First-party data plays a major role in Hollywood decision-making to pinpoint content that will resonate with audiences. But Brent Magid, CEO of media research and entertainment consulting firm Magid, warns that focusing on what consumers have already done is “only part of the picture.” In reality, their current thinking is “more predictive about they’re likely to do.”
“Truly understanding people is pretty crucial,” the consumer research executive told TheWrap for this week’s Office With a View. “There are a lot of people whiffing on it because they think they can get away without it. You can, but you’re going to operate at a 30%-40% disadvantage.”
The CEO pointed to all the films and shows that don’t perform well, arguing that there’s a disconnect between what studios make and what consumers think is good.
“You can’t just create by spreadsheet, but to be able to have some perspective about what is really resonating with people, what people are excited about, what they’re sick of watching to inform creative can be very powerful,” he added. “People’s creativity and coming up with things that have never been done before obviously are amazing, but you can do that while having a sense of the consumer sentiment.”
Prior to running the firm founded by his father, Frank Magid, in 1956, Brent Magid got his start in the media industry as a sales department intern at the local TV station KSTP, where he learned how “exceedingly powerful” relationships between media and advertisers can be. His love of selling would be further explored in his first job out of college in the late 1980s as an associate for J.P. Morgan Chase’s media and entertainment corporate finance group in New York — when the cable business was booming.
“Depending upon what side of the business someone’s on, a lot of people lose sight of what are the fundamentals of the business in a for-profit sense, and what are the levers you need to push,” he said. “To understand those dynamics from a banker’s perspective was huge.”
By the early ’90s, he joined Magid’s London office, where the firm was focused on developing privately owned TV operators in Europe, Africa and Southeast Asia. He returned to the U.S. before the turn of the millennium in a business development role and later headed up Magid’s local media group before taking over as CEO in the early 2000s.
Read Magid’s full Office With a View interview below.
Magid recently released a report stating that not all subscriber churn is the same. Can you explain what you mean by that?
I think what’s happened is most subscription businesses have felt or acted as if every subscriber is prone to doing the same thing. What we know to be true via our [next generation analytics-driven tool] SubScape product is that’s not true. There are different groups of people with different predispositions.
To be able to understand what type of person you have in your subscriber profile becomes critically important. Just assuming that they behave the same way is not going to work for different types of subscribers. It’s about going from a blunt axe world of how you operate subscriptions to one that is like a Swiss Army knife and fine tuning exactly the tool and approach you need to appeal to the different types of subscribers to begin with.
Then there are a lot of other issues on top of that which have to do with the different tradeoffs that people see in streaming services and what prompt them to either subscribe or churn. There are different elements that motivate that.
For example, having a robust library can be a retention vehicle, having a steady stream of hits can be retention vehicle. You don’t necessarily have to have both. But what’s important is how you position yourself to have the components of strength that you need to sustain the maximum number of subscriber months in a year because you’re going to have people who naturally come in and out. To assume you have the potential to take people and lock them in is a bad assumption.
If you look at the number of months of subscription that you get out of people, it’s a much better metric. So even some of the KPIs that people are using in the industry really should change to be much more reflective of what it takes to be successful and maximize profitability in the business.
Streamers’ current strategy to reduce churn appears to be bundling services together. What do consumers ultimately want to see in their bundles?
There’s this whole idea where you have different services that deliver on different points of value. For example, Apple TV+ doesn’t have a huge library. So if you were to take that and think, “OK, who else could we fit in there to join with them to create a bundle?” It could be, “OK, how do you create some linkage between Apple TV+ and Tubi,” which is somebody that has a big library and happens to be free.
Disney has a pretty interesting bundle with Disney+, Hulu and ESPN with Hulu playing a very, very powerful role in the mix and ESPN+ playing actually not a very strong role. It’s kind of being held up by the others. But if you’re going to create a portfolio, that’s what you need to look for ideally.
My sense is we’re going to see M&A, we’re going to see consolidation. So I think part of the calculus has to be what are the profiles of the different services and how do you really create in financial terms an efficient frontier? If you’re just acquiring additional services, some may be beneficial to what you already have, others may actually just be duplicative and not really doing anything for you.
The other thing that’s really important in this bundling piece that no one is really addressing — which, if addressed would be a meaningful change in the market — is universal search. One of the biggest pain points in television today is discovery. People spend an average of 20 minutes per session just looking for what they’re going to watch. It’s such a waste of time and so frustrating for so many people.
Who is best positioned to create a so-called “super bundle” where streaming content is available all in one place?
I’ve often thought it could be the old cable companies that are in the best position to do it because they’re an independent player, just a packager of services, and they actually have a big opportunity to establish themselves as the entertainment hub of the home, which people are dying to have.
Netflix is hugely powerful and clearly the default streaming service that people feel they need to have. But I don’t necessarily think they’re the ones to create a universal service and are going to do that. So I think the multi-system operators are probably in a better position than almost anybody.
How much of a role do outside corporate partnerships with SVOD and AVOD play in subscriber retention?
I think it’s actually an area for much deeper exploration. Consumers tend to evaluate parts of their lives by what’s going on in another part of their life.
Partnerships like Peacock and Instacart are about: “Are there brands that you can associate yourself with that is meaningful relative to the package you’re offering?” I think some of those deals are just throwing a bunch of stuff together and hoping that it replicates what Amazon has done, which I think is a bad thing to shoot for and doesn’t make a lot of sense.
If you’re going to package other services, you have to think about what’s really useful in the same context as your service and what brand alignment is going to enhance the value of your brand. So there’s a lot more thinking that one would have to do to be more strategic about it rather than just pushing a bunch of stuff together.
What are your thoughts on consolidation in the entertainment industry?
SubScape data shows that there’s been a migration to the top eight to 10 services, and if you’re not in that group, you’re still trying to bootstrap your way in. There are some smaller services that tend to be very niche-oriented and have a strong following and that’s a bit of an anomaly. BritBox would be one of those. But if you’re a service that’s out of the range of the top ones, and that would include stuff like Paramount+, I don’t know how viable that is on a go-it-alone basis.
I also think in some of the consolidation that’s happened, it would have been better off not being consolidated. It’s benefitted Disney to have a portfolio without necessarily smushing everything together because you have services that have different offers that are attractive to different people. That’s actually one of the increasing complaints, that its back to the cable days where I’m spending all this money but I only watch this much content.
The more people smush a bunch of stuff together, the more consumers will be like, “I appreciate that you stuck these two services together and arguably you think we have more, but I wasn’t really into that stuff and I don’t want to have to pay the doubling of fees that you’re charging me. So forget it.”
This interview has been edited for lengthy and clarity
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