MCN Commentary & Analysis

When Chaos Came To Town – Episode II: If 100 Million People Watch A Tree Fall For Two Minutes, Does It Make A Sound?

Monday, I looked at what the studios are chasing in streaming (the world)… and the long road ahead. Today, a little about how they are chasing it and the unexpected consequences that are still being mostly unexamined outside of the deep, dark rooms inside the offices of the streamers.

A cottage industry has quickly grown, including legacy companies like Nielsen, around trying to quantify what is happening in the streaming content world. Every streamer knows exactly what is happening in their world. And it is the most highly protected information in the business.

As we continue to reach for Peak Spending On TV, the cost of production across all platforms may well crack the $80 billion mark for original content. At an insane (but not unrealistic) average of $8 million an hour for this content, that’s 10,000 hours or original TV content being created in a year… More than one hour of new TV created for each of the 8,760 hours that exist in a year.

Madness.

If you spent twelve hours a day, every single day, consuming only original TV content, you couldn’t get through half of this annual content.

It’s always been this way on some level. But in the streaming era, it’s become a cartoon of itself. Content has always been nichey, with some shows or films taking on the mantle of universality. But the faucet has never been open so wide that it feels like Niagara Falls drenching your living room every day of the year.

What does this mean moving forward? Will there ever be another Friends or Seinfeld or M*A*S*H*? Will, putting aside the foolish myopia threatening to kill a significant percentage of movie theaters, there ever be a billion-dollar theatrical grosser again?

One assumes that the streamers all want to have this kind of content, beloved and endlessly viewed for years with real value in the ongoing IP. When established IP comes on the market, it gets snatched up like the most athletic, handsome boy on Sadie Hawkins Day. Disney is endlessly referenced by the quality of its existing IP.

But there seems to be a missing step in the thinking on this. It’s almost childlike, really. Like they all believe in the idea that content just becomes beloved and ongoingly compelling by showbiz magic. If you make enough of it, they will be forever captured by some percentage of it.

And indeed, however much content you make, some percentage of it is likely to be popular with audiences. The more you make, the more they will probably like.

Buy loyalty doesn’t tend to come as cheaply as that. In the eight years and $70 billion or so that Netflix has invested on Original Content, the channel only has nine scripted shows (Chelsea Handler has the most episodes, all within one year) with as many as fifty episodes, ranging from The Unbreakable Kimmy Schmidt‘s fifty-one episodes to Orange Is The New Black‘s ninety-one episodes.

Seinfeld… 180 episodes. Friends, 236 episodes. The Office, 201.

In ye olde days, 100 episodes was a key statistic because it signaled that a show had enough episodes for syndication. This metric was transformed by DVD, which in its heyday, became fully accessible and in many cases, more profitable than syndication. Suddenly, your show was not being counted on to fill a five-day-a-week slot on a local station. A show like Firefly could make money after managing just one season on the air (only fourteen episodes) and selling more than a quarter-million DVDs of that single season.

In 2021, the DVD is a niche revenue stream and syndication has been all but demolished by streaming. But in terms of the audience relationship with a series, what are the true metrics of a passionate following?

There is not one answer. A show like Fleabag barely got any attention when the first season hit Amazon Prime. Then the second season became a phenomenon. A big part of this could be spending by Amazon, seeking a payoff in awards season.

Humans make lasting connections is many ways. You can tip an emotional response with quality or crap, singular experiences or a dense number of experiences, directing an audience towards a narrow idea or a broad one.

There are two quite different goals on the part of content distributors. First, they need to lead some-odd million horses to water. Then, they need to keep them drinking.

King Netflix has been quite conventional in various ways, in the traditional television model. For instance, they advertise in-house… very little beyond that. What in-house marketing means in the internet-driven world is inherently different than it was in the days of only three or four networks. But maybe less than you would think.

The value of in-house marketing was so great in the broadcast-driven era that on talk shows, the name of the network where a guest’s show was appearing was not allowed to be spoken (unless is was the network of the talk show). How many thousands of times did Johnny Carson say, “… on another network”?

Netflix does the full range of modern publicity. But so does everyone else. Sometimes, that is where the fire is sparked, particularly amongst social-media-driven kids. But the greatest power for Netflix is their homepage, where the first image you get when you turn on the app is five promotional images. (Your number of images may vary, depending on platform.) This is where Netflix tells you, wordlessly, what they want you to watch right now.

