If you are of a certain age, as I am, you grew up being told and probably believing that America is the land of opportunity. For many of us, it certainly has been. The combination of working hard and steadily, saving, and playing by the rules has paid off for many. Yet, as a person who deals almost daily with demographics, I have often had a gnawing feeling when I looked at income, education and lifestyle distributions. Is this still or was it ever really the land of opportunity?
My last post was about Big Data and I recommended that readers get a copy of Seth Stephens-Davidowitz’s EVERYBODY LIES and devour it. A study that he mentioned in that book will be the topic of this post.
Most of us have looked at hundreds or, in my case, thousands of research studies both long and short, superficial and occasionally profound. One question I always need answered is how large is your sample, how was it drawn, and what geography did it cover? People often brag about the number of observations that they have—500, 800, 1000! Well, Seth found us the veritable mother load of observations. A study from Raj Chetty at Harvard tracked the tax records of all Americans over a period of several years(using actual IRS data). This treasure trove of data gave them a staggering 1.2 billion observations. Now, the knee jerk reaction of many who hear of that kind of any unwieldy base is to say that a traditional survey would have given them remarkably similar answers. They are probably correct. Yet, what Professor Chetty did with the data was different—with so many observations, he was able to drill down and deep GEOGRAPHICALLY. What he found was enlightening, disturbing, yet made a great deal of sense.
Previous global studies found that if one were born in the bottom 20% of a society economically their chance of reaching the top 20% was as follows:
United States 7.5%
United Kingdom 9.0
Denmark 11.7
Canada. 13.5
The U.S. does not do well in terms of upward mobility, it would appear.
Chetty, with his massive collection of cold income facts, was able to break out the U.S. by MARKET.
Here is what popped and is quoted in EVERYBODY LIES:
San Jose, CA 12.9
Washington, DC 10.5
Unites States Average 7.5
Chicago, IL 6.5
Charlotte, NC. 4.4
Amazingly, he also tracked people who moved from a metropolitan area that was a low performer to one that had greater prospects for upward mobility. The results? Over time, people who moved or their children had a higher probability of climbing the rungs of the financial success ladder. Other issues emerged that backed this up. College towns did better despite lack of high wealth as it appears the local professor population demanded and fought for better schools. Low income students did well perhaps due to peer pressure from children of academically advanced parents. So, concluded Stephens-Davidowitz, “some parts of America are better at giving a chance to escape poverty than others.”
Also, a few other trends emerged. The top 1% of women in income live 10 years longer than the bottom 1% of women. With men, the gap is a staggering 15 years! Poor people in a city with a lot of rich people live longer than those not surrounded by the wealthy. Professor David Cutler says it could be due to “contagious behavior.” The wealthy work out, eat better, tend not to smoke, and like less pollution. Poor people in wealthier cities tend to mimic that behavior.
Absorbing all this makes me pause a bit. I am not saying that pre-destination reigns in America. Young men and women can “pull themselves up by their bootstraps” and overcome adversity in many cases. But, it has always been hard and given certain structural issues in our society today, it may be getting even harder.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, July 8, 2019
Thursday, June 27, 2019
Everybody Lies
My friends, please forgive the provocative headline. Actually, you are NOT about to be treated to an angry rant. EVERYBODY LIES is the title of a book that I have read and re-read in recent weeks. Its author is Seth Stephens-Davidowitz. The entire title is: Everybody Lies, Big Data, New Data, and What the Internet Can Tell Us About Who We Really Are (Day Street Books, 2017).
If you are a marketer, a media tactician, a political consultant or even a serious investor, may I suggest that this book is required reading. Much of the book covers how Big Data is getting to be a better and better forecasting tool. Seth is a very engaging writer and questions the significance of surveys using the moniker in his title of Everybody Lies. How did Trump surprise the pundits with his electoral college win? Easy, several percent of people surveyed did not want to appear politically incorrect, so they did not admit for whom they would vote. As a media researcher, I often wondered how PBS would consistently do a 2.0 rating in most Nielsen markets (DMA’s). Back in the 70’s Masterpiece Theatre probably did not really deliver Downton Abbey size ratings but people said they were watching to appear more sophisticated.
