Too Much TV: Your TV Talking Points For Wednesday, June 14th, 2023

Unlearning the myths of the streaming business

Here's everything you need to know about the world of television for Wednesday, June 14th, 2023.

UNLEARNING THE MYTHS OF THE STREAMING BUSINESS
The WGA strike is well into week seven and the studios continue to refuse to with the return to the bargaining table with the writers. So we are likely in for a very prolonged, painful strike and as I listen to the points of the view from both sides, I'm struck by how many writers (and journalists, tbh) don't have an accurate take on the way the streaming business works, much less the best way to improve things.

To be clear, I've been a journalist all my life and have certainly dealt with some terrible organizations. So in general, I am pro-writer in this battle.

Still, I am often frustrated by how often I hear the same talking points from WGA members. Particularly when those talking points don't accurately represent what is going on in the industry.

What streaming myths am I talking about? Let me dive into just a few of them here:

1) More Transparency Would Allow The Creatives To Properly Value Their Work
This is sort of true. Although the raw viewing data is a lot less helpful to valuation than you might imagine.

In the old linear TV-only days, ratings numbers were a pretty good indicator of success. Generally, the more people that watched the show, the more value it provided to advertisers and the studio. Because at the end of the day, more eyeballs meant more advertising money. And more viewers kept the show around long enough to go into syndication, which is where the studios made the bulk of their money.

As I have written about before, the situation in the streaming world is very different. Yes, streamers want as many people as possible to watch a show. But raw viewing numbers are only part of the witches brew they use to determine value:

A primary Netflix metric is called the "adjusted view share," which is a combination of more than 30 factors that attempt to assign an overall "value" for any piece of content. An example I was given was that it's possible to track which content was most watched by brand new subscribers last month. That content would be considered more valuable because it presumably was one of the reasons why viewers subscribed. But if those viewers exit after a month or two, that lessens the value of the content. The assumption being that some percentage of the canceled subscriptions came from people who subscribed primarily for a specific show.

It depends on where people are watching. A show that is more popular in a region such as the U.S., where the ARPU (average revenue per user) is higher has a greater value than one that tracks more in regions where the ARPU is lower. Although that indicator is weighted less than some others and whether the content is attracting subscribers in a territory where subscriber retention costs are high also factors into the equation. Netflix also tracks how many people complete a TV show within a week, the percentage of people who rewatch a series (although if the number is too high, it's discounted as possible fan manipulation). And there are many more. Each of the factors is weighted differently and the weighting can apparently change as the company's strategy evolves.

All of which is to say that having more transparency about viewing numbers might be helpful in the abstract. But even if writers get the data, there is no mechanism in place right now to reward a popular show. While more transparency would be nice, the bigger problem is that streaming residuals are so small as to be essentially non-existent. Increasing the minimum residuals (and extending them to AVOD projects) would be a much more effective way to put money in the pockets of writers than pushing to get more viewer data.

2) Binge Releasing Shows Is Inherently A Bad Idea
This is one of those topics where you have to separate the attitudes of the people making the TV shows and those writing about them from the general public.

There is a belief in the TV industry that binge-releasing an entire season of a show is almost always a bad idea. It's harder to promote a binge drop and writing the ever-popular episodic recaps is a lot less helpful if six or eight episodes are released the same day. "shows get lost and are often forgotten a month after they are released," is a complaint I hear on nearly a daily basis.

There are really two different problems here, so let's unpack them separately.

While we're still relatively early in the streaming era, I think one thing we know for sure is that the biggest factor in whether or not a show surfaces in the pop culture zeitgeist is the quality of the show. Plenty of big-budget programs have been released on a weekly basis and absolutely no one noticed. While I suspect it is true that some shows get overlooked when dropped in a binge format, these are also shows that probably would have struggled even if episodes had been released weekly. 

And most times, when someone is arguing that their favorite show failed because it was released in a binge format, most other viewers who have seen the show realize the problem was creative, not logistical.

One aspect of the binge release that does become challenging from a promotional standpoint is that streamers routinely have embargoes on reviews and other coverage that expire just before a show's release (and sometimes the day of release). The theory is that these shows will be "discovered" by subscribers and positive word-of-mouth will boost viewership. But that is an unpredictable result and the streaming television universe is littered with the corpses of great shows that most viewers never found until it was too late.