Scroll down on your Netflix homepage a little and Netflix tells you what you have already shown interest in… what others like you are interested in… what is most popular on the app (a Top 10 on most platforms)… what you are already partially committed to watching… and much more.

And this is, oddly, where Netflix becomes like “old” TV… they have a captured audience and because the monthly fee is already paid (“free,” emotionally, for many), there is a comfort with sampling that within that contained space. Sometimes, people turn on Netflix seeking a specific show. But a big chunk of people turn it on, looking for something to watch. Sample all you like. It’s “free!” In the old days, in prime time, you had 3 channels to choose from and you made your choices. Obviously, the size of the offering is much wider on Netflix (or any streamer), but the human switch gets flipped in very much the same way.

In the old paradigm, networks had to create gimmicks to create the same in-house marketing opportunity that is natural to Netflix. “Must See TV,” “Family Fridays,” blocks of content meant to control the entire primetime chunk of three hours on a given night. Netflix’s goal is the same as NBC in the 90s… Get them to turn us on first, keep them from leaving. One of the most important elements of Must See TV Thursdays for NBC was the ability to release new shows in the “hammock” slots of 8:30 and 9:30, between 2 big established hits and on the way to E.R. at 10p. “Why change the channel? We got ya!” This created a bunch of hits (and a bunch of five-episodes-and-gone shows too).

Netflix wants you to turn to their app first… then, at the very least, breath in a wave of new-ish content or watch a bunch of trailers/previews, but preferably watch something… proving the value of the app to you every time you turn it on. That’s all they really need to keep you from churning away.

At some point, someone will do a long-range study of streaming viewing habits by individuals that will show real trends in how we all relate to our streaming experience. My insight is only as wide as my view of my own experience and that of others I know. But I feel comfortable making educated guesses at some of it.

I believe that if you have ten positive contacts with a streaming service each month, you will likely—unless you are part of the small group of aggressive content shoppers – stick with that service for another month or two. Within that notion, I believe that if you have three great contacts with that service in a month, you are likely locked in for number of months.

If one streaming service is the place you start when you turn on your TV, that streaming service has won. You aren’t cancelling anytime soon. And that is really all that matters to that (or any) streamer.

If you check out a streaming service every other time you turn on your TV and find something to watch a third of the time, they are likely safe from cancellation.

The failure of a streamer starts when you, as paying subscriber, doesn’t bother to check the app very often or that app fails to deliver something for you to stick with more than once a month.

And that is where things are. That is where things will be. Lead them to water. Keep them drinking enough to not think about how much it costs.

Streamers seek to use relentlessly popular IP in much the same way that the broadcast networks (and increasingly, streamers) use sports. This is why both are wildly overpriced, overly chased, and used incorrectly, a sucker bet.

This is why Discovery+ added more subs in the last quarter than HBO Max while HBO Max threw a half-billion in movie production expenditures to try draw an audience (We’ll never know how much was Friends and how much was Godzilla) and Discovery+ spent on cake batter and new variations on leaving people naked and alone on an island somewhere. This is why Adam Sandler is more valuable to Netflix than Martin Scorsese, and always will be.

Netflix has failed to create sticky IP. They have had plenty of solid successes. They make some really great shows. But they haven’t hit on a Friends or an E.R. or even a Law & Order so far. If they do – and they could – then maybe they will change their overall strategy.

But they walk an interesting tightrope, using talent and IP whose value has been built elsewhere to build and support their original content. Their greatest successes have really been on the more original content side. Kevin Spacey was a B movie star, but rose with the right show. Anya Taylor-Joy was a rising actress, but she did not land on The Queen’s Gambit, The Queen’s Gambit landed on her. And Tiger King might be the ultimate Netflix winner, building a phenomenon on a story with no celebrity at all.

But there are only so many shows that get sticky at this level. So what Netflix does right now is to bludgeon the public with their overall numbers. It started with how many internet hours were being used watching theoir streaming service. Then, they made up an absurd metric – the two-minute view – and started using it to push the claim that many modest successes on Netflix are seen by 40+ million people and that their big successes are viewed by as many as 100 million people.

Of course, this is absurd on its face. I am not accusing Netflix of lying. But I blame the media for sucking in this meaningless metric like it is the return of the good ol’ days of Nielsen. The impact of any content seen by 20 million+ people is intense. As a consumer, you can feel it. Maybe you are part of the party, maybe you aren’t. But you feel it.

