1. Netflix’s WTF Moment

So Netflix released some viewership numbers this week and the near-universal reaction was “WTF?”

First off, the numbers were all about “hours viewed” which, given the way the rest of TV viewing is measured, leaves everyone scratching their heads and trying to figure out the answer to the million dollar question which is “Are these numbers good? And if they are, why?”

The numbers are certainly very large, with billions of hours clocked, but given that Netflix has millions of subscribers, that’s not saying much.

There are a lot of them, and Netflix released them as an Excel spreadsheet, which I guess was supposed to make them seem more transparent. (I hope they charged Microsoft something for not making it a Google Sheets spreadsheet.) But it also put out a vibe that Netflix could not be bothered with actually interpreting and making sense of the numbers. Sort of a “You wanted numbers? Well here! Now you’ve got them!” moment that seemed aimed at the newly unstriking WGA and SAG membership as much as the ad industry.

Then there was the fact that, as Evan Shapiro neatly lays out here, the accounting was pretty odd—each season of a series was counted as a separate line item. This probably makes sense to Netflix, as older seasons are considered library content while newer seasons are considered originals, but given the bingey way people watch Netflix, I agree with The Map Man that it makes far more sense to group all seasons together.  (As apparently, does Netflix, at least at some level—Shapiro’s formula is the same one Netflix uses for its weekly Top 10 lists.)

But none of those were the actual WTF moment.

No, the actual WTF moment came when people looked at the top shows and realized they had not heard of many, if not most of them.

Why It Matters

When Netflix first launched its original programming strategy, the overall vibe was “Bingeable HBO.”

Original series like House Of Cards and Orange Is The New Black were aimed at the same upscale educated audience as HBO and the launch of a new original was an event and the amount of buzz each launch got was pretty major.

Netflix has been riding off that buzz ever since. 

They’ve managed to keep it going with high profile series like The Crown, The Queen’s Gambit, Black Mirror, BoJack Horseman and Ozark, series that would have been right at home on HBO.

But here’s the rub: HBO-like series win awards and get lots of buzz, but they don’t really draw in big numbers.

Take Succession. The New York Times was roundly mocked for featuring a half dozen articles and op-eds about the series finale all on the same day, while the cultural impact of the show—think of all those breathless articles about “quiet luxury”—has been notable as well.

But the chattering classes don’t watch a lot of television and so Succession’s ratings are only about a fifth of popular network TV fare like CBS’s Fire Country.

Which is why I frequently find myself thinking about the anonymous executive who dismissed Apple’s streaming offering as “expensive NBC.” And their fellow anonymatus who dissed the industry’s propensity to make “snobby shows nobody watches.”

They have a point, at least when it comes to numbers. And so it should not come as any great surprise that, using Shapiro’s revised metrics, Ginny and Georgia, a teen-oriented dramedy with a 60% Tomatometer score and a B- from Entertainment Weekly, is the streamer’s top show by a fairly wide margin. 

To be fair, I had never heard of the show before and I was vaguely aware of the number two show, The Night Agent, an action thriller that Rotten Tomatoes dismisses as "Bingeable as a beach read and just as forgettable.”

Ouch.

Which brings us back to the question of WT actual F. 

As in what was Netflix’s ulterior motive in releasing these numbers?

At one level it was to comply with SAG, AFTRA and the WGA’s demands for greater transparency. On another, though, it might be to point out to advertisers that Netflix has a far broader range of programming than they may have thought, that if you are advertising Neutrogena face wash for teenage girls, then Ginny and Georgia’s loyal and massive audience might be just the place for it.

Only there’s a line there. Because, you see, all this is great if it stays within the pages of Variety, Deadline and TVREV. (See what I did there?) 

But that does not seem to be the case.

The ratings story has made its way into the mainstream and then some— even The Hill, a highly wonky political site—had an article about Netflix’s ratings. (Admittedly a pick-up from Nexstar News, but still…)

That means that both mainstream reporters and consumers are seeing what Netflix’s top shows are and there’s a clear and present danger of a narrative forming that Netflix is slipping, that it’s filled with mediocre genre series and certainly not worth $15/month once you’ve finished The Crown.

That’s not a good look either. Especially at a time when Max seems to be best known for a trio of actual HBO series— Succession, The White Lotus and The Last of Us, and when Amazon and Apple are doubling down on their purchase of major league sports rights.

Something to think about.

This too: OG TVREVver Nick Cicero shared some numbers he’d crunched with me. While Netflix’s The Night Agent logged 812.1 million hours, popular YouTuber Mr. Beast logged 14.53 billion hours viewed in that same time period.

