Tag: Disney

The Christmas Chronicles Was Netflix’s Most Watched Film in the US in 2020 and Other Data Thoughts from “Who Won December”

December was a big battle in the streaming wars. The Christmas Day/end of year is becoming increasingly important to the streamers since it is the last time to grab subscribers before annual reporting. This is why the latest installment of my “Who Won the Month” series at Decider may be the most important one of 2020. 

So check it out!

To keep that article flowing, I ended up cutting a few insights/thoughts from that article that still felt good enough to share. Consider this the “DVD extras” addendum to that great piece. (Seriously, read it before you continue.) 

Other Contenders That I Didn’t Mention

The biggest drawback to a word count is having to cut a few shows from contention. Last month that mainly meant some shows from the smaller streamers. CBS All-Access released their latest Stephen King thriller The Stand. (It had a peak of 9 on Google Trends.) The challenge is a word like “stand” is fairly generic, so it just may not be picked up in the Google Trends data. However, on IMDb, its ratings are 6,600, so likely it isn’t really catching on. Showtime released Your Honor, but it didn’t really budge the popularity needle.

Apple TV+ focused on kids in the holidays, airing both A Charlie Brown Christmas and Wolfwalkers. Again, I didn’t really see the WolfWalkers trending. (Charlie Brown is too generic.)

Caveats to IMDb Data

For the first time, I compared shows using IMDb ratings data. I both want to explain how and why I used this data source and also some other insights into last month’s results.

The “why” is because I love capturing qualitative feedback on a given show or film in addition to viewership. In particular for TV, this can be somewhat of a leading indicator to forecast if subsequent seasons of a show are going to build momentum or begin to flag. This applies to TV series as well as film franchises. Especially for franchises, actually. A big marketing campaign can result in a strong opening weekend, but if the IMDb ratings are low, then eventually the series will decay in viewership. (See Fantastic Beasts or The Hobbit series for some examples.)

As for how, I tend to use both the rating itself and the number of ratings. The number of ratings is fairly correlated with viewership overall. Thus, if you don’t have viewership itself, IMDb can act as a proxy, like Google Trends. The actual rating itself (the 1-10 numbers) doesn’t account for small but well-liked films and TV series. My approach is to make a scatter plot, and see which films are in the upper right: lots of reviews and high ratings. (If you want to pay for it—and I can’t afford it—IMDb page traffic is also a good proxy.)

Now the caveat: some folks hate using IMDb ratings because online trolls have attacked certain films.

You can see this in Wonder Woman 1984. While it has nearly as many ratings as Soul, its average rating is much, much lower. Which raises the question of whether or not Wonder Woman 1984 is being intentionally dragged by trolls online. And this is the main problem with IMDb data: some folks will intentionally drag down shows for political reasons, which skew the value of this data source. 

But I won’t throw the baby out with the bath water. Because it’s the best publicly available, qualitative data set we have.

Rotten Tomatoes and Metacritic are probably the next two biggest review sites, and their numbers are orders of magnitude smaller than IMDb. The caveat here, of course, is that larger sample sizes of biased data are still biased, meaning that doesn’t justify using IMDb. The problem is that for Rotten Tomatoes and Metacritic, their sample sizes in many cases aren’t big enough to be representative. I’ve considered using Amazon ratings, but in that case some films are available in streaming, but some are available for free and some are available for purchase. This makes ratings not apples-to-apples, and that’s before the fraud problem with Amazon ratings.  

So when I use IMDb data, I tend to accept its shortcomings and use it carefully. To start, I know IMDb tends to skew “genre” in its ratings. This means for shows like The Expanse or Wonder Woman 1984, the reviews on IMDb are relevant. Since The Expanse has done well on IMDb, that shows some genuine fan interest. For something like Bridgerton, I’m less concerned if its score is weak.

Then, I try to figure out if a given show has been dragged by potential online trolls. When they have—eg The Last Jedi, Black Panther or Captain Marvel—I just wouldn’t use those ratings. Though don’t go overboard: don’t pretend that every poorly rated film is just a victim of online trolls. Some films are bad and fans don’t like them.

For Wonder Woman 1984 specifically, while I haven’t heard of any specific campaigns, on another user review site, Rotten Tomatoes, Wonder Woman 1984 has done better than its IMDb score. This likely indicates there is some intentional downvoting, but even with that it is unlikely Wonder Woman would have been a 8.0 or higher film.

IMAGE 1 - RT vs IMDb for Wonder Woman

A score of an “8” on IMDb tends to separate the merely good from the great. Meanwhile, The Midnight Sky did poorly in both locations. So it may be widely watched, but folks didn’t really love it.

(Also, never use the Tomatometer. That has very little nuance since it simply measures “good vs bad”.)

Did Netflix Have a Good December?

Probably, but not as good as last year. If you just casually read the news, you heard a series of great Netflix reports, and you’d assume they’re crushing it again.

Fortunately, I’ve collected every Netflix datecdote over the last few years and can put those numbers in context. Here’s the last three December releases that we have datecdotes for from Netflix. (These are films released in December. I’ll look at Netflix’s entire Q4 in a future article.)

IMAGE 2 - NFLX Decembers

The best way to describe this is that Netflix’s top film and top TV show released in December both underperformed their peers who launched last year. This looks even worse in context of the growth of the service during that time frame. The key question every quarter is whether Netflix’s content can help propel growth, or merely hold subscriber counts steady. And it seems to me like Netflix held steady in December compared to 2019.

Did Disney Really Win the Month?

For the first time in December, I didn’t just declare The Mandalorian as the winner in December, I also said that Disney won the month compared to Netflix. Essentially, between Soul and The Mandalorian, Netflix didn’t have a blockbuster show that drove the same level of interest.

The counter could be: but what if you added up every new thing Netflix released? Would it pass Disney by sheer volume?

So I looked for any Netflix series that seemed to generate interest and tried to figure that out. However, even after that, Disney was still the winner:

IMAGE 3 - Google Trends Expanded Look

There is a lesson in here about content planning and “return on investment”. Essentially, Disney could match Netflix for interest with only two hit releases. Now, those two may not generate as much time on the platform as Netflix currently has (their usage is much higher), but as for keeping subscribers, Disney may be able to do that more efficiently. I say “may” because it’s not like the two pieces of content Disney made are cheap by any means. (The Mandalorian may be the most expensive show on TV until Lord of the Rings comes out.) That’s its own form of inefficiency.

This also repeats a point I constantly make about the streaming wars: the best shows aren’t a little better than other shows, but multiples better. Thus, you don’t win the streaming wars with singles and doubles, but grand slams. And in July, November and December, Disney hit a grand slam each month. And with much fewer at bats than Netflix. That is an efficient form of content spend.

November Flashback: What Can Nielsen’s Data Tell Us?

