Just a few years ago, media executives thought theatrical releases didn’t benefit their streaming services. Now, many of them think the opposite.
For much of the past decade, Hollywood executives striving to catch Netflix started believing that the only way to increase the subscriber numbers for their own streaming services was either by significantly narrowing the time between a film’s theatrical release and its appearance on streaming or by putting both out simultaneously.
But the industry has now largely come to a very different conclusion: The key to making a movie a streaming success and attracting new subscribers is to first release it in theaters.
Especially since the pandemic, this “user obsession” has driven tech-minded folks at streamers to demand that movies be released day-and-date on streaming services. “Consumer preferences” — that people should be able to watch anything whenever they want, wherever they way — dogmatically drove this agenda.
But beyond customers asking for it in surveys, there’s no evidence that this makes business sense or actually caters to the customer. The theatrical hype machine and word of mouth is part of wanting to watch something in the first place. I wrote about this in 2017 when Disney first hinted at day-and-date. No amount of streaming marketing can buy theatrical’s inherent offering: placing a movie into thousands of multiplexes across America. It’s like instantly scaling an experiential event into 5000 cities. Why pass that up?
Now imagine you’re Disney or Universal and you actually rely not just on streaming (like the example in this article, Amazon’s original “Red One”) but need to be able to sell derivative merch, products, games and parks tickets for years into the future. You need a red carpet and a theatrical release to launch the multi-year momentum required for that kind of lasting IP.
Media companies face some challenges but bundling is a solution—not a problem.
I thought about this when reading this recent Deadline op-ed which argued that streaming bundles replicate the flaws of cable again.
As streaming bundles proliferate, competition among them will drive innovation and affordability. I think bundles can be outrageously accretive and we’re just at the beginning. Although there are many more, three reasons they are superior come to mind for me: personalization, bundle innovation and advertising realignment.
Personalization increases engagement with smaller libraries
Machine learning and AI enable bundles with smaller libraries to create more engagement. By tailoring recommendations to user preferences, smaller libraries can bubble up the most relevant content from deep in their catalog, ensuring viewers needs are met without as many options under the surface. In the old cable model, we had access to hundreds of channels but only tuned in to a handful and only a fraction of the media cos’ libraries could even air at a time. When streamers begin (actually, truly) relying on personalized homepages and merchandising, they will be able to cater to viewers’ interests with less content. And even start green lighting against those signals. That means I could meet my family’s needs by subbing to a sports, movies and kids bundle with less total content — but as much (or more) viewing hours for me as a consumer. Why would people pay less wallet-share for this?
Innovative bundles cater to consumers (and contribute $$$)
As media companies rushed DTC, they began foregoing other windows to consolidate audience. This is only the beginning of streaming; media cos will inevitably evolve to find windows again. If bundles proliferate, they can begin to cater to different consumer needs, each supporting a new window. Consumer needs can span interest, price point and even cross-industry businesses– hardly any of these are fully explored. Niche bundles are already a thing (Shudder, Crunchyroll, Hallmark) and many more are obvious: kids, sports, news, short form. That’s without any real innovation yet. For instance, a “low-latency live + gambling” bundle could command a window for some sports. What other industries outside of streaming could be integrated into a bundle? Health tech, GenAI, consumer products, gaming… Niche bundles offer a way to monetize underrepresented audience segments while spreading risk across a diverse portfolio of content, ensuring more stable revenue streams for media companies.