The author raises some profound issues although he does not address the advertising model directly. By looking at purchase data, a marketer has a great handle on your likes, dislikes and how you spend your time and money. Why bother with traditional media where over 90% of your audience will never be buyers? Zero in using Big Data and the marketing effort becomes infinitely more profitable. Forecasting is never easy but it has to get sharper as Big Data gives you real world information. As Winston Churchill once put it—“Facts are better than dreams.”
I will return to this topic and book a few times in the weeks and months to come. Meanwhile, take a look at EVERYBODY LIES. It is the clearest presentation of the future and usefulness of Big Data that I have seen to date.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
If you are a marketer, a media tactician, a political consultant or even a serious investor, may I suggest that this book is required reading. Much of the book covers how Big Data is getting to be a better and better forecasting tool. Seth is a very engaging writer and questions the significance of surveys using the moniker in his title of Everybody Lies. How did Trump surprise the pundits with his electoral college win? Easy, several percent of people surveyed did not want to appear politically incorrect, so they did not admit for whom they would vote. As a media researcher, I often wondered how PBS would consistently do a 2.0 rating in most Nielsen markets (DMA’s). Back in the 70’s Masterpiece Theatre probably did not really deliver Downton Abbey size ratings but people said they were watching to appear more sophisticated.
The author raises some profound issues although he does not address the advertising model directly. By looking at purchase data, a marketer has a great handle on your likes, dislikes and how you spend your time and money. Why bother with traditional media where over 90% of your audience will never be buyers? Zero in using Big Data and the marketing effort becomes infinitely more profitable. Forecasting is never easy but it has to get sharper as Big Data gives you real world information. As Winston Churchill once put it—“Facts are better than dreams.”
I will return to this topic and book a few times in the weeks and months to come. Meanwhile, take a look at EVERYBODY LIES. It is the clearest presentation of the future and usefulness of Big Data that I have seen to date.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, June 12, 2019
Connecting the Dots
Someone, quite young, asked me recently, if there are any advantages to getting old. I laughed but said yes, to me, there was a really big one. “These days, I am much better than ever at connecting the dots.” The young adult did not quite get what I was saying so I gave an explanation that I will now share in part with you.
As kids, we were given little games or quizzes where we had to connect the dots on a page. The resulting artwork was sometimes logical but usually messy but always fun. As the years went on, I was confronted by many problems or situations and the assignment remained to somehow find a way to “connect the dots”. In the business world “connecting the dots” usually means making logical inferences connecting items of information. Over time, most of us should have gotten better at it.
When I look at issues today in media, marketing or finance, I often conjure up the familiar refrain of “I have seen this movie before.” Business goes in cycles and while many think that something is totally new, the reality is that many things are a rehash of the past or simply packaged differently. Companies that are allegedly the next best thing get overextended financially and crash and burn. In media, the “new” is really a new platform but the idea is not novel. Also, as more players crowd in to that unique and new space, there is a big shakeout and the original players depart. Were Google and Facebook and Amazon the first in their categories? No way. Yet, they executed better and pushed out rivals who were at the party earlier.
By writing this, I am not being cynical. What I am saying is that when something seems to be the next big thing or dominant player in a category, I always take a breath and try and connect the dots in the situation. Is this truly unique? Is it capitalized properly? Is the timing in the business cycle good or terribly risky?
It is amazing how the “cannot lose” upstarts rarely make it. The backers of such enterprises are not spending enough time trying to connect the dots. Do I still get fooled? Of course! My batting average is getting better as compared to similar situations from the past. Yet, I rarely get wrapped up in the euphoria of someone’s somewhat breathless description of the next Apple or Amazon.
