Displaying items by tag: Netflix

Netflix announced its Q2 2023 earning number on Wednesday and as had been predicted by stock analysts who follow the company, it beat market expectations, nearly doubling previous estimates.

The streamer reported a global gain of nearly 5.9 million new subscribers, to end the second quarter (ended June 30) with more than 238 million subs worldwide. This marks a turnaround from last year when Netflix reported a net loss of 1 million subs worldwide.

Netflix added 1.17 million subscribers in North America; 2.43 million in Europe and the Middle East; 1.22 million in Latin America, and 1 million subs in Asia Pacific.

Earlier on Wednesday , Netflix announced it was stopping its basic ad-free subscription plan for new and returning subscribers. Existing subs on the plan can continue accessing service unless less they cancel service. All new subs are being directed either to the lower-priced ad-supported tier, or the standard and premium options, priced at $15.49 and $19.99, respectively.

The company said in its shareholder letter that it has now launched paid sharing in more than 100+ countries, representing more than 80% of our revenue base. Revenue in each region is now higher than pre-launch, with sign-ups already exceeding cancellations, according to the streamer. Netflix is rolling out paid sharing to most of the remaining countries: 

"Increased sophistication on pricing and plans strategy is important to improved monetization. In Q1, we lowered prices in a number of less penetrated markets, and in Q2, we phased out our Basic ads-free plan for new and rejoining members in Canada (existing members on the Basic ads-free plan are unaffected). We’re now doing the same in the US and the UK. We believe our entry prices in these countries – $6.99 in the US, £4.99 in the UK and $5.99 in Canada – provide great value to consumers given the breadth and quality of our catalog."

"Tackling account sharing between households has been another focus as it undermines our ability to invest to improve Netflix for our paying members and grow our business. In May, we expanded paid sharing to 100+ countries, which account for over 80% of our revenue. The cancel reaction was low and while we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full paying Netflix memberships as well as the uptake of our extra member feature. We are revenue and paid membership positive vs. prior to the launch of paid sharing across every region in our latest launch."

"Beginning today, we’ll start to address account sharing between households in almost all of our remaining countries. In these markets, we’re not offering an extra member option given that we’ve recently cut prices in a good number of these countries (for example, Indonesia, Croatia, Kenya, and India) and penetration is still relatively low in many of them so we have plenty of runway without creating additional complexity. Households borrowing Netflix will be able to transfer existing profiles to new and existing accounts."

“Now that we’ve launched paid sharing broadly, we have increased confidence in our financial outlook,” co-CEOs Ted Sarandos, Greg Peters and CFO Spence Neumann wrote in the shareholder letter. “We expect revenue growth will accelerate in the second half of 2023 as monetization grows from our most recent paid sharing launch and we expand our initiative across nearly all remaining countries plus the continued steady growth in our ad-supported plan.”

There was also a discussion of content mix and subscriber engagement, with the company touting what it describes as a wide variety of titles that will give both regional and global audiences "titles they will love":

"We focus on engagement because it's the best proxy we have for satisfaction. It’s also closely linked to retention, an important driver of our business. Key for Netflix members is the variety and quality of our content, with the understanding that quality is in the eye of the beholder. We’re often asked “what is a Netflix show?” The answer is one that super serves the audience, leaving them highly satisfied and excited for more. It’s the satirical dramedy Beef (starring Ali Wong and Steven Yeun) and the dating show Love is Blind S4 (both of which were in the Netflix Top 10 throughout April), the romance of Queen Charlotte: A Bridgerton Story and the action of The Night Agent (both of which were in our top 10 throughout May)—stories that could not be more different and yet thrilled millions. The combination of content variety and personalization means that each person easily finds titles they will love."

"We learned the importance of variety back in the DVD days, and it’s become even more important with streaming. Because if you aspire to serve hundreds of millions of people all around the world, you can’t program for one set of tastes or sensibilities. You need to invest across genres, cultures and languages. Q2 was a good example of the range to which we aspire. Members could choose dramas like The Diplomat and Sanctuary (Japan), adrenaline-filled action with Arnold Schwarzenegger in FUBAR (followed by Arnold, a documentary about his life) and Fake Profile (Colombia), satire with Black Mirror, sports with the Tour de France: Unchained, romantic young adult comedy with XO Kitty (a TV spinoff from the To All Boys I’ve Loved Before film trilogy) or rap competition with Rhythm & Flow France S2."

"All these titles not only hit Netflix’s Top 10 list in their own country but also across multiple countries and our Global Top 10—showing that, with good subtitles and dubbing, plus easy discovery, great stories can truly come from anywhere and excite audiences everywhere. Even in the US, which has historically had incredibly local viewing habits, we’ve seen non-English language titles gain increasing popularity. Shows like Physical 100 (Korea), The Glory (Korea), Alice in Borderland (Japan), Marked Heart (Colombia), The Snow Girl (Spain) and Que Viva Mexico! (Mexico) and films such as Hunger (Thailand) and AKA (France) have all hit Nielsen’s weekly original streaming TV or film top 10 lists in the US for at least one week this year."

"As always, we strive for constant improvement and to increase the impact of our slate investments over time. Film is a good example of our steady progress, as our Q2 film slate demonstrated a consistent string of hits. We kicked off the quarter with Murder Mystery 2, featuring Adam Sandler and Jennifer Aniston (114.3M views in its first three months). This was followed by the thriller The Mother* (starring 4 4 Views are based on the first 91 days of release. For titles released less than 91 days (denoted with an asterisk), data is from launch date through July 16, 2023. We publish weekly our top titles based on engagement at Netflix Top 10. 3 Jennifer Lopez) in May, which spent six weeks atop our Top 10 weekly films list and has now become one of our most popular films of all time with 131.6 million views. We closed the quarter with the Chris Hemsworth-led action blockbuster Extraction 2*, which garnered 116.7M views in only 31 days."