The one drawback to my “Who Won the Month” series is that Nielsen data usually isn’t ready by the time I write my initial article. (They perform better near the month they cover, so I try to write them for the last day of the month or so.) This means that we can now look back and see which calls I made in December are either confirmed or refuted by the Nielsen data. 

So let’s hold myself accountable for my calls:

– Was The Mandalorian bigger than The Queen’s Gambit? I said yes, but according to Nielsen it depends how you count. The Queen’s Gambit was able to sustain higher week to week viewing than The Mandalorian, but Mando outpaced in terms of weeks on the Nielsen top ten:

IMAGE 4 - Week by Week Nielsen Ratings

– So The Crown was big? Yeah, that’s what the Nielsen data says. However, this is partly expected because The Crown now has four seasons airing, so that’s a lot of episodes to catch up on. The limitation of Nielsen’s data is we can’t see season level viewership. (That’s right, they give us some data and I just want more!)

– Did I undersell The Christmas Chronicles? Maybe. According to Nielsen’s data through the beginning of April, The Christmas Chronicles 2 had Netflix’s biggest film launch of this year in the United States by minutes viewed through the first two weeks! (36 million hours to Extraction’s 31.6 million hours in the first two weeks.)

– Did Hulu overhype Run? I think so. Hulu went so far as to release a vague press release calling Run its best performing film launch of all time. The problem for my system is that “run” is so vague that it didn’t register on Google Trends. So I said we’d wait for the Nielsen data to make a final call. When Nielsen released its weekly ratings for Thanksgiving weekend, Run didn’t make the cut.

Nielsen 2020.11.23 copy

– What about The Flight Attendant? At first, I was tempted to say that this HBO Max drama underperformed as well, because it didn’t make the Nielsen Top Ten. Then folks on Twitter (helpfully) pointed out that Nielsen isn’t tracking HBO Max yet. So we don’t know. Though, given that they only track services with a significant volume of regular viewers, likely The Flight Attendant wouldn’t have made the Nielsen top ten either.

My Favorite Ratings Tweet of the Quarter

This comes from Michael Mulvihill, who analyzes ratings for Fox Sports:

I would add, while he’s comparing 60 Minutes viewership to The Queen’s Gambit viewing, but that’s US only numbers compared to Netflix’s global viewership.  (Correction: I initially wrote NFL instead of 60 Minutes. As I’m supposed to say, I regret the error.)

Is Streaming Winner Take All? My Question of the Year for 2021

Well, give 2021 credit for trying to catch up with 2020 in terms of monumental new stories. This is absolutely one of the craziest weeks in my lifetime and I assume many of the folks who read. (Though, for historical hindsight, we tend to forget how absolutely chaotic the 1960s were, which featured the assassinations of at least 3 major political leaders. This isn’t to downplay the events of this week, but to emphasize that US democracy is always a fragile creature.)

The holidays tend to be slow for entertainment news, so we can take our time catching up on it. The biggest story–how did the big straight-to-streaming films perform?–I’ll handled over at Decider. In the meantime, let’s get reflective on the year that will be.

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Most Important Question of the Year – Is Streaming a Winner-Take-All Market?

In my first column last year, I said that 2020 would be defined by this question:

“What is the same and what is different between streaming and traditional distribution?”

Little did I know that we’d have a lot of things that were extremely different in 2020, namely a global pandemic that threatened to upend streaming and traditional media. (The biggest hypothesis is still that Covid-19 “changed everything”. I don’t really buy that; flashy world-altering headlines get the clicks but I’m a little skeptical about how much actually changed. We’ll see.)

My 2020 question and the lack of an answer shows a lot of the problem with articles predicting the future. It turns out that’s really hard! That’s why I like the approach of not predicting the future, but figuring out the most important question for the given year. And I have the question that I think 2021 will potentially answer. And if it does answer it, the consequences for entertainment are huge:

Is Streaming Video a “Winner-Take-All” Market?

Specifically, will one firm take a commanding lead? Will they capture a huge portion of the marketplace? Something like 70-90% of the value of the market? Contrariwise, do the streamers split the market—defined by subscribers, revenue, viewership, you name it—roughly evenly? Or does it land somewhere in-between? Say a few big winners with a lot of smaller players fighting for scraps?

Take the United States, which is probably the most mature market. As it stands, we’re in between the extremes of market consolidation. There is one clear dominant streamer, but it has by no means a monopoly on viewing. Specifically, Netflix has roughly 30-35% of the viewership depending who is measuring and when:

Comscore via Hedgeye by Type copy

This year, that number grew a pinch. Long term, that share of streaming viewership is declining. This massive viewership translates into the largest streamer by total subscribers:

chart-us-paid-streaming-subscribers

That said, Netflix got to develop such a dominant position because until 2019, Netflix only had two real rivals, Hulu and Prime Video (CBS All-Access is older than you think, but until recently has felt like a side project for CBS.) Now Disney, HBO and NBC are all-in on streaming. And ViacomCBS is half-in on streaming.

Can those firms catch up to Netflix? Or does Netflix keep growing and outpace its rivals? Can Disney+ catch up with Netflix in total US subscribers? Or Peacock and HBO Max? 

I think 2021 is the year we find out. Not all the services will catch up to Netflix in one year, but we’ll at least find out if this is going to be competitive or not. And that’s huge.

The Ramifications of this Question

To start, Netflix is the biggest beneficiary of the assumption that there will be one winner in streaming. The thesis is that “Netflix will become TV”. Not just a channel, but the whole shebang. That’s a winner-take-all economy. That’s network effects. That’s what has driven the huge valuations of the rest of the FAANGs (Facebook, Apple, Amazon and Google).

If Netflix can’t dominate streaming, then the better analogy is that Netflix is a new “bundle of channels”, much like what Disney, NBC-Universal and Viacom-CBS already were in cable. What has changed is the distribution. If that’s the case, woe to Netflix’s stock price.

This also matters for all the other streamers. They want to be a piece of the streaming pie. If Netflix owns the whole pie outright, then the investments of Amazon, AT&T, Disney and Comcast will utterly fail.

Further, this impacts the device and operating systems of the world, Roku, Amazon, Microsoft, Apple and Sony (the RAMAS if you will). If Netflix is the once and future king, it will have the leverage to negotiate those devices into oblivion. If they aren’t, then all the streamers may lose to the RAMAS’ value capture. (Their fees to sell subscriptions will capture most of the profit margin from the streamers.) 

My Take? Streaming Won’t Consolidate

If you’ve read my website for any amount of time, you can guess how I think this question will be answered. (So fine, I am making a prediction!) While content often performs with “logarithmic distribution of returns”, channels don’t have quite the same variability. (Or the winners can shift over time fairly easily. NBC won the 1990s, CBS won the 2000s; HBO won the 2000s, but Showtime almost caught them until Game of Thrones.) Frankly, this is where I see streaming headed: consumers will have multiple streaming services simultaneously, meaning there will be leaders, but not dominant winners.

