A Culture of Analytics: How Big Data is Shaking Up the Film & TV Market

Has Big Data become an essential currency for both producers and distributors?

 

Published May 4, 2016

How important is Big Data to Netflix and Amazon? Very.

We have entered an age of analytics. Big Data has taken centre stage in entertainment politics and strategy. For entertainment behemoths such as Netflix and Amazon, handling Big Data has become second nature, a necessary core of their corporate strategy. “You do not make a $100 million investment these days without an awful lot of analytics,” Dave Hastings, Netflix’s director of product analytics, recently said at the Wharton Customer Analytics Initiative Conference. Over the years, Netflix and Amazon have accumulated extensive data by analysing every moment of a customer’s journey on their online interface. Through this analysis they’ve managed to build a digital strategy so tangible and repeatable, it has allowed them to create original premium content. When it comes to fully utilising Big Data to its ultimate gain, Hastings couldn’t have put it better: “You integrate all this together, and you really get to know who your customer is.”

In the last couple of years, Netflix and Amazon have been flexing their acquisition muscle within the film market. Netflix’s procurement of the rights to “Beasts of No Nation” at Cannes ‘15 noticeably marked their entrance into the film-market, affirming their presence as a buyer of worldwide distribution rights. Using in-house data, Netflix are able to measure previous audience behaviour and patterns, allowing them to speculate how content will perform on their platform. This data-led strategy forms the crux and the ethos of Netflix and Amazon; their data granting them exclusive access into audience insight empowering them to famously conceive shows like “House of Cards” and acquire the likes of “Beasts of No Nation.”

By the end of 2015, Netflix had proved what they’d set out to do at Cannes; they were here to stay. Providing producers an alternative and different opportunity and by taking those SVOD rights out of the equation, Netflix pre-empts those deals and cuts off the revenue stream. With “Beasts of No Nation,” Netflix had bought all the rights and had partnered with Bleecker Street to release the film day-and-date. “We are increasingly trying to figure out, can we do a theatrical and partner Netflix into the deal,” says ICM’s Jessica Lacy, “We’re no longer just thinking of all-rights deals with traditional distributors.”

2016, the game-changer year: From Documentaries to Blockbusters.

Ushering a new era at Sundance this year, Netflix and Amazon were going to put forward their all-encompassing plans ranging from catalogue expansion to acquiring the mechanisms of a blockbuster franchise. Beating out Fox Searchlight, Focus Features and other studios, Amazon bought Kenneth Lonergan’s highly praised drama “Manchester by the Sea” for $10 million. Experiencing rave reviews, the film currently has the potential to push Amazon to the Oscars. Quickly expanding its catalogue, Amazon snatched up Whit Stillman’s “Love and Friend” and “Author: The J.T LeRoy story.” The latter is the first documentary acquisition for Amazon, an example of their Amazon’s plan to aggressively expand their catalogue offerings.

shutterstock_277821950Netflix hardly stood on the by-lines, snatching up three anticipated titles before the festival had started: “Tallulah,” starring Ellen Page, “The Fundamentals of Caring” and “Under the Shadow.” Netflix was also responsible for the largest Sundance deal, driving up the bidding for Nate Parker’s “The Birth of a Nation,” which eventually got sold to Fox Searchlight for $17.5 million (Netflix was originally offering $20m but the producers decided to go for the more traditional distribution route.) Later in the year, Netflix’s expansion took another stride with the purchase of the action film “Bright,” at a $90m price tag, beating out Warner Bros for the rights after an extended bidding war. Following this summer’s highly anticipated “Suicide Squad,” “Bright” will team up director David Ayer and Will Smith again. It’ll have a limited theatrical release and appear on Netflix’s streaming platform. As it’ll only be having a limited theatrical run and be primarily available on SVOD, Netflix had to present the money upfront as the stars will not get income from residual ticket sales. “Bright” proved to be a major investment for Netflix, serving as its first advance into blockbuster feature films. Due to their Netflix’s heavy reliance on analytics to make financial decisions, it’s believable that Netflix used its large amount of in-house data to help close this deal.