Mark Twain allegedly said that “History does not repeat itself but it rhymes” (Actually, some argue the saying first emerged in 1970! Twain passed on in 1910). What it means is that there are many similarities from past enterprises or events that help us predict the future. So, old folks, I cannot help you with your aches and pains. Yet, on a positive note, just remember, if you stay alert and objective, you may well connect the dots better than many half your age. Experience counts!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
As kids, we were given little games or quizzes where we had to connect the dots on a page. The resulting artwork was sometimes logical but usually messy but always fun. As the years went on, I was confronted by many problems or situations and the assignment remained to somehow find a way to “connect the dots”. In the business world “connecting the dots” usually means making logical inferences connecting items of information. Over time, most of us should have gotten better at it.
When I look at issues today in media, marketing or finance, I often conjure up the familiar refrain of “I have seen this movie before.” Business goes in cycles and while many think that something is totally new, the reality is that many things are a rehash of the past or simply packaged differently. Companies that are allegedly the next best thing get overextended financially and crash and burn. In media, the “new” is really a new platform but the idea is not novel. Also, as more players crowd in to that unique and new space, there is a big shakeout and the original players depart. Were Google and Facebook and Amazon the first in their categories? No way. Yet, they executed better and pushed out rivals who were at the party earlier.
By writing this, I am not being cynical. What I am saying is that when something seems to be the next big thing or dominant player in a category, I always take a breath and try and connect the dots in the situation. Is this truly unique? Is it capitalized properly? Is the timing in the business cycle good or terribly risky?
It is amazing how the “cannot lose” upstarts rarely make it. The backers of such enterprises are not spending enough time trying to connect the dots. Do I still get fooled? Of course! My batting average is getting better as compared to similar situations from the past. Yet, I rarely get wrapped up in the euphoria of someone’s somewhat breathless description of the next Apple or Amazon.
Mark Twain allegedly said that “History does not repeat itself but it rhymes” (Actually, some argue the saying first emerged in 1970! Twain passed on in 1910). What it means is that there are many similarities from past enterprises or events that help us predict the future. So, old folks, I cannot help you with your aches and pains. Yet, on a positive note, just remember, if you stay alert and objective, you may well connect the dots better than many half your age. Experience counts!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Thursday, June 6, 2019
I Am Just Being Honest
Over the years, we have all observed or been criticized by someone personally. The individual doing the attacking may see the wounded look on someone’s face or their angry response and say, “Sorry, I am just being honest.” Fair enough. Lately, I have noticed a number of millennials using the term but in a somewhat different context and I find it a bit disturbing.
Let me preface this by saying that I like millennials very much. Given economic issues plus the demographic and technology tidal waves underway, I think that they will have a tougher time making it than we American baby boomers did. I wish all of them the best.
What I find jarring is how many throw themselves under the bus with the “I am just being honest” rationalization. Here are two recent examples that happened amazingly within an hour of each other. I ran in to a student who I was to see later in the day. I asked if he was going to deliver a paper on a selected topic or take a quiz. He smiled, said he had not bothered to study, so he knocked out a brief paper in the wee hours of the morning. I froze, kept my composure and said, “Why are you telling me this?” An answer of I am submitting a paper would have been sufficient for me. He answered, “I am just being honest.” Later that day and the next, I read his paper four times. Why? I was trying to be fair. Clearly, I was annoyed and wanted to make sure that I did not give him a grade that was guided by my emotions.
Later that day, I was meeting with a group and explaining a concept using a hypothetical example. One person, sitting in the back of the room, was typing furiously on his/her laptop. I stopped my monologue and said, “You will not find the answer on line. I made this case study up as a hypothetical example. It never happened.” With a dismissive wave of the hand, the individual said, “I have not been listening to you. I am trying to order something online.” Again, my answer was “why are you telling me this?” And, you guessed it, the response was, “I am just being honest.”
Candidly, I liked both people but now I wondered how they would behave in formal business settings. Both said way too much. They did not have to lie but either saying I wrote a paper or simply stop typing would have been fine. I would never say this to them but they were not simply being honest, they were being stupid. These two cases are not isolated. I hear it all the time.
