Opening Up the Black Box

Last week comScore announced a new service called OTT Intelligence that will provide viewership data for broadband video services like Netflix, Amazon, and Hulu, including audience size and demographics.

What will it mean to finally open up the black box of SVOD viewership, and what will it mean for the future of TV? Two thoughts.

1. Subscribers Are Not The Same As Viewers
Health clubs are in the business of signing up signing up tons of members. The number of people actually in there breaking a sweat on any given day? Well, that’s another story altogether.

Subscription VOD services love to report subscriber numbers. Netflix’s quarterly reports consist of little else. Amazon brags about the number of Amazon Prime members it has, though a sizeable number (roughly 20%, or more than 10 million of them, by one study) apparently never use it. The one common theme across the TV & video industry has been the largely self-serving nature of the data that’s disclosed. Companies trumpet data that makes them look good. Numbers that put them in a not-so-positive light typically never see the light of day. For example, Dish includes Sling TV in its subscriber numbers (rather than breaking them out separately) because it makes cord-cutting look less bad. Disney CEO Bob Iger acknowledged in a moment of candor last week that ESPN’s numbers would be even worse if they didn’t mix vMPVD subscribers in with the legacy TV count.

Given this pattern, what can we expect once Comscore starts reporting on actual viewership? One safe prediction is that viewership numbers will disappoint as likely as awe. The disappointment will come in two forms. First, with respect to broadband video services as a whole, there will inevitably be some brands that underperform. If I had to hazard a guess, I’d be bearish on audience numbers at CBS All-Access and Showtime, as well as on the aforementioned Amazon Prime Video. Netflix, on the other hand, may look pretty good at a macro-level.

Second, and unfortunately for many, better data means better visibility into viewing patterns within particular services. For example, what if it turns out that Netflix’s numbers are juiced by tons of kid viewing, as parents turn to the service as an ad-free babysitter while dinner is being prepared? Are those hours of equal value to someone watching a new episode of House of Cards? I think not, which brings us to our second point.

2. Numbers Are Never Neutral — They Create Their Own Reality And Feedback Loop
People love rankings and numbers of all kinds. One can make a good argument that Billboard’s Top 40 didn’t just track music sales; it helped create the entire phenomenon of pop music and pop stars. Back in the early 2000s when mobile ringtones became a big business, many operators struggled to understand why Fifty Cent’s Candy Shop was so endlessly popular. The reality was that the Top-10 list itself was a (nearly) infinite loop. Beyond a certain point, that ringtone was popular mainly because it was popular. This is the same reason that Kim Kardashian has over 50 million Twitter followers and PewDiePie has over 50 million YouTube subscribers. Their popularity is rooted in the very metrics that describe their popularity.

The numbers don’t always go up and to the right, however. Sometimes the effect runs the other way. Snapchat just reported its first numbers as a public company, and the user numbers weren’t that great. The service added only eight million users in the last quarter (to a total of 166 million, representing roughly 5% quarter-on-quarter growth). Not very impressive for a service that is (was?) supposed to be growing like a rocket. The stock proceeded to get hammered, shaving off more than 20% (and several billion dollars of market cap) literally overnight.

If people didn’t know those numbers, would the perception of Snapchat have changed from one day to the next? Not likely. Similarly Twitter, which is now widely perceived as a failure, due in large part to its inability to grow the numbers. Similarly, ESPN, which must report subscriber numbers as part of Disney’s public company quarterly disclosures, has suffered significantly from the awareness that it is losing subscribers. Does anyone think those numbers help ESPN’s leverage when negotiating the next round of affiliate deals? Highly unlikely.

The bottom line: The availability of viewing data from SVOD and other broadband video services will inevitably change perceptions (and therefore the reality) of those same services. Once numbers are out there, only one of three things can happen: they go up, they go down, or they stay the same. In each case, the underlying companies (including Netflix) will be affected.

Numbers have become the coin-of-the-realm of our increasingly data-driven economy. SVOD providers have been the beneficiaries of highly selective disclosure. Those days are coming to an end.

Stick with TDG and stay ahead of the curve.

Joel Espelien is Senior Advisor for TDG and VP of Client Services for the Corum Group doing sell-side technology acquisitions. He lives near Seattle, WA.