If you haven’t already surmised, I’m passionate about data and how digging for detail can reveal insights that otherwise get glossed over. So I’m a fan and an eager consumer of VIP+, the Variety Intelligence Platform that produces intriguing dissertations on media trends utilizing a myriad of innovative sources and applications of syndicated data. Frequently, they produce some valuable connect-the-dot analyses, such as their dissections of streaming services that reveal that maximizing subscribers doesn’t necessarily equate to actual viewership of the content that is contained on it.
Sometimes, though, the eagerness to produce a headline misses the concept of contextualization. I’ve never met the author of the recent piece that trumpeted
VIEWER DATA SUGGESTS MANY NETFLIX HITS GO FROM SIZZLE TO FIZZLE QUICKLY
but my hunch is that he’s been around a few less blocks than moi.
The analysis uses recent data points from innovative national and international third party panels such as TVision and Whip Media’s TV Time, two alternatives to Nielsen that have provided superior, platform-agnostic quantitative data through a competitive lens, as well as Netflix’s self-reported Top 10 data from their own internal tracking. The takeaway headlines are:
- Top 2021 Netflix series saw audiences peak in the first month following their debut
- Even reigning hit “Squid Game” saw pronounced drop after hot start
- Frequency of big Netflix originals quickly losing steam hints at why the streamer must spend so heavily on content
Well, duh.
Streaming services, particularly those that debut original content and PVOD movies, have effectively supplanted the traditional model of windowing and trickling original content via the limitations of theatrical release, a broadcast network window or a territorial first position with a global dump of a movie or a season of a series on one day or in an a limited arc of multi-episodes releases. In studio finance terms, this process is reflected in the utlimate, where the total investment of production and marketing is projected to eventual be made up over a sequence of windows where profit margins over time increase once the cost is offset by incremental revenue. A longer-tail property is ideal, because a property with “legs” that lasts longer in a theatre or sustains ratings over several cycles of reruns realizes greater profit margins over time. The reality is that such properties are rare exceptions.
When I would look at a pro forma of an acquisition for a movie title or a TV series, we would apply what we called the Uranium scale to our projections. Different uranium isotopes have varied half-lifes. The gold standard, Uranium 238, has a half-life of 4.5 billion years, meaning it will take that long for the isotope to lose 50% of its potency. In contrast, uranium 234 has a half-life of just under 250,000 years. Way more movies and series are 234s than 238s.The same way that an overwhelming majority of theatrical movie releases make their box office maximum on opening weekend, then quickly fade. Only rare confluences of word of mouth or competitive opportunties (e.g. a major hyped release comes and goes quickly, bad weather impacts a premiere weekend) produce the 238s. That model has been applied to theatrical releases for decades. The decision of Univeral Studios to decrease AMC’s theatrical window for many top titles to a maximum of 17 days was largely based on this.
So should we truly be shocked that the VIP analysis shows that successful streaming content gets consumed disproportionately in the first month of its availability? A hot dog tastes better hot off the grill. Good content yields demand. But you can’t re-eat a good hot dog after it’s been digested. So yes, it certainly makes sense that it must continue to spend money to grill more hot dogs, particularly when the business model that made it so successful early on has been disrupted so permanently.
Netflix’s data consistently shows that procedural shows like NCIS and Criminal Minds, shows that have several hundred episodes and iterations, are often as or more viewed in aggregate than most originals. They have quantity and that 238 quality. But Netflix didn’t make them; in these cases, Viacom divisions did. As Viacom, Universal, Disney and Warner clawed back their rights, it forced Netflix to grill lots more dogs. It costs money to shove the meat into casings. So yes, it’s also a duh that last week’s controversial announcement that their monthly subscription cost was going to as much as just under $20 a pop. Stock prices dropped significantly after that announcement, which had a trickle-down impact on compettiive media companies to boot.
Again, was this really so surprising?
Perhaps more of a tell was the revelation that co-CEO Reed Hastings had purchases $20 million in holdings, raising his personal stake to over 5 million shares, As reoported in Motley Fool ysterdaym billionaire investor Bill Ackman of Pershing Square Capital Management announced he had acquired 3.1 million shares, saying that the recent sell-off had created a buying opportunity.
Hastings in particular knows the value of owning 238s. There are media companies out there with a few of them. Sony, for example, owns thousands of hours of series and tens of thousands of movies. So does Viacom. Under the right circumstances, either one could provide Netflix with a regeneration of the model that made them what they are. And the more content they own, the more time each subscriber will spend with them, meaning less with competitors. That is unquestionably what the studio streamer strategy is posturing.
I’ll reiterate that the data revealed in the VIP analyses is valuable and worth the price of subscription. But caveat emptor on the conclusions that are postured from them. If you haven’t been been bitten by many dogs, “dog bites man” is a headline. In this case, better to let sleeping dogs lie.
Until next time…