Worst case, remaining silent in those situations is a mild sin of omission. Yet, a number of people have used that term to me in recent years in similar situations and I do not understand why. All they do is make themselves look unprofessional. Would I want someone so careless working for me or representing me? Would I give them a great job reference?
There is an old phrase that has been around for generations. It is “silence is golden.” Often, I found it to be a great negotiation tool. I would make an offer via phone and then get quiet. Some 15-20 seconds would pass. The person on the other end of the line would ask if I were still there. I would say yes and then get quiet again. Most of the time, they would sweeten the offer as they were negotiating with themselves and I was giving nothing away.
My young acquaintances need to learn this lesson. Do not lead with your chin or deliberately make yourself look bad when a person needs a simple answer. Play it close to the vest when you are busted but the other person does not know it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Let me preface this by saying that I like millennials very much. Given economic issues plus the demographic and technology tidal waves underway, I think that they will have a tougher time making it than we American baby boomers did. I wish all of them the best.
What I find jarring is how many throw themselves under the bus with the “I am just being honest” rationalization. Here are two recent examples that happened amazingly within an hour of each other. I ran in to a student who I was to see later in the day. I asked if he was going to deliver a paper on a selected topic or take a quiz. He smiled, said he had not bothered to study, so he knocked out a brief paper in the wee hours of the morning. I froze, kept my composure and said, “Why are you telling me this?” An answer of I am submitting a paper would have been sufficient for me. He answered, “I am just being honest.” Later that day and the next, I read his paper four times. Why? I was trying to be fair. Clearly, I was annoyed and wanted to make sure that I did not give him a grade that was guided by my emotions.
Later that day, I was meeting with a group and explaining a concept using a hypothetical example. One person, sitting in the back of the room, was typing furiously on his/her laptop. I stopped my monologue and said, “You will not find the answer on line. I made this case study up as a hypothetical example. It never happened.” With a dismissive wave of the hand, the individual said, “I have not been listening to you. I am trying to order something online.” Again, my answer was “why are you telling me this?” And, you guessed it, the response was, “I am just being honest.”
Candidly, I liked both people but now I wondered how they would behave in formal business settings. Both said way too much. They did not have to lie but either saying I wrote a paper or simply stop typing would have been fine. I would never say this to them but they were not simply being honest, they were being stupid. These two cases are not isolated. I hear it all the time.
Worst case, remaining silent in those situations is a mild sin of omission. Yet, a number of people have used that term to me in recent years in similar situations and I do not understand why. All they do is make themselves look unprofessional. Would I want someone so careless working for me or representing me? Would I give them a great job reference?
There is an old phrase that has been around for generations. It is “silence is golden.” Often, I found it to be a great negotiation tool. I would make an offer via phone and then get quiet. Some 15-20 seconds would pass. The person on the other end of the line would ask if I were still there. I would say yes and then get quiet again. Most of the time, they would sweeten the offer as they were negotiating with themselves and I was giving nothing away.
My young acquaintances need to learn this lesson. Do not lead with your chin or deliberately make yourself look bad when a person needs a simple answer. Play it close to the vest when you are busted but the other person does not know it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Thursday, May 30, 2019
Update on Quibi TV
Last September 17, I put up a post entitled "The Allure of New TV." It talked about how Meg Whitman of ebay and Hewlett Packard fame and Jeff Katzenburg, an extremely prominent Disney alum, were teaming up to produce a new streaming device dubbed New TV at the time. The service would have short form video of extremely high quality with episodes lasting around 12 minutes apiece. The service would be available on wireless devices which translates largely to smartphones.
Recently, Ms. Whitman sat down with David Faber of CNBC for an interview. The link is:
https://www.youtube.com/watch?v=rrFSs2vPp34
The service is slated to debut in 4th quarter of 2019 and has a formal name now--Quibi. The name is an abbreviation of Quick Bites. As usual, Mr. Faber gives a solid interview and Ms. Whitman is as direct as ever. One thing hit me and it may effect you the same way. The pricing structure for the service is $4.99 per month with advertising and $6.99 without commercial interruption. What is intriguing is $6.99 is the same price that Disney, one of Quibi backers, is charging for their new Disney + service.
