You Know What Some Bears Do In The Woods. Some Do It On Earnings Calls, Too.

I’d contend one of the more impactful books I’ve read in my life was the 2000 best seller THE TIPPING POINT, which introduced most of the world to the mind and thughts of the brilliant albeit electrocutionally coiffed author Malcolm Gladwell.  As Wikipedia accurately explains, the title referenced what Gladwell defined as “the moment of critical mass, the threshold, the boiling point.” and offered what he called the “(t)hree rules of epidemics” (or the three “agents of change”) in the tipping points of epidemics.   The first, which is covered in meticulous detail by Gladwell, is known as the “The Law of the Few” (which) is, as Gladwell states: “The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts. 

These people are described in the following ways:

  • Connectors are the people in a community who know large numbers of people and who are in the habit of making introductions. A connector is essentially the social equivalent of a computer network hub.  Gladwell characterizes these individuals as having social networks of over one hundred people.
  • Mavens are “information specialists”, or “people we rely upon to connect us with new information.”[4] They accumulate knowledge, especially about the marketplace, and know how to share it with others.
  •  Salesmen are “persuaders”, charismatic people with powerful negotiation skills. They tend to have an indefinable trait that goes beyond what they say, which makes others want to agree with them.

I’d contend after scouring the coverage that yesterday’s Netflix earnings call, which THE WRAP covered practically in real time with multiple breaking news alerts that thankfully had nothing to do with Gaza, our cuddly little CEO Mr. Sarandos should have given the book a quick refresh beforehand.  Because while Netflix indeed possesses the skill sets of the first two categories within his still formidably-sized staff, it’s evident he sees himself as exclusively the third, and I’d vehemently argue yesterday’s series of declarations revealed him to an even more marginal one at that.

The first, offered up by Kayla Cobb:

Starting Wednesday, Netflix increased its prices in the U.S., U.K. and France. The company announced this price hike during its third quarter earnings report for 2023.

Currently, the streamer’s Standard with ads plans and its Standard without ads plans will remain the same at $6.99 a month and $15.49 a month, respectively. However, its Basic plan has jumped to $11.99 a month — an increase of $2 a month — and Premium is now $22.99 a month — an increase of $3 a month.

The Basic plan is a holdover from a previous era of Netflix. New subscribers are unable to sign up for it. Only those who currently subscribed to the discontinued plan or the Premium plan will see a price increase.

So, that kinds screws the connectors.  Sarandos’ motivation is obvious: as we’ve previously covered, their current ad tier proposition is laughable; reportedly in the neighborhood of 2% of U.S. subscribers and 4% globally.  Several reports yesterday revealed Netflix is optimistically purporting potential for a 25% acceptance rate for the ad tier within two years.  So a gap that now has pushed a new subscriber rate to nearly double that of its incumbents, and double that should you want the service as the earliest adopters and its staunchest advocates bought into it is being seen as perhaps the “tipping point” that will finally get Netflix chillers to accept the service with commercial loads.    In theory, if you REALLY love Netflix content, you’ll go along with this plan.  But will crossing the $20 a month threshold for a singular AVOD be what pushes some subscribers who simply aren’t THAT much in love with LUPIN to say ENOUGH?

And I’m not buying the spin that Cobb attempted to convey where Netflix touted (m)embership for the ad tier has increased nearly 70% quarter over quarter, and 30% of Netflix signups in countries that offer the option are for the ad plan.  Those are proportionate gains over low bars, and still nowhere the kind of levels that are being touted as necessary to acheive the lofty goals it (or the investment community) has set for it.

So then Adam Chitwood and Jose Alejandro Bastitas dropped this gem about how Sarandos now plans to populate the service with some fresh chum:

Call it the “Suits” effect. After the gargantuan performance of the USA series following its debut on Netflix in July, the streamer signaled on Wednesday that it may be increasing its licensed content in the near future.

“As the competitive environment evolves, we may have increased opportunities to license more hit titles to complement our original programming,” Netflix said in its third quarter earnings statement. “We believe this will deliver additional value for our members (i.e., engagement), as well as for rights holders who benefit from the increased awareness and revenue that Netflix delivers, in addition to the new life that success on Netflix can drive.”

The streamer cited “Friends” and “The Office” — two titles it no longer holds the license to — as other examples of licensed shows that drive success on Netflix.

