The film that made Tom Cruise a star, Risky Business
, wasn’t about the media and entertainment business (sorry for the spoiler), though the title fits it. Even if — especially if — you crave the objective reality of numbers in financial statements and budgets, you have to stomach a lot of uncertainty to navigate a business that depends on the magic of the creative process and the whims of consumer preferences. And despite the granularity of digital media data, managing information in this business is getting less rather than more predictable, driving up risk in everything from content production to library acquisitions to M&A. The way to rise above the risks and reap the rewards is to seize the initiative in understanding, synthesizing and applying the insights from the newest and most impactful sources of data available.
Traditions no longer apply
William Goldman, the legendary Oscar-winning screenwriter for All the President’s Men
among many other movies, once said about the unpredictable process of trying to create a hit “Nobody knows anything.” Goldman’s words have been taken as gospel for a long time. Yet even this risky business of ours benefited from decades of relatively stable sources of data and long-settled patterns of how even speculative entertainment products are likely to perform over their lifetime. By comparison, CFOs today, at least as much as creatives from actors to writers, operate in a world of testing and learning to figure out what a “hit” actually is and the kind of a future is in store for that hit and the broader business.
The heart of the theatrical motion picture business has always been the box office. HBO didn’t launch as Home Box Office for nothing. Numbers from a picture’s opening weekend box office long set the market for its pricing throughout the distribution value chain — from premium cable (primarily HBO and Showtime) to basic cable networks to broadcast syndication to global film exhibition. The box office numbers from just the opening weekend also drove the allocation of millions of dollars in studio marketing budgets including television advertising. In fact, a well-known studio head in the recent past didn’t wait for the full weekend numbers. In extrapolating Friday’s numbers to project the rest of the weekend, staff was required to come in on Sunday mornings to set weekly marketing budgets. Of course, those allocation decisions were also a lot easier to make when you knew that to “open” a movie you had spending big marketing dollars on one outlet in particular — advertising on NBC’s Thursday night “Must See TV” lineup.
“To succeed in this digital age, players in the entertainment industry should seek to integrate multiple sources of mission-critical data with like-minded industry participants.”
Today? It’s unlikely, even post-COVID, that opening box office weekends will ever have the impact they once had on motion picture success or that you’ll find another one-stop marketing platform like NBC’s Thursday night lineup. A “film” by its very definition now includes Marvel Cinematic Universe movies, Netflix originals and CNN documentaries. Is a film a hit if no one sees it in a theater but it drives huge online viewership, social media buzz and additional subscribers to a connected TV app? How do you allocate the risks and rewards of that performance among star creatives, studio marketing machines and digital platforms? You surely can’t treat superheroes like actors in independent dramas, right? A looming risk for studios is a future of lawsuits unlike any before, such as the recent case of a talent suing a large studio over an exclusive release in theaters shifting to a joint in-home launch on subscriber streaming services.
In television, the only thing historically more complained about than inaccurate weather forecasts were Nielsen ratings. Yet for all of the complaints about them, Nielsen’s ratings at least represented a common data framework that media buyers and sellers adhered to for more than half a century, determining the price of individual commercial slots, the flow of billions of dollars of marketer spending and the direction of Hollywood’s creative processes.
Unfortunately for Nielsen, and for whatever certainty it provided, it looks like decades with no clothes have left the data emperor exposed, perhaps permanently. The Media Research Council, which provides the data certification process in TV advertising, recently and for the first time decertified Nielsen after an increasingly frustrated set of TV industry complaints that the company consistently underreported viewership during COVID. To be fair, Nielsen never purported to count actual viewers of TV programming but rather based projections on a sample subset of TV households. Today, new technology — including set-top boxes, smart TVs and connected TV devices, and mobile phones — can provide second-by-second, census-type viewing behavior with precision.
To be valuable, sources of truth must be commonly accepted
Despite a flood of grateful nods from many in the business who have felt wronged by ratings numbers over the years, the picture of the post-Nielsen media measurement world is anything but clear. Grant Thornton Transformation Principal Will Whatton observed: “To succeed in this digital age, players in the entertainment industry should turn away from developing their own set of truth through a flood of independent and disconnected sources of data. They should instead seek to integrate multiple sources of mission-critical data with like-minded industry participants.” Major media companies with their own direct-to-consumer services have captured more details of how content is consumed on their platforms than Nielsen was ever able to provide. But as Whatton noted, “the most successful companies moving forward will secure windows into not only their own data but of their competitors and their advertising buyers.”