I understand the concept and wish Quibi well. The target is people on the go, largely 18-35, who spend several hours on their mobile device daily and one hour of that watching video. Will they be willing to pay for it?
Informal polling that I have done shows a sharp, as you would expect, demographic divide regarding Quibi. Several 21 year olds told me that they loved the idea as Netflix episodes were too long. More mature people whom I would presume would be reaching for their reading glasses as I would, do not seem enamored with a service that they could only watch on their mobile device.
I see significant value on college campuses and people with long subway or mass transit commutes. Also, I suppose it might be a nice break during your lunch hour to catch an episode. Ms. Whitman admits that consolidation will hit the streaming space so maybe that is already baked in to the cake.
It will be very fun to watch how Quibi unfolds.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Recently, Ms. Whitman sat down with David Faber of CNBC for an interview. The link is:
https://www.youtube.com/watch?v=rrFSs2vPp34
The service is slated to debut in 4th quarter of 2019 and has a formal name now--Quibi. The name is an abbreviation of Quick Bites. As usual, Mr. Faber gives a solid interview and Ms. Whitman is as direct as ever. One thing hit me and it may effect you the same way. The pricing structure for the service is $4.99 per month with advertising and $6.99 without commercial interruption. What is intriguing is $6.99 is the same price that Disney, one of Quibi backers, is charging for their new Disney + service.
I understand the concept and wish Quibi well. The target is people on the go, largely 18-35, who spend several hours on their mobile device daily and one hour of that watching video. Will they be willing to pay for it?
Informal polling that I have done shows a sharp, as you would expect, demographic divide regarding Quibi. Several 21 year olds told me that they loved the idea as Netflix episodes were too long. More mature people whom I would presume would be reaching for their reading glasses as I would, do not seem enamored with a service that they could only watch on their mobile device.
I see significant value on college campuses and people with long subway or mass transit commutes. Also, I suppose it might be a nice break during your lunch hour to catch an episode. Ms. Whitman admits that consolidation will hit the streaming space so maybe that is already baked in to the cake.
It will be very fun to watch how Quibi unfolds.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, May 5, 2019
Update: The Coming Streaming Wars
Last week, I put up a post entitled “Disney’s Big Challenge.” It generated lots of direct response to me as I projected that while Disney could compete easily with Netflix on a content basis given their vast properties and film franchises, they were behind in international growth and particularly in Artificial Intelligence (AI). If Disney Plus, their new streaming entry is to succeed this fall they will need to step up their game in AI and do it with some speed. Many readers agreed, and, as usual, a few said that I was out of touch with reality.
Well. In this this post, I will look at things from the point of view that I always prefer to take—the long game.
Soon, there are likely to be four major players in video streaming—Netflix, Apple, Amazon and Disney. Yes, other players will be there such as AT&T with HBO will be engaged, but, for this post, let us limit to the four media, retail or tech giants. Developing new programming is expensive. How much cash does each player have on hand at present? From Yahoo Finance at end of 1st quarter, 2019, we find:
Company Cash (Billions/U.S.)
Apple $86.43
Amazon 41.25
Disney 4.46
Netflix 3.71
A cursory look at the above numbers should tell you one thing: Apple and Amazon can definitely play the long game in streaming. Either one could lose a few billion a year for a long time with their streaming entry and still survive and prosper. Apple could continue to buy back shares and up their dividend by low double digits as they have done in recent years as they are now only paying about 30% of earning back to shareholders in the form of dividend hikes. Netflix, on the other hand, has borrowed a reported $3 billion this year to help finance the production of new made for Netflix series.
We also feel that Netflix is vulnerable to a price war. When Disney announced two weeks ago that Disney Plus would cost $6.99 per month, the press was surprised. By undercutting Netflix, they can “buy” some share. If the service gains significant traction prior to the next recession, people may cancel Netflix (and cable, I might add) and keep Disney Plus when the inevitable downturn hits. And, Amazon can tout that their rapidly improving (in my eyes) video service is free as the cost is embedded in each Amazon Prime subscription.
