Search Engine - Why’s it so hard to figure out how many people watch Stranger Things?

Episode Date: September 15, 2023

Maya Hawke, of Stranger Things, would like to know why won’t Netflix just tell her how many people watch the show? Plus the question underneath that question … might the internet have broken our TV industry? We get answers with help from Bloomberg’s Lucas Shaw. Review the show!  Check out my newsletter this week for some thoughts about how this story might relate to the podcast industry. To learn more about listener data and our privacy practices visit: https://www.audacyinc.com/privacy-policy Learn more about your ad choices. Visit https://podcastchoices.com/adchoices

Hello, I'm PJ Vote. Before we start, if you have a moment before the show starts this week, please consider rating and reviewing us on Apple Podcasts. It really helps us find new listeners. There's a link in the show notes. You can just click it. Right now, there's a really nice five-star review from someone named Harvey Butthole. Thanks, Harvey.

I wonder what it was like for you at the DMV. All right, happy Friday. Welcome to Search Engine. Each week, we answer a question we have about the world. No question too big. No question too small. This week, Maya Hawley. from the hit Netflix TV show Stranger Things

wants to know, why won't Netflix tell us exactly how many people watch Stranger Things? That question, after some ads. This episode of Surge Engine is brought to in part by Square. Square, the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes,

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Here, are, you have been in podcast studios before, pretty simply. I have. Okay, so you're okay with, like setting up your mic? Yeah. It just needs to be a little bit closer. Yeah. Like, here? Yeah. Great. Hi. I'm Maya Hawke, and I'm an actor. I talked to Maya about a month ago in August. She'd come to Search Engine with a question about a TV show she's on called Stranger Things. It's about teenagers who live in a town where spooky things are always happening.

Maya plays Robin, a larger-than-life character who appears in season three, wearing a sailor hat, which generated a ton of Halloween costumes that year. She's been in a bunch of other stuff. I really liked her in the West Anderson movie, Asteroid City, but that role on Stranger Things on Netflix, that was her breakout. And it's still what a lot of people know her from. And so before we even get to your question, I want to ask you some questions about like Netflix, not the company, but like the app on your phone or device. Yeah. So you use Netflix, like, as a citizen?

I do, but I don't get it for free. Okay, that was, you're anticipating one of my questions. I always thought when I would work for Netflix that you would get it for free somehow. You don't get it for free? No. So you pay for Netflix? If I'm being honest, on my phone, I'm on a family account. On the TV at my apartment, I pay for Netflix.

And on my iPad, I'm on my friend Willis account. I don't know why. I have a hard time with passwords. It's a disaster. But I do pay for Netflix, but I also use a lot of other people's accounts. I'd actually been asking Maya about her Netflix app, not because I was curious if she got Netflix for free,

but because I wondered if she got access to some kind of special version of Netflix. Probably that sounds ridiculous. But back when I used to work for Spotify, I did get a special version of Spotify. It was free. It also had high. higher fidelity audio, but most interesting to me was I could see this dashboard online with

download numbers for every podcast on the app, not just mine. And actually, not just download numbers. I could see where in the world people were listening from. I could see when people stopped listening to a particular episode. If you've ever clicked a play button on the internet, the company that owned that play button, Spotify, Netflix, YouTube, they saved a lot of information about you, who you are, what you watch, how you watch it. That's how they tune their algorithms. Getting a glimpse inside Spotify's records of me and everyone else was fascinating. And Maya has a similar curiosity about Netflix.

It was what had brought her here. I am curious why everyone tells me that I am on one of the most popular TV shows on Netflix, most popular TV shows these days, and yet there is no way to know how many people watch Stranger Things. I think most people would, people probably don't think about it, but people would find it surprising that you don't know how many people watch it. Yes. Yes.

This question for Maya started to take shape a few years ago. It was the summer of 2019, and she'd made her premiere on the show. I think, for me, it happened the day that the show came out. The day that my first season on Stranger Things came out, season three, everyone, was like this many people, I can't remember how many, but like X huge amount of people watched Stranger Things in the first day. And I was like, wow, there's so many people who watched me perform. And then after that first day, big chest beating display of pride over this alleged high number. Yeah. There was never any more numbers. Oh, that's so weird. And so it felt like

there was this big bragging thing that happened when the show came out that actually just scared me and then no more information. And I would travel all over the world and meet people who saw the show. And I started to feel like, who's watching this show? How many people? Where is it reaching? And so that is when I first started thinking about it was when I got this big bragging number and then never any more numbers. And what did you make of the fact that they only gave you the one bragging number. At the time I didn't know what to think about it, I just knew it made me feel weird. And now it feels connected to a larger issue that's impacting everyone and just kind of seems to be getting more and more important. Why does it have to be a secret? Why does it have

to be a secret? Maya understands her question is a simple one, bordering on a little bit silly, our favorite genre of question, frankly. Obviously, she knows Stranger Things is a hit. She knows a lot of people watched it. But she's asking because it's a simple question that might help answer some more complicated ones. As you probably know, we are in the middle of a big Hollywood strike. The writers and the actors are asking for better pay, better working conditions, some rules around artificial intelligence.