Data has proved instrumental into driving both digital players into the acquisitions market. Being the two largest players in video OTT (Over-the-top content), they have the ability to shake how markets are bartering for films. Netflix and Amazon aren’t performing brinkmanship; instead they are willing to make calculated, data-backed decisions to acquire premium content in order to bring in more subscribers. Ultimately, if they draw in more subscribers to their SVOD platforms and make higher quality shows and films.

The Battle for your screen: New OTT players playing catch up.

“We live and breathe the customer,” Hastings said at the Wharton Customer Analytics Conference. To make calculated moves into the film-market, Amazon and Netflix needed to leverage every resource at their disposal, which included their powerful algorithms. They’ve created a set of systems needed to acquire mountains of data, along with the algorithms responsible for extracting actionable insights from the data. With these algorithms, they’ve potentially created a competitive advantage; the data providing them with a visualisation of general audience insights – what audiences demand during what period of the day, when they pause, what they skip after a few minutes, and of course, what genres of content are in high demand. “We start with data,” said Hastings. “But the final call is always gut. Its an informed intuition.”

Netflix and Amazon aren’t the only ones rapidly gaining territory in the OTT market. With Netflix and Amazon rapidly expanding, other OTT providers have long seen the value of their data; HBO have launched its direct-to-consumer SVOD OTT service in April. Since then content owners such as CBS, Showtime and pay-TV providers like Verizon and Dish have introduced their own OTT services. Content owners are realising the value of their own content, along with all the data they’d be able to track and monetise through their individual platforms. With Netflix’s catalogue shrinking (it’s shrunk 31.7% in two years) it could be speculated that content owners are either removing their content or not renewing licenses, preferring to host them on their own platform. Hulu has made direct moves against Netflix’s SVOD market, sending out a clear message that they’d no longer tolerate Netflix’s close monopoly in the SVOD, ad-free market. In the latest competitive move, Amazon now lets you subscribe separately to Amazon Prime Video for $8.99/month, posing the most direct and threatening play against Netflix so far, whose subscription is priced at $9.99.

Piracy, the valuable variable for both OTT providers and sales agents.

With the prominent rise of quality OTT, data is going to undoubtedly play a big part in the future of film and television acquisitions. To parallel this growth, there has been an on-going emphasis on the currency and data of piracy as to how it powers the value of a film or television show. By understanding and tracking the piracy of films, you can understand pre-existing demand, or, even more crucially, regional pre-release demand. Clearly, data can impact market value for content; if a film already has existing piracy demand, rights owners, and in particular international sales agents, can examine the audience base (its size, location etc.) whereby affecting the sale and acquisition value of the film. Netflix already tracks piracy, looking at what television shows are ranked highest on popular piracy sites before acquiring their streaming rights. Likewise, Hulu decides what shows to license by tracking piracy, believing an audience that pirates is an audience “passionate enough to break the law.” For Hulu, piracy is a valuable variable as it measures how committed a certain segment of fans are to the show and how they could be subsequently be converted into a Hulu-viewing market. Third party tools like MUSO’s Market Analytics platform are now leveraged as a serious asset by rights owners globally to both find and validate this audience. Ultimately, understanding pre-existing piracy demand has fast become one of the most effective tools to drive value during the acquisition of IP rights throughout the film & TV market year.

It is a fascinating, transitional period as the content industry adapts to understand, analyse and monitise the currency of big-data. There are many facets to how best utilise and aggregate this data, whether it be understanding audiences through piracy or general audience behaviours. MUSO will be exploring each angle with a new series of data-focused articles, to accompany our new Market Insight Reports throughout 2016. “We are getting to the point, with all the data we can have, that there will be trade-offs,” said Bill Franks, Chief Analytics Officer for Teradata, which works with Netflix on big data, “The focus has to be on achieving a gain, not just analytics for its own sake.” Welcome to the culture of analytics.

This article will be the first in a series of data-focused articles presented by MUSO.


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