Another stat that a number crunching wonk such as I likes to look at is Leveraged Free Cash Flow. What the hell does that mouthful mean? A financial dictionary would describe it as the amount of money a company has left after paying off all its financial obligations. Here Apple is at $45.14 billion and Netflix $8.47 billion. Investors like to look at this as do company management as it illustrates if a firm can make further investments in the company business or pay a bigger dividend.
And, Apple has modest debt while Netflix has very high debt levels. One more well known measure that investors look at would be the price/earnings ratio meaning how much do you pay for each dollar of earnings if you purchases shares in the company? Apple is a low key 15.86 while Netflix is at an eye popping 96.25 largely owed to their rapid growth and little competition in recent years.
So, what is going to happen? I do not know. If Apple and/or Amazon go full throttle at Netflix they could starve them out in a few years. That is unlikely as they both have many irons in the fire and direct to consumer video is not their top priority at present. Disney is formidable from a content standpoint but will lose money on Disney Plus for a few years and it will take a while to roll it across the world. All three players will chip away at Netflix some for sure. Many of you reading this and the writer love Netflix as a service. Yet, in a free market, if someone appears to have a field to themselves others want to enter and do. The difference here is that two have the deepest pockets in corporate history and one has an unparalleled expertise in the content.
I would like to provide a hypothetical scenario. It is NOT, I repeat, not a forecast. About two years ago, I was among many who thought that Apple might buy Netflix. Then the shares of Netflix exploded upwards. So, Netflix might not be such an attractive target for Apple as it was until recently. What if Apple decided to form an alliance with Disney or even decided to purchase Disney? Bob Iger, the Disney chairman, has sat on the Apple board of directors for several years. In a recent interview with David Faber on CNBC, Iger said that he recuses himself when the topic of Apple’s foray in to video comes up. At the same time, Reed Hastings, CEO of Netflix, is resigning from the Facebook board, just as Facebook is reported to be entering the streaming space as well. Hmmm. Interesting.
Netflix has the lead, both domestically and internationally. And, they have millions of loyal viewers such as you and I. Yet, Frederick the Great allegedly said it right in Prussia nearly 300 years ago—“God is on the side of the big battalions.” Apple and Amazon are the big battalions for sure and Apple/Disney would trump anything imaginable.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Well. In this this post, I will look at things from the point of view that I always prefer to take—the long game.
Soon, there are likely to be four major players in video streaming—Netflix, Apple, Amazon and Disney. Yes, other players will be there such as AT&T with HBO will be engaged, but, for this post, let us limit to the four media, retail or tech giants. Developing new programming is expensive. How much cash does each player have on hand at present? From Yahoo Finance at end of 1st quarter, 2019, we find:
Company Cash (Billions/U.S.)
Apple $86.43
Amazon 41.25
Disney 4.46
Netflix 3.71
A cursory look at the above numbers should tell you one thing: Apple and Amazon can definitely play the long game in streaming. Either one could lose a few billion a year for a long time with their streaming entry and still survive and prosper. Apple could continue to buy back shares and up their dividend by low double digits as they have done in recent years as they are now only paying about 30% of earning back to shareholders in the form of dividend hikes. Netflix, on the other hand, has borrowed a reported $3 billion this year to help finance the production of new made for Netflix series.
We also feel that Netflix is vulnerable to a price war. When Disney announced two weeks ago that Disney Plus would cost $6.99 per month, the press was surprised. By undercutting Netflix, they can “buy” some share. If the service gains significant traction prior to the next recession, people may cancel Netflix (and cable, I might add) and keep Disney Plus when the inevitable downturn hits. And, Amazon can tout that their rapidly improving (in my eyes) video service is free as the cost is embedded in each Amazon Prime subscription.