They are also asking, though, in their negotiations, for an answer to this question, how many people watch the shows they make. And at the heart of that question, that demand is this anxiety, that streaming may not make long-term sense for the people actually making these shows. The story of the anxiety goes something like this.

In the old days, before TV streamed on the internet, actors got paid X amount of money to appear on a TV show. It wasn't always a ton of money, but if the show was a success and if it went into reruns, then it was possible for actors to make a lot of money on those reruns. They would get paid what are called residuals. Every time Seinfeld played late at night on TV, the actors would be entitled to some fraction of a cent.

And those fractions of cents add up. Mailbox money. In the streaming age, the idea of a rerun doesn't really translate. And residuals have gotten much lower. The feeling among a lot of people who make shows is that at some point, they may have made a bad deal. And that's really at the heart of Maya's question. A suspicion that these hidden numbers

might be evidence of how things changed at some point, possibly for the worse. To me, it seems like it would have to be a secret because if the information was available about who was watching what and when, then there would have to be a conversation about residuals. Right. Because it would become clear

that people were paying for Netflix for certain things. And if they conceal the numbers, then it's, then it's, then it's, that information is gone and no one can be like, hey, maybe some of that $16 should be mine. So your assumption is the reason they don't want to share the numbers is because they want to hide how much money they're making from the hits so that the people who make the hits are in a weaker negotiating position. Yes, that is my assumption. Maya is clear this is just an assumption. And she says personally she feels like she's really fortunate.

She's on a popular show. She's well compensated. It's when she looks around at her peers who are are having a harder time in the streaming era, that she has questions. Another reason she has questions about whether life may have been better before a streaming company showed up is because she grew up in a family supported by the old arrangement. Both of her parents are actors who built their career in the pre-streaming era. I am 25 years old, and both of my parents who are also actors, they are a big source of where I get my information about how the industry used to work.

But when you're told the story of, like, once people, before TV went on the internet, there was kind of a golden age where things made more sense. So, yeah, there's two sides of it. One is I can say that I, my mom has made a lot of her money from residuals from Kill Bill, a movie that she did as a young person and that took off and did great, and there were toys made and books made and posters sold. And she got a little, you know, half a quarter of a penny every time that happened. Yeah. And it has sustained our family for, you know, most of my life. Yeah. And, and, and, and, and, and, and, and, and, and, and, and, and, and, Every other little project, every other little movie that you did where you agreed to make no money to make it, but, you know, a portion of DVD sales.

You'd get, you know, 0.02% of the revenue of the movie in exchange for you in some ways donating your time. So that's the way in which residuals have impacted my life is they've been a massive support to both of my parents' careers. Do you remember growing up, like, how much your parents would talk about just, like, numbers? Like, this movie did this? Never. Absolutely zero times. Really? Never.

What do you make of that? I was really lucky. My parents have done remarkably well for hippies. Right. For full-blown artists who were not in it to make money, not business people, not people that were like starting skincare brands or like software companies. They were starting theater companies. and planting comquots and squash.

Those are real examples. Those are real examples. My dad ran a theater company when he was young, and my mom has a massive and beautiful garden. So their focus was never on making money. The conversation that we often had was, should I do this job? Is this job where I want to be?

Is this going to take me away from my family for too long for the amount that I want to do it? And sometimes we had to sell our house. And sometimes we bought a bigger house. Like, that was the amount that I was aware of how well we were doing financially. Was whether the house was being sold or being bought. Yes. I see.

Sometimes we sold the big house and moved into a small house. And sometimes we moved out of the small house and into a bigger house in a worse neighborhood. And then a better neighborhood, you know, it was like that was kind of how you could figure out. We moved a lot. Yeah. And that's how we sort of knew how we were doing. And it felt okay? Yeah, it felt great.

Because their priority was, let's do things that are artistically interesting and sort of of like the money will happen. Their part of it is if you don't look at it, who knows what's in there. I'll move when my accountant tells me to move. Right. Like I think that my, I mean, I think it'd be fun with me saying this. My dad, I've come to him a couple times being like, how do I handle money? How do I talk about this?

How do I do this? What do I do? He's been like, Maya, when I was in money trouble, I went into my accountant's office and they explained to me that I was in money trouble and I fell asleep. I was so stressed. Like the idea of trying to figure out what was going on or how to handle this was so stressful that his whole body went into narcoleptic shock and fell asleep. And I think that that's a massive thing that plagues a lot of artists, musicians, actors, athletes who do well in their careers

is that they're often really young when they start doing well. And when they make money, they are not people who got into that field to make money. And usually those people are not at all equipped. to handle, manage, protect, prepare to take care of themselves, to save their money, to plan for a healthy and sustainable life. Well, it's funny because it's like an industry of artists, which is just sort of a contradiction in terms a little bit. Well, it's an industry of artists except the non-artists. Right. Except the tech professionals.