Notably, part of this thesis stems from a skepticism on the presence of “network effects” for streaming video. (And the dreaded “flywheel” for Netflix.) For user-generated content, network effects were very, very real. The more users posting videos on one platform, the more viewers used the platform, so the more creators who posted videos on that platform. Hence, Youtube has demand-side increased returns, and it’s winner-take-all. Same for Google in search, Facebook in social, and Amazon more web marketplaces. 

The biggest input for streaming video, though, isn’t user data—which allegedly is Netflix’s driver of their winner-take-all flywheel—but the quality of content. And since the difference between 30 million subscribers and 60 million in data terms doesn’t produce that much better content, network effects in streaming video likely won’t appear. So it won’t be a winner-take-all market.

At least that’s my theory!

I’m not certain and as an analyst I’m willing to be upfront with you, instead of pretending to a level of uncertainty most analysts can’t truly possess. (Is this a bit of shade throwing at some of my entertainment business peers? Sure. Welcome to 2021!) The rest of this year will help me/us figure out if we are/were right or wrong. 

Other Questions That Will Define 2021

Does the live/experiential economy feature a boom?

When a vaccine was announced, I speculated about the upcoming “year of bacchanalia”. Over the break, I was glad to see another pundit take this same stand in Andrew Sullivan. His/my thesis is that once the vaccine begins rolling out in force, we’ll see folks make up for the lost time of 2021 by partying. For entertainment, this means lots of potential revenue. Concerts will see booming attendance, same with music festivals, bars, parties, travel, theme parks. You name it, we celebrate it. Quoting myself:

Customers in 2021. My biggest prediction is that we see a big rebound emotionally/culturally/socially. Take the Roaring 1920s and pack it into one year. Folks throwing big parties. Or holding double birthday parties. Splurging on outdoor concerts and festivals. Big vacations. In other words, 2021 becomes the year of the party. The pent up demand hypothesis.

The challenge will be figuring out if this is happening. If we use full-year numbers, it will be hard to see, since no one knows when we’ll feel safe to party again. It could be by March (if deaths fall quicker than expected) or fall (when we achieve herd immunity). Or somewhere in between. I’ll be looking to use per capita numbers as much as possible to untangle this.

What happens to theaters?

They’ll suffer the same uncertainty as the live economy, with more pronounced scheduling problems. The key date for me is May 7th, when Black Widow premieres. If theaters can be at full capacity in America by then, the entire world looks better. The other question is how firm the theatrical release slate is and how much the studios are willing to spend on marketing. And then whether or not the theaters can make it to May. Lots of question marks.

What happens to the economy?

The entertainment industry isn’t quite as recession proof as folks have made it out before. If wallets are trimmed, some entertainment spending goes with it. Some cheaper forms of entertainment, though, can resist this trend (like theaters) and some limited capacity forms of entertainment can also focus on high-wealth individuals (like concerts, sporting events and some theme parks). 

Thus, in 2021, entertainment folks would rather have a booming economy than a stagnant one. Folks are now openly speculating about a “v-shaped” recovery again, but it remains to be seen if the damage of 2020 can be overcome that easily. (Lots of businesses closed that may never come back, and that damage can take years to overcome.) The solution is lots of stimulus, which it sounds like Biden is considering.

Other Contenders for Most Important Story

If I weren’t speculating about the future of this year, what could have been the story of the week? Glad you asked. 

Roku Acquires Quibi’s Library

Is this a good deal for Roku? Who knows. If I knew the price, I still couldn’t tell you because I don’t know how good these shows are. If the price was very, very low, then maybe. Really, though, this is still a content licensing deal since Quibi didn’t own most of the shows, but was either licensing them or co-producing them with top talent.

Apple TV+’s Bold January Release Schedule

I’m sure if Apple TV+ could have, they would have released a lot of season 2 TV series back in the fall, a year or so after they launched. Instead, a lot of shows got the “Covid-19 pause” and it looks like Apple TV+ is on track for a big January, with Dickinson, Servant, Losing Alice and Palmer releasing each week in January. Also–and this is big–Apple TV+ is moving some shows to a weekly release

The upside is this will keep folks engaged (hopefully) through Q1. So I love that. The downside is a few other big shows still have vague “2021” release dates, like The Morning Show and Foundation. Apple TV+ still has new service growing pains, clearly.

For those keeping track, Disney+,  Apple TV+ and Prime Video have all released some shows weekly. (HBO Max has flip flopped on this point.) At this point we have to ask, who really knows more about release schedules: the rest of the market or Netflix?

Discovery Plus Launched

And it’s here! Discovery+ launched this week, and the reviews are much stronger than I anticipated. Rick Ellis makes the case that Discovery+ will help a lot of folks cut the cord, what I would call the next gen of cord cutters. Dan Rayburn says it is intuitive to use and has a massive library. I’ll be curious when we see the numbers on this one.

I’d also add, the Food Network Kitchen experiment doesn’t seem to be going well, and I wonder how long that standalone service lasts.

Netflix Increases Prices in the UK

This brings the UK in line with US prices (roughly) so it wasn’t unexpected. (The price increase in the US was!) Still, it will be fascinating to see how these latest price hikes fare in the next year with much more competition.

CyberPunk 2077 Security Fraud Case

Read about this interesting case either at Sportico or Matt Levine’s newsletter. Essentially, some folks are suing the makers of CyberPunk 2077 for releasing a game that was so bad it had to be recalled. Of course, some entrepreneurial lawyers will always sue claiming “securities fraud” for almost anything. However, this could set a precedent for digital products that are released and fail to meet their billing.

M&A Updates

Amazon is acquiring another audio platform, podcaster Wondery, to boost its Amazon Music platform. As the article notes, Amazon also owns Audible, which competes with a separate subscription in narrative audio. When a company is so big it’s competing against itself, that’s probably too big, right?

As for the strategy, it’s fine. The biggest harbinger of doom is for Spotify, though. It would be much easier to corner the market on audio if Apple, Google and Amazon weren’t all fighting you for it. (We could also ask, is music streaming winner take all?)

Context Update 

When it comes to regulations, I have my eye on antitrust for 2021. (I should have put that in the other questions above!) I hadn’t really considered unionization, but this could absolutely become an issue for the big tech firms. Like antitrust, this is a regulatory issue where a motivated Biden Presidency could make lots of changes without Congress passing new laws. So keep an eye on Amazon to see if unionization pushes come to them.

You Won’t Believe How Many DVDs Frozen II Sold Last Year – Physical Disc Sales in the US in 2019/2020: Visual of the Week

Every so often, as I pull data for a given article or to make a point, I come across a database that’s worth exploring further. (Which is why I created the “visual of the week” feature!) For example, in 2018 I stumbled across The-Number’s home entertainment data for the United States. More specifically, the number of physical discs still sold to people in the US. (Both DVDs and Blu-Rays will be called DVDs in this article, but are both “physical discs”n.)

