Share

BOOK REVIEW: Big data and the entertainment revolution

Streaming, Sharing, Stealing: Big Data and the Future of Entertainment (MIT Press) by Michael D. Smith, Rahul Telang

PROFESSORS Smith (Harvard) and Telang (Carnegie Mellon) have produced one of those books that changes the way you think about an industry and where it is going. It has the two characteristics I admire most in a good business book: deep and reliable scholarship, and thoroughly engaging and entertaining style.

The subject of this book is the profound change the entertainment industry is undergoing.

The book covers movies, music, books, television, radio and more, but to get a sense of the issue, I will focus on the first topic the authors cover: free-to-air television.

To sell a TV series to one of the major networks requires making a pilot episode that can cost between $5 and $6m. It is estimated that some $800m is wasted annually on pilots that never make it to the small screen. If the series is accepted (a big if, because the industry is very wary) these weekly episodes must fit precisely into 22 or 44 minutes for viewing in 30- or 60-minute slots, including a catch-up from the week before.

After a first-time release on television, the series might be made available after some time on pay channels, to encourage people to watch the earlier version. This is necessary because the TV stations earn their living by attracting viewers, and then selling that viewership to advertisers.

That has been the traditional way of doing business in the television industry but much has changed, making alternatives more effective and more attractive to almost everyone. But not for the traditional media owner.

Netflix is an American provider of streaming media, video-on-demand online, and DVD by mail. Watching a series as part of your subscription fee saves you the annoyance of commercial breaks because the company earns through their subscription fee, not from advertising.

“One of the most profound examples of this shift in market power occurred when Netflix began to offer original programming,” the authors explain. 

Beau Willimon, the creator of the American political drama House of Cards, approached Netflix with his ideas for a series. The reception he received was completely different to what he would have received from a television network. They agreed to purchase the series without a pilot! This was not an act of bravado, or deep conviction. Their business allows for this type of decision-making.

Netflix can collect accurate data on the tastes and choices of its subscribers, not from interviews, but from what they download to watch. Based on these facts it was clear that there was an audience for House of Cards. Additionally, Netflix can target potential subscribers who would be the audience for such a series - as individuals! This tailored, direct marketing is not possible from the traditional network alternatives.

Traditional television fare must be slotted into a 24-hour day, so what is broadcast needs to be as attractive to audiences as possible. Only with large, appropriate audiences will advertisers pay for the commercials that fund both the station and produce profits for the shareholders.

Whatever you want, whenever you choose

With Netflix streaming movies and series on demand, viewing isn’t restricted to a specific time of day so the question of when best to show the series is not relevant. Netflix is not limited to the number of shows possible in a 24-hour period. Its business model is - whatever you want, whenever you choose.

This offers many attractive advantages. The viewer does not need to wait until next week to see the next episode, it can be viewed on demand. This gave Netflix the advantage of being able to release all of season one’s 13 episodes simultaneously. For the creators of House of Cards this was a huge artistic advantage, because the story line did not have to be designed in odd chunks – it could be written as one would a book, made up of chapters of uneven length.

As with a book, people can view as much as they like in their available time. Releasing the full series in one go allowed the viewer to binge on all 13 episodes at once (as one of my colleagues did!). Rather than subject oneself to the tyranny of the studio’s time schedules and intrusive adverts, the viewer is now in control of the viewing experience. This raises the bar for the enjoyment of this type of leisure-time experience.

At the opening of House of Cards, Frank Underwood kills an injured dog. When an executive was informed that “people are telling me we’ll lose half of our viewers when we kill this dog. What do you think about that?” He was able to reply that he didn’t really care if they were offended or not.

No television studio executive could have replied with the same indifference, as a loss of audience would translate into a loss of revenue. If Netflix subscribers were repulsed by Frank Underwood’s actions, they could choose from more than 100 000 hours of other Netflix content.

“While Netflix was working hard to expand the use of digital channels to distribute and promote content, the networks were trying to find ways to limit the use of digital channels to avoid cannibalizing viewing (and advertising revenue) on their broadcast channels,” say the authors.

The advances in technology have drastically changed the way people can consume media, and the future of the older models is no longer assured.

This is true not only for broadcast movies, but also for music that is no longer sold and controlled by stores. Both movies and music can be easily pirated, copied and consumed across many devices and through many channels. Offering books digitally opens them to the same competition and threat.   

The most alluring new option: free

What all sorts of content producers have learned is that in the digital era, control is much more difficult to exert. With the ability to copy or pirate content, consumers have a more alluring new option: free.

To compete with piracy one can make the pirated content harder to find and legally more risky to consume. Or, as Netflix has done, by delivering more value than consumers could receive from pirated content, and by charging a reasonable fee for this extra value.

To thrive in this new digital age as a media house requires reliable and detailed observations of audience behaviour. The new ways to distribute content need to be more personalised than is possible from broadcast channels, and the promotion of this content has to be done differently. The development of content needs to be less restrictive and allow new levels of creative freedom for writers.

Further, a new and more economically efficient way to monetise content needs to be found: on-demand bundled services currently beat à la carte sales.

“We don’t know which firms are going to come out on top in the next phase of competition in the entertainment industries. But we do know how technology is changing the entertainment industries.”

A stern warning from the authors, two very well informed and thoughtful men.

Readability:    Light ---+- Serious
Insights:        High +---- Low
Practical:        High ---+- Low

* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of the recently-released Executive Update. Views expressed are his own.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.38
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders