It has now become as ubiquitous or more ubiquitous than box office analysis. Streaming analysis.
And every time I come across it, I cringe. Not because the people doing the analysis are anything less than super smart. Not because I don’t love crunching numbers. Not because actually knowing these details doesn’t seem interesting. Not because I don’t want analytics wonks to make a living taking full advantage of a new market where potential clients are endlessly confused.
My problem is, these numbers, in many ways, mean nothing.
Everything we are currently seeing about analyzing the detailed results of a subscription service is about how we saw value in the past, not the present… much less the future.
Do results have an impact on the talent involved with whichever shows? Yes. It can change how those individuals, in front of and behind the camera, are valued within the industry, aka, the next deal. But there is always a way to measure that. Agents are geniuses at this. And as most shows/series are failures, not successes, the lack of a set figure is actually a boon for agents, benefiting the majority of their clients.
Essentially, “ratings” for streaming services are like ratings for pay-TV services at this point, almost exclusively publicity. The measure of the model is subscribers, subscriber adds, churn, and the price that can be extracted from each household (aka Average Revenue Per Unit).
But where we are today with all of this is not what I expect to see in the future, as we continue to head away from the “all you can eat” era of cable television and into the Chinese Restaurant Menu era of television. Pick what you like from column A, B, and C, etc.
Until now, Netflix and those following in the streaming business have been mostly consumer add-ons to cable/satellite. $10 here, $8 there, $15 there. Many have cut the cord, but nothing close to a majority. Those keeping MVPDs (cable/satellite) have looked for ways to lower their monthly bills to make room for the streaming spends, but the MVPDs have adjusted how they sell their packages to make paring down less attractive.
There are many drags on the near future of streaming, primarily poor household internet service. For a lot of people, cutting the cord is an act of faith. People will spend a surprisingly amount of time viewing a spinning circle on the middle of their screen if a show turns up at the end. But that is not going to be the image to “win” the tv revolution. Home internet service will have to improve overall… and it surely will, not unlike mobile telephone service. But it will take time.
Which all brings me to Red Notice.
This film is now being touted by Netflix as their most viewed launch of a film ever. Huzzah!
But what does this mean? Not literally. Conceptually.
I don’t know anyone who would argue that Red Notice has had the same kind of cultural impact of Squid Game. And almost as few would argue that Red Notice has had any cultural impact at all.
So what is the film’s value to Netflix? And how do we value other successes on other subscription streaming services? Not numbers, real or made up… value… real and conceptual value to those companies paying for the content.
According to Bloomberg, internal measures at Netflix say Squid Game generated $891.1 million in impact value.
WTF is “impact value?”
I don’t just mean to demand a cash value. I am happy to engage the idea of impact having value, especially because there is no direct cash value to Netflix on any show. So what does this number actually mean? Bloomberg doesn’t know. No media outlet can explain it because they don’t have the internal math that Netflix uses.
It’s an Algorithm!
But let’s consider this… if Netflix internal valuation algorithm is telling Netflix that a show has a value of $1 billion, is it intentionally misleading itself? As in, “it’s nearly impossible to measure a direct effect or the mood of our subscribers based on each show, so we’ve made up a number and that will help us feel we are in control of something we can’t really control.”
No harm. No foul. A company that deeply believes in analytics is going to want something more than the feelings of human executives to lean on. I tend to believe this is self-delusional… but there aren’t a lot of corners of this industry that cannot be so described.
This doesn’t answer the initial question, however. And this is not just about Netflix or any particular line-up of shows/movies.
How do industry companies measure the value of content, seriously, moving forward?
At the moment, the portion of effort being made to satisfy Wall Street, including pushing the media to sell the success and never consider anything greater or lesser, is enormous. And for its part, media has (almost) completely ignored the ramifications of shifting an industry from a solid, mature market to one based on faith more than the details of these businesses.
It’s a bit like America leaving the gold standard behind. The television/film industry is leaving the revenue standard behind. Do you understand how the U.S. dollar is valued in the world, measured on public markets every day? Neither do I, except in the broadest sense. But I do know that it’s people who are looking in various metrics and making moves based on their instincts.
Is there any objective reason for Disney’s stock to be down 17% in the last 6 months and Netflix’s to be up 53%? This is a rhetorical question. The answer is, “no.” With zero judgment against or for either company. The swing between the two stories cannot be rationalized, only accepted because it’s a fact.
Where we are today is complicated by the fact that Netflix is years ahead of anyone else in the maturity of their operation. So they are working on one set of goals and everyone else is working on a different set of goals.
For instance, Squid Game had very little, if any, apparent impact on subscriptions in US/Canada… but it was significant in Asian markets. No one else is really there yet, where they are ready for that to be a step.
Would Squid Game have been more important to Hulu or Amazon domestically? Yes, probably. But would their lack of international numbers kept the publicity value inhibited? Also, yes.