"Murder Mystery 2 and Extraction 2 also sparked renewed interest in the original films, with both surging back into the Global Top 10 in Q2, several years after they first premiered on Netflix, highlighting the durability of these titles and talent. We see similar fandom on the TV side too. Bridgerton S1 reappeared in Netflix’s Top 10 in May when Queen Charlotte*—our latest story in the Bridgerton franchise—launched (79.6M views), Never Have I Ever S1 re-emerged in June when we premiered the fourth and final season of this beloved coming of age story and The Witcher S1 and S2 returned to our Top 10 in July as fans re-immerse themselves in the third season of this fantasy drama. This success demonstrates the progress we’ve made building lasting intellectual property (IP) from a standing start just a decade ago. This year we’ll have more returning seasons than any other streamer with The Crown, Top Boy, The Upshaws, Sweet Magnolias, Heartstopper, Virgin River, Too Hot To Handle and more still to come."



The shareholder letter went to say:

"Net cash generated by operating activities in Q2 was $1.4B vs. $0.1B in the prior year period. Free cash flow in Q2’23 amounted to $1.3B compared with about breakeven in the year ago quarter. Assuming no 9 material swings in F/X, we now anticipate at least $5B in FCF for 2023, up from our prior estimate of at least $3.5B. Our updated expectation reflects lower cash content spend in 2023 than we originally anticipated due to timing of production starts and the ongoing WGA and SAG-AFTRA strikes. While this may create some lumpiness in FCF from 2023 to 2024, we plan to deliver substantial positive FCF in 2024 (with a cash content spend to content amortization ratio of roughly 1.1x)."

"We finished Q2 with gross debt of $14.5B (in-line with our $10B-$15B targeted range) and cash and short term investments of $8.6B. During the quarter, we repurchased 1.8M shares for $645M. We now have $3.4B of capacity remaining under our $5B share buyback authorization. We’re currently running a bit above our targeted minimum cash level , so we expect to increase our stock repurchase activity in the 10 second half of 2023, assuming no material change in our business."



Co-CEOs Ted Sarandos and Greg Peters, CFO Spence Neumann and VP of Finance/IR/Corporate Development Spencer Wang will be on an investors call with Jessica Reif Ehrlich of BofA Securities at 3:00 pm PT on Wednesday.

For an update on that discussion, subscribe to my free, daily Too Much TV newsletter at toomuchtv.substack.com

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An abbreviated version of this piece first appeared in the free, daily Too Much TV newsletter at toomuchtv.substack.com

Netflix is notoriously difficult to navigate as a journalist. Most people who work either actively distrust the press or have been taught by the Netflix culture to not speak to the press. But I have some good sources there and while many times I learn things I can't use publicly, there have been times when someone has been willing to at least speak to me without attribution.

Several days ago, someone forwarded me some internal emails from Netflix. I'll be circumspect about some of the details, in order to keep anyone there from tracking down my source. 

One of Netflix's long-cherished components of its corporate culture is the idea that team member should take "informed risks." And while that idea has scaled back a bit in recent years, it's not unheard of for someone to step out of their lane a bit and put forward an idea that potentially pushes the boundaries at the streamer.

These emails were a chain of message that began with a very thoughtful proposal from a relatively mid-level executive and it posited one question. The writer's strike is ongoing and an actor's strike might be on the horizon. So what would be the best way to settle this issue? And by "best way," the proposal would be built on maximizing the amount of impact Netflix could have on the negotiations while simultaneously inflicting financial pain on their streaming rivals. And it is a fascinating read.

The proposal included in the initial email suggests that Netflix should cut a separate deal from the other studios and negotiate terms with the unions that would minimize the changes the streamer would need to make.

* Netflix would propose to shift the production cycle for most shows in a way that would make it easier to keep writers tied to production. In part, that would involve ordering some shows based on a pilot script and outlines, allowing the writers to break the episodes during the production process. The minimum guaranteed size of the room would remain small (4 instead of the six proposed by the WGA), but those production changes, along with tweaks on span and other related items might provide enough for writers to accept without substantially impacting the bottom line.

* There wouldn't be much of a change in transparency on viewing numbers and other internal metrics used in determining content value. But there would be a formula that would provide performance-based bonuses for projects that reached certain goalposts, including Netflix Top Ten Lists, Nielsen rankings and some other third-party data. It's not residuals, but it would at least provide some financial incentives for performance that would be a solid interim step. And it's notably a similar approach to the one reportedly proposed by SAG-AFTRA, which would pay performance-based residuals out of an agreed-upon pool of funds.

* Changes to AVOD payments and residuals that would not only provide a pay increase for union members, but make it less lucrative for streamers to move low-performing projects to AVOD. The proposal notes that while it would be a substantial cost to Netflix, the changes would fall hardest on Prime Video and Warner Bros. Discovery, both of whom have been aggressively moving original productions from SVOD to AVOD. That factor was seen as a net plus.

* A penalty "payment" that would go to union members if a project was completed, but permanently shelved for whatever reason. This was another proposal that seemed to be most directly targeting Warner Bros. Discovery, although this would have some impact on nearly every streamer at some point.

There are some other ideas, but many of them are somewhat incremental shifts in payments. More than AMPTP would likely would prefer, but less the the final WGA proposals. The subject of AI wasn't addressed at all. I suspect because of the complexity of the issue in the framework of this idea.

The email went out to a handful of Netflix employees and most of them appear to be in the same work group. Although one of the recipients was a person the author reported to. There were a number of responses and the initial feedback seemed to center around a couple of points. a) There were a lot of solid, actionable ideas that would likely be accepted by the unions, and b) The proposal would essentially be declaring war on the other major streamers and the consensus was that wasn't a move Netflix's top executives would likely to approve. "(name redacted) hates our competitors but (name redacted) doesn't HATE hate them," was part of one response.

It's not clear if this is an idea that Netflix could have moved on even if it wanted to. None of the participants in the email chain were anywhere near the level where they understood the rules of engagement with AMPTP. But none of the responses believed company executives were willing to burn so many bridges with other major media companies. Especially at a time when Netflix is aggressively trying to license selected content from those same companies. 

