Further, the CDC expects 200 million total doses distributed to states by the end of March, which implies a daily rate of 3.5 million doses per day in March.

Input 2: One Vaccine Dose Begins Providing Protection

The initial data from the UK and Israel shows that even one vaccine dose provides a high level of protection. This does not mean individuals shouldn’t get a second booster shot. They clearly should. Very likely, though, the first dose provides immediate impacts on infections, hospitalizations, deaths and even transmission. More and more data is coming out which supports this conclusion.

Input 3: The Covid-19 vaccines work. Extremely well.

It seems crazy to have to repeat this, but it should be noted that the vaccines work really, really well. You probably saw this tweet from Brown epidemiologist Dr. Ashish Jha, but it’s worth repeating:

Moreover, studies conducted in the United Kingdom and Israel on vaccine roll outs confirm the efficacy of these vaccines. In addition to preventing symptomatic illness, the vaccines also drastically reduce hospitalization and death. Finally, initial data also suggests that in addition to preventing death, it looks likely that the vaccines prevent transmission to other individuals.

Input 4: Covid-19 is most severe for older individuals, who the US is prioritizing in the vaccine rollout.

While the coronavirus can and does kill all ages, one of the more clear trends is that the virus disproportionately kills older individuals. Here are a few looks at this:

IMAGE 9 - Deaths by Age

IMAGE 10 - Deaths by Age v02

Fortunately, in January, after vaccinating healthcare workers, the CDC changed guidance to focus on high-risk (meaning older) populations. This means the impact of effective vaccines will be even greater than general distribution because it will decrease hospitalizations and deaths of those most likely to be hospitalized and die. 

If we can achieve high levels of vaccinations in those groups (say 80% of a given age population vaccinated) then the results will be dramatic. Vaccinating 80% of individuals over 75 will lower total deaths by 48%, individuals over 65 will lower deaths by 65% and vaccinating individuals over the age of 50 will lower total deaths by 76%. (And if we can achieve 100% vaccination in the most at risk groups? We’d lower total potential deaths 95%!)

Input 5: The current lockdowns are having a dramatic effect.

Meanwhile, as the Covid Tracking Project’s data show, the number of cases are plummeting in America. The declines are dramatic:

IMAGE 11 - Covid Tracking

Whatever the cause—lock downs, seasonality, growing natural immunity, some vaccine prevention—this is very good news for the United States. It means cases are trending down, right when vaccine distribution is ramping up.

Input 6: Case rates by population

To understand the impact on cases, beyond deaths, it is important to know how cases are distributed in the population. Unlike deaths, cases are fairly well aligned with the population. Meaning, folks will test positive for Covid-19 roughly correlated with their percent of the population. 

IMAGE 12 - Case and death and population

This is important because it could mean that as vaccines are rolling out to younger populations, the case rate could flatten or even increase, but deaths will not. There is already evidence that case loads are dropping in certain age groups in the UK, Israel and US, but as you can see that may not impact the overall case load significantly.

My Working Hypothesis

Add these inputs together, and this is my working hypothesis:

If current lockdowns can drive down cases…
Which will drive down hospitalizations/deaths…
And if the United States can vaccinate the highest-risk groups…
And if we can continue to increase the vaccines distributed per day/week…
Since vaccines prevent deaths and hospitalization…

Then once we get the current hospitalization rate down, it will stay down until the next flu season (next November or December). If hospitalizations are down, deaths will stay down as well.

This will allow states to reopen, including theaters.

The Model

So that’s the working theory. Let’s turn this into a model.

Step 1: Vaccine Distribution

To start, I sketched out some vaccine distribution scenarios. To start, I drew a linear model in vaccine distribution to see how it was growing. Then, I made a simpler second model based on potential vaccine supply. This weekly model uses big round numbers, but is more aggressive than the linear model and based on CDC guidance about distributing 200 million doses by the end of March. Lastly, I made a very conservative model based on plateauing vaccine supply at 2 million per week starting in February. 

First, here’s the linear model to show the logic:

IMAGE 13 - Scatter Plot

Here’s the table of doses by week:

IMAGE 14 - Table per Day

And a chart of that…

IMAGE 14 - Chart

That’s a lot of number, so here is a summary by month of the “reasonable” model.

IMAGE 15 - Chart

The monthly model confirms that vaccine makers could indeed hit the aggressive targets. I built the conservative model based on misreading the director of the CDC Rochelle Walensky estimating that we’ll have 200 million doses by the end of March. (I thought she had said 200 million by the end of April.) At a rate of 200 million doses by the end of March, the CDC is basically forecasting that we’ll be vaccinating 3.5 million people per day at some point in March. That’s my “reasonable” but aggressive model.