Yikes!

What You Need To Do About It

If you’re Netflix, there are two things you need to do.

The first is easy enough: you need to get ahead of the narrative and actually say the quiet part out loud and all that: you have something for everyone and that’s your value. There are soaps and procedurals and spy thrillers and The Crown, and they’re all well done and they’re all bingeable and they’re all Netflix. Own it. Make it seem like a good thing before a bunch of culture critics start writing about it like it’s a bad thing and the narrative slips away from you.

The other is something I’ve been told you’ve at least thought about: linear channels for your library content.

Look—it works for FASTs for a reason. People don’t like making decisions. They like turning the TV on and not having to think about it.

You certainly have enough library programming—Seinfeld and Suits are two of your top shows no matter how you slice it—so create some genre channels and single show channels and give people a reason to tune in longer.

You want Netflix to be their “every day after work, every night after dinner” destination. That thing they put on when they’re not in the mood for a “lean in” experience. 

You can use it to pump all those indie films you bought that have disappeared into your catalog. Zack and Miri Make A Porno got decent enough reviews and has lead actors people have actually heard of— it shouldn’t be languishing at the very bottom of your chart. 

It will help your ad sales team out by increasing the number of hours people watch and thus the number of ads they see. It will make your next half year chart have bigger numbers. And the line between “watching a linear Seinfeld channel” and “bingeing Seinfeld” is a thin one, so it’s very much in your brand image.

Go for it.

2. The FCC Makes MVPDs Do Better

The FCC ruled this week that MVPDs can no longer impose Early Termination Fees on their users.

Those are the fees you pay when you cancel your cable service before the term of your multiyear contract is up. Either because you moved or because you wanted to cut the cord.

Consumers hate these fees and the complete and utter lack of transparency around how they are handled has not helped endear MVPDs to their customers.

That said, the MVPDs argue that they are necessary, that if they are going to give consumers deep discounts on pricing they need some sort of commitment in return to make the initial loss worthwhile for them.

The vote split along party lines, par for the course in DC these days, but it’s a sign the decision is still a somewhat controversial one as, without diving too deeply into the weeds, there is a still a debate as to whether all fees of this sort should be considered “unfair and unreasonable” and if not, what is the standard used to determine which are and which are not.

Fun.

Why It Matters

This is all about The Great Rebundling. 

Yes, at some level the MVPDs are concerned about their ability to keep their current customers from cutting the cord or churning, but at another level they’re looking down the road at their ability to offer streaming bundles. 

And one of the key arguments they can make to the SVOD services to get them to agree to discounts for the bundles is “we can lock these people in for a year or two.”

This benefits the streamers as it helps cut down on their biggest nightmare, the high level of churn that comes with the current system of month-to-month subscriptions.

So there’s that and then there’s an even bigger monster hiding in the closet: fixed 5G broadband to the home.

That, friends, is why this decision is so hard for the MVPDs to swallow.

Because if all the naturally occuring cord cutting wasn’t enough of a problem, they now have to contend with AT&T, Verizon and T-Mobile showing up and offering a more modern sounding competitive product for a lower price.

And if a consumer is locked into a contract with serious cancellation fees, then they’re not going to go chasing those 5G deals, at least not right away.

But if they can jump any time they want, well you’ve got trouble in River City.

The new ruling will also do away with one of the MVPDs favorite pricing strategies (and to be fair, they are not the only industry that uses this technique) which is to front-load the discount. So $75 for the first six months and then $150 every month thereafter, with a full two-year contract. 

Or something like that. You get the picture.

What You Need To Do About It

This is tricky. If you are an MVPD, you want to keep these sorts of plans in place for all the reasons stated above, yet you don’t want to be seen as advocating for them since consumers particularly dislike them and they already hold you in fairly low esteem.

Your best bet might be to offer both types of plans—month-to-month plans and discounted multi-year plans where you are very clear about what the penalties are for quitting early.

If you are one of the telcos and you’re rolling out fixed 5G broadband the fact that you do not have these sorts of plans can be a great marketing tool—consumers love the notion that they have the freedom to switch at any time.

I’d also push full-year plans though, as the temptation to get caught up in price wars is going to be hard to resist and consumers will roll to the lowest price deal each month.

If you’re the FCC, remember that this is going to be a controversial decision, and that there are going to be massive price wars. So pushing for greater transparency and upfront disclosure may prove to be the better path for many (but not all) of these plans.

ALSO CHECK OUT:
Q&A With Alan Wolk: Fast’s Future, Global Growth, Advertising Impact And More — an interview I did with Amagi’s Mike Asebrook.