This is not to say that Netflix shows claiming these numbers are not hits. This is what is tricky. They are hits. Real hits. An audience of 20 million – even if it is reported at 40 million or 60 million – is a hit in 2021. The Big Bang Theory was Top 3 in the Broadcast ratings for seven straight years and never averaged as many as 20 million viewers a week.

But there is no Netflix original show that has anything close to the rewatch levels of Big Bang. The Ranch‘s eight-season, eighty-episode run is the #2 for episodes in NetflixLand, but it has always been somewhat below the radar. Netflix has never offered a number for the show’s viewership, though there have been myriad stories about how popular it is in the “flyover” states.

Hell, The Goldbergs is launching its ninth season and no season has averaged as many as 8.5 million viewers. The did seventy-one episodes in the first three years and there is almost zero chance that had it been a Netflix show. it would have made it any further. (Season 2 was Peak Goldbergs, in terms of ratings.)

So how does one define “a hit” in 2021? For ABC, they keep renewing The Goldbergs in spite of annual drops in the ratings. (They were under 5 million an episode last season.) But in a business model where more new episodes are profitable, even with reduced ratings, making more makes sense… until it doesn’t.

Does anyone expect to be talking about Season 17, episode 369 of Bridgerton in 2038?

Yes, there have been 369 episodes of Grey’s Anatomy.

And I haven’t really come close to answering the hypothesis of this piece… because our loyalty to films and television shows is subjective and emotional and the reality of the streamers, like the broadcasters before them, is objective and plainly financial.

No model is The Model.

Do you prefer a buffet, a sit-down served dinner, fast casual (when you order on a line and then sit down and the food is brought to you) or the drive-thru?

Every one of these businesses desire success in the variations that the other businesses have had success with. Envy is a natural occurrence. Everyone wants Netflix’s mass numbers. Everyone wants Disney’s IP advantage. Everyone wants HBO’s track record of quality with a modest number of programs.

Netflix is pushing into family animation. Wouldn’t they love to have original Illumination and DreamWorks Animation in their line-up?

Disney has had great success with Disney+ at an $8 price point. Wouldn’t they love to have all of their D+ subscribers buy the bundle and raise that price point to $14?

Warner Media has HBO as its shiny centerpiece. Wouldn’t it love to have daily appointment junk TV to bring in everyone who never paid or rarely paid for HBO in previous decades? (See: Discovery)

But while each company may covet some of their neighbor’s stuff, they are cooking their own complex stews. Netflix is the only one long-established enough to be beyond the initial blush of “gonna lose money… but we’re desperate for subscribers now and we’re gonna throw all kinds of stuff at the wall in that pursuit.”

Let’s say that Netflix, as it exists, will never develop much deep IP that reflects the loyalty that has been built up over the last hundred years in film and television. Does it matter?

Let’s assume that Netflix will cut back on English-language-initiated content a bit and aim a larger and larger segment of its content spend on the international territories that will be its only growth engine and at least 2/3 of its subscription base moving forward? Does it matter?

What if Orange Is The New Black and Stranger Things are Peak Mass Audience Netflix, repeated occasionally, but never topped? Does it matter?

I would argue… no. None of these limitations matter.

And I would add… if this hugely successful company puts aside its ego and takes a hard look at itself, they can cut the content spend quite a bit and keep satisfying its subscribers. It doesn’t need awards. It doesn’t need blockbusters. It doesn’t need gaming.

All of those things do have value. They have been a part (except for the new gaming effort) of building the company’s draw to subscribers. They have had success in those categories. But it’s time to grow up. And that includes not convincing yourself that your business can be more than it can be. God knows, what it can be is a huge footprint in the world with great financial success.

This, the idea that it is equally important to reach for the stars as it is to know the limitations of your company’s physics, is true of all the streamers and the companies behind them. Every competitor in the field does not have to compete in every category. The sweet spot is maximum success with minimum expenditure of resources. Same as it ever was.

Netflix has proven itself and it doesn’t really matter than it is incapable, within its ecosystem, capable of or willing to do what is needed to create hard core, long-lasting IP.

There is, sorry, a reason why DC and Marvel have been around so long and been so dominant. Just buying another cool comic company isn’t going to create the next DC or Marvel. Moreover, Kevin Feige is as irreplaceable as a content obstetrician as the core IP. And he was emotionally invested in this content for 30 years before he got the gig.