Another common complaint I hear about binge releases is that many viewers miss the experience of reading weekly recaps and sharing a common cultural experience with other viewers over the course of a season.

That experience was wonderful and you can still experience that to a lesser degree with some shows that are released on a weekly basis. But to a certain extent, that complaint is similar to the one that music fans make about the lessened importance of album releases. It was fun to experience an entire album from beginning to end, without being able to cherry-pick tracks and only buy the ones you wanted. But both of those shared cultural experiences reflect a bygone era and that won't change even if every show was released weekly and you could only buy complete albums and not individual songs.

Honestly, there is no right or wrong answer for binge releases. Sometimes it's a good fit and sometimes it's a bad idea. But headlines like that wouldn't get much attention from readers.

3) Streaming Is A Lower Margin, Unprofitable Business
Yes, it is. 

Now executives and creatives who grew up in the golden days of linear television long for those 40 percent margins (and larger) that were made possible by market consolidation, few choices for subscribers, and a carefully crafted assembly line of markets that allowed new TV shows to move from broadcast & cable first-run to physical product, on-demand and then through various levels of syndication. Every stop along the way provided another bit of revenue as well as plenty of residuals. 

Financially, it was certainly a Golden Era and I see a lot of people arguing we should somehow go back that model.

Streaming is a very different business, but it's worth noting that it's not inherently unprofitable. I was amused to hear a Warner Bros Discovery financial exec shrug off the company's streaming business by noting that it's only a "20 percent margin business." For those of you who aren't CFO's or financial reporters, it's worth mentioning that in nearly any other business, a 20 percent margin is considered to be the sign of an extremely profitable business.

And that is the core of the problem right now. Media executives and shareholders are accustomed to seeing margins that are unrealistically large in any but the most unusual times. So they blame the streaming business instead of recognizing that the gravy train days of printing money without worrying about competition from other forms of entertainment is coming to an end.

The problem for writers is that media companies have recognized that streaming is an inherently less profitable business and have decided to try their best to ensure those lost profits come out of the pockets of their creative partners. And while that might have worked in the short term, it's unsustainable in the long run. As is the practice of moving productions to increasingly cheaper (and often non-union) territories in order to save money. 

The industry has not just reached the end game for those production shifts, it's also emboldened writers, actors, directors and other creatives in a number of countries to push back against the relentless cost-cutting. It's become a global issue, which is one reason the studios are pushing back so hard against the WGA right now. They are worried that whatever they agree to the U.S. will be used as a template in other markets and they consider that prospect to be a near-extinction level event. They're wrong, but their current negotiating stance is built around that belief.

4) The Streaming Business In The United States Is An Accurate Representation Of The Global Streaming Business
Since the dawn of motion pictures, Hollywood and the issues that Hollywood thinks are important have driven the global entertainment conversation. While Hollywood only creates some of the world's most popular programming, the size of its media companies and the ubiquity of its programming has made American interests a primary focus. Even when they don't deserve to be.

Given that, it can be easy for American media industry journalists to forget how differently the streaming business looks outside of the U.S. Think Netflix doesn't have nearly enough of the familiar hit linear TV titles? Then you should check out the service's catalog outside North America, which includes many shows that stream on rival services here in the U.S. Depending on where you live, shows ranging from The Office and The Big Bang Theory to Young Sheldon are available on the local version of Netflix. And that makes the "there's nothing good on Netflix anymore" conversation look a lot different than it does here in the U.S.

Do you think of Discovery+ as primarily a home for unscripted television mostly shifted over from linear television? Then you should know that in many other markets, Discovery+ looks very different. In some territories, it also includes linear channels as well as live sports and other events. All of which made the "combining HBO Max and Discovery+" idea a lot more complicated.

There are all kinds of local quirks of the streaming industry that don't get much attention here in the States. For instance, did you know that the rights owners of French programs viewed on Netflix in France, Luxembourg, and Belgium receive royalties every three months from the streaming service under an agreement signed in 2014 between the streamer and the SACD (the Society of Dramatic Authors and Composers)? Under the terms of the agreement (which Netflix signed just before it launched in France), rightsholders receive both a complete rundown of the number of people who watched the program and payment based on those numbers.