Streaming advertising will eventually re-align with viewership
It may take more time, but advertising dollars will come back to TV as the marketplace becomes more efficient. The piece makes an argument that TV was bloated with ads in the late 2010s and Google/Facebook have captured ad demand. Advertising dollars follow viewership, and while viewing habits have shifted, the total audience remains constant — eyeballs don’t disappear, they go somewhere. Indeed, people are watching less linear TV… but that viewing has shifted to streaming TV. Some leisure time has gone toward gaming and social media; but streaming TV + linear TV still commands the majority of entertainment time spent across all age groups. Even though ads are being bought through Goog/FB/Amazon, this doesn’t mean viewership resides on Google search and facebook.com. Amazon is a great example where their ad growth is in Prime Video… which is a bundle that’s ad-supported. These are platforms that ultimately sell (or will sell) those CTV eyeballs. For competition and consumers’-sake, expect them to optimize frequency, encourage dynamic creative and innovate new formats. As market efficiency returns to TV advertising, those dollars will return to media companies.
Lots of folks are talking about Marie Kondo now that she has a Netflix show. I haven’t watched the show but I skimmed her book. And my clothing drawers have never been the same! I love her advice of thanking items “for their service” — gratitude is awesome.
The phrase that’s never helped me much is the “spark joy” rule. It seems to work for everyone cleaning their rooms, but not me, until now. I realized lately that it helps me enormously with defending my email inbox, instead.
My email is a private line right into my pocket so everything in there should spark joy, not dread! Does that email newsletter spark joy? Before you hand out a business card: will this person bring me joy?
It’s actually a very good test. Many email newsletters are awesome– but for me, they sometimes inspire panic to buy something or the anxiety that I’m behind on reading the news. Unsubscribe! And it’s for the opposite reason — sparking joy — that I violate the sacred rule of “inbox zero” and keep subscriptions to a few newsletters that I love.
I’ve been thinking a lot about the rumor of Apple’s hardware and content subscription bundle. The idea — whether it actually happens or not — is that they’d create a very expensive subscription of $80/month or so that bundles Apple Music, the new Apple original content, Apple Care, iCloud and a new iPhone every year. This is very much a rumor but very viable avenue posited here and by Matthew Ball at Redef.
This immediately reminds me that for years, Americans paid $100+ per month for another expensive hardware and content bundle: cable TV. I remember the salesman coming to my home and explaining to my parents what cable TV included. It was much more than TV, because before the internet, that box was your only gateway to many things. It was movies, music channels, educational programming for your kids, breaking news, live concerts and the hardware to make it all look beautiful on your only screen.
One way to frame Apple’s rumored hardware/content bundle is that they attract you with their device ecosystem (hardware) and then keep you hooked with their shows and music (content). The phone and its TV and cloud components are already a huge draw for audiences so their content can play the role of keeping users engaged there by making that ecosystem useful on a daily basis.
This got me thinking… maybe content isn’t really an effective audience awareness or acquisition tool AT ALL. Maybe, when all the cards fall, content is just the retention piece of a recurring payment business model and other elements of the bundle are what bring you in the door. This is somewhat reflected by the calculus Amazon did around their original video: it turned out that prestige TV shows like Mozart in the Jungle and Man in the High Castle weren’t such an efficient acquisition tool for Prime.
Check out how this thinking might apply to other businesses. I’ll use this analogy: come for X (acquisition); stay for content (retention).
Apple hardware/content bundle – Come for the hardware ecosystem; stay for Oprah.
Amazon Prime – Come for free shipping; stay for Nicole Kidman.
HQ — Come for a cash prize; stay for the trivia.
Facebook — Come for your friends; stay for Facebook Watch.
And the corollary seems to also be true with failed SVODs and streaming services — there’s no acquisition component, just a bunch of originals and licensed content to retain the audience that never came.
There are probably a bunch of examples that prove this thesis wrong, chief of which are Netflix and HBO. (But you could argue that they OVER spend on content, trying to force content into becoming an acquisition tool.)
Even if it’s only a little true, it’s a helpful thought experiment: what if you had to launch a streaming service WITHOUT using content to acquire an audience? You’d have to offer real utility to your users — some other valuable product or service that would attract them to your subscription. Apple already has that part figured out: the phone, the ecosystem. And on the content side of your business, brands like Marvel, leagues like the NFL and celebrities like Oprah wouldn’t be as valuable because you already have a giant draw for new users. If your content is only playing the role of retention, it doesn’t need to hit an attention-grabbing must-see fever-pitch. It can be much less ambitious. You can spend way less than Netflix.