Yes, it was NBCU that sold SUITS non-exclusively to Netflix, the folks that clawed back THE OFFICE from them, and Yosemite Zas and MAX, who own FRIENDS, have shown a willingness to do business as well, given the recent sale of titles like INSURRECTION.  But, respectfully, INSURRECTION isn’t FRIENDS, and not every off-USA “Blue Sky” drama is SUITS.   SUITS was algorhymically launched on the heels of the success of Netflix’s HARRY AND MEGHAN special and was thus positioned to be discovered by both fans and haters of a one-time British princess.  Unless Matt Bomer marries into royalty or a mob family sometime soon, I doubt there’s much in Netflix’s war chest to drive people to rediscover, say, WHITE COLLAR to the same extent.  (And as someone who watched both shows regularly when they first aired, I’ll even tell you SUITS is the better watch.)

Not that they’ve actually quite yet figured out, or are willing to publicly share, what actually would define future success.  As Loree Seitz dropped still later in the day:

Netflix’s co-CEO Ted Sarandos predicted transparency regarding streaming viewership data will be “much more common” moving forward, but offered no detail on how the streamer will shift its own viewership model. 

Since 2020, the streamer has chosen to display its viewership data in several top 10 lists, which rank the most-watched English TV shows, English movies, non-English TV shows and non-English films. While Netflix previously ranked the top TV shows and films based on total hours viewed, the streamer adjusted its metric this June, when it announced it would rank its titles based on total views by dividing a project’s total hours viewed its runtime. 

Most of those details have been hashed and rehashed previously in this space.  But do check out how Sarandos is now crediting others with why there has been such a checkered past in simply letting the world know what’s working:

“At the time we started creating original programming, our creators felt they were pretty trapped in this overnight ratings world and weekend box office world to finding their success and failures,” he said. “As we all know, a show might have enormous success down the road, and it wasn’t captured in that opening box office.”

Sarandos added that holding off on viewership data was partly due to the streamer’s “relationship with talent, not just the business aspects of it.”

Funny, not a single writer or showrunner I know who spent the better part of 2023 striking in large part for more transparency cited any Faustian bargain to be denied data.  Nor do I know a single maven that would have endorsed it.  So much for them.

Which may be why at the end of this day DEADLINE’s Dominic Patten offered up this “review” from someone who had been hoping he would perhaps seen him somewhere else besides trade news websites:

 Ted Sarandos may have insisted today that he and other studio CEOs want to end the over three-month long actors strike and “get everyone back to work,” but for SAG-AFTRA’s chief negotiator, the Netflix boss is full of nothing but hot air.

“Talking about putting people back to work while refusing to negotiate is just spin,” bluntly exclaims Duncan Crabtree-Ireland to Deadline this evening in response to Sarandos’ comments during the streamer’s third-quarter earnings call Wednesday. 

As he has repeatedly and publicly since negotiations were shuttered, Crabtree-Ireland pushed back against de facto Gang of Four leader Sarandos’ assertions today, maybe harder than ever. The union leader stated that if the CEOs really are “incredibly and totally committed to ending this strike,” as the Netflix co-CEO said Wednesday, then they should put their money and their motivations where their mouths are.

 “The best way to reach a deal and end this strike is for him and the other CEOs to end their walkout from the bargaining table and resume negotiations,” Crabtree-Ireland said tonight. “We have been and remain ready to continue talks – every day.  It is irresponsible for the companies to continue to refuse to negotiate. It hurts their employees, the industry and their shareholders.”

Bravo, DCI.  And let me remind that Sarandos’ signaling that the service is willing to open its satchels to buy other product is yet another sign that they are increasingly looking at alternatives beyond scripted US-produced TV to supply them.  Remember, Netflix has already seen success in reality TV with the likes of LOVE IS BLIND.  Their aggressively touted entry into live sports, effectively a celebrity golf challenge match akin to how TNT found a way to produce a live sporting event at the outset of the pandemic, could spawn similar promotable one-offs.  They are making increasing investments in animation, with Skydance’s slate joining the recently resurrected STAR TREK: PRODIGY.  And don’t forget their seeming obsession with pivoting toward gaming (my already obsessed roommate certainly hasn’t, and he’s more than happy to continue to pay, BTW).

I don’t know about you, but that’s a lineup that might actually incite me to actually stop watching the service, or even TV in general, and take up something more healthy proactive like, for example, long hikes in the forest?

About the only downside I see is to be sure to avoid the area where our cuddly little Teddy may have taken a dump yesterday.  It sure seems like it was a pretty smelly load.

Until next time….




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