Right. And it used to be, in my opinion, that more people who were running studios were running studios because they love making movies. They're like, I'm not an actor. I'm not a writer, but I just want to be here in the room with you, and I want to go to the parties. And, like, that had its own annoyingness to it when my parents tell stories about that time that now they long for. Because that character has been replaced by someone who does not care about anything other than whether or not the algorithm is telling them that they're going to make money on this or not. It feels like a content business. Yes.

And people use that word all the time. And that's maybe my least favorite word. That's the C word to me. A hundred years ago, if an actor wanted to know how many people were in their audience, they just opened their eyes on stage. Twenty years ago, they checked box office reports or TV ratings. Today, Maya, finding yourself with this question, is flumixed. It's possible maybe that I could go directly through some kind of secret Netflix portal

and find that information out. I haven't really looked for it beyond the ways that you would and asking my agents. Wait, what would a secret Netflix for? I don't know. Like, I storm into Ted Sarando's office, and I say, you must tell me how many people are training things. Or, like, maybe, I don't know,

maybe somebody on the show knows. Maybe David Harbour knows. Maybe Winona knows. I don't know. Why would David Harper or would Noonan know? Because they've been on the show longer? Because they're grown-ups? I don't know.

I still sometimes have grown-up, like, Well, the grownups must know. Well, it's a show where half the cast are playing kids and half the cast are playing grownups. But I feel like my understanding is that Netflix is like fairly secretive about this. I think that that's true. I just occasionally get worried that I'm just stupid. But I think nobody knows. I should say this story is not just about Netflix.

It's about all the streamers. But after the break, we will try to get some Netflix numbers. We will also go to the real question under the question. Was streaming actually good for TV? for the people who watch it, for the people who make it, or is this a catastrophe that we're all about to watch unfold in real time? Seems pretty interesting. Some answers after a word from our sponsors.

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slash impact. That's vanguard.com slash impact. All investing is subject to risk, Vanguard Marketing Corporation distributor. It's so good. Springstiles are at Nordstrom rack stores now, and they're up to 60% off. Stock up and save on rag and bone made well.

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on a Wednesday in August. The funny thing was, just days earlier, I'd already interviewed a reporter where I was asking a question very similar to Mayas. My question was not specific to stranger things, but I wanted to know why weren't streamers just telling us how many people watch their shows. It's one of those things that when you start to really think about it, before the internet, when we had TV, there were always ratings. If companies like Netflix were hiding their ratings because of corporate greed, presumably NBC and ABC and all those companies had been greedy, too. So that didn't really explain this change. We reached out to Netflix for comment and a PR representative very politely declined. I should also say this show, Search Engine, is produced out of Jigsaw

productions, which has sold stuff to streamers. Okay, so, a few days before I talked to Maya, I talked to this reporter, Lucas Shaw, and I'd asked him, why did ratings disappear in the streaming age? Lucas is managing editor of media and entertainment at Bloomberg News, and author of the very entertaining newsletter screen time. After I talked to Maya, I called him a second time. So, thank you for talking again. Basically, like, after we talked the first time, I happen to get a more specific question

the one I'd asked you. Maya Hawk, who plays Robin on Stranger Things, wanted to know essentially why as one of the stars of Stranger Things, a television show that she suspects is a hit show.

Is she not allowed to know how many people watch it? Just so that I know, are we, is this our... We're on. We're rolling. Okay, you're on. So I should have had a response

to Maya Hawk, how cool it is that she reached out to you, the serendipity of you wanting to do an episode on this subject. And then, lo and behold, that one of the... stars of the biggest show on Netflix, or one of the biggest shows on Netflix reaches out to you, I think it's a plant. I don't know that I buy this.

A little podcast, Paola. Just to be clear, this was an actual coincidence. But Lucas's skepticism, or in this case, his me-directed paranoia, it is a feature of his profession. He's a journalist. Lucas and I are about the same age. We ended up in our jobs for similar historical reasons. By which I mean, both of us came of age in a moment where young people, who wanted to make names, for themselves as journalists, had this advantage,

which is that big changes were happening because of the internet. And those changes were just more interesting to us than they were the more senior, skilled, experienced people above us on the career ladder. I was writing about media, which was newspapers firing people, and anything that wasn't Hollywood stuff, film and TV. And I quickly gravitated towards this new,

I mean, probably the same as you getting fascinated by the internet, digital media and started writing a lot about YouTube, and Netflix and all the new ways that people my age were consuming film and television. I mean, I spent many years writing about and trying to explain how technology was going to change what we watched, how we watch all these things. And in the traditional entertainment business, got a lot of pushback and a lot of people who would claim that we just didn't understand how great TV was and how impervious it was to change.