But the conversation did note that Netflix and the other streamers have a lot more flexibility to negotiate than the companies that are attempting to juggle streamers as well as legacy broadcast assets. 

I spent a lot of time trying to confirm the authenticity of the emails and contacted everyone in the email chain. Several people admitted to having received the emails, but one person who seemed to have added several long entries in the email thread told me they "didn't recall" whether they had read it or responded to it in any way. Which seems...unlikely. I read a selection of emails to another recipient, who told me they appeared to match the ones they had received. 

The author's superior doesn't appear to have responded, although I very likely didn't receive all of the responses that weren't part of the "reply all" chain. But enough people confirmed the legitimacy of the emails that I feel pretty confident they're real and unaltered. 

As to the question of whether the idea was passed along up the chain at Netflix, my guess would be no. There was a lot of agreement that the proposals had value and with some further tweaking possibly allowed Netflix to settle with the unions early and net a massive advantage with its rivals. But there also seems to have been a quick consensus that this "informed risk" would be too risky for Netflix upper-level executives to seriously consider.

So in the end, this falls into the category of "what might have been."


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Regular readers will know that I have some pretty good inside sources at the streamers and they help to give me some unique insight into the inner workings of the industry.

In February, I posted some thoughts from a Netflix executive, who talked about some of the issues likely to cause a writers strike. Including the issue of so-called mini rooms:

I am of the opinion that mini-rooms work best for a lot of shows. Streaming services are ordering a lot of shows that are essentially primarily written by one writer and perhaps a very small room. But how can we make that work better for the industry? The money aspect is part of a bigger pay discussion, although I'm sympathetic to the argument that a per-episode payscale isn't viable long-term. But how do we make it better for everyone without blowing up the budget? As it is, we're often shifting writing money into other parts of the production. So we need to figure this out in a way that helps writers make a living without making every show economically unsustainable. I think we can talk about changes in span and make sure writers aren't being hold so long on a project. Those are doable changes that cost money, but not the entire bank.

I'm also sympathetic to the complaints that mini-rooms and extended production schedules mean that writers don't get the same access to the set they would if they were working on a network procedural. I honestly don't know how we work that out. There's no money in the budget for flying someone to the set just to gain some production experience. Or keeping writers around after the room has closed. But we also need to grow the industry's younger writers. Maybe that means more mentorship programs or something we haven't thought of yet.

We have continued to talk in the ensuing weeks and following some reports in the Hollywood trades that Netflix seems to be the AMPTP member pushing back the hardest against WGA proposals to mandate a minimum staff size for writers rooms, the executive passed along some thoughts about the proposals. It's worth reminding you that this executive is not directly involved in negotiations with the WGA, but is familiar with the thinking of both AMPTP and Netflix:

"It's clear the writers room proposals might be the toughest to work out. Even the AI stuff can be finessed into something both sides can live with for a few years. But while the company (Netflix) is taking the most heat over mini-rooms, I can tell you that the position isn't any more friendly at Amazon or WBD. Mandates create a minimum overhead and that's not a small issue for streamers. And from Netflix's perspective - and I think it's also shared at other companies - there is a fear that whatever is established during negotiations with the WGA will become the expectation across the globe. That will lead to a massive cost increase and I'm not sure the company is willing to take that hit. It would be terrible for the bottom line in the short and mid-term."

I asked about two arguments I frequently hear from writers: that the small mini-rooms have led to showrunners as well as the other writers being overworked. And that the mini-rooms ironically likely cost the streamers money because not giving the writing room the sufficient time to do their best work combined with not having the writer of the episode on set likely leads to a lower quality end result that costs more money:

"I can't speak for everyone, but my experience is that executives I have spoken with absolutely don't believe the writers are overworked. At least, not on a consistent basis. I've had a closer relationship on a couple of shows, and I've seen some of the problems that pop up. But at this point, no one on our side of the negotiations is willing to change anything due to work load. Their attitude is "if they can get it done, then obviously it's not too much for them." I don't agree, but it's going to be hard to change that mindset.

If we weren't in the middle of a strike, I can see some discussions around whether the current model of "cost-plus" productions, small rooms and no pilots is the best approach. But people are dug in deep now and I don't know of any executive that is willing to entertain changes at this point.

The problem with all of this is that the people at the top have the least experience with the day-to-day operations of a TV series or film. They're just looking at spreadsheets and internal data which tracks how "efficient" a production is compared to a baseline. None of which gives you a sense of how a show gets made and how it can be done more efficiently. The lower-level people here tend to be at least somewhat sympathetic to the WGA stance. Some of them are much more than somewhat sympathetic. But the people in the C-Suite? I think there's a mix of an arrogant belief they're making the right decision combined with a growing anger that the people they employ aren't being sufficiently grateful.

This is not a good mix for anyone."

And to be honest, streaming executives are no different than executives in any other industry. They are much more concerned with the impact now or next year then they are about ten years from now. Asking for set writer's room staffing solves a longer-term problem. But media company executives are not set up to worry about the next decade. It's much more about the next quarter's numbers and Wall Street narratives.

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I have a 17-year-old son and like most modern American teenagers, he spends the majority of his spare time not watching traditional television. He'll watch at least some of his beloved Islanders games live, but most of the time he is following the seasons of his favorite teams by watching the official daily highlight videos posted on YouTube by the various sports leagues. 

In fact, YouTube is where he spends most of his video screen time. He watches compilations of "fail" videos, game hints and walkthroughs and an amazing number of YouTube personalities doing their thing. It's not that he never watches traditional television. But if linear TV comprises 10% of his screen time, I'd be shocked.

Even his time on the various SVOD platforms is hit-and-miss. Despite living in a household with pretty much every possible paid video service, he's at best an intermittent user. He'll watch game shows with my wife, a few shows like The Mandalorian or The Curse Of Oak Island with me. 