I’ve since used this data for various projects over the last year or so. Once, when I was trying to figure out how many DVDs Game of Thrones sold during the course of its lifetime. (A lot!) I’ve since used it to look at various blockbusters to refine my film finance model. Recently, I’ve been looking at Christmas movies. (Next week!)

This isn’t some esoteric data point, though. In 2020 Covid-19 made home entertainment the only window available. Then, Warner Bros smashed the theatrical window altogether. Thus, importance of this aging technology to film financing couldn’t be more important. We’ve all know we’re trading “physical dollars” for “digital pennies”, but what does that mean in practice, as opposed to slogans? Specifically, what are the numbers that implies?

So that’s the quick topic for the day. As always, the 5Ws of the data:

What – Physical disc sales in US (by unit and total revenue)
What – Top 100 shows or films, by units sold.
Where – In the United States
When – 1-Jan-2010 to 15-Nov-2020
When (time period) – Annually
How (did I get it) – The-Numbers.com
How (is it measured) – Survey of customers and estimated total sales

That resulted in a data set of 821 films across 11 years. Here’s the top line result of the top 20 physical disc sales for 2019 and 2020:

IMAGE 1 - Top 20

(All data in millions of dollars.)

To answer my headline, Frozen II sold 3.6 million physical discs in the United States, leading the pack for any film or TV series this year. Avengers: Endgame won 2019, with 4.8 million sales for $104 million dollars. (And Frozen II could catch Avengers, since they year hasn’t ended and my data set for 2020 only goes through mid-2020.)

Let’s run through some fun insights, though with this dataset:

– People still buy DVDs. Again, even in an age of streaming, when folks could sign up to Disney+, 3 million families in the US alone bought a DVD for Frozen II instead of watching it there.

– DVD sales aren’t films only. TV has always had a spot on the list. Here’s a rough categorization of how film sales looked in the last two years or so:

IMAGE 2 - Categorization

– Yes, that’s right, in the United States with just physical discs, the big studios sold $2.4 billion dollars worth of discs. Yes, studios don’t keep that whole price, but that’s still a lot of extra money for each film. (Say about 40% of the price, or $10 for a film.) And this just physical home entertainment, a shrinking market. Electronic sales are now a much bigger piece of the pie. (That I don’t have similar revenue estimates for…) So each of these films could add about 8-10% more revenue to their total revenue. When this market decays to nothing, that revenue likely goes with it.

– If you’re wondering if box office predicts home entertainment sales, they absolutely do. Box office is about 89% correlated with home entertainment sales. Here’s what that means in practice:

IMAGE 3 - Scatterplot

– Yes, this is a shrinking market. It’s declined by 62% over the last decade. (Since 2020 is in progress, we don’t know how it will ultimately fare yet.) Here’s how the top 100 films fared over the last decade (up through 2019, since we have full data):

IMAGE 4 - Decline by Year

– And yes, this market is also logarithmically distributed. Thousands of films sell less than a million units a year, whereas Avengers: Endgame sold over a $100 million dollars.

IMAGE 5 - Log Scale

How the Antitrust Case Against Facebook Could Upend the Streaming Wars: Most Important Story of the Week – 11 Dec 2

Disney is a marketer’s marketer. With the biggest brands in entertainment, they can serve up an investor day—an investor day that is for Wall Street investors!—that gets regular folks to turn in and trends on Twitter. Yet, for all the buzz, the basic story was that Disney is releasing Disney content on the Disney branded streamer. We’ll get to that, but another story could have bigger implications for entertainment.

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Most Important Story of the Week – The Antitrust Case Against Facebook

A few months back, following Epic’s Games epic lawsuit against Apple, I stated that I planned to follow “antitrust” news fairly closely. Because antitrust could be the new “deregulation”:

I’ve been scanning the landscape more over the last couple of months to look at the future. And the “blue ocean” space in the entertainment strategy landscape for me isn’t technology–again, the futurists have it covered–but how regulation could change business models. And this is a hypothesis I’m monitoring: 

Could antitrust enforcement could become the new deregulation?

Deregulation was arguably the biggest driver of disruption in the 1970s and 1980s. Deregulating industries across the globe from airlines to energy to telecommunications repeatedly enabled smart firms to seize new advantages. That airlines example above is a perfect example; Southwest likely doesn’t become Southwest without deregulation.

Generally, everything has been deregulated. So what comes next? My guess is a reversal of antitrust. 

Since then, the signs that antitrust is on the agenda have only picked up steam. Consider:

– The House Antitrust Subcommittee released the “Cicilline Report” which laid out how the four big tech firms have used their market power to hinder competition.

– The Department of Justice filed a lawsuit against Google for specific antitrust violations. State Attorneys General are expected to follow suit.

– Joe Biden was elected as the next President of the United States. While there is some bipartisan support of renewed antitrust legislation (see Google’s antitrust suit, filed by a Republican), Democrats are still clearly more supportive than Republicans on antitrust.

– This week, 48 states and the Federal Trade Commission filed an antitrust lawsuit against Facebook. (Also a bipartisan move.)

In August, I laid out a few waypoints that I would watch to see if increased antitrust enforcement was likely coming. We hit the big one (Biden’s election), the next biggest (Congress increasing pressure) and now antitrust is headed to the courts (Specific lawsuits against Google and Facebook). As the future becomes slightly clearer, then, it’s worth expanding the potential for what comes next, especially for entertainment and media.

Predictions

What happens next?

To start, more antitrust lawsuits for the rest of big tech feels inevitable. Amazon seems particularly easy given that they have leveraged their market power in retail for years to enter new industries or stifle competition. The complaints from smaller vendors are legion. (The diapers.com affair from the start of the decade is particularly egregious.) Apple is more beloved than Amazon, but the Fortnite fiasco basically illustrated in stark terms Apple’s market power, and brought up a host of smaller competitors crushed under their power. Both Amazon and Apple, though, are more popular than Google and Facebook, which have both been embroiled in partisan bickering.

After that? The states/FTC/DoJ will either win or lose their lawsuits. That proposition is dicey because these suits are decided by individual judges, many of whom were appointed by Republican presidents with The Federalist society backing “Borkians” who tend to downplay antitrust concerns. Or in some cases just don’t believe antitrust is worthy of government attention.

If the states lose their lawsuit, then it would require Congress to change the laws around antitrust. That’s a much tougher challenge in today’s political landscape. But not impossible. (The Georgia run-offs will say a lot on whether this is possible.) Assuming that the Big Tech companies lose their fight, then come the potential remedies, which adds another layer of complexity to predicting what happens next.

