It’s been amusing to see the meltdown over the alleged outing of Netflix’s closely-guarded audience metrics.
As someone who programmed radio stations for over 20 years, living and dying with new ratings data every single week, I can tell you that in our new media world, ratings don’t matter. Not really. (For related reasons that you can figure out on your own, something similar can be said for box office, by the way.) Oh, and the other guy’s ratings really don’t matter.
My basic point is quite simple:
In the new entertainment business, the bottom line really is the bottom line.
If you’re a broadcaster, ratings certainly help drive revenue, but in the end, the relationship between ratings and revenue is not, and will never be, linear. The relationship between revenue and profit isn’t linear either.
In that light, ratings are window dressing for the ego.
In the digital world, ratings don’t necessarily have any relationship to revenue whatsoever. Further, if you’re a broadcaster who’s putting any time or energy into comparing your audience to your digital competition, you are wasting that time and/or energy.
Ted Sarandos’ denial of the accuracy of Netflix’s purported audience metrics is not the key point here, though I’ll admit that his “I hope no one’s paying for it,” quote was pretty dang funny. His claim that Netflix does not track demographic data of its users is also not the point, though it’s certainly an – er – interesting asssertion.
The real takeaway is in these two statements:
- “The ratings themselves have no specific impact on the business. If we were spending a lot of money on shows people weren’t watching, they will quit. People are finding value in how we’re spending our content dollars… if they’re watching today, tomorrow or seven days from now.”
- “We may build a show for two million people and we may build a show for thirty million.”
In 1991, before satellite radio, there were three “DAB” (digital audio broadcasting; the term means something different today) companies: Digital Planet, Music Choice, and Digital Music Express (DMX). I worked at Digital Planet, where we went out of our way to create amazing and unique programming content. (A quarter century later, a hat tip to our leader in those efforts, the brilliant Paul Goldstein, who still knows how make audio magic with the best of them.)
We created. We made magic. That was just half of the business model, however. The whole business model was really a two-step process:
- Make content remarkable enough to get someone in a household to write a check for whatever our monthly fee was back then. (And yes, I said, “Write a check.” Remember, it was 1991.)
- Give the customer enough quality that, when the bill showed up every month, they’d keep writing that check.
Audience metrics were not part of the equation. For DMX and Music Choice, I can’t imagine they are today either. The same is true for Netflix and any other SVOD service.
In that light – or really, in any light – the industry freakout that a record 400+ TV series is simply “too much television” is as silly as the obsession with Netflix’s “ratings”. In a nation of 323 million people, embedded in a world of 7.3 billion humans, there’s room for plenty more content (as long as you’re keeping costs under control, of course).
Not every television series needs to pull in a five-rating with Adults 18-49. There are plenty of ways to make money with a smaller, committed audience, whether they’re paying for an SVOD subscription or helping you amass a sellable audience on basic cable. (Oh, and as a reminder, those 400+ TV series are creating our old friend j-o-b-s, and when we’re keeping more of your talent – above- and below-the-line – working, we’re strengthening our industry.)
Further, the desperate need to compare the numbers for, say, Orange Is The New Black and Empire misses the point. OITNB is part of a subscription-driven advertising-free machine. Empire is part of a machine whose revenue is a product of ratings, demographics, ad rates…and a lot of other things (like advertiser passion to be on the “next big thing” and, yes, the personal affinities of buyers). Even then, Empire’s financial value derives from a whole lot more than audience numbers produced by a company whose radio measurement arm once published this in its ratings data.
The reality, as much as we hate to admit it, is that all media is not absolutely measurable. More importantly, in an era with 400+ television series, free print content all over the internet, and more audio-only content (from broadcasters, webcasters and podcasters) than you can shake a radio tower at not all audience is created equal.
Noting that the ratings report clipping I just posted is from the former Arbitron (now Nielsen Audio for the uninitiated), I must also observe that everything I just said about Empire is true of radio as well. I’ve had the pleasure (well, it was usually pleasurable) of working with many great radio talents whose value far exceeded their ratings, and whose continued employment was far more a function of audience- and advertiser-loyalty and the resulting endorsement revenue than it was about ratings. I can name an alternative radio talent (in other words, a talent with an 18-34 year-old audience) who can generate ratings, but also move books just because she’s passionate about them and an amazing entertainer.
Some will give you money just to be able to see OITNB or, not so long ago, The Sopranos. Some will set an appointment to watch (or DVR) Empire every single week and then buy every soundtrack and other piece of merch that goes with it. Some will listen to your podcast (or your radio station) religiously and give you their loyalty in ways measurable and immeasurable. Some will come see you dressed up in a bunny suit just because they love you.
For those of us who are creators, we’ll always stress over every ratings metric we can get our hands on because it’s important to us to know that we’re connecting with people. (And because we tend to equate ratings with job security.)
For those of us who are laughably referred to as businesspeople, it might be advisable to stop sweating the ratings and sweat the bottom line since there are plenty of shareholders, analysts, and board members doing likewise.
Revenue and passion are causes. The bottom line is the effect, and the number on your bottom line is the one that truly has an effect on your (economic) quality of life.
The reality is that, when looking at this from a business perspective, the bottom line – whether as the final line on a corporate P&L statement or as the number on your paycheck – is the one number that truly matters.