Netflix is killin it and I continue to be bullish on their future. There’s one corner of the business I’m afraid they’re being just a little too pensive about: mobile.
This year, they’ve launched some of their first short-form programming and some new native portrait features in their mobile apps. But I’m afraid this won’t stop other mobile competitors — Google and Facebook — from locking them out of this critical piece of the entertainment pie. Now is the time for them to begin spending in the mobile content space and here’s how they should begin.
Why mobile is critical to Netflix
Let’s start with why Netflix should care.
There’s an obvious massive market of short form video consumption, well-proven by YouTube and Facebook. 34% of global internet video traffic is shortform. So, when Netflix says they’re competing with all forms of entertainment, this seems like an obvious adjacent area to pick up some additional engagement — whereas interactive, live and sports are much more of a moonshot.
But I think all of that frames this as a business expansion opportunity when I actually think this is a threat to Netflix’s stranglehold on the streaming market. Have a look at this graph, which explains the userflow of new subscribers to the service.
When this slide first broke, a lot of emphasis was put on the fact that after 6 months, 70% of Netflix subscribers were watching on a big TV. What stands out to me is that 10% are STILL watching on a mobile phone. Just 1 month in, more than 15% are still struggling to watch long form TV shows and movies on a tiny mobile screen. And right from the getgo, a full THIRD of Netflix’s new users start on a mobile device.
We are in a mobile world and who cares that people watch more content on their mobile phones — people TRANSACT more on their mobile phones. Enough people subscribe to Netflix straight through iOS that they’re trying to bypass Apple altogether — another sign of just how many folks sign up on mobile. Given that Netflix’s model is dependent on one giant transaction at the top of the funnel (their subscription), many more of their new customers are entering their ecosystem through mobile phones. And this user flows shows just how long it takes that mobile customer to begin finding big-screen-TV-type-value in their subscription. Were Netflix to actually provide valuable mobile content during that couple-month transition, they’d reduce churn among new users. (Still another strategy would be a freemium model of mobile-only content to lure users through the paywall when they realize the app’s value on another screen.)
What Netflix is already trying in mobile
Netflix is not completely blind to this. They’ve launched a few new short-form originals and mobile products this year. For those trying to reverse-engineer their mobile content strategy, here’s a recap of their short form content:
The Comedy Lineup (15 minutes) – Mini stand-up comedy specials
Explained (14-18 minutes) – Newsmagazine (Vox)
Follow This (16-18 minutes) – Newsmagazine (Buzzfeed)
Comedians in Cars Getting Coffee (12-25 minute) – Celebrity interviews with Jerry Seinfeld
Marching Orders (12 minutes) – Docuseries
Cooking on High (14 minutes) – Competition reality
In the scheme of Netflix’s $6 billion content spend, I’d call this an extremely modest beginning — it’s really just a test. It’s heavy on news and unscripted, there are no filmmakers, high-value talents or standout IPs. I estimate their 2018 spend on short form around $20MM at most. To make a meaningful move into mobile, they’ll need to spend 5-10x that.
How Netflix could form a mobile content strategy
It’s clear that Netflix needs to get into the mobile content game ASAP. But how? So many short form content platforms from go90 to Watchable have flamed out because of a lack of distribution.
Broadly, I’d approach this similarly to the rest of Netflix’s business:
START FAST with a mountain of inexpensive mobile content that’s easy and fast to launch.
PIVOT TO PREMIUM – Use the analytics gathered from starting fast to inform a mobile Originals strategy and finance exclusive new series.