Potential Outcomes

Let’s be honest and let the air out of the balloon right off the bat: The most likely outcome is that Big Tech is mostly left in place. Think Microsoft in the 1990s. In the worst case, the companies agree to some measures to control their behavior, but immediately go back to not following them and paying minuscule fines.

This is, essentially, what has happened with most merger consent decrees this decade. Facebook said it wouldn’t integrate What’s App’s data, then did it anyways. AT&T said prices wouldn’t go up after mergers, then raised prices. The companies pay the fines and keep consolidating. Disney said it would keep producing Fox movies, but now may release fewer films in theaters post merger than they did before.

The best case would be consent decrees that are enforced. Like the Paramount Consent Decrees of the 1950s. This helped movie studios and theaters thrive. Or AT&T’s forced divestment of patents in the 1950s. This spurred innovation across the U.S. landscape, which really did help competition. (It does say something that success examples of this happened 70 years ago…)

The bigger, and more fun to imagine, scenario is breaking up big tech. (And while I try to avoid my own policy recommendations, this is the outcome that I believe would benefit America the most.) These breakups could be either horizontal (the same industry) or vertical (different business units in the same company in related fields). 

Vertical is actually easier in most cases since the different companies don’t need each other to survive. So for Amazon, spinning off AWS, for example, would hardly impact Amazon’s retail business. (Though it would deprive Amazon of a valuable profit stream.) Google has multiple business units that could easily survive on their own. I’d add that splitting up Instagram and What’s App from Facebook are horizontal break ups, but relatively easy to contemplate since customers wouldn’t notice a change. (I’d make the same case for Amazon breaking up their marketplace from their other retail enterprises.) 

While vertical break ups in many cases don’t address market power, they are still very helpful for competition, since it means the firms left in a given industry can compete more evenly. (And most vertical integration tends to be followed by price gouging, product tying or other anti-competitive behavior.)

The key question for entertainment is whether each of the big tech titan’s entertainment enterprises get divested individually or remain as part of the bigger conglomerate. I could argue that Google should easily divest Youtube. Youtube can clearly survive on its own, but this would also give a powerful new internet advertising option to marketers. Apple could divest its media fairly easily (they are all just apps running on their operating system). Amazon has a better case for Prime Video staying in Prime, but even that isn’t ironclad. (Ask yourself: couldn’t Amazon pay the new Prime Video to stay in their Prime bundle? Yes, obviously. So why wouldn’t they? Because the value isn’t actually in the current video/data, it’s the market penetration to gain dominance overall.)

This is an unlikely scenario I’ve laid out. The plaintiffs have to win their lawsuits and then the remedy has to be the most extreme of remedies (break up). But imagine we do get here. Who are the winners and losers of this world? Imagine that Prime Video becomes its own company (with Twitch, Amazon Music, Audible and maybe a few other assets). Apple One becomes its own company (Apple Music, iTunes, TV+, Arcade and so on). And Google spins off Youtube.

Who wins or loses in this scenario?

Winner: Netflix

Say what you will about being bearish on Netflix’s business model, they aren’t a monopoly. Some investors want them to become one (building a “moat”), but a company with only 8% of all viewing in the United States is hardly a monopoly. Indeed, the biggest threat to Netflix, in my mind, is the unlimited cash reserves of Apple and Amazon. If forced to compete on an even playing field, this would benefit Netflix. (With the caveat that multiple new streaming companies on the NASDAQ may impact all share prices simultaneously, for good or ill.)

Winners: Traditional Streamers

Cord cutting is the biggest pain point for traditional media. But the biggest challenge, more than anything, is competing against competitors who don’t have to make money. If Big Tech had to compete on a level playing field–read not deficit financed–traditional media has a much better chance to survive in a streaming world.

Further, there is a big difference between radical disruption (where revenue drops by double digits year over year), and slow evolution (where profit margins slowly decline). Both get to the same place (which is the likely outcome from streaming), but one has a lot less pain for the incumbents and their suppliers. 

Losers: Prime Video and Apple

These seem like the two biggest losers in all this because most folks acknowledge that their streaming business models just aren’t based on actually delivering a valuable product. Phrased differently, no VC firm would invest in Apple TV+ if it weren’t owned by Apple; there is no business plan there. Spun off from their parents, these new media companies would be valuable, but much less invincible.

Losers: AT&T and Comcast

After Big Tech, if Congress wanted to find the industries that are heavily consolidated and hated by customers, cellular and cable are next on their wishlist. (Then health care.) Breaking up Big Cable would probably be the most popular move of the Biden administration. 

Winners: Roku and Sonos

If devices are sold at cost, the independent device makers have a chance to succeed and thrive.

Winners: Talent…probably.

In a lot of ways, the boom of streaming and peak TV is the best of times and the worst of times for talent. More shows and films are being made than ever before, but back end cuts are smaller than ever before. Meanwhile, junior writers work for some of the worst pay in the last few decades. Arguably, with many more streamers who are less powerful, the guilds could negotiate better rates, especially down the line. 

However, this may be offset by the end of the so-called “Drunken Sailor Era” (™ Richard Rushfield) as firms have to start making actual money. So they could cut back on content spend. That means less potential jobs overall.

TBD: Customers

Like talent, this could go either way. On the one hand, it has been great for customers to have multiple firms willing to subsidize cord cutting. The problem is those subsidies are harmful long term and entrenched market power is awful too. So prices could go up, but they’d reflect economic reality. Meanwhile, customer choice would come either way.

The Caveat: All of this is Unlikely

Does a huge break up of Big Tech, including spinning of media firms actually happen? Probably not. But without throwing out random probabilities, it’s probably twice as likely as it was even in August. (So yes, this is like a streamer saying a show grew 50% year over year. 50% of what?)

Yet, Biden was elected President, and that’s huge. Combined with renewed emphasis by the Democratic coalition, and I think corporate consolidation is on the table for change. He’ll likely appoint attorneys general, federal judges and administrators who could put a renewed emphasis on antitrust. That will impact entertainment eventually.

Other Contenders for Most Important Story

Disney Investor Day

Few analysts are (and have been) as bullish on Disney’s streaming future as I have been. I write that to put in context what I’ll write next: I don’t think this Disney Investor’s Day deserves the hype it has been given.

Take a few of the headlines touting “10 New Star Wars and Marvel” series coming to Disney+. That sounds huge. But given that this will take place over the next few years, is it? In context? Take this analysis by Emily Horgan:

Or take my timeline I’ve been using to model Lucasfilm’s financials:

base

And for kids…

kids

In other words, Disney confirmed what I’ve been modeling for a while now. This Star Wars volume is a pinch higher, but considering the volume of one-offs, not that much more than I modeled. But most of Wall Street/the trades seem surprised by it. I’d add there are a few more caveats for why the total volume of content may not match the reality:

– Shows will likely get cancelled. Like Ghost Rider, Benioff and Weiss’ Star Wars Trilogy, Howard the Duck, Rion Johnson’s Star Wars Trilogy, more Han Solo films, and countless other projects over the years.
– A lot of this content is animated and for kids. Which is crucial to Disney’s future, but likely replaces exactly what they were making for Disney Channel, Disney XD and Disney Junior. Which we weren’t getting super excited for before streaming times.
– Some of the announcements really are for a long way off (like a Rogue Squadron film in 2023). Most announcements didn’t have dates.