The one genre he does watch with an almost obsession is anime. Lots of anime. He recently told me he had watched something along the lines of 170 anime shows and honestly, I can't decide if that's impressive or scary. But of everything he watches, few shows compare in his mind to the various Pokemon TV shows. He's watched them since he was a child and while he won't rewatch them again, he impatiently waits for the next round of new episodes. And since the 2020 deal that secured the streamer the rights to be the exclusive home of new episodes of the Pokémon animated series in the United States, that has meant watching Netflix.

As is the case with many of their animated shows, Netflix splits a traditional season of Pokemon episodes into 3-4 "chapters" of episodes, with each chapter dropping at one time. And when they do, my son blasts through them with a remarkable efficiency. He watches them on TV, watches them on his phone as he's walking around..he'd watch them in the shower if we let him. And within a day or so, he's done with the chapter and eagerly awaiting the next round of new episodes.

Seeing his behavior made me wonder whether his love of the show was a widespread phenomena or whether the various Pokemon animated shows were more popular then I realized. I hadn't ever seen the show jump into any Netflix Top 10 list when new episodes were released. On the other hand, Netflix recently signed a deal with the Pokemon Company to partner on a new stop-action Pokemon series. So there is obviously some level of interest with Netflix subscribers.

To find an answer to the question, I reached out to data analytics firm Parrot Analytics, which among other things collects what it describes as "global audience demand" data. Basically, they collect a wide range of data points from across the industry. Everything from official viewing numbers and social media interest to data culled from viewer interactions on search engines, IMDb, even pirate sites that offer the option of illegally downloading titles. They are then able to estimate a "demand" number, which allows customers to not only see how much interest there is in a specific title, but also compare it to other competing titles. 

I won't claim to understand all of the intricacies of their number crunching, but based on what I've heard from people working at the various streamers, they have a pretty good model. And when I posed this question to Parrot, they provided a wide range of interesting data points to consider. It can't answer the specific financial question of how much the Pokemon shows are worth to Netflix, particularly because we don't know the terms of the deal between the two companies. But it should help us determine how popular the show might be with Netflix customers.

As a starting point, Parrot data notes that anime was the No. 1 ranked subgenre in audience demand globally throughout all of 2022 overall. And more importantly, in a popular genre, episodes of the three new Pokemon shows that have premiered on Netflix have been exceptionally popular.

All three series were described as having either "outstanding" or "exceptional" demand and that characterization depends on the overall popularity of the show compared to other Netflix shows of all genres in the same region. 

The following data takes a look at the performance of all three shows throughout all of 2022, and the overall number represents how many more times in-demand the show was than the average series in that region and time frame. So, for example, Ultimate Journeys was 20.99 times more in demand than the average series in the US over the course of its run. 

Journeys (Nov. 17, 2019-Dec. 4, 2020)
US Avg: 19.96x (Outstanding - Top 2.7%)
WW Avg: 21.81x (Outstanding - Top 2.7%)

Master Journeys (Dec. 11 2020-Dec. 10, 2021)
US Avg: 22.08x (Outstanding - Top 2.7%)
WW Avg: 23.17x (Outstanding - Top 2.7%)

Ultimate Journeys (Dec. 17, 2021-March 24, 2023)
US Avg: 20.99x (Outstanding - Top 2.7%)
WW Avg: 18.93x (Outstanding - Top 0.2%)

The peak number for the U.S. and worldwide are even higher, but it feels as if the overall number is a better representation of the show's popularity. Pokemon is a very popular show in a very popular genre.

But what likely makes Pokemon even more important to Netflix is its overall subscriber engagement. Some other Netflix animated originals grab substantial demand, but that demand rises and falls depending on the release of new episodes. While Pokemon titles see the same ups and downs of demand, the shifts are less pronounced when compared to some other titles. 

For instance, take a look at this comparison between Pokemon's demand in the U.S. compared to that of Big Mouth, another Netflix animated original:



The daily demand for Pokemon is relatively stable, whether or not new episodes are released. In the case of Big Mouth, you see a big jump around October of 2022, when the latest season of the show was released. Overall, from January 1st, 2022-March 21st, 2023, Pokemon peaked as the 25th most in-demand TV series in the US while Big Mouth peaked at 106th. 

Those number reflect what I was told on background from a data analyst at Netflix, who noted that a substantial portion of Pokemon viewers watched episodes more than once. And even more importantly to the streamer, they were more likely to engage with other animated titles on Netflix. And while the average Pokemon viewer might watch less non-animated Netflix content than the average Netflix viewer with the same demos, they were valuable to Netflix because anime is a genre that the streamer sees as important to its future growth, especially in less-mature markets.

And the data from Parrot seems to bear that out, since it shows that while the show is popular with anime fans in the United States, it's also important to subscribers globally.

Compare these two charts that show animated series demand on Netflix in the U.S. and worldwide over the past 60 days.  Both in the US and globally, Pokemon ranked among the 10 most in-demand animated shows housed on Netflix:

When you look at the demand data country-by-country, some of the numbers are surprising. The year-to-date peak rank of the Pokemon shows in the U.S. is #61, which is roughly the same popularity that you see with subscribers in France. But it's much higher in Canada (#35) and not surprisingly much lower in India (#152)

From Netflix's perspective, one of the attractive aspects of the Pokemon franchise globally is the behavior of the typical Pokemon viewer when compared to viewer cohorts of many other anime shows. While Attack On Titan viewers are super engaged with the series, the churn rate for those subscribers is on average substantially higher. Pokemon viewers more closely resemble the behavior of subscriber families who watch kids-oriented animation such as Cocomelon. They watch a lot of similar Netflix programming and the 6 and 12-month churn rate is lower.

When Netflix assesses the valuation of any content, it looks at all of these numbers as well as numerous other data points. How many people are likely subscribing in part because of a show, where they are located (and that opens up everything from the region's average revenue per user to strategic growth goals) as well as comparing the viewers to other groups of subscribers and attempting to parse out future behavior.

I'm limited what I can share publicly, but I can tell you that based on Netflix's data, the deal to acquire the new seasons of Pokemon was considered to be both a financial and strategic success. The subscriber engagement was solid in the APAC regions, but it was also substantial in some of the more mature European markets.