Why this two-part strategy always works is the subject of a whole other blog post. But Netflix is in a unique position to build a war chest of start-fast mobile content at a low cost-per minute without sacrificing their premium values. Step one of fast/easy/quick mobile content — pretty obvious — is licensing. Now is a fantastic time to cheaply license premium mobile content. Every mobile content studio is clamoring to work with Netflix which earns them outrageous leverage. Plus, many of them were gifted back go90 or other mobile series that they have no place to distribute. The second source of start-fast content is probably less obvious: the content they already have. Netflix outright owns a lot of their shows and by getting creative, they’ll find a new life if they’re re-cut for a shorter runtime or carefully cropped for a vertical screen.
When audiences coalesce around their start-fast mobile content, they can decide where it makes sense to pivot to premium, maintain licenses or trim back.
In sum, I think mobile is a crucial growth area for Netflix and a place they have some natural competitive advantages. They could quickly turn a source of churn into a new source of revenue and expansion. I predict they’ll make some dedicated moves in this space but it’s going to take a larger commitment to realize the potential mobile content has in Netflix’s future.
I love how ballsy this would be. Disney is out of Netflix and has announced their plans to make a similar service. And in a guest post on THR, Ben Weiss posits this crazy new move: that Disney could quickly amass a big subscriber base by launching their movies on the service “day-and-date” — that’s the much-feared-by-theaters idea that a movie could be streamed the same day it releases in theaters.
It’s brilliant because it endruns the entire traditional entertainment distribution-windowing business model in favor of the consumer preference of when-I-want-where-I-want. It would definitely grow them a huge base of subscribers. But they’ll never do it.
Disney is already giving up $300 million in revenue by opting out of Netflix.
Theatrical is the majority of their studio entertainment revenue, about 60%… and a move like this wil piss of theaters and threaten that nut. Theaters may refuse to carry the movies or put them in fewer cities. It may even piss off some consumers who still like the theater experience– if their local chain decides not to carry the movies over this move.
If Disney does day-and-date they’re not just threatening the theatrical revenue. They’re endrunning all of their studio ent distribution: pay TV, home entertainment, etc. Why would another provider value their content the same way if it’s already debuted in a streaming window?
And finally, the REAL business of Disney is parks and products — maybe twice the revenue of all of the studio business. What if this slow, gradual windowing model actually helps propel their brands in those venues? It might be a stretch but my instinct is that being in every theater in America is the best billboard ever for a parks attraction or action figure. Better not mess with that.
But, boyyyy, would I love to live in a world where studios made distruptive moves like this. I dare you, Bob!
I talk a TON about how important knowing your target is. You don’t have to be a marketer — even if you’re just MAKING content. You need to know your audience.
Netflix does an incredible job of analyzing their audiences and serving them targeted, empathetic content. And there’s a secret way of leveraging their algorithm, data and analytics to help you understand your own audience.
Secret Codes and Shelves of Targeted Content
Rant Stant-up Comedy, TV Dramas and Understated Comedies are some of the categories on my Netflix homepage.
Netflix has an algorithm that creates “shelves” of movies and shows that they believe please certain content niches. If you use the service, you’ve probably noticed some of them like “Dramas Based on Real Life,” “Rock & Pop Concerts” or “Asian Action Movies.” Some of them get eerily specific, including ones that target specific children within 2-year age ranges.
If you’re trying to target a specific content audience, chances are, Netflix has a very specific category that caters to that target. You can use these shelves to see they types of shows that Netflix believes are “stickiest” for people in that psychographic corner of entertainment. Watch a few of these shows and you’re suddenly inside the mind of that consumer (their wants and fears) or at least beginning to understand what types of content you’re competing with.
The trouble is, Netflix usually picks when to serve these up to you based on your watches, likes/dislikes and preferences. So, if you’re a fan of Thrillers, you usually can’t view the content Netflix recommends for fans of Tearjerkers. The hack, which you may have seen before, is to find the specific “deep link” URL that’s assigned to the category you’re interested in. They follow this pattern netflix.com/browse/genre/#### and some smart people have made them conveniently available in lists like this one and this one. Click on the category or guess the right genre number and you go right to the page of content that Netflix recommends.