In total, then, I don’t think this is really much more content than Disney was planning on making last year or the year before. Some of it may have shifted from film (previous pitches for movies may have turned into TV series, like potentially Obi-Wan), but it’s probably similar. At the end of the day, it looks like from 2021-2023 we can bank on a Disney live-action adult series every 2 months or so on the platform for Marvel and Star Wars. 

That feels about perfect. If they can keep up the quality, that’s a big slate that will keep folks subscribed. It’s also the “if” that defines all success in entertainment.

(Though Disney+ still has a big hole for adult TV outside of Marvel and Star Wars. That’s a tough hole to fill.)

As for business strategy, the biggest news is no news. Hulu stays where it is. Star is officially becoming Disney’s adult brand globally. ESPN+ will continue expanding, and be available within Hulu. And lastly only one film is “breaking” the theatrical window, with Raya going to Premiere Access (like Mulan’s $30 release) simultaneous with theaters. (I have a feeling it will do much smaller business than Mulan on PA.)

An NFL Update: Ratings are Down, but Good for Broadcast

Is the state of the NFL viewership good or bad? Maybe both. Americans consume NFL football more than any other sport–arguably more than any other type of content period–yet the ratings aren’t as high as past years (down about 8%) because linear TV viewing just isn’t as high as it was (down about 30%). This of course begs the question for what happens next. I can’t see a world where broadcast TV doesn’t nab a few more years of NFL rights, even non-exclusively, but the key question is, “At what price?” Likely they will be high.

Disney+/HBO Max and Comcast Integration

Disney+ and HBO Max will soon be available on Comcast’s Flex operating system. This is a smart next step for both Disney+ and HBO Max. (If anything it should have come sooner.) For all the talk of cord cutting–and there is a lot!–one of the surprising survivors is the cable box. This makes it much easier to reach another big group of customers that Netflix and Prime Video are already reaching.

Data of the Week – The Hallmark Channel Is Still Winning Christmas

Josef Adalian has the details in a recent newsletter, but 3.4 million folks tuned in on one Sunday for a Christmas movie. Linear TV is dead, but it won’t lie down.

M&A Updates

Just because antitrust is back on the agenda doesn’t mean that mergers won’t continue fast and furious. The two latest biggies both have tangential relations to entertainment. Slack is the de facto messaging service of lots of Hollywood, and it was just purchased by Salesforce. Meanwhile, S&P and IHS are merging for a huge price tag because they are both financial data firms. S&P fascinates me because they had earlier purchased SNL Kagan, and Kagan was a tremendous source for entertainment data back in the day.

“The Mandalorian vs The Queen’s Gambit: Who Won November” at Decider

In what is now a recurring column, over at Decider I took a look at all the ratings data I could find to declare the streaming winner in the US for November. This one is packed with with charts, tables and data.

(If you’re curious for the older editions, here’s September and July.)

Also, I discuss the latest Nielsen streaming data in this thread:

Disney Has Almost Caught Up To Netflix in the Streaming Wars: Explaining the EntStrategyGuy’s US Paid Streaming Subscriber Estimates- Part I

(This is the last article in a three part series estimating how many US paid streaming subscribers there are in the US. Read the numbers here, and the second half of the explanation here.)

I’ve become a pinch frustrated with media folks who don’t differentiate between the US subscribers compared to global subscribers. Why? Because it violates the number one rule of data, which is to compare things “apples-to-apples”. Meaning, one should compare the most similar numbers to each other. 

Not to pick on them because they do great work, but the wonderful Axios Media Newsletter (which reaches a lot more folks than I do) was guilty of this this week:

IMAGE 1 Axios - Total Subscribers

That looks at Netflix’s global numbers to HBO Max’s US only numbers. That doesn’t make sense, does it? Meanwhile, it’s compares Prime Video customers, who get it for free, to those genuinely paying for Netflix. And Apple TV+ can’t make the list since we know nothing.

So, as I wrote yesterday, I stepped up to provide some estimates for each of the major streamer’s US subscriber totals:

Chart - Updated Totals not title

And the chart. (With some typos fixed from yesterday.)

Table Abbreviated

If yesterday is the data shot, today is the analysis chaser, describing the details of what I did and how. Which is just as important. If you read yesterday’s article, you’ll learn some statistics. If you read today’s—and yes it’s long—you’ll learn about what is driving these numbers.

We have a lot to get to over the next two days. Here’s the outline:

– The rules I used to estimate US subscribers.
– The confidence levels for each estimate.
– The explanation for each of the twelve major streamers.
– The reason for this deep dive. (Mainly the need for “apples-to-apples” comparisons.)
– Finally, a chart with the ranges for each streaming estimate.

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

The Rules

In a quest to get to “apples-to-apples”, I had to figure out what type of apples we were dealing with. Here are the ground rules, in rough order of priority:

– First, US only. Global subscribers will come later.
– Second, subscription was the key. Free or advertising-supported services from Youtube to Pluto TV didn’t make the cut.
– Third, the goal is “streaming”, but I added “premium” channels too. Because frankly, lots of folks subscribe to HBO, Showtime and Starz directly. Ignoring that provides less context than more. So the premium companies made the cut. The linear channels paid through a cable bundle did not.
– Fourth, the goal is to focus on who “would pay” for a service. In other words, for Apple and Amazon, to try to figure out who would pay for those services if they suddenly cost money.
– Fifth, I had to draw a line somewhere or I’d have too many subscription services. I decided to focus on “major” services, which I defined as 2 million customers and above.
– Sixth, some services are very cheap as well, so I’m assuming roughly a $5 per month price point as the cut off. Yes, there are tons of discounts that get applied, but this is a good starting point.

My Confidence in Each Prediction Explained

Last year when I calculated how much money Game of Thrones made for HBO (a lot!), I realized I was dealing with a few different types of information. And I needed some categories to describe them. So I came up with this:

IMAGE 2 - Confidence Table

A fact is something a company has confirmed in a specific report or statement. Or in some cases ratings numbers and what not. Those are numbers we can believe in. Leaks are also from companies, but usually anonymous. They are fine, but always be careful with leaks. Companies are very self-interested and their PR folks—who are still good people—will mislead you. Specifically, with data that reinforces how well they are doing and hides any bad news. (The definition of bias.)

Estimates are predictions I am confident in. Usually it means I’m taking a few specific numbers and applying good models to them.