Step 2: The number of vaccinated individuals

So that’s the first step. We can reasonably forecast how many doses we’ll have distributed by future dates. Yet, some folks will insist on distinguishing between shots and those who’ve been fully-vaccinated. I went further and also calculated those who will be two weeks from their first dose, since data shows this too provides quite a bit of protection. Specifically, we need to know these dates by the start of May, our presumed launch of Black Widow, 

Here is my rough counts for those, and to put them into context, the percent of the population over the age of 18 who would be covered:

IMAGE 16 - Numebr Vaccinated

IMAGE 16 - Chart

(Why over 18? Because the vaccine is only approved for those 16 and over, and Covid-19 has very little impact on ages younger than that. Plus, frankly, it is about 250 million individuals which is a nice round number.)

In the worst case scenario, by the time Black Widow premieres, only 30% of the population will be fully-vaccinated. 

However, in the best case scenario, if you include natural immunity, one dose vaccines and count folks who are two weeks from their first shot, then up to 69% of the population will have immunity to Covid-19. So we’ll be on the verge of herd immunity by the end of April!

Let’s be clear on these assumptions:

– Some portion of Americans have already had and recovered from Covid-19 acquiring natural immunity to it. This floor is at least 27 million confirmed cases. (About 10% of the population.) The high end is unknown, but Harvard epidemiologist Michael Mina’s forecast is 40%. Let’s split the difference and call it 20%.

– I used the date five weeks prior since Moderna is three weeks, then two weeks to be fully effective. Yes, Pfizer is four weeks, but again this difference is minimal overall.

Step 3: The number of deaths prevented. 

Again, the impact of Covid-19 is not equal across the population. It is very much tilted towards older individuals. Meaning, when they are vaccinated, the odds of dying from Covid-19 decease by 92% or more.

To figure out how to vaccinate the right folks, I simply took the CDC data and 2019 census information, and assumed an 80% vaccination rate:

IMAGE 17 - Deaths and Cumulative Distribution

In other words, to prevent 76% of deaths, we need to vaccinate 80% of everyone over the age of 50. The key assumption is that we can achieve 80% full vaccination by group. Most surveys put vaccine hesitancy at 70% of the population, but only about 10% is hard core obstinacy to any vaccine. So I took a number in the middle.

So how many people do we actually need to vaccinate to get to that 3/4th decrease in total deaths going forward? Well, here you go:

IMAGE 18 - % Needed to Vaccinate

Of course, not all doses will go to healthcare workers and individuals over the age of 65, especially as counties and states begin vaccinating more essential workers. (Like Los Angeles, who is moving onto food workers, teachers and remaining public safety officials after those older than 65.)

Given the vaccination rates above, we can see that it is very, very likely we’ll have fully vaccinated 40% of the population with either one or two doses, including most healthcare workers and folks over 65. A big portion will also likely be those 50 to 65. If we include people getting only 1 dose of Johnson & Johnson, then we’ll almost certainly have vaccinated all high risk groups.

My model forecasts that by May 7th, we’ll have lowered the ceiling of potential deaths by 76%. If this widespread vaccination results in decreased case loads and transmissions, the actual death rate could be much, much lower. This is essentially the “ceiling” of deaths.

Step 4: The Los Angeles Specific Model

This model, so far, has only addressed vaccinations and deaths. What about cases?

As I set up in the problem, the primary criteria to release Black Widow (and other big studio films) in theaters is whether or not the coastal cities are reopened. To answer this, ideally, I’d build a model forecasting cases in both of those cities. Given that I live in Los Angeles, I pulled the numbers there to see how far LA is from reopening. I’m assuming that Los Angeles and New York are roughly correlated with each other, and their outbreaks are also roughly correlated with national outbreaks.

(This assumption is both fine and could be horribly wrong. The “summer surge” mainly took place in “Sun belt” states, whereas the first surge took place in north Eastern states. However the last surge took place in every state simultaneously.)

I showed Los Angeles’ current performance on state re-openings, but it’s worth noting that most metrics are tied to case loads. If it goes down, ICU capacity, case positivity rate and the equity will trend downward as well. Here’s the current case trend line:

IMAGE 19 - Case Trend Line

Now the question is can we model how vaccine distribution could impact case levels going forward?

And no, I don’t think we can. 

I’ve done a lot of forecasting so far, but every number is from a fairly reliable source. The vaccine distribution plan is fairly well reported, and its growth is easy to forecast. (Again, look at that straight line!) The impact of the vaccinations is also fairly well known. Thus, we can confidently predict a coming drop in deaths that will stay low, if we vaccinate the most at risk groups.

Cases, though, are a different ball game. 

Just look at US trendiness in the past. If you started in the middle of October, and just extrapolated forward, you’d have missed the December spike. Or if you started in the middle of January, you’d have forecast cases to stay high. This actually happened with the CDC forecast. In the middle of January, their model of models forecast 1.5 million cases by the middle of February, with a floor over a million.