Traditional measurement data sources are far from the only ones that have lost their anchors. For decades if you rolled out a cable network, you knew subscribers and sub fees would grow every year on a reasonably predictable trajectory, and audiences and ad dollars would follow. Even if you could do it today, how many people want to launch a new cable network? With cord-cutting and the explosion of content-viewing outside of these traditional multichannel environments, a new cable network hardly ensures a promising future for optimal distribution and monetization of valuable content.
“You've got to look at the validity of all your underlying data, not just data results. 80 to 90 percent of data analytics takes place below the surface.”
The implications for this newly emerging data complexity are profound. How can leaders plan their investments in video production if historical box office numbers have little relevance for driving app subscriber growth? How do leaders know what to pay for talent without a historical database for the impact of stars in the streaming world? What content will perform best on which new platforms? How do leaders allocate billions of dollars of ad spending when there is no common measuring stick for audience reactions? What is the value of a planned acquisition when past performance on linear platforms is truly no guarantee of future success in streaming ones?
Adopt a new vision of tech possibilities
In this newly decentralized data domain, green shoots of entrepreneurship abound. NBCU’s Kelly Abcarian, NBCUniversal’s executive vice president of Measurement & Impact, Advertising & Partnerships and a former ratings company executive, noted in a recent blog post
: “It’s time for us to declare measurement independence… . We need all our industry’s builders…to architect an entirely new blueprint.” Referring to the need to move beyond “outdated advertising measurement,” NBCU is looking across the industry at potential partners to create what it calls “a new global currency” for audience measurement that “values content fairly.”
Determining what is “fair,” the data that should form the basis of this currency and the approach to implementing such a new system are critical challenges ahead. NBCU is joined if not literally then in objective by both established and emerging media players. In fall 2021, ViacomCBS announced
that their advertisers could use VideoAmp metrics as an alternative to Nielsen; Univision made a similar announcement
with respect to Comscore. Both media measurement companies are potential partners for NBCU, as well.
Another newer market entrant among many with ambitions in this space is Diesel Labs. The company’s CEO Anjali Midha has a perspective like many linear TV leaders, which is that viewership numbers in streaming are extraordinarily difficult to quantify. In fact, identifying even the most basic streaming viewership is complicated, as Warner Media has not permitted Nielsen to include HBO Max in its publicly released streaming figures. Netflix has just for the first time publicly released a list of their most-watched programming
, virtually daring their competitors to follow suit. Of course, Netflix’s self-generated numbers still represent “grading one’s own homework,” and releasing the information in a fashion that will reflect best on Netflix. Even if ultimately publicly available, this fragmentation only makes life more complex for media buyers and sellers.
Diesel Labs’ alternative approach is to develop a snapshot of movies, TV shows, games and books, with the goal of leveraging third-party data from every major social media app to create a proxy to help producers, networks, platforms and ultimately marketers shape their content-related business decisions. This data- and tech-centered company and many others are aiming to solve these data challenges by providing the foundation of next-generation media analytics. Does this approach work? That answer awaits testing and learning from the market. And if it does work, do you know how would you incorporate that into your existing data stack?
Given this swirl of data-related issues, how should media and entertainment players approach this challenge? First, as Will Whatton emphasized, “Companies must play offense and defense simultaneously, managing risks from obsolete or inaccurate data and seizing new opportunities in a rapidly changing market.” Next, according to Johnny Lee, Grant Thornton’s national leader of Forensic Technology, “You’ve got to look at the validity of all your underlying data, not just data results. Keep in mind that 80 to 90 percent of data analytics takes place ‘below the surface.’ And finally, be cautious about the inferences you draw from data. Data that may be highly valuable for one function may be far less so when applied elsewhere.” The best way to navigate the flood of new data might be summed up with the old Russian proverb made famous by Ronald Reagan in his arms control negotiations with the Soviet Union. “Trust but verify.”
Senior Advisor, U.S. Media & Entertainment
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National Leader, Media & Entertainment
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