A guess, on the other hand, is usually when I have to estimate too many things. At which point my confidence in the estimate starts dropping. Which doesn’t mean educated guesses are bad, just uncertain. (Magic numbers are briefly explained here.)

Analysis: How I Determined Each Number

Enough preamble to the meat of this article. In order of the table above. 

Netflix

While Netflix discloses a lot of information compared to its streaming peers, on its US numbers it has become frustratingly vague. At the start of this year, Netflix decided to split the world into four territories to better show how its business is doing globally. Which meant for years we knew US subscriber numbers, but now those were bundled with Canada. Fortunately, they provided three years of data. Here you go:

IMAGE 3 - Netflix Subs over Time

In other words, US customers are about 90.3% of the UCAN total. That means we can estimate fairly well the current US subscribers based on the UCAN number. About 66 million US subscribers. Even though these numbers are so tight we probably don’t need it, I made a range for the estimate, and call this my 90% confidence interval:

IMAGE 4 - Est US Subscribers

(If you’re wondering where these numbers come from, I collected every Netflix subscriber number from here to olden times for this article. An update is coming next week as my “visual of the week”.)

Disney

Disney isn’t one service, but three. Two of those services aren’t globally available, which means we know for certain how many US subscribers they have. (ESPN and Hulu.) 

What about Disney+? Well, we have our first tricky estimating process. To figure it out, I looked for some historical data. To start, here’s my historical growth chart:

IMAGE 5 - Chart Disney Subs

That helps, but not perfectly. The best way to estimate Disney+ subscribers is to use some correlated variable we do know, and assume the subscriber numbers are related to that. For example, if a country is 25% of the worlds population, then you assume they are 25% of the Disney+ subscriber total. The problem is that no one variable is perfectly correlated. You could use population, but some countries are wealthier than others. You could use GDP, but it doesn’t quite account for size. Broadband and mobile penetration are also potential options. Ultimately, I decided to compare all the countries by population.

Yet this has a big problem for Disney+. The big wild cards are India and Indonesia. While most of Western Europe and Japan have similar economies to the US, India does not. Fortunately, Disney leaked that they have 18.4 million or so (a quarter) of their subscribers from India. So that means we now have to parse out how many of the 55.3 million or so are from the US.

In this case, I looked at various populations of the countries Disney+ has entered, compared to the total size.

IMAGE 6 - Disney Population Numbers

In other words, if countries adopted Disney+ simply by population, Disney has 40% of the population, so jeu would have about would have 22 million subscribers. That’s too low. When Disney first announced numbers in December of 2019, they’d have already been at 21 million subscribers using the population method. So did Disney+ only gain 1 million customers this year? With The Mandalorian season 2 and Hamilton? Probably not. So I made a sensitivity table, which netted me this:

IMAGE 7 Sensitivity Table

Looking at it, the 54% of non-Indian subscribers having Disney+ is the most likely number. Or better phrased, between 25-35 million of all Disney+ subscribers are in the US. Any lower or higher feels unrealistic. And yes, I wish I had a more scientific way of triangulating this. Frankly Disney has released so little US data, and the data they have released has so many confounding variables that it’s probably the best we can do.

(Also, for the first of several times this article, if you want to disagree, feel free to do so in the comments or on Twitter and explain why.)

About The Headline “Disney Has Almost Caught Up To Netflix in the Streaming Wars”

Yesterday, I also included the total unique subscribers by company, because I do think that is the best way to compare companies. (See the table above.) 

Logically, if Disney could get to 50 million Hulu subscribers and 50 million Disney+ subscribers, and each was paying $10 a month—and those are numbers that are only possible 3-5 years in the future—then it would be hard to say they aren’t “beating” Netflix, if Netflix stays at around 65 million subscribers, but at a say $16 price point.

To be clear, I’m not predicting that happening. But that scenario is one of the possible futures. The fact that Disney has nearly caught up to Netflix with its three streaming services in terms of customers matters since it’s just starting out, even if average revenue per user is lower right now. (And yes, I only counted the “bundle” customers once for my summary yesterday. I assumed that all the ESPN+ growth, 6.5 million customers, since Disney+ launched was due to the bundle, which is a conservative assumption.)

HBO

HBO releases US subscribers and the number that have turned on HBO Max, which they call activations. The number of folks who would subscribe to HBO Max (if linear HBO disappeared entirely) is somewhere between those two numbers.

I’ll defend my lumping premium subscribers with streamers now. Frankly, I’ve never understood the logic of not comparing HBO linear subscribers to Netflix subscribers. Yes, one is direct-to-consumer and the other is sold through MVPDs. But ultimately, the customer is what matters. And HBO customers are very loyal. If the bundle goes away tomorrow, some customers may not continue subscribing to HBO, but more will. (And still do, frankly. HBO passwords are as borrowed/shared as Netflix, especially when Game of Thrones was on.)

As for the range, it’s between the activations and the total subscribers. So I provided both numbers. I’ll take the top of that range as my estimate (for now), but you can choose somewhere in the middle.

(If you want more details on HBO subscribers over time, check out my visual of the week from a few weeks back.)

Viacom-CBS

If I was going to count all premium subscribers for HBO, it only made sense to do so for Showtime as well. Fortunately, Viacom-CBS has leaked quite a bit of details to the press over the years, and their financial report provides specific numbers for total streaming subscribers. (For this project, I searched for every number I could find.) For example, in September, sources told Joe Flint of the Wall Street Journal that Showtime had 27 million total subscribers, including 7 million OTT. (That’s a very useful leak, if accurate.)

Meanwhile, in their latest earnings, Viacom CBS told us that between CBS All-Access and Showtime they have 17.9 million OTT subscribers. Assuming that ratio has held constant since the summer, then CBS All-Access has about 11 million subscribers. We can confidently estimate that. If you want an error range, since Viacom has said that subscribers are about evenly split between CBS All-Access and Showtime, the low would be 50% of the about 18 million subscribers and the high is the opposite end of that, or about 12.5 million subscribers.

However, unlike Disney, I didn’t try to disentangle ViacomCBS bundled customers at the company level. While Disney’s growth could easily be attributed to their bundle, it’s much less clear how many dual CBS All-Access and Showtime subscribers are out there.

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

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

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

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

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

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

Disney Re-Orgs the Chart To Focus on Streaming

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

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

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

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

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

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

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

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

Netflix Loses a Third Content Executive in a Month

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

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

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

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

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

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

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

Do Executive Reshufflings Matter?

Yes and no.