Would Squid Game have anywhere near the impact it has had on Peacock or Paramount+? Probably not. The show would surely add subs… but the scale of these streamers is not great enough to take advantage of this kind of potential hit.
The streamers are all at different levels of maturity and therefore, are both constructed to and able to take advantage of opportunity differently.
But we’re still not answering the core question. Again! How does one measure the return on product that doesn’t have any clear financial return?
Well… after all the hysteria of this transition calms down a bit (a couple more years), this is what I suspect we will see.
As there has been for quite a while, there will be a memorialized series of revenue streams for any piece of content… most of which already exist.
Some product will be intended to only serve one master… those would be shows or movies created exclusively for paid subscription streaming services in support of those subscriptions. Everything outside of that very specific window will serve more than one master/revenue source.
Paid Subscription Streaming Exclusive (PSSE)
Paid Subscription Streaming
Free Subscription Streaming
Ad-Based Subscription Sub Streaming
Cable/Satellite deals or sales
Video on Demand
Premium Video on Demand
International broadcast and syndication
So far, Netflix has been all PSSE. They have done some theatrical windows, but not with an interest in or serious afford to create revenues.
Disney has mixed and matched, with series starting as PSSE and some movie titles that have added Physical Media and PVOD and then VOD to the revenue profile. In time, I suspect they will add Broadcast TV and their cable outlets, but well down the road.
Comcast/Universal/NBC has been quite aggressive in playing to multiple fields. The PSSE for movies on Peacock has been very rare. They have done a handful of series as PSSE. But mostly, they have put movies in theaters with shortened window before going to PVOD and then VOD & Physical Media and varied timing going to their duel paid/free subscription streaming service, then pushing content to a long-standing Pay-1 with HBO, and eventually, broadcast and ad-based subscription. In other words, every revenue stream aside from PSSE.
Sony doesn’t have its own major streaming platform and has now sold their Pay-1 slot to Netflix starting next year. Even so, they are staying out of the PSSE box and using everything other than traditional subscription streaming, except in flipping Pay-1 from the traditional cable berth to Netflix… which is what is happening elsewhere as outlets like HBO now puts your title on HBO Max as well in most cases.
Paramount, does have its own streaming platform, but it’s really just starting to service it with original content. So far, it’s been an outsized version of the CBS streaming platform with more Paramount-side content. On the studio side, they sold off the vast majority of their commercial feature films off in period just before and during the Pandemic and have held 5 select titles for release in 2022 along with some branded titles that were already due there. Their entire 2021 wide release schedule was 4 movies and they have a new boss because he was responsible for 1 of those 4, which grossed $40m domestic… so who knows what they will do?
Warner Media is heading into yet another year of transition. New boss. The theatrical window is back. Their first wide release into theaters is The Batman on March 4. HBO will be HBO. So how they decide to navigate all the choices is an open subject.
And still… I don’t seem to be answering my own question. How will we measure content value on a consistent basis moving forward!
Ultimately, I suspect there will be an equation, not too unlike Netflix’s equation of “impact value,” that will include one variable like “impact value” and measure the success of any given film/series. But this equation will not be like a rating or box office result as we have used over these last 50 years. It will be calculated quarterly, not instantly or weekly or even monthly, because a day or a week or a month of data will not be enough to accurately reflect success or failure.
Historically, studios created "ultimates’ (still do), projecting out all the revenue streams for each piece of content, which is then adjusted as actual data comes in. There numbers are not publicized and rarely end up being reported, before, during, or in the late stages of content release.
The only area in which these numbers, which are aspirational at first, are now kept blind to the working partners on a show/film is in the Paid Subscription Streaming Exclusive (PSSE). Media, of course, sees this as the only model that matters.
If you want to know why Netflix switched over to an hours-watched public metric, it is likely because they have determined that overpaying to compensate for potential revenue earnings that will never come in PSSE is more expensive than paying on performance.
In the now-brief, 2-minute Top Ten era, you can be sure that agents were trying to set deals with triggers on appearances in that rating. They will now be looking for bonuses at 100m hours, 250m hours, etc.
At some moment, I would bet $50 bills to donuts (as donuts are not $3.50 apiece, killing off another olde clever turn of phrase) that on the 5th negotiation for top tier acting talent where the agent said, “Well, if you can’t tell us what the numbers are, you need to pay us for what you are hoping they will be,” Netflix made this change.
So have I answered my own question?
I guess my answer is that the agents and the content distributors will work it out, as they always do. And that the main point of the public discussion of hits and misses will be positive publicity almost exclusively. Eventually, box office reporting is more likely to be phased out than serious streaming ratings reportings getting phased in.
But my real question, to myself, when starting this piece was, “What do the numbers we are seeing from Netflix mean to us as a culture when so often, the ripples in the pond seem so small?”
I got caught up in the business side and didn’t really even end up addressing the cultural side. That will, I guess, have to wait for another newsletter.