Another stat that a number crunching wonk such as I likes to look at is Leveraged Free Cash Flow. What the hell does that mouthful mean? A financial dictionary would describe it as the amount of money a company has left after paying off all its financial obligations. Here Apple is at $45.14 billion and Netflix $8.47 billion. Investors like to look at this as do company management as it illustrates if a firm can make further investments in the company business or pay a bigger dividend.
And, Apple has modest debt while Netflix has very high debt levels. One more well known measure that investors look at would be the price/earnings ratio meaning how much do you pay for each dollar of earnings if you purchases shares in the company? Apple is a low key 15.86 while Netflix is at an eye popping 96.25 largely owed to their rapid growth and little competition in recent years.
So, what is going to happen? I do not know. If Apple and/or Amazon go full throttle at Netflix they could starve them out in a few years. That is unlikely as they both have many irons in the fire and direct to consumer video is not their top priority at present. Disney is formidable from a content standpoint but will lose money on Disney Plus for a few years and it will take a while to roll it across the world. All three players will chip away at Netflix some for sure. Many of you reading this and the writer love Netflix as a service. Yet, in a free market, if someone appears to have a field to themselves others want to enter and do. The difference here is that two have the deepest pockets in corporate history and one has an unparalleled expertise in the content.
I would like to provide a hypothetical scenario. It is NOT, I repeat, not a forecast. About two years ago, I was among many who thought that Apple might buy Netflix. Then the shares of Netflix exploded upwards. So, Netflix might not be such an attractive target for Apple as it was until recently. What if Apple decided to form an alliance with Disney or even decided to purchase Disney? Bob Iger, the Disney chairman, has sat on the Apple board of directors for several years. In a recent interview with David Faber on CNBC, Iger said that he recuses himself when the topic of Apple’s foray in to video comes up. At the same time, Reed Hastings, CEO of Netflix, is resigning from the Facebook board, just as Facebook is reported to be entering the streaming space as well. Hmmm. Interesting.
Netflix has the lead, both domestically and internationally. And, they have millions of loyal viewers such as you and I. Yet, Frederick the Great allegedly said it right in Prussia nearly 300 years ago—“God is on the side of the big battalions.” Apple and Amazon are the big battalions for sure and Apple/Disney would trump anything imaginable.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, April 29, 2019
Disney's Big Challenge
On April 12th, Bob Iger, CEO of Disney, unveiled the long awaited plans for Disney Plus, a streaming service that would be competing directly with Netflix. Media reports consistently mentioned that a collective gasp went up in the audience when Iger announced that the new Disney entry would cost a subscriber $6.99 per month or $69.99 for a complete year. Clearly, it was priced very attractively for all kinds of households and well below what all of us are paying for Netflix.
The Disney franchise is a strong one going back to 1937’s “Snow White and The Seven Dwarfs.” Today, they have the current Disney studios, legacy films, the Fox film library and great franchises such as Pixar, Marvel, and Star Wars. This weekend their new “Avengers” entry garnered well over a billion dollars at the box office. Disney Plus, according to Iger, will also be the exclusive venue for 30 years of “The Simpsons.” So, to put it mildly, Disney is the king of content in the media world. Disney projects 90 million subscribers to Disney Plus by 2024. Many media analysts put it somewhat lower at 50-60 million but one generally expects bullishness at the time of a major announcement.
A lot of people are stopping here which strikes me as a big mistake. Let me be clear. I have great admiration for Bob Iger. He is not just the greatest media executive today but one of the greatest leaders, in my opinion, across all industries both domestic and international. He is very shrewd and saw how the media world was evolving. Iger knew that he had to do something as commercial avoidance continued to advance and Netflix and other video alternatives gobbled up more and more viewing time with direct to consumer plans.
To me, too many observers are focusing solely on the video content. Disney has to transform itself from a largely legacy or conventional provider to a strong streaming entity. To me, they can do that. They have many talented people on board and have the hammer of abundant content to execute it. Many say that Iger has delayed his retirement for a few years to oversee the transition.