And at the end of the day, that is why Pokemon matters to Netflix. It makes an important segment of its subscribers happy and it reinforces the overall strategic goals of the company.

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A version of this piece was first posted in my free, daily Too Much TV newsletter at toomuchtv.substack.com earlier this week.

I have also added some of the comments I received from readers - both from the writer's perspective as well as the studio side. 

To add your comments, simply reply email me at This email address is being protected from spambots. You need JavaScript enabled to view it. and I'll keep your feedback confidential unless you specify otherwise.

A NETFLIX EXEC UNOFFICIALLY WEIGHS IN ON RESIDUALS, MINI ROOMS
While nothing is certain, there seems to be a growing consensus among writers and executives I speak with that a WGA strike this summer is almost inevitable. Writers have a long list of what they consider to be "do-or-die" issues and in many cases they aren't wrong. But from the studio side, executives I speak with argue the industry is already tightening belts. So how likely are they to agree to provisions that will substantially increase costs and as a result, lead to more production cutbacks?

I spoke with a senior Netflix executive this morning off-the-record about another issue and as we were wrapping up, the topic of a possible strike came up. This executive deals with these issues on a regular basis but would not be part of the final decision making at the streamer when it comes to agreeing to new terms. This executive agreed to be quoted, but not identified. These comments have been lightly edited for clarity and to preserve some identifiable information:

"Look, I'm sympathetic to a lot of the complaints and some things need to change to keep the industry healthy. But I also am realistic about we can and can't change. Take short seasons. For us (Netflix) and for most other streamers, eight episodes is the new norm. Maybe ten episodes. That is not going to change for a lot of complex economic reasons...so then how do all of us make this work economically for both sides?

I am of the opinion that mini-rooms work best for a lot of shows. Streaming services are ordering a lot of shows that are essentially primarily written by one writer and perhaps a very small room. But how can we make that work better for the industry? The money aspect is part of a bigger pay discussion, although I'm sympathetic to the argument that a per-episode payscale isn't viable long-term. But how do we make it better for everyone without blowing up the budget? As it is, we're often shifting writing money into other parts of the production. So we need to figure this out in a way that helps writers make a living without making every show economically unsustainable. I think we can talk about changes in span and make sure writers aren't being hold so long on a project. Those are doable changes that cost money, but not the entire bank.

I'm also sympathetic to the complaints that mini-rooms and extended production schedules mean that writers don't get the same access to the set they would if they were working on a network procedural. I honestly don't know how we work that out. There's no money in the budget for flying someone to the set just to gain some production experience. Or keeping writers around after the room has closed. But we also need to grow the industry's younger writers. Maybe that means more mentorship programs or something we haven't thought of yet.

As far as residuals - or however you want to frame the money - I hear some writers arguing for some sort of an increased residual based on popularity, which is as close to a non-starter as you can find from our perspective. Aside from just the bookkeeping nightmares related to just determining what qualifies as viewed, doing that would be contrary to every other deal we've worked out globally. More transparency is certainly coming, although I am pretty sure it won't be what most people want. But we could end up with a situation closer to what we deal with in places like France and some other European markets. Writers, directors and producers receive a quarterly recounting of the viewing numbers on any program they've worked on that was produced in that specific country. And a residual or bonus is paid based on that. They also agree to receive the viewing statements in exchange for agreeing not to publicly discuss the numbers. And honestly, that has more to do with a fear of numbers being reported out of context than not wanting them to be reported at all.

I also think giving participants access to data such as retention rates or other metrics that fall into the non-production side of the business is problematic....."

READERS WEIGH IN: A NETFLIX EXEC UNOFFICIALLY WEIGHS IN ON RESIDUALS, MINI ROOMS
My piece in Tuesday's newsletter that highlighted a Netflix's thoughts on a possible WGA sparked a LOT of feedback from readers. Some of which is confidential, although that was also all very helpful. 

But here are some other questions and comments I can pass along, albeit anonymously:

"One of the biggest problems is the current cost-plus formula used by streamers. That has the streamer paying the studio the full cost of a show from the start, plus a 30 to 40 percent premium. The theory is that the "plus" is supposed to replace money lost because of a lack of syndication money or residuals. But that approach has a lot of downsides and it costs the streamers as much as the talent. Because the "plus" is built on top of the final budget, it encourages a lot of budget bloat and trickery because that's the only way now to make extra money. And since the streamers (particularly Netflix) have structured deals in which the "plus" or other bonuses don't fully kick in until a certain metric is hit - often in seasons three and above - the streamer is encouraged to cancel shows prematurely because it saves them paying out the bonuses. 

It's the same reason why Netflix splits animated shows into short "chapters." They're contractually required to up everyone's money after each respective season and they get around that by ordering what is technically one season, then splitting that order into shorter chapters to spread out the episodes and save money."

"We're screwed. There is no way there won't be a strike and when there it is it will be brutal. I wish it wasn't the case, because I work on a broadcast show and we'll get hit harder than anyone."

"I think a lot of writers have the attitude that the 2008 strike was tough but we ended up getting a lot out of the pain. But things are so different now and it frankly scares the crap out of me. The bigger streamers can shift production outside the U.S. and survive okay. And unlike back then, we don't have someone independent like Nikki Finke who can push our point of view to the public. (editor’s note: clears throat) I don't trust the Penske-owned publications that depend on all of that studio money to survive. They're not going to lie for the studio, but the coverage will lean into the studio's direction."

"We are well past the point where we should be accepting less money for a show simply because it's streaming."

"It will be painful, but I think both sides can come together on the overall pay issue. I'm not convinced that there is a workable answer for the demand for minimum writing staffs on shows. How many people do I need on a six-episode show helmed by someone who both created the show and wants to write all the episodes? I get the need to keep people employed and we need more experienced people in the pipeline. But this just feels like a battle that might not be worth fighting for writers, especially with so many other things to fight for this time."

