Netflix ca-ta-strophe

You don’t want your bad news to lead the main evening news in a wealthy but peripheral market.

“Netflix has just known a ca-ta-strophic day on the stock exchange”, losing $15bln, 12% of its market cap, after its first-ever drop in US subscriptions. —Sacha Daout, 19h30, RTBF, Belgium

It has been clear for years that the economic case for Netflix was not firm even when beheld at a squint. But this rather forces the reckoning into the present moment. The wall in front of you might be closer than it appears and moving faster.

If Netflix is seen to fail, and I don’t see how at least its worldwide original content could survive, it will be a terribly chilling effect on originals, at least in many linguistic groups at once.

More on the event

Image: RTBF

Crossplatform measurement urges a rethink of intab, reach

Existing definitions are already too diverse for a level playing field. We must adapt them further to work well for video measurement intended to capture all screens.

Alldience, a joint platform developed by Immetrica and eCGlobal, can measure any screen, anytime, anywhere using smartphones. The smartphone is on or within reach of most people who have one, most hours of the day; it is the closest practical approximation to the often–quoted ideal of one Nielsen client of a measurement device implanted in the sample member. Furthermore, a double-digit percentage and increasing share of viewing is done on mobile devices, mostly invisible to conventional measurement technology—but not to Alldience, where the measurement smartphone is either also the playback device or close to one.

When we set out to design this system, we confronted one problem that was conceptual rather than technological: the inadequacy of the intab definition. The intab is the cooperating part of the sample. Most viewing and listening measures are fractions in which the intab is the denominator (as in a rating), or an element of it (as in a share). The required degree of cooperation varies from a few minutes to almost the entire reporting day, but whichever it is, the intab varies directly with the sample size.
 

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Alldience: Complete audience measurement any screen, any source, anywhere, anytime

In cooperation with eCGlobal

For more information, please contact: Adriana Rocha adriana_rocha (at) ecglobalsolutions.com

More on Alldience

Immetrica, audience-measurement systems engineering specialist, and eCGlobal Research Solutions, innovative consumer insights and big data analytics company, are proud to introduce Alldience, a new ratings service built from the ground up to capture all viewing regardless of location and technology, and integrated with eCGlobal’s existing social-media use and consumer panel with approximately one million active members served by dozens of pay-TV operators. The service can measure new-technology-enabled viewing to realtime and timeshifted DVR but also sources invisible to most currency ratings providers, including VOD, OTT, websites, apps, YouTube, other social media, in and out of the home. Based on a highly reliable smartphone-enabled ACR technology, the service detects viewing in any environment in which the media audio remains intelligible, in realtime or timeshifted using any means for up to a year after broadcast—or longer. For advertisers, we offer complete audience data that permits the calculation of campaign ROI; campaign retargeting that permits the purchase of inventory that reaches the target audience; ad creative testing, covering propensity to watch in realtime and on DVR, opinion and biometrically measured emotion; and reporting on the entire consumer journey.

For premium-channel operators, we offer channel-coverage ratings (ratings among their subscribers rather than the entire sample) when eCGlobal operates subsamples of its panel specific to them. We can also offer a behavioural definition of channel use, which, however, ignores viewers who have access to these channels but do not use them.

Alldience can measure binge-watching, and can ingest the multinational streamers quickly and efficiently, and update their libraries promptly for additions and deletions. Alldience can support near-real-time programmatic advertising markets and other uses that require near-immediate turnaround of data. The unit of measurement is a demographically described individual viewer, with a rich single-source set of descriptors such as income, education and occupation; social-media use and engagement; and consumer behaviour available to drill down further to the target or de facto audience, on a panregional, nationwide, or local-market scale. In addition to audience measurement for broadcasters, we offer advertising spot ratings and competitive analysis of advertising flights. Of particular interest to advertisers is the opportunity to engage panel members who have just watched designated content with a custom survey automatically pushed to the members’ smartphones in near-realtime, in what amounts to the world’ss largest focus group.

The service is delivered through a world-leading analytics platform capable of handling the large sample sizes; an optional cost-effective custom reporting service using Immetrica’s proprietary technology; and customized means for clients with needs beyond these.
A test deployment in Brazil returned first usable data on 31 August 2018 and continues to run today, demonstrating high accuracy, stability and utility. We have also studied the viewing of 84 designated advertising creatives.

Contact us to discover what we can do to find all your audience.