Looking across the world, it is clear that Netflix has won the streaming battle with 160 million + subscribers in countless countries (despite this, they are not a big moneymaker). So, Disney, even under the best case scenario is not going to unseat Netflix overnight or even in several years. Disney faces a big or huge challenge that few people are mentioning but I feel is key to the Disney Plus and even their corporate future. As mentioned, Disney has lots of content and nobody does it better. The edge to me that Netflix has is not with their subscriber base but with their amazing lead in Artificial Intelligence (AI). Look closely at Netflix. Their logarithm is not good—it is amazing. When in college, some friends and I ran the film society on campus. We became devotees of classic films. Over the years, I have reviewed over 3,000 films for Netflix. Using my preferences, they have NEVER recommended a film that I did not like. Not once.
They can create original programming by looking at their viewer profiles and tastes and putting together shows that might not have huge broad appeal but build loyalty among a fair sized number of aficionados. Some reports claim that they have users divided in to over 1,000 buckets and tailor programs to them.
This to me is the big hurdle that Disney will face as they launch Disney Plus on November 12th. They can produce content—some good, some great. They have deeper pockets than Netflix and can lose money on their Plus entry for quite a while. What they need to do as they transform their company is get up to speed and quickly on AI. That is the issue that will be key going forward on whom will be standing profitably years from now in the video world.
Very soon, I will put up a post regarding Netflix vs. Disney vs. Apple. Watch for it!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog
The Disney franchise is a strong one going back to 1937’s “Snow White and The Seven Dwarfs.” Today, they have the current Disney studios, legacy films, the Fox film library and great franchises such as Pixar, Marvel, and Star Wars. This weekend their new “Avengers” entry garnered well over a billion dollars at the box office. Disney Plus, according to Iger, will also be the exclusive venue for 30 years of “The Simpsons.” So, to put it mildly, Disney is the king of content in the media world. Disney projects 90 million subscribers to Disney Plus by 2024. Many media analysts put it somewhat lower at 50-60 million but one generally expects bullishness at the time of a major announcement.
A lot of people are stopping here which strikes me as a big mistake. Let me be clear. I have great admiration for Bob Iger. He is not just the greatest media executive today but one of the greatest leaders, in my opinion, across all industries both domestic and international. He is very shrewd and saw how the media world was evolving. Iger knew that he had to do something as commercial avoidance continued to advance and Netflix and other video alternatives gobbled up more and more viewing time with direct to consumer plans.
To me, too many observers are focusing solely on the video content. Disney has to transform itself from a largely legacy or conventional provider to a strong streaming entity. To me, they can do that. They have many talented people on board and have the hammer of abundant content to execute it. Many say that Iger has delayed his retirement for a few years to oversee the transition.
Looking across the world, it is clear that Netflix has won the streaming battle with 160 million + subscribers in countless countries (despite this, they are not a big moneymaker). So, Disney, even under the best case scenario is not going to unseat Netflix overnight or even in several years. Disney faces a big or huge challenge that few people are mentioning but I feel is key to the Disney Plus and even their corporate future. As mentioned, Disney has lots of content and nobody does it better. The edge to me that Netflix has is not with their subscriber base but with their amazing lead in Artificial Intelligence (AI). Look closely at Netflix. Their logarithm is not good—it is amazing. When in college, some friends and I ran the film society on campus. We became devotees of classic films. Over the years, I have reviewed over 3,000 films for Netflix. Using my preferences, they have NEVER recommended a film that I did not like. Not once.
They can create original programming by looking at their viewer profiles and tastes and putting together shows that might not have huge broad appeal but build loyalty among a fair sized number of aficionados. Some reports claim that they have users divided in to over 1,000 buckets and tailor programs to them.
This to me is the big hurdle that Disney will face as they launch Disney Plus on November 12th. They can produce content—some good, some great. They have deeper pockets than Netflix and can lose money on their Plus entry for quite a while. What they need to do as they transform their company is get up to speed and quickly on AI. That is the issue that will be key going forward on whom will be standing profitably years from now in the video world.
Very soon, I will put up a post regarding Netflix vs. Disney vs. Apple. Watch for it!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog
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