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Thursday Thoughts…

• When it comes to Hollywood investments, is Korea the new China? The Journal says that Parasite producer CJ Entertainment’s parent company, CJ EMN, is buying 80 percent of Endeavor Content in a deal that values it at between $900 million and $1 billion. Remember, CAA just sold a WGA-mandated majority of its production entity, Wiip, to another Korean studio, JTBC Studios Co. 
  
  
• I think I’m on Team Tarantino in the lawsuit brought by Miramax over his effort to sell Pulp Fiction NFTs, but it will depend on whether a judge considers handwritten script pages to be among the “reserved rights” in Tarantino’s deal. Regardless, it was a shady move for Miramax lawyers to attach QT’s confidential contract to the complaint, but it led to the revelation of who might have played the Travolta and Jackson roles.   
  
  
• The question everyone’s asking me: Who comes out looking the worst in the new HBO oral history book? I’ll have the answer in Sunday’s email.

Why Reed Hastings Had to Send Everyone Home From Munich

This week’s Netflix confab in Germany was set to last three days, but Covid had other plans.

Here’s a Netflix-sized cautionary tale for media executives thinking about restarting in-person offsite meetings: Co-C.E.O. Reed Hastings summoned his top 100 global executives to Munich on Monday for one of his famous brainstorm sessions. Hastings is big on these gatherings, and one of his big laments of the pandemic shutdowns was the lack of face-to-face time with colleagues. “Not being able to get together in person, particularly internationally, is a pure negative,” he said last fall.

This week’s Germany confab was set to last three days, but Covid had other plans. Someone tested positive, I’m told, so the proceedings were abruptly shut down, the executives were tested, quarantined, and are being sent home. I guess this is why almost all big media companies have declined to reinstate these kinds of large, in-person off-sites.      

“This was a long-planned meeting, with strict health and safety protocols including required vaccination and daily testing,” a Netflix rep tells me. “One person tested positive, having caught Covid while en route the prior week. At this time, there are no other positive cases and we continue to monitor the situation carefully.”

Speaking of Netflix, what does everyone think of its new “ratings” system? Here’s my take…

Netflix’s New Love Language: Hello, Engagement!

Of all the wool that Netflix has pulled over Hollywood’s collective eyes—and there has been an entire sheep’s worth over the years—the lack of transparency in ratings data has been the thickest. “I honestly have no motivation to do it,” co-C.E.O. Ted Sarandos said back in 2013 when asked why he kept secret the viewership of House of Cards. Netflix doesn’t sell ads, he noted, and creators don’t really care about ratings, they just want to make cool stuff. When Kevin Spacey asks, “I just tell him I'm thrilled,” he laughed.

Well, the joke was on the entire creative community. Consumption is the currency of media, and in the few years that followed, Sarandos leveraged that secrecy—and the unique bargaining power it gave him—to build a content delivery machine now worth $300 billion, more than Disney. Netflix was the actual House of Cards—meaning it held all of them, doling out morsels of data only as it benefited Netflix. A friend in business affairs there used to brag to me how that imbalance made him great at his job. Sure, plenty of creators got rich, and agents salivated over the premiums that Netflix offered on their clients’ quotes, but were those clients paid what they were actually worth to Netflix? Only Netflix knew.

Slowly, talent representatives fought back. Agents can read earnings reports and stock charts; they could see, at least in the aggregate, how the content was translating into skyrocketing value. And, it turns out, most creators actually do care how many people are watching their stuff. Money has never been the only validator in Hollywood; even a star making eight figures craves more likes on his Instagram.

So the kimono opened incrementally, and today, creators do privately receive a set of carefully selected data—but only on Netflix’s terms. You’re huge in Brazil! Seventy-seven percent completion rate! That kind of thing. More for the bigger names, less for the newbies. Publicly, vague superlatives like “Most-watched original comedy!” gave way to slightly less vague superlatives like “50 million accounts viewed!,” when a “view” could be as little as two minutes. I don’t know about you, but it took me a few beats to realize that the latest Melissa McCarthy movie was directed by her husband and thus wouldn’t be worth my time, yet that counted as a view. And I know you skipped through Sex Life to check out that one scene. Also a view. The metric was a joke, and everyone in town knew it. 

The media certainly knew it, even as it dutifully amplified the Netflix P.R. messaging, while at the highest levels, the sophisticated talent law firms and agencies were amassing their own data to throw at Netflix. Third party services like Antenna and Parrot Analytics developed proprietary metrics (which Netflix dismissed, of course). And auditing firms were enlisted to come up with alternative data that might cause Netflix to bend a little. That has always happened—Nielsen and box office reports often don’t paint a full picture—but with Netflix, there was never an accepted baseline off of which to negotiate.

It wasn’t just Netflix, of course, but as the first major mover and the biggest spender, Sarandos set the ground rules for the lack of transparency in the entire streaming video ecosystem. Don’t forget, HBO and Showtime have never sold ads, either, but for at least two decades, they have released viewership data. Yet Netflix throwing up a wall gave Disney+, Amazon Prime Video, Hulu, and AppleTV+ a path toward even less transparency. Now even companies that offer services with ad tiers, like NBCUniversal and ViacomCBS, are making noises about ditching Nielsen or launching their own, in-house data provider. Why wouldn’t they? Controlling the information confers great power, and if Netflix is doing it without repercussions, why shouldn’t they? 