"Span protection is THE number one issue for me and I'm glad to see that it appears to be a priority for most people. Solving that issue will go a long ways towards solving some of the other problems.

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On Tuesday, The Wrap published a piece about changes at Netflix's Kids and Family section of its animation division. Those changes included the exit of Phil Rynda, whose official title is Netflix’s Director of Creative Leadership and Development for Original Animation, along with several of his staff.

The article recounts some really brutal issues in the division, but this section jumped out at me:

Making matters more frustrating for creators are a set of imposed corporate guidelines that dictate, with Draconian exactness, the marketing and distribution of the series. Promotion doesn’t typically begin until a month before the shows premiere. (Sometimes they haven’t even been announced before then.) This leaves a very small window to build awareness and anticipation, much less cultivate genuine excitement. And once the show debuts on the platform, it can often get lost in the shuffle (how many times have you ever seen an animated series “above the fold” on the homepage?), leading many creators to become their own hype machines via various social media platforms.

Levers that other animation studios at bigger corporations can pull, like consumer products releases or promotional tie-ins, aren’t pulled at Netflix. There weren’t “Kid Cosmic” action figures lining the shelves of Target. You couldn’t get a “City of Ghosts” Happy Meal toy at McDonald’s. There’s no theme park or dedicated retail space to exploit either. On the official Netflix Shop, there isn’t a single Kids & Family animated series represented.

These complaints about Netflix's marketing decisions won't be a surprise to long-time readers of AllYourScreens, because I have been covering this issue for several years:

This might all sound like inside baseball whining. But I WANT to promote these shows. I want to highlight the best of them and surface some great smaller projects. And oftentimes it's a near-impossible task. My inconvenience is real, but that's not the real issue. Netflix often seems to have more faith in its internal ability to push programs over most external promotion. And we have no metrics from the outside that would support or disprove that theory.

What is true is that an increasing number of producers and outside studios feel as if they have to hire outside promotional help when their show launches. Probably 75% of the Netflix shows I've covered in the past few months have hired outside PR help. And I frequently hear from those publicists that their efforts to work with Netflix publicists on their show is beyond frustrating. (Note: I've seen some other journalists tweeting this 75% figure around as if it was the results of some in-depth study. This is just my experience & YMMV)

I think there are a couple of factors at play here, but the core issue is the role of the press and the related marketing of an upcoming show.

There is a very real belief inside Netflix that most press coverage is of marginal value, aside from being an effective way of letting subscribers know a series or movie is set to premiere. I've been told by more than one executive in recent years that their internal data shows the best method of content discovery is through Netflix - whether that is through outreach such as emails or content pushes inside the Netflix app itself.

And that may very well be the case. But that approach also has some notable flaws. First, given the amount of new content Netflix is releasing, there is just not enough bandwidth to properly promote every new project. And if your project isn't prioritized, you can feel as if no one knows you even exist. Especially if you have a project that is too complicated or nuanced to sell through a catchy thumbnail image.

That belief in internal promotion efforts is also part of the reason why Netflix insists on not beginning any promotion or marketing of a show or movie until very close to the premiere date. There are exceptions to this when the project is high-profile and/or the talent has insisted on a certain level of promotional efforts as part of the their deal. But generally speaking, most TV shows and movies are lucky to get any marketing a week or two in advance of the premiere. Which often leads to subscribers seeing something new and saying "Hey, where did that come from? I had no idea it was even coming out?"

Now, Netflix executives will argue that surprised eureka moment is the most effective type of marketing. And once again, while that may indeed be the case, the problem is that eureka moment is the result of luck as much as marketing. And entirely too many shows don't get the "accidental" attention needed to bring in the expected level of viewers.

This belief is extremely frustrating to producers, showrunners and other crew, who often find themselves unable to publicly reach out to the audience most likely to watch the show. "I worked on a show based on a game and I begged Netflix executives to let me drum up interest on the show," one producer on a recent Netflix series told me. "I was told in no uncertain terms that I was not allowed to get out in front of the Netflix PR people. And they didn't do anything until a bit more than a week before the premiere. The company prevented me from promoting my own show, then complained after it premiered that it didn't get the number of viewers they expected,: he continued. "I wonder why not?"

And all of these challenges are simple compared to the complications that come from trying to cover Netflix's international releases. While there are a few higher profile international releases that receive marketing and promotional efforts in the U.S., most of the programs made outside of the U.S. are just set free here in hopes that someone will discover them. To be fair, this isn't a problem limited to Netflix. The promotion of internationally-produced programming is a serious problem for HBO Max and Disney. And at least in the case of Netflix, they spend the money to dub the shows into a wide range of languages. 

Marketing is hard and proper PR can be labor-intensive. But if Netflix executives really do want to be more cost-conscious and hope to be more efficient, then giving every new title as much of an edge as possible seems like a pretty cost-effective approach to the problem. It would also help the streamer's reputation inside Hollywood, which could use a boost after the events of the past week.

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I have been bullish on Netflix for a long, long time. I interviewed Reed Hastings in 1999 for a now-defunct financial news web site and at the time I was struck by his vision of the future. Even in the company's earliest years, he was already thinking about what Netflix would look like in the digital era. At a time when his company's business was entirely based on DVDs & most people still had dial-up internet accounts, Hastings talked about a future in which Netflix would deliver titles online. Which in 1999 seemed to be about as likely a scenario as the existence of a refrigerator that emails you when you need to buy eggs.

But for all of the things I think they do right, I've always been frustrated with how they promote their original programs. Netflix has some passionate, knowledgeable and helpful publicists. But the overall promotional strategy for the company seems to be that except for a few, high-profile projects, it's more important to promote the service than any individual program.

That's why I was not at all surprised when Netflix recently announced it was letting about 15 marketing people go in the company's L.A. offices. In the Variety story, a Netflix source admitted that the move was part of an effort to shift promotional focus to the overall Netflix brand:

The company will continue to promote individual shows as part of its greater marketing initiatives to promote the whole service.