So the argument that "Netflix never reveals viewing numbers" is mostly true. Unless you're a producer in France, Luxembourg, and Belgium.

And many countries have similarly convoluted ways of dealing with streaming services and data. From taxing the revenues to forcing platforms to earmark X amount of revenue for local productions, the global marketplace is a complicated place.

I understand the U.S.-based press is naturally going to focus on the stories of interest to its mostly American readers. But that shouldn't be taken as an excuse for stripping out the global context of stories or not understanding the nuances of the global streaming business. All of this context is important when it comes to the current WGA strike. Because the television and streaming production process is becoming increasingly integrated. And that has an impact on what the studios are willing to give up in the U.S. negotiations.

5) The TV Bundle Is Back, Baby!
Certain often-used streaming industry narratives make me absolutely insane and at the top of the list is the claim that we are entering the time of the "great rebundling." The theory is that in the dinosaur days of the 1990s and early aughts, media companies made wheelbarrows full of money by combining cable channels together and selling them as a very profitable (and expensive) bundle. 

And like clockwork, every time a streamer raises its price or cuts a distribution partnership, a flurry of think pieces get posted arguing that "hey, all of this streaming stuff is going to cost as much as a cable package" and "all of these different streaming services are starting to feel like a new bundle."

But once again, that's nothing like a cable bundle. If it was, subscribers would have to subscribe to every major streaming service in one package and wouldn't be able to drop any individual streamers. Which is the complete opposite of the reality of the streaming business.

Part of this insistence on the mythical bundling future is that journalists often reflect the attitude of the executives they cover regularly. And industry old-timers love the concept of the old cable bundle. Because churn was lower, profits were high, and increased content costs were just automatically passed along to helpless customers. Not surprisingly, subscribers don't look back on those days with any fondness and there is close to zero chance they will willingly sign on to any new bundle that limits their choices while raising their monthly fees.

I've run down just some of the misconceptions and myths surrounding the streaming TV business. And if I might modestly say so, this is one of the reasons why this newsletter has proven to be of value to many of you. I provide a unique perspective which is often counter-intuitive to what you'll read in the big Hollywood Trades. Plus, I'm an independent site not owned by PMC. 

I don't bug often, but if you're able to upgrade to a paid subscription, I would appreciate it. I've priced the annual rate below many other newsletters. Because while I need the support to continue, I also want to make it easy as possible for all of you.

ODDS AND SODS
* Season two of the workplace comedy Minx premieres Friday, July 21st on Starz.

* Ovation TV will re-air its December 2019 episode of Inside the Actors Studio featuring Treat Williams this Sunday, June 18th at 11am ET.

* Netflix has renewed the To All The Boys spin-off series #XOKitty for a second season.

READER FEEDBACK
I received a lot of feedback about my CNN piece yesterday and while most readers wanted to keep it off the record, I learned a lot about what might be working (or not working) in the cable TV news business. I was also reminded about a couple of interesting, lower-profile shows that should have been higher on my radar.

I'll have more to say in the coming days. But in the meantime, thanks for sharing your thoughts and feedback.

WHAT'S NEW FOR THURSDAY:
* Black Mirror Season Six Premiere (Netflix)
* Booked: First Day In Series Premiere (A&E)
* Dragons: The Nine Realms Season Premiere (Hulu/Peacock)
* Jagged Mind (Hulu)
* My Journey To 50 (BET+)
* Outchef'd Season Premiere (Food)
* Pretty Freekin Scary (Disney)
* Project Runway Season Premiere (Bravo)
* Pocket Dial Murder (LMN)
* Rap Battlefield Season Two Premiere (Max)
* 60 Days In Season Premiere (A&E)
* Star Trek: Strange New Worlds Season Two Premiere (Paramount+)
* Swiping America Series Premiere (Max)
* The Villains Of Valley View (Disney)
* True Crime Story: Look Into My Eyes (Sundance/Sundance Now/AMC+)

Click Here to see the list of all of the upcoming premiere dates for the next few months.

SEE YOU THURSDAY!

If you have any feedback, send it along to Rick@AllYourScreens.com and follow me on Twitter @aysrick.