Also, don’t get confused. Even Feige couldn’t be making this happen were it not for the giant leap in computer graphics in the late 1990s. The revolution of computer graphics took believable, big-visual comic book movies from a huge challenge that was occasionally met to a form where you not only would believe a man could fly, but that worlds could collide. The technology fit the IP and in that, there is commercial magic.

Disney seems to have a real plan for its direct-to-consumer future and it doesn’t look like Netflix. It looks like Netflix plus. That doesn’t mean it will “win” against Netflix. It means that the company understands that they need to win their games and not spend the whole time watching the scoreboard.

The idea that both Netflix and Disney (and others) cannot win huge in all this is simply false.

On the other hand… they are both suffering – while winning – from a similar problem. No matter how successful anything they make is with the public, it is temporary. This is especially true of binge shows, but not untrue of weekly release.

And the irony for the more mature Netflix is that they made these massive talent deals for established legacy talent… and then asked them to/let them do something other than what they do. The only one who has delivered pretty much exactly what he has already done is Ryan Murphy. And he’s taken a lot of crap for it.

But the question about Bridgerton and Grey’s Anatomy is right at the heart of it. Shonda Rhimes took the deal and is likely making more money for doing less work, or at least, grinding less hard. But as beloved as the first “season” of Bridgerton is, eight episodes a year isn’t going to make it into Grey’s Anatomy for Netflix. And with all respect to the master that is Shonda Rhimes, that is what they need from her. Twenty episodes a season is the minimum. And I would say, roll them out five at a time every other month.

Word is, they spent 9 months in production for the first 8 episodes, aka Season 1. Sorry… but that’s just self-indulgent bullshit. The show is sumptuous. But people don’t love it because they shot magic hour for a week (or whatever).

I am not suggesting that Netflix stop delivering their shows as they do now… just not every show. A few hit shows with am old fashioned episode count and everything else goes down better… and they need to produce less of it to maintain the relationship.

Yes, that was never the HBO way. The Sopranos did six seasons and 86 episodes. The Wire was sixty over five seasons. Sex & The City did ninety-four in six seasons. Game of Thones did seventy-three in eight seasons. I mean, it was more episodes. But not a network twenty. But not only have expectations changed, but HBO’s value proposition has always been different than Netflix’s. This isn’t meant to say that Netflix is without quality, but their pitch has always been covering all bases, while the HBO pitch (which started with nudity and language and evolved) has been unusual quality. The fact that people understand what happened with all those players in Game of Thrones over eight seasons is a singular achievement in and of itself.

If Netflix did twenty episodes a year of Bridgerton and spread them out a little, no Bridgerton fan is a threat to cancel their subscription in those years. If that fan base is 20% of Netflix households, that is a huge win. At eight-to-ten episodes a year dropped in a binge window, sorry, but Netflix has to do that four or five times a year more for that same audience to have the same effect.

I love The Kominsky Method (twenty-two episodes in three seasons), but Chuck Lorre is a twenty-episode-a-year guy. He did one other show for Netflix, Disjointed… and it was a twenty-episode season, multi-camera, released in two packs of ten episodes each. It flopped. But it wasn’t the number of shows or the release pattern or the style of production. The show just sucked.

Five or more years of a hit show, on Netflix or a network, is huge win, whether you are maintaining subs or milking it for ad dollars the whole time. It is an anchor, in the best way.

Disney is eluding this a bit because their hugely popular short series are connected by Star Wars or Marvel. How much better would it be to have a series with twenty episodes out of fifty-two weeks a year… in addition to all these exciting short series?

Netflix announced a deal to pick up a final season of Manifest, a dying show on NBC, produced by Warner Bros. in the last days of me slowly writing this piece. The show started off hot, releasing sixteen episodes in a five-month release window. But with nearly a year before Season 2, the ratings dropped 40% in Season 2 (with just thirteen episodes). Another year later, when Season 3 launched thirteen episodes, the ratings dipped another 30%, averaging only 40% of that first hit season. Placed on Netflix in whole, the show did great numbers, apparently. And now, Netflix made the deal with Warners for a twenty-episode final “season.”

How many ways is this weird? Well, for starters, why is this happening on Netflix and not Peacock, owner of NBC, or HBO Max, owned by production studio Warner Bros.? Multiple answers. First is… NBC and Peacock screwed up. Their show. Their aspiring streamer. They dropped the deal with WB and anyone could get it. Second, HBO Max screwed up and didn’t pick up the three existing seasons for streaming and didn’t have the vision that it could become more in house. Third, Neither Peacock or HBO Max yet has the audience base that Netflix does – domestic or international – to be making hits out of misses yet.