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With all that backstory, I was a bit surprised to hear a cautiously optimistic tone among talent reps I surveyed about the Tuesday announcement that Netflix is ditching its ridiculous “view” metric and will instead publish Top 10 charts based on hours consumed, similar to Nielsen’s minutes metrics. Netflix’s Pablo Perez De Rosso, a V.P. of content strategy, planning and analysis, called the move “an important step forward for Netflix, the creators we work with and our members,” and the reps I talked to seemed to agree. “Not exactly what we want, but better than what they did—and better than the others,” one top lawyer told me. 

My Puck colleague Julia Alexander will analyze the actual Netflix data next week, but because this issue is so crucial to the entertainment economy, let’s be clear about what Netflix is doing here, what it isn’t doing, and why:

What Netflix is Doing:

• More expansive Top 10 lists: These are weekly rankings for TV shows and movies in 90 different countries, with “hours viewed” data to show just how popular certain content is. Netflix still controls all the information.
  
  
• An independent audit: The numbers will be reviewed by the accounting firm EY and revealed to the public sometime in 2022, Netflix says. It’s not clear how this will work, but until now, there was zero third party involvement in data analysis, and thus zero accountability (other than potential S.E.C. fines for lying during an earnings call). That’s some progress.  

What Netflix is Not Doing:

• Nothing beyond the Top 10s: Obviously, these lists will exclude most Netflix content, leaving thousands of collaborators in the dark, unless Netflix chooses to provide data privately. Remember, most creators are given some information now, but it’s cherry-picked by Netflix with no public scrutiny.   
  
  
• No demo information: Netflix is quick to distinguish itself from the social media data hoarders like Facebook because it doesn’t collect info like the age or gender of subscribers. But it knows a lot about the habits of people watching: What you like, what you also watch, whether you churn in and out. Those kinds of valuable data points.
  
  
• No data on the so-called “spikes and valleys” of viewership: Talent reps would love to know whether a show’s viewing was concentrated in the first days of release or if it generated a longer tail. This is key because Netflix often evaluates numbers over 28 days to help determine the “stickiness” of a series before deciding to renew it. 
  
  
• No market comparisons: Everyone knows the real holy grail of streaming ratings is the comparison between how something does for Netflix vs. another show’s value to, say, Peacock. But with wildly different subscriber numbers and performance metrics across platforms, those numbers are left to the independent analysts to attempt to discern, with pros and cons of each methodology.  

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Why Netflix Is Doing This:

Ted said it himself back in 2013: he has no motivation to reveal anything of substance. So he’s been backed into this new strategy, which seems to further the goals of content promotion, talent appeasement, and an effort to change the industry dialogue around Netflix.

On the promo point, it’s not a coincidence that engagement on Netflix shot up a few years ago when the service started showing users what other people were watching. Marketing 101: People are drawn to what they think is popular. That’s the reason that second-weekend film ads trumpet “#1 Movie in America!” and why news websites include “Most Viewed” lists. Top 10 modules are powerful discovery vehicles; Squid Game has reached an astounding 2.1 billion hours viewed in part because it kept showing up in the Top 10 worldwide, so, people thought, it must be something.     

Second, Sarandos can see how the landscape is evolving. He’s been telegraphing more transparency for a few years now, not because he necessarily wants it but because the talent community is increasingly demanding it. We all get that the old Nielsen overnight metrics don’t work for an on-demand streaming service, but creators aren’t willing to settle for nothing, or even for handpicked scraps, like they once were. Plus, technology is getting better at deciphering Netflix ratings without Netflix participation, so Sarandos might as well play a leading role in that conversation. 

Third, Netflix is subtly shifting the standard of success in streaming in another way—a way that benefits Netflix, of course. For years now, the narrative around the company has been its astonishing subscriber growth. Each quarter brought a new milestone met, another hurdle jumped, more sloppy kisses from analysts and investors who ignored the ballooning debt and focused only on that upward right trajectory. Then this year the growth slowed, thanks to a combo of market saturation, legacy media getting its act together, and the end of pandemic lockdowns. Netflix knows the sub-growth narrative likely won’t be there in the future, at least not like it was. And while the share price so far hasn’t suffered, Disney got hammered when it reported sluggish streaming numbers last week. So what’s the lesson? Change the conversation. So long, sub growth, hello engagement!

And with 213 million subscribers, Netflix is an engagement machine. It can deliver more hours viewed than any other service, its data operation can identify burgeoning hits like Squid Game and supercharge them via home pages worldwide, and it uses those annoying tricks like superfast autoplay to goose time spent on the service. Disney+ might boast the low price and franchise titles that translate to a high value proposition, and HBO Max might offer more higher-quality shows per capita, but Netflix can grind out the hours, so why not shift the narrative toward engagement instead of sub growth? It just requires a bit more data transparency.

What would be disastrous for Netflix—and great for the rest of the creative ecosystem—is if an independent, credible, well-financed platform emerged for industry-wide consumption data. That’s what the market craves, and it almost seems inevitable. (I know many top producers have for years strategized about how to create just such metrics.) Netflix knows this, and much like Facebook—another tech company that wields its data like a sword—it recognizes that some kind of check on its power is coming, so it’s out there aggressively trying to shape the framework of that check. 

While Netflix tries to draw the lines on the playing field, will other streamers follow its lead and launch their own “hours viewed” lists? Netflix hopes so. But most of its rivals release almost zero specific data, so on this issue, and with a very low threshold, Netflix, sadly, has to now be considered a leader.   

Have a great weekend,

Matt

Got a question, comment, complaint, or an explanation for why The Morning Show went off a literal and figurative cliff in Season 2? Email me at Matt@puck.news or call/text me at 310-804-3198.

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