This Pandemic is an Existential Crisis for Cinema

With not enough cinemas globally open to show the tentpole content, studios are electing to release on their own streaming services. This is precipitating an existential crisis for cinema. [blog.mindrocketnow.com]

During Lockdown i, you might remember that Trolls World Tour made a splash by bypassing theatres and being released on streaming services only. I remember because spending on ads on the side of buses was pretty much frozen, so pictures of those little blighters lingered for a long time. AMC took particular umbrage (possibly not at the bus posters, but at being disintermediated) and black-listed NBCUniversal. 

But Trolls World tour made $95M in 2 weeks, which compares favourably with its $90M production costs. It compares very favourably if you think that NBCU didn’t have to share any of its revenue with the theatre groups (hence AMC’s outrage). Predictably, this strategy has been repeated with other high profile movies.

Disney elected to stream Mulan on Disney+ for £20 premier access - not PPV but a one-off fee to access a premier subscription tier comprising of a single movie. It became Disney’s lowest grossing of its live action remakes to date, and won't recoup its $200M budget (yes, there were mitigating factors in the freezing of China-US relations which made this movie a cultural casualty). 

Christopher Nolan’s Tenet wasn’t released online, only in theatres, made £347M in the box office (against $205M cost). However, that box office will be shared with the theatres so WarnerMedia didn’t recoup its investment; it was also Christopher Nolan’s worst-performing movie to date. 

Mulan will be judged a success and Tenet a failure. The reason is that Mulan drove increased takeup of Disney+ (Disney won’t confirm how many people took up a Disney+ subscription and paid the premium just to watch Mulan). So the cost of the movie can be somewhat offset by a reduced cost of acquisition of the new Disney+ subscribers.

So it’s not surprising to me Wonder Woman 1984 will be released in cinemas and online on HBO Max today (Christmas Day 2020). Not only will WarnerMedia not have to share revenue, but it’ll drive more people to its OTT service (which is fourth in a field of three so really needs to catch up). What is surprising is that WarnerMedia is not intending to charge a premium for it. 

It’s conventional wisdom that even in a recession TV survives household budget cuts. TV subscription is a recurring expense, and going to the cinema is an infrequent treat. Pricing PPV as the latter rather than the former is problematic. Charging a content premium when your market is suffering from increasing unemployment is a hard sell. When the Premier League tried to charge £15 per match, fans revolted. The best riposte to this price gouging was from Newcastle United fans. Instead of paying the broadcaster, they donated the same money to a local food bank, raising over £20k. It’s not necessarily the amount, but the context.

At £20 per view, each movie will have to cost the same as Trolls to break even. The pricing looks much more compelling at £15 with a complementary digital download later, or £20 one-off upgrade to a premium subscription, as long as there’s more than just the one blockbuster. If there isn’t an upgrade fee, if the new title is adding to the value proposition for the service, then the decision is a no-brainer. 

If you’re Disney or WarnerMedia or Amazon or Netflix, the pandemic has served to increase your addressable market for your OTT service. However, it seems clear that this pandemic has hastened the demise of the multiplex. We’re not going back to a tentpole movie filling up every screen in a multiplex on opening night. Indeed, we haven’t had that in a decade. 

Cinema is no longer the premium venue to see premium content - that is now your own home. Instead, I can see chains like Everyman and The Prince Charles Cinema flourishing, spending less on screening rights, and spending more on creating an experience for cinema lovers. 

Merry Christmas everyone, and see you in 2021!

Effective not Efficient

 How do you know if what you did today moved the needle? Delivered value to the business? And if you don’t know, why did you do them? [blog.mindrocketnow.com]

The answer to this last question normally boils down to being too busy to stop to think. Making time for reflection ends up being prioritised below real work, because there’s no immediate output. The name of the game is to produce as much output as possible, because that’s what can be measured, put into annual appraisals, paid a salary against, so we assume it’s an accurate proxy for delivering value.

There’s a logical thread from optimising output:

• To maximise output, we need to maximise utilisation;

• Which means we need to eliminate anything that impedes delivering output, anything that isn’t writing code;

• But we know that eliminating planning is bad, so instead, we do all our big planning up front;

• And we know that plans fail because of lack of contextual knowledge when the plans are made, so we need to do big design before big planning;

• To get the design right, we need to have clarity of the product we’re intending to put into market, so we need to put big market analysis and big product analysis before big design;

• This is a fair bit of work to do up front, with varying skill sets, probably from different teams, so we’ll need the various resource holders to agree that this is the right thing to commit their resources to = organisational alignment;

• To secure that commitment, we’ll need to prove that we’ve thought it through, and present a business case that associates output with investment;

• This business case is important, so we’ll need to put some thought into it, so we’ll need a little planning, little design, little analysis, little resourcing, little commitment…

• This is getting a bit recursive now 

Let’s look at the opposite position, where we aren’t optimising output, but focusing on creating the best output (let’s assume it’s software).

• We’ll probably have scrum teams with all the skills in-team to create successful, well-thought-out code;

• Because all the skills are in-team, we’ll be more nimble, responding to changes in context quickly, so the code will probably take less time to complete;

• We’ll probably be using DevOps techniques, so the code will have security, operability, quality baked in from the start;

But:

• We still won’t know if we’ve delivered any value, or merely great code.

Both cases are failures, because both rely on the assumption that output is a good proxy for value. It isn’t.