IMAGE 20 - Forecast

Instead? Cases are currently at 600K and falling.

IMAGE 21 - Cases Feb

I don’t blame the CDC. Modeling seasonality, societal behavior and mostly a brand new virus is incredibly tricky, and these epidemiological models have trouble with it. Again, no blame here from a fellow modeler. I’m just acknowledging the limitations of modeling.

Add it up, and I won’t forecast the case rate/total cases in Los Angeles by the beginning of May. There are too many unknown variables. Indeed, I think both the best case (cases stay very low, due to natural immunity and expanding vaccinations) and the worst case (case rates rebound after widespread reopening, potentially driven by more transmissible variants) are both possible by May. The only thing I am fairly confident (as steps one though three show) is that deaths will stay down. 

At best, what we can say is that as vaccinated rates go up, the peaks of the worst metrics will be limited. Think of it like this: the infection rate is the number of people an individual with symptomatic Covid transmits it too. If it is 2.5, that means one individual gives it to 2.5 individuals. If half of all the people someone meets are protected from Covid-19, then the max number would now be half of that, or 1.25. 

The Key Metrics Going Forward

Notably, I haven’t provided any probabilities thus far. If I apply probabilities to events two months out, my error bars would need to be very, very wide. Those probabilities wouldn’t be worth much more than guesses. 

Instead, I’m going to provide a scorecard of key metrics. The higher the scorecard, the more confident we can be that society will returning to normal. You can apply your own probabilities based on the numbers. These metrics will have three parts: vaccinations, deaths and case loads. 

Screen Shot 2021-02-18 at 5.02.44 PM

I plan to think on these metrics a bit before I do an update, hopefully next week. As I said, I won’t provide predictions, except for the vaccine roll out, but will color code which metrics are moving in the right directions.

As I said at the start, if you read all the way down here, as vaccine distribution picks up, the Covid-19 pandemic will end gradually, then all of a sudden.

In the meantime…

Please do whatever you can to prevent the spread of Covid-19, focusing on the best practices at preventing spread. 

1. Wear a mask. In fact two, or the highest quality you can afford.
2. Avoiding indoor gatherings until you are fully-vaccinated.
3. By all means, get vaccinated as soon as you are able to.
4. Help older relatives get their vaccinations by whatever means necessary.
5. Spread positive news about the efficacy and safety of vaccines and that they will enable our society to reopen. Vaccine hesitancy is driven by vaccine skepticism, a large amount of which is coming from the media. This includes skepticism about how vaccines prevent hospitalizations and death. Do your part to spread the good news and not Covid-19 hysteria.

Sources

I linked to most data I used to put this together. However, a few websites provide regular updates. I recommend…

Our Wold in Data
Covid Act Now
The Covid Tracking Project
The Los Angeles Time
Bloomberg Vaccine Tracker
Nate Silver’s Twitter feed, who close followers will recognize a few tweets from.

Has Netflix Lost Ground Since the Pandemic? Using Reelgood’s Share of Streaming Data to Find Out – Visual of the Week

Yesterday, I speculated that Netflix had a weak summer for content, and until the end of December, this may have caused it’s usage to slip. This was driven by the Nielsen weekly data, which hit a peak in March, and then in the middle of November. Yet, I can’t show that since I don’t actually have Netflix’s monthly usage data.

But other firm’s data can act as a proxy. Like Reelgood, a company that helps users find their favorite shows and films. (In full disclosure, Reelgood provides me their data on a regular basis and I am friendly with this firm.) Two of their charts in particular stuck out to me, both in their “quarterly streaming” reports. What I did was combine them into one. And voila, my visual of the week:

IMAGE 2 - Usage by Streamer

And here it is in table form:

IMAGE 3 - Table

Some quick thoughts/insights:

– Reelgood claims 2 million users, but doesn’t clarify the demographic break down of those users. (It’s a question on my to do list to ask.) So that could skew these results. Though by no mean does it skew them enough that I won’t use their data.

– Also, given how their platform operates, I wouldn’t be surprised if it skews “adults” since kids more often just turn on a given streamer and watch the same shows. So this probably doesn’t capture all usage.

– That said, their usage for Netflix is within the margin of error for Nielsen’s Q2 results, which had it at 34%. Comscore has shown similar numbers too.

– As such, that decline feels bad! Or to use biz jargon “sub-optimal”. I don’t think Netflix is really achieving the same usage as Prime Video, but clearly they didn’t gain in Q3 and Q4 usage.

– Disney being flat with The Mandalorian is also a sign that they need a stream of hits to drive usage up across the board. 

– This is also another data point that the Wonder Woman 1984 experiment worked to drive usage up.