(The most comprehensive list I could find was split between two pages on What’s On Netflix: Page 1 and Page 2. According to them, new categories pop up almost daily. InstantWatcher also has a good index. )
Getting More Detailed and Selling to Netflix
If you want to get even more granular, you can use these categories with a site like InstantWatcher which will let you narrow your target even more by adding filters like runtime, publish year and Rotten Tomato score.
I believe you could use this info to enhance a pitch for Netflix to buy a series from you. Netflix has said to THR that it doesn’t want content similar to other content they already have:
There’s some overlap but surprisingly little… as a general rule, the audience who watches House of Cards does not watch Hemlock Grove — and yet again, is not the audience that watches Arrested Development. We hope to reach the entire subscriber base with at least one original series by the time we’re done.
This makes sense because they want to attract households with diverse content desires and become broadly popular through many content niches. As Matthew Ball puts it, they want “underlap.” Hence their emphasis on Kids.
This could be important to a content pitch because you want to show them that your content isn’t “too” similar to the content they already have. If you want to make or sell content that doesn’t overlap with their existing library, you could browse categories that are empty or dial in an area in InstantWatcher that they’re lacking.
Pretty soon you’ll be making “Angsty British Military Zombie Sitcoms for Kids 8-9 Years Old.” But with the help of Netflix’s genres algorithm, at least you’ll know what that audience likes.
Watch Time is the most important metric that YouTube uses to promote and drive audience to a video. In a way, it’s the most important metric on any platform. Netflix uses very similar information to decide on the shows it renews, greenlights and licenses. Snapchat, Amazon and Facebook have been known to use a similar engagement metric too. But there’s one secret side of watch time that most creators completely miss.
The “basic” definition of Watch Time is how long people spend watching your video. Cool. It’s not how many people watch your video… it’s how long all of those people watch it for. And this is fine, colloquial way of looking at Watch Time. It’s a proxy for how engaged your audience is with your content. And that’s about all the information YouTube provides you with in the Watch Time section of your Analytics.
But it’s missing one, extremely important distinction. One critical precept of the definition. So many people miss this and it’s fundamental. Watch Time is not about how long people spend watching your video. It’s about how long people spend watching other videos, after they’ve watched yours. That’s right. Your video’s engagement only matters to the extent that it gets people in the mood to watch more content.
YouTube optimizes search and discovery for videos that increase watch time on the site.
How could YouTube judge me based on something the users do after they watch my video? It would seem like you have no way of controlling what people do after watching your content. But that’s not true! Think about this from a psychological perspective. Your job is to engage viewers. If you’re successful at that, you should be able to increase watch time on the entire site of YouTube.
How? Firstly, you can just make “binge-worthy” content that hypnotizes people into watching subsequent videos in your series. Make sure you’ve got never-ending “rising conflict” to keep people hooked and subscribed. Or you can make videos that are incredibly effective at framing or promoting other videos that aren’t yours. In that way, you can actually boost watch time by simply being an outrageous curator.
You can also avoid things that are apt to get people out of the content-consuming mood.
For instance, don’t drive people off YouTube… it’s unlikely that they’ll come back. Don’t tell people to search, donate to your Patreon or go to your own .com.
And don’t make extremely short videos because it just opens more opportunities for people to get distracted. Short-attention-span content begets short attention spans — flakey users who will leave YouTube.com.
Another common misstep: pushing commenting and “liking” and sharing at the end of a video. In my experience, those actions are very low weight to the YT algorithm compared to watching more content. Asking people to be contribute in the comments or respond to a prompt will kick them out of consumption mode and into productivity mode.
Of course, there are reasons to break all of these rules in the name of your business model or goals… but you have to be aware of how they’re impacting watch time.
Reframe how you think about engagement and it might inspire you to address watch time in completely new ways. Remember this common misconception and you’ll have a secret edge compared to Creators who have no clue.