In theory, I understand the reasoning behind the shift. With entire seasons of shows being released in one drop, spending time on any one show might seem like a waste of resources. Especially at a time when Netflix releases multiple new shows in one week (and often, one day). And to be fair, even broadcast networks end up doing triage when it comes to promoting its new shows. More than once, I've tried to get help from a show publicist & quickly realized that the network was already cutting its losses.

But Netflix's reluctance to promote all of its original programming has a couple of unrelated but important impacts on the way critics cover its shows as well as any individual show's ability to grab enough viewers to get the order for another season.

From a TV critic's point of view, trying to get even basic information about many shows is damn near impossible. Netflix sends out emails highlighting higher-profile shows and oftentimes review screeners are available. But it's common to only get 3-4 episodes of the 8-10 episode season. It's also common for reviews to have an embargo that doesn't lift until the show actually hits Netflix. Which leaves critics with the option of posting a review of a partial season when the viewers have access to the entire thing. Or screen the episodes we get ahead of time & then quickly watch the remaining episodes and post a review.

To be honest, while those restrictions are unwieldy at times, the biggest issue for me is the number of shows that hit Netflix with little or no promotional efforts whatsoever. Take, for example, the recent documentary series "Pandemic: How To Prevent An Outbreak." The series is a great look at viral pandemics & given that it came out the week the Chinese coronavirus outbreak hit the news, the show should have gotten tons of attention. But apparently no one received an early look at the show, since every review I could find was written after it premiered. Providing at least some promotion for the series seems like a dunk shot, but it's just another show that came and went before most Netflix users discovered it. 

And that is often the case for mid-tier original shows premiering on Netflix. You have to scramble to track down screeners, and even if you get one there is often little or no cast and crew information. Photos have no credits on them and even when the show has a page on the Netflix media site, there is increasingly only a generic email contact.

This might all sound like inside baseball whining. But I WANT to promote these shows. I want to highlight the best of them and surface some great smaller projects. And oftentimes it's a near-impossible task. My inconvenience is real, but that's not the real issue. Netflix often seems to have more faith in its internal ability to push programs over most external promotion. And we have no metrics from the outside that would support or disprove that theory.

What is true is that an increasing number of producers and outside studios feel as if they have to hire outside promotional help when their show launches. Probably 75% of the Netflix shows I've covered in the past few months have hired outside PR help. And I frequently hear from those publicists that their efforts to work with Netflix publicists on their show is beyond frustrating. (Note: I've seen some other journalists tweeting this 75% figure around as if it was the results of some in-depth study. This is just my experience & YMMV)

Netflix PR people will likely consider this all a bunch of whining from a smaller individual web site. Fair enough, believe what you want. But Netflix is spending hundreds of millions of dollars on production deals in order to grab the hottest creative talent. And a fair amount of that effort is going to be wasted if the Hollywood community begins to believe that the creative freedom offered by Netflix is more than offset by the service's haphazard promotional efforts. Hiring an outside PR firm to promote your show shouldn't be the default approach on any network or streaming service. The fact that so many producers believe it's an essential expense is a failing of Netflix and it's not one they seem to be interested in addressing right now.

I am not one of the television critics or industry experts who believe releasing an entire season for binging at one time is a bad idea. But I do believe that covering and promoting bingeable television requires some new skill sets and approaches. And for all of its expertise, Netflix still hasn't figured out the most effective method to adequately promote all of its billions of dollars a year of new programs.

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One consequence of Netflix releasing its bad Q1 numbers yesterday is that every person with a Netflix account is suddenly an expert on what the company needs to do to turn things around. And in many cases, these criticisms conflate "this is the way I use Netflix" with "this is what I think Netflix is doing wrong."

One of the more commonly heard refrains - particularly on social media - is that Netflix needs to move away from its binge-release method of premiering shows. But does that make sense and would that move make Netflix's future any easier? Let's take a look at some of the arguments against the binge release method and you can decide for yourself.

Since Netflix drops an entire season at one time, people can just subscribe for a month and then drop Netflix until the next time something comes along they want to see.

Yes, they COULD do that. But given that Netflix consistently has the lowest churn rate in the industry, it seems obvious that not many subscribers feel the need to do that. One of the rationales for Netflix creating so much content is the theory that even after you've watched your favorite show, there is something else new there you might find interesting. 

By the way, "interesting" doesn't always mean a high-profile scripted show. Most people watch a range of content and that means everything from true crime and dating shows to older, lesser-known movies featuring familiar stars.

And when you look at today's Top Ten list of Netflix programs in the U.S., there is a bit of everything reflected in the lineup. Anatomy Of A Scandal and Bridgerton are #1 and #3, but the second most-watched title is The Ultimatum: Marry Or Move On. The top ten also include a 2007 Samuel Jackson film (Cleaner), a suspenseful thriller (Choose or Die) and older licensed episodes of some well-known shows (Better Call Saul, Queen Of The South, Married At First Sight). 

This mix of content might not be what you want to see, but it's an attempt to please the largest number of people. It's what I've described in the past as the theory of perceived value:

The lesson from all of this is that the temptation is to look at some ideal monthly subscription fee charged by a streaming service & use that as a benchmark for a service's "value." But in reality, what a service is worth in the real world is a concept called "perceived value." This is how it's described in the business dictionary:

A customer's opinion of a product's value to him or her. It may have little or nothing to do with the product's market price and depends on the product's ability to satisfy his or her needs or requirements.

Media industry analysts and reporters often parrot the argument that "content is king." And while content is important, a bigger factor in the success of a media business is perceived value to the customer. How valuable is the content to the customers you're targeting? Is your user interface friendly enough that it doesn't lessen the value of your content in the eyes of frustrated users? There are a lot of factors that go into how customers perceive the value of a streaming service. And because it's all a bit squishy & difficult to quantify on a spreadsheet, it's often overlooked by industry analysts.

For instance, subscribers numbers are important. But to a certain extent, subscriber numbers are also a lagging indicator of perceived value. The customers subscribe in large BECAUSE the price matches or is lower than their perceived value of the service. It's why the cost of Amazon Prime Video is rolled into a package that includes everything from free music to free shipping. That's the customer's perceived value of the Amazon content. 