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

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

Screen Shot 2020-10-16 at 10.35.08 AM

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

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

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

Other Contenders for Most Important Story

Netflix Ends Free Trials

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

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

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

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

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

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

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

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

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

Context Update – Stimulus This Year Looks Unlikely

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

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

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

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

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

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

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

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

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

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

Insight 1: Disney is a Hit Driven Business

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

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

Image 1 - G Trends with Hamilton

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

IMAGE 2 - Parrot Analytics Recent Demand

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

IMAGE 3 - Antenna Longer Time Period copy

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

Ramifications

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

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

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

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

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

IMAGE 4 - 7 Park Long Time Period

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

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

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

Ramifications

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

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

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

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

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

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

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

IMAGE 5 - One and Only Ivan

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

IMAGE 4 - 7 Park Long Time Period

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

Ramifications

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

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

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

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

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

Image 6 Netflix Hard R Financials copy

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

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

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

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

Image 7 - G Trends Hulu

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

Image 8 - 7 Park Summer Data

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

Ramifications

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

Image 9 - Reelgood

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

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

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

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

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

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

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

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

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

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

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

Thought 1: The Theatrical Distribution Industry is NOT Theater Businesses

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

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

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

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

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

Thought 3: This is Disruption We’ve Never Seen

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

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

Thesis: The Theatrical Industry will Survive.

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

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

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

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

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

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

What Comes Next for Theater Companies?

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

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

This Process Won’t Be Pleasant

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

Data of the Week – Sports Ratings Are…?

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Should Disney Have Released Mulan to PVOD?: Part III of “Should Your Film Go Straight-To-Streaming?”

Last week, we figured out that Mulan was likely watched by 1.2 million Americans on its opening weekend. (Plus or minus 1-1.5 million.) We estimated this means it likely ends up with a global PVOD of $150 million.

But what I didn’t do was explain what all that data means.

Which is today’s article. As I was writing up my implications, I realized I was really writing another entry in my series on the changing film distribution landscape, “Should you release your film straight-to-streaming (Netflix)?” So here’s the latest version of that. As before (See Part I here or Part II here), I’ll be asking myself the questions.

Was the Mulan PVOD “experiment” worth it?

I’m probably too much of a stickler on language–I called out a much more influential strategic technology analyst on Twitter for mixing up aggregation and bundling this week–but I do believe terms of art have a role in setting strategy. Words have meaning and mixing them up can make for sloppy understanding.

The word “experiment” should be reserved for true experiments. Meaning scientifically rigorous processes to draw statistically significant conclusions. In business, this is incredibly hard to do. Most often, we have a sample size of “1”. Given that a company can’t split the universe into multiple alternate realities to see what happens, if they change their strategy they have only one data point to draw conclusions from. They only have the one strategy to adjust. It’s an “n of 1” as I wrote last Wednesday. Meaning we can’t draw conclusions from it.

I prefer “test” instead.

Fine, was the Mulan “test” worth it?

Probably not. Because most “tests” really don’t help refine strategy. Strategically, it’s usually a mistake to run “tests” that muddy your strategy and/or consumer value/brand proposition. In this case, Mulan was huge news. With tens of millions of dollars on the line, you shouldn’t run “tests”, but make strategic decisions that align with your long term strategy.

As it is, Disney got the data that PVOD sales didn’t match their expectations. Consider a question I’ll ask later: What if Disney had released Hamilton on PVOD? Then arguably the test would have worked! But the true difference is one film was the most popular musical of the last decade, and the other was a live-action adaptation. The track record on live-action remakes is more mixed: they’ve had a much more up and down reception. (The Lion King and Beauty and the Beast did really well; Cinderella less so.) In other words, we could have guessed that Mulan could not launch well but Hamilton would have.

But that’s why Disney needs to decide if PVOD is a part of their strategy or not going forward.

Okay, my last try: “Was the Mulan PVOD release strategy the best one to maximize revenue?”

That is the best way to ask the question! Thanks, me.

I think it wasn’t. With the caveat that I’m second guessing the executives, let’s review the options Disney had in front of them. They could release in theaters now, or next year. They could try the PVOD test. They could release in TVOD. Or go straight to SVOD on Disney+.

Trying to run the numbers wouldn’t really help since it would require tons of estimates and just guess work. But if we’re ranking the options, my gut is Disney ended up choosing the 3rd or 4th worst option. I’d do it this way:

1. Release on TVOD in September in Disney+ territories, theaters elsewhere.
2. Release in September in theaters globally, with a shortened window.
3. Release sometime next year in theaters globally.
4. Release on PVOD in September as above.
5. Release straight to SVOD in Disney+ territories, theaters elsewhere.

Here’s my logic for number one: Mulan had higher brand equity than Trolls: World Tour, so it would have generated more interest. Indeed, the biggest release tactic that held Mulan back wasn’t the price, it was the distribution strategy. However, you could convince me that options 2 and 3 could have beat option 1.

As I wrote a few weeks back about “exclusive distribution channels” when it came to Spotify, Podcasts and Joe Rogan, when you go “exclusive” you artificially limit your upside. Disney essentially opted for the same path here. The problem was their exclusive channel doesn’t look to be worth it. Essentially, TVOD would have expanded the footprint by so much that it would likely have generated more sales. So that’s my number 1 option to maximize revenue. (And a lower price I think would have further convinced folks to buy it.)

What about the new subscribers Mulan brought in?

Uh, look at the Antenna data of new sign-ups in context of past releases:

antenna-longer-time-period-1

In other words, Mulan didn’t drive new subscribers. Because it was PVOD, fundamentally, it didn’t help with retention either. The number of new subscribers is barely statistically significant.

What about releasing in theaters?

Unlike Universal, Disney hasn’t been expressly antagonistic to theater chains. (Though as soon as AMC and Comcast agreed on a deal, they publicly became best buddies again.) So assuming Disney could have sold the theater chains on it, yes there is a chance they could have released Mulan in theaters followed by a simultaneous or 3 weeks later PVOD release. That would have made more money than PVOD only.

The logic for me is simple: give multiple options for customers to watch a film. The challenge is most theaters in huge markets are still closed. It’s that uncertainty that is hurting theaters more than anything. And the theater chains would have fought fiercely.

Could Disney have held it until next year?

They could, but three things are holding them back. Which I’ve been struggling to explain all summer, and think I just figured out.

First, the financial cost of capital. Which is the idea that if you spend $200 million to make a film, the goal is to eventually make $216 million accounting for inflation since the entertainment industry’s cost of capital is roughly 8%. (No matter what else you know about entertainment, that’s the key math.) If you wait a year, you need to make 8% extra to cover the costs of the delay. That’s the damage “cost of capital” does to a cash flow statement.

(Want an explainer on net present value/the time value of money? Go here.)

For big films, this is clearly worth it; smaller films it isn’t. If the next Fast and Furious film does a billion dollars, taking the 8% cost of capital hit is better than a 60% total revenue hit. Using this logic, Disney should have moved it back.

The second cost, though, may be the real driver. That of what I’m calling “organizational” cost of capital. If everyone moves their films back simultaneously, the problem is many of those films can’t release at the same time. And that means you can’t start making new films, since they won’t have anywhere to go.

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