I once transformed a software delivery capability within a company that was overly focused on cost control, and therefore big everything up front, into one that was able to deliver quality code reliably without a big front, and so much more cheaply. Once the spend rate and code quality were no longer concerns, we were able to focus on what delivered value. And as it turned out, none of the features being mooted actually moved the market. Our investment was better made into marketing and content, rather than further app changes. So I pivoted the team to the next market, with a clear conscience knowing that done = Done.

Building software is complicated. Building the right software is not complicated, but it is harder. It requires trust that your process will yield good output, so the focus can be on understanding which is the right output.

Media Tech Bites: Serving the Niche

Here’s my short take on a piece of media technology. This week I look at how the big broadcasters are ignoring niche at their peril. Do you agree? [blog.mindrocketnow.com]

It’s a curious phenomenon that whilst there’s more content being produced than ever, there’s less choice being exercised. In making a choice, we are a product of our unconscious biases. Default bias will guide us to choose the first in a long list of programmes, the pseudocertainty effect will guide us to choose the most familiar as the most risk-averse, projection bias will overestimate how much we’ll want to actually want to finish the series that we started, and the sunk cost fallacy will make us watch every episode until we get to the end. Because we just don’t want to incur the cognitive pain of choosing something new, we watch another episode of Friends.

The reason that we don’t choose something new, something eye-opening, something horizon-expanding is because content service providers are really bad at providing good options for us to choose from. Netflix is the market leader, so should be really good at this, and yet we ended up watching the latest Adam Sandler halloween movie for our family movie night. I assumed it was going to be bad, IMDB rated it to be bad, and yet we ended up watching it because it was a choice that we all settled on - perhaps it incurred the least amount of cumulative cognitive pain.

Technology should be enabling more choice. The incremental cost of distributing another VOD asset is negligible. The incremental cost of another broadcast channel is low enough that a “pop-up” broadcast over satellite is eminently economically viable. And costs will inevitably be driven down as broadcasters take advantage of economies of scale of the cloud. But the opposite is happening. 

Wouldn’t it be great if technology could take on some of the cognitive load. Rather than relying on sifting through irrelevant recommendations presented to me, wouldn’t it be better if there were some sort of artificial precognition that could be applied to content catalogues to find something to watch. The distinction between these two approaches is important.

We don’t need more big companies to suck more data about us so that they can better market their content to us, and sell our digital soul to everyone else. We need to take control of our choice, and we need tools to help us do so. I’m looking forward to the day when I can apply my emulated thought process, on technology that only I can access, to pre-sift the increasing tide of dross for me, so that I can spend my time watching the gems.

Remembering Quibi

The brief rise and precipitous fall of Quibi perhaps shows that the world doesn’t need yet another big streaming service. What can we learn? Do you agree? [blog.mindrocketnow.com]

As I write this, the polished https://quibi.com/news site still presents a list of achievements: a new series, reflected glory from the Emmys. The news ends in September 2020, and omits the last piece of big story; that it has closed after 6 months and $1.75B. Most startups fail, especially those in crowded markets, but this one has failed more thoroughly than most.

In a crowded market, you have to differentiate, and that differentiation should address a gap in the market. Digital media services have been trying, to varying degrees of lack of success, to combine the way people want to consume content with the way people want to communicate - streaming and social media. So it made sense that Quibi this is the gap that should focus on; being a social streaming service. Quibi focused on short form and mobile because that’s how people live their social media lives.

Analysts were impressed with the “mission to entertain, inform and inspire with fresh content from today’s top talent—one quick bite at a time”, as were investors. And a lot of investment was needed. Quibi wanted to differentiate itself from user-generated content by having high artistic and production values. There’s not a lot of this premium content to acquire, so Quibi had to produce the content itself. And premium content is expensive to create. Netflix spent $17.3B in 2020 so if you want to be in the same game, you’ll have to spend billions too. 

The current market has shown that people will pay for content. US research shows that people are willing to pay at least $10 to $20 per month for streaming services. Backers saw an addressable market of the size of YouTube’s 2B monthly active users. It would only take a fraction of a percent of that market with a regular subscription to pay back that investment manyfold. YouTube itself has 20M subscribers for its Premium service. At Quibi’s $4.99 per month this makes a healthy revenue stream. The business case seems straightforward.

Using this huge investment, they went all in on premium content. Quibi covered the production costs, unlike cinema where producers take the financial risk and then recoup from box office receipts. This enabled content creators to take risks. The creators seemed to respond with ideas that were really interesting, using the 10min cap on duration to spur creativity. 

Was it a casualty of the pandemic? Well, Disney+ and HBO Max managed to launch and sustain, so no. The pandemic didn’t stop it getting mind share of its target audience through buying influencers. The pandemic didn’t stop it from being downloaded from app stores.

I think Quibi got the market wrong. They thought they were "competing against free". I think they were competing against the pause button. Once you get underneath the gloss and money, I think that they were solving the wrong problem. This is hardly uncommon in startups. Most startups realise this when they start to run out of money, so they pivot away or fail. Quibi had too much money so they continued. Perhaps the story would have ended differently if they had the same depth of catalogue as Disney or WarnerMedia, but they didn’t have enough money for that. Ironically, they had simultaneously too much money to succeed, and too little money to be successful.

In a crowded market, you have to differentiate, and that differentiation should address a need in the market. Quibi addressed a gap, not a need, and that is ultimately why it failed.