Growing things in scorched earth might not yield much

One of Shakespeare’s best-known scenes is at the end of Henry V, where two armies have, with few exceptions, killed each other. Such events might not make sense to civilians, but they have occasionally resulted in the achievement of one side’s objectives. The real Henry V did win the Norman territory he regarded as his birthright—temporarily. Enter Netflix, a frightening behemoth that levels pay-TV giants all over the world with its cheap subscriptions and compelling programming, some of it original and exclusive. Cord cutters and cord nevers in one country after another either rely on streaming exclusively or in combination with digital terrestrial broadcasting with its near-perfect signal quality. Much of the streaming is Netflix. It is verily scorching the earth, and unlike Henry V, it’s doing so unilaterally. But all is not alright in the monster’s lair. The company is 22 years old. Shareholders and investors have acquired the silly notion that it’s old enough to meet expectations of a mature company. Instead it continues to have an astounding burn rate and has no obvious means of escape: even if it raised prices and/or increased market share transcending any realistic expectations, it would still take decades to break even. The notional Wall Street is tired of waiting for the adult that still behaves like a child. Netflix’s actions and statements seem to militate against reality. It is raising new fundingwhich, however, won’t even last it a year. And it predicts its burn rate will peak this yearalthough heretofore it has been growing, and at increasing rates. In fairness, no-one has tried to do what Netflix is doing: to become a provider of programming and a producer of much original programming to most of the world, all at once, and to do so at affordable prices. An effort such as this is bound to be expensive. And if it could only keep growing at the current pace a few more years it would at least stop losing money. But competition is growing (Hulu’s international expansion is just starting), access to third-party programming is shrinking in the US and will likely do so in the highest-income countries as well, and its ability to raise prices is dampened by competition and local economic reality. It can cut back investment in original programming, but that might be counterproductive (or not) by removing a motive to subscribe or keep subscribing. It can introduce advertising but ditto. So the possibility that Netflix will die having killed many others is no longer hidden behind the horizon. Particularly relevant to this blog is the audience measurement aspect. Netflix has until recently avoided any external disclosure of its own measurement, save for a very few tidbits dripped onto the press. This has raised the fame of its ratings of its own service to the level of unobtainium: although no-one outside the company knows whether it’s even any good, almost everyone would like to see it. It has recently started sharing limited data on its US viewing as Nielsen started measuring it (Nielsen also has an agreement with Hulu and measures it and Amazon Prime Video). This seems to have been a defensive move as Netflix’s numbers, at least for some of its highest-profile original programming, are higher than Nielsen’s, and thus serve Netflix management’s interest (to show that its investment in this content is rewarded with viewing). Netflix is apparently breaking with convention in how it reports its numbers. It uses cumulative audience (reach) rather than average audience (the audience at a given moment of the content, across all views in the reported time interval). Nielsen offers cumes too, but carefully deduplicates them; it’s unclear whether Netflix does, and the fact that the numbers it does share are substantially higher suggests it might not (so what it’s actually reporting is gross impressions at one per show, which would be a strange and misleading measure to use here). Beyond such ruminations is the algorithmic and technical design of Netflix’s audience measurement system itself, which remains a black box, probably unseen by anyone qualified who did not create or curate it. Unless Netflix is brazenly lying about its numbers, the possibility arises that they are nonstandard and thus too high, that management cannot understand this, and is therefore overpaying for its top external content. Another effect is also possible, and would explain why Netflix has historically regarded its audience measurement data as a trade secret: its subscription pricing suggests that, while it might be overpaying for a few high-profile third-party properties, it probably underpays for most. There’s simply not enough revenue for everyone to be paid equally relative to audience—the same problem faced in sports leagues with salary caps, which harms all players except perhaps the stars. So far, Netflix has been able to shut down any third party that tried to measure it, loudly claiming those numbers were wrong, without proof. It tried to do that to Nielsen, as well, but must realize it cannot win in a credibility contest with the leading name in the ratings industry. Had Netflix not been thus undermined, then, rapidly losing its ability to offer its investors an exit strategy, it could be expected to hang on to every perceived advantage as long as it can, including keeping its data away from content providers who would use it to force higher rates. It is still expected to do so in countries where it is not exposed to third-party measurement. As in the case of Uber, another tech company without evident means of escaping eventual fiscal doom, the fact that competition based on profound lossmaking leaves a scorched-earth battleground of dying competitors, doesn’t help the disruptor much in the end.