On the Netflix side, they get a show they are already doing well with and they will have fifty-three episodes of Manifest, which if you count it against Netflix Originals, will be the seventh-most episodes of any Netflix Original and #4 amongst hourlongs. (For clarity, I keep leaving out Chelsea, which had the most episodes, but all in one flop year with five a week. I mean filmed scripted shows.)

What keeps coming up is the idea that Netflix has a better time building stronger audiences for shows that have already had a strong core established than they do with their own originals. That’s cool… but it also exposes a weakness.

Every example has its own detailed quirks, but if NBC had cancelled Manifest after the second season drop, would we be where we are now with Netflix and the show? Or, if NBC had ordered a second season of twenty and started it in, say, September 2019, seventh months after the end of the previous season, would it have kept its audience and built, making all of this moot?

It would be unfair to try to box Netflix in as a content vulture. They have done well with Originals. Manifest may be the show that informs a different angle on the future for the channel, a hybrid of network and streaming… which is really what Hulu and Par+ and Peacock all want to take advantage of, as they have both networks and streamers, but can’t quite figure out from their side either.

In any case…

The rest of the players are not doing what Netflix and Disney are right now… they are not maximizing their assets and building their own unique platforms. (I would argue that Disney won’t really accelerate until Hulu is clear of Comcast… but a different conversation. There was – also as this piece has taken me so long – an analysis of the trouble for Hulu when their network content partners withdraw… which utterly missed the point. Disney is not planning on Hulu – Star, internationally – being what Hulu was. But I digress, inside of a digression…)

The question remains, how much is the process of developing habits in consumers – as opposed to relying on their choices in a 24/7 a la carte on-demand world – the key to building content loyalty?

If there is one idea that I hear all the time from people about many things, but especially entertainment, it is that the consumer is in charge of what they get. I love this idea. But it is utter bullshit. From every direction.

People who make money by offering content want that content to be popular as possible for as little cost as possible. In recent years, we have seen the evolution to a regular stream of movies that gross over $750 million… and almost always cost over $200 million to produce. That’s a choice to chase the bigger gross. And in that context, to spend as little as possible.

Likewise the question of popularity. There are all kinds of choices to be made on every side. How do you define popular success? What are your revenue expectations? What are your non-revenue-based expectations?

Spending does not assure popularity. And cult status doesn’t assure that there is a bigger audience to be found.

Not prioritizing deep IP relationships has worked for Netflix so far. Not prioritizing non-IP popularity has worked for Disney+ so far.

But the standard for success evolves as these businesses evolve. And while the immediate news is important, it is almost never a key indicator of what will be important in the future (even five years or less).

This is a core reason why I care about the future of theatrical as a business model, not as a delivery system that I love (cause I do). There is every indication that theatrical box office can be at least 10% of the annual revenues for every one of these streamers, releasing only a small percentage of the content each company makes.

But that is another Episode…

3 Responses to “When Chaos Came To Town – Episode II: If 100 Million People Watch A Tree Fall For Two Minutes, Does It Make A Sound?”

  1. Doug Pratt says:

    You are absolutely right about everything…except Netflix going into gaming, which looks to me like Microsoft realizing they need to get into the browser business.

  2. Serg says:

    I don’t think people care. Yes some people are loud about beloved shows getting cancelled too soon but for the most part, consensus seems to be that people have series fatigue.
    There are so many shows that are literally repackaged versions of other popular shows that everyone is tired and cynical about series now. The LAST THING on people’s minds is “oh I wish there were 40 more hours of this crap” .
    Plus the only reason there were 20-episode seasons was in order to milk already successful product with an audience for more and more ad revenue.
    It was not that fans wanted that much runtime when most of the time, storylines were stretched and suffered from the artificial elongation versus just telling your story and going home..
    Also, money Heist, Stranger Things and The Witcher are much bigger hits culturally than Orange or House of Cards.

  3. cadavra says:

    Two things. The real Netflix success story of a rejected network show is LUCIFER, which they picked up for only one season, then renewed for another, then extended, then again for yet another season–and it’s being watched by far more people than ever saw it on Fox. That’s pretty remarkable.

    And I totally disagree with you on DISJOINTED. It was side-splitting. The reason it flopped is that it was a CBS multi-cam on Netflix, and nobody wanted to see a CBS multi-cam on Netflix. Just that simple.

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