Netflix's subscriber numbers slumped in its more mature markets during Q1 not because it was binge releasing episodes of Is It Cake? It struggled because for some subscribers, the recent subscription rate hike and/or other economic factors meant that the cost of Netflix was more than its perceived value to the customer.

Dropping an entire season at one time means that shows get lost and are often forgotten a month after they are released.

There are really two different problems here, so let's unpack them separately.

While we're still relatively early in the streaming era, I think one thing we know for sure is that the biggest factor in whether or not a show surfaces in the pop culture zeitgeist is the quality of the show. Plenty of big-budget programs were released on a weekly basis and absolutely no one noticed (The Lost Symbol, The Mysterious Benedict Society). While I suspect it is true that some shows get overlooked when dropped in a binge format, these are also shows that probably would have struggled even if episodes had been released weekly. 

And most times, when someone is arguing that their favorite show failed because it was released in a binge format, most other viewers who have seen the show realize the problem was creative, not logistical.

But when Netflix releases so much stuff at the same time, great programs get lost in the flood of new content.

I do think the complaint that shows get lost is a valid one, but the primary reason is not because of the method the episodes are released.

I've long been critical of Netflix's marketing efforts and while the company has made some improvements, too many projects are just dropped onto the service with little advance promotion:

And that is often the case for mid-tier original shows premiering on Netflix. You have to scramble to track down screeners, and even if you get one there is often little or no cast and crew information. Photos have no credits on them and even when the show has a page on the Netflix media site, there is increasingly only a generic email contact.

This might all sound like inside baseball whining. But I WANT to promote these shows. I want to highlight the best of them and surface some great smaller projects. And oftentimes it's a near-impossible task. My inconvenience is real, but that's not the real issue. Netflix often seems to have more faith in its internal ability to push programs over most external promotion. And we have no metrics from the outside that would support or disprove that theory

It's especially an issue with programs produced in another region. Highlighting global content is a tough challenge and no streaming service really has it figured out. But if international content is the future, then Netflix and its rivals need to figure out the promotional challenges. 

Because I review more international programming than most U.S. sites, I receive a lot more outreach about global shows. But because of the way the promotional efforts are set up, that means I am getting information in a variety of languages. And while Google translate is helpful, it's a clunky way to learn about the newest show from Poland or Portugal.

It's also true that despite a lot of work on the part of Netflix's PR teams, many producers still feel the need to hire outside PR firms to properly promote their projects. To be fair, there is always going to be some unhappiness on that front. But there is more of it with Netflix than with most other streamers.

But I miss the experience of reading weekly recaps and sharing a common cultural experience with other viewers over the course of a season.

That experience was wonderful and you can still experience that to a lesser degree with some shows that are released on a weekly basis. But to a certain extent, that complaint is similar to the one that music fans make about the lessened importance of album releases. It was fun to experience an entire album beginning to end, without being able to cherry pick tracks and only buy the ones you wanted. But both of those shared cultural experiences reflect a bygone era and that won't change even if every show was released weekly and you could only buy complete albums and not individual songs.

Change is hard and it's not always for the best. But while blaming your unhappiness on binge releases might make you feel better, it won't change the reality of the world we live in.

Here is a list of entertainment industry COVID-19 outbreaks currently being tracked by the Los Angeles County Health Department. Their list includes any location where three or more cases have been reported within the past 14 days:

CBS Studio Center Bungalow 3, Lyons Gate Production
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 26

CBS Studio Center Stage 04
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 11

CBS Studio Center Stage 14
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 8

NBC Universal - Mr. Mayer Production (I am assuming they mean "Mr. Mayor")
100 Universal City Plz, Bldg 5225, Universal City, CA, 91608
Total confirmed staff cases: 12

NBC Universal Stage 1
3900 Lankershim Boulevard, Stag
e 1, Building 2230, Studio City, CA, 91604
Total confirmed staff cases: 7

Netflix Productions
18421 S Main St, Gardena, CA, 90248
Total confirmed staff cases: 9

Pluto TV
8684 Melrose Ave, West Hollywood, CA, 90069
Total confirmed staff cases: 10

Warner Bros Television - Lucifer
4000 Warner Blvd, Bldg 28/ Suite 1300, Burbank, CA, 91522
Total confirmed staff cases: 17

Warner Bros Television - Young Sheldon
4000 Warner Blvd, Building 191, Burbank, CA, 91522
Total confirmed staff cases: 11

Here is a list of entertainment industry COVID-19 outbreaks currently being tracked by the Los Angeles County Health Department. Their list includes any location where three or more cases have been reported within the past 14 days:

CBS Studio Center Bungalow 3, Lyons Gate Production
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 26

CBS Studio Center Stage 04
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 11

CBS Studio Center Stage 14
4024 Radford Ave, 3, Studio City, CA, 91604
Total confirmed staff cases: 8

NBC Universal - Mr. Mayer Production (I am assuming they mean "Mr. Mayor")
100 Universal City Plz, Bldg 5225, Universal City, CA, 91608
Total confirmed staff cases: 12

NBC Universal Stage 1
3900 Lankershim Boulevard, Stag
e 1, Building 2230, Studio City, CA, 91604
Total confirmed staff cases: 11

Netflix Productions
18421 S Main St, Gardena, CA, 90248
Total confirmed staff cases: 9

Pluto TV
8684 Melrose Ave, West Hollywood, CA, 90069
Total confirmed staff cases: 10

Warner Bros Television - Lucifer
4000 Warner Blvd, Bldg 28/ Suite 1300, Burbank, CA, 91522
Total confirmed staff cases: 13

Warner Bros Television - The Kominsky Method
4000 Warner Blvd, Burbank, CA, 91522
Total confirmed staff cases: 10

Warner Bros Television - Young Sheldon
4000 Warner Blvd, Building 191, Burbank, CA, 91522
Total confirmed staff cases: 12