Content owners are breaking herd immunity

It is all the rage for fashionable content owners to set up their own streaming services. First came CBS AllAccess with original programming premiered only on it, then Disney announced Disney+ (entertainment focused on children) and a separate service for ESPN, both of which would offer exclusively programming that would be withdrawn from Netflix and other third-party distributors, in January Comcast/NBCUniversal has announced a service with exclusivity on some programming, and now AT&T has announced that Warner Studios series such as Friends, The Office (US version) and ER will be pulled from third parties and offered exclusively on its new three-tiered streaming service, to be launched next year (it already operates three, which will be subjected to some rationalization). Original programming of company’s HBO unit has always been exclusive to its own streaming services. When the same week as AT&T’s announcement, its Warner Bros. movies were downgraded from 4k to regular HD on iTunes, some thought this was a quiet and immediate imposition of a milder version of exclusivity: one could still use the content but not as well. As the MacRumours story suggests at the end, this seems not to have been intentional. Especially as it affected the entire Harry Potter series of feature films, which does not make sense as an exclusive on an AT&T streaming service because its audience is very far from overlapping. But the withdrawal of so many big turtles into their shells does feed the assumption that the downgrade was intentional. Exclusivity doesn’t make sense if you can monetize the demand for your content more fully by permitting its distribution by others. Disney can go it alone, at least in the US, because it can be reasonably sure that most customers will follow it to its new platform, for both its sui generis entertainment programming and for ESPN with its exclusive sports rights. Few others can assume they can leverage such loyalty. But brinkmanship in negotiations over money will only increase in the near future, and when talks break down a downgrade might seem temporarily (while regular HD is not seen as tantamount to no service) attractive alternative to a complete outage of that content on the distributor’s platform. It might not suffice, though (the lower resolution might not be enough of an impediment to use, neutralizing the content owner’s main weapon). I rather expect that AT&T is fooling itself when it assumes its high-profile ex-NBC series give it the market power on which Disney is relying. The proliferation of content-owner streaming services with exclusivity on the owned content—disaggregation—raises the cost and complexity beyond the tolerance of most viewers, and something will give. The lesser content will fail first but almost every player will be hurt. As the antivaccination movement shows, a few ill-advised decisions can spoil it for everyone.

Squeeze play

“Traditional Pay-TV Squeezes More Revenue Out of a Declining Asset”, writes Midia Research.

Yes, squeezed more, just barely, and probably because around a couple of percent of advertising spend was relocated this year from online to TV by advertisers unhappy with the quality of targeting online.

But it’s the last gasp. The NFL has seen lower ratings because it’s been less interesting lately (in the opinion of those who would know the difference, of whom I’m not one), but it remains a major national sport in the US, and it is headed to SVOD/OTT with the lower-value prescheduled evening fixtures first. The more interesting, dynamically scheduled games currently on Fox and CBS will surely follow.

The league’s thirst for cash has demanded an ever more increasing subsidy from broadcasters and pay-TV operators even as margins permitting them to pay this subsidy have become static or started declining. As Margaret Thatcher warned early on in an argument against tolerance of inflation, it is easy to end up pricing yourself out of the market.

The difference between stopping poachers and sustainable harvesting

Facebook's announcement of a change to the newsfeed selection algorithm in favour of personal-network posts at the expense of posts from businesses was greeted with hysterical headlines such as “RIP Facebook News Feed for Publishers”.

Business/brand activity on Facebook will show up less, not be eliminated entirely. It will certainly not RIP; Facebook has jealous shareholders now and is not becoming noncommercial. Currently businesses are enjoying a free marketing ride on Facebook, and in so doing they reduce Facebook's utility to the owners of the very eyeballs they're after: a contemporary version of slash-and-burn agriculture that destroys the ecosystem it uses. The algorithm changes will reduce the extent of such poaching. And some portion of businesses' activity will probably be redirected into paid advertising. This could meaningfully enhance revenues even if only a small portion of current business activity becomes paid.
What we haven't seen so far is an acknowledgment of the negative effects of the current complex wall/newsfeed content selection algorithm. Since its introduction, the newsfeed has become unpredictable: reload and you'll see a largely different selection of posts, so you can never be sure you're fully caught up on those from even the sources most interesting to you. The feed sequence is frequently interrupted by repetitive promotional messages from Facebook itself. And there's no escape: changing the few available configuration parameters has little effect.

Users’ lack of control also harms the utility of Facebook and the common weal by downranking news organisations, which post extensively to social media in efforts to keep themselves vital and relevant, and in so doing keep us supplied with information despite, for many newspapers in the US, negative margins. They may post news free of charge to readers to promote themselves, drive subscriptions and keep their heads above water, but they’re not able to spend to push news stories as paid advertising; that’s a nonstarter, and a dangerous one for the country at that. If I cannot instruct the Facebook algorithm to maintain the prominence of, say, The Washington Post and Science Alert in my newsfeed, the feed loses much of its utility to me, and this perforce looks like someone has decided that he knows what I want better than I do. That, perhaps unintentionally, propels us right past the point of evil (as in Google’s “don’t be evil”) and into ideological totalitarianism. The end result is likely to be the decline of the social network in favour of another, as has happened many times before (to Compuserve, Delphi, AOL, MySpace).