It turned out, obviously, TV was not at all impervious to change. It was extremely pervious. Oh, I see why nobody uses that word that way. Anyway, we are living in the aftermath of all the changes that TV was pervious to. Netflix, Hulu, Disney Plus, the fact that every 15 minutes there's a prestige miniseries about a minor Star Wars character, the fact that I watch them all, the strikes, everything now exists because of that hairline crack in television and film that Lucas saw emerging way back then.

And one of the many changes would be the death of ratings. TV ratings, the fact that all of us, viewers, stars, reporters, could see on a typical Friday what everybody else was watching. An episode of Seinfeld, a Simpsons rerun, an Andy Rooney monologue.

We had numbers for what was happening in all the other living rooms. And we all knew that, actually not because of the people making the shows, but because of a different company, an independent one. So the company that's synonymous with ratings is Nielsen, which has had some different names and different products, and it measures different industries. But it started in Chicago by this engineer,

Arthur C. Nielsen. I think it started actually by testing conveyor belts. Really? Yeah. Nielsen, which started out in 1923 as a conveyor belt testing company, is more fascinating than any other conveyor belt testing company I've personally, heard of. Fascinating, actually, because when his conveyor belt business flopped during the Depression, Arthur C. Nielsen pivoted. And imagine an idea so central to how we live that you could forget someone had to come up with this idea in the first place. Arthur C. Nielsen's idea had to do with measurement, with data. The notion of measuring what he called market share, his company was the

first to go to other companies and offered to sell them data on just how they were doing respective to their competitors. He'd go into drug stores and sample how much of each drug was selling, then go back to the manufacturers of those drugs and say, you want to buy this data? About your business? This was not done before Nielsen. In the 1940s, Nielsen decided to start measuring a newish industry called radio, which was actually very hard to measure. Because radio waves are broadcast via a tower, and those invisible waves can theoretically reach an infinite number of radios within range. So initially, there was no way for a broadcaster to know how many people were actually listening. But Nielsen figured it out. The way he did it was he picked a thousand households,

which he called Nielsen families. Each Nielsen family had a device attached to their radio called an autometer, audience meter. In 1950, Nielsen moves into television with a similar version of the same idea. TV ratings books no longer have the answer. The A.C. Nielsen company is about to abandon its decades-old system of ratings. This is from a CBC news story about the device, now called the People Meter, as it's being rolled into Canada. You see a little beige box that goes on the top of your TV. The current viewer can press buttons, denoting their gender and age. And then the TV itself is equipped to record what's being watched.

They put a computer right into the TV. Viewers enter their sex and age into what's called a People Meter on top of the set. They punch in when they start watching, and they punch out whenever they stop, even if it's just to go to the bathroom. Have you ever heard that, say, 76 million people tuned in for the Seinfeld finale? I didn't know this, but that's more of an estimate than anything. It's based on extrapolating from a sample of families. The people meters record every program watched, every channel flip, even when it's the VCR and not the TV being used.

At Nielsen, headquarters all the information from the people meters is fed into a computer. The number grunching begins. During Nielsen's heyday at its peak. how successful was Nielsen? Like how much money were they making off of TV and radio market research? Well, at its peak, Nielsen was, and in many ways still is, the dominant measurement system for television viewership in the U.S., for audio consumption, music, and radio in the U.S. You know, in 2010, which is pretty close to the peak of the cable business,

Nielsen as a company generated more than $5 billion. in revenue and more than a billion dollars in profit. Now, Nielsen as a company was more diverse than just measurement. But even now, I think in the last couple of years, it's still a company that makes billions of dollars a year in revenue, primarily from measurement. And so, like, once they come on the scene, what does it do for just the power balance?

Like, how much power does Nielsen have? Does the industry have, the talent? Like, how do ratings change the balance of power? I mean, what I can say is that it becomes just sort of this integral feature in the television business and in sort of pop culture writ large in that it's currency, right? It's like how advertisers know what they're going to buy and what shows they want to be a part of or look at another way. That's how TV networks make a lot of money because they use Nielsen ratings to make guarantees

and sell upfront advertising dollars. Stars see those Nielsen ratings because they get reported in the trade publications every single morning. And so everyone just sort of sees Nielsen as the gold standard or this way of knowing what's popular and as a result, what should be making money. Got it. They're the scoreboards sort of hanging over the field. Yeah. It's worth saying, I don't think there are many American businesses that actually want their data publicly viewable by default. Nobody likes a scoreboard hanging over the field because scoreboards also show losses. Broadcast networks did it back then because they didn't have a choice. Broadcast TV and radio were supported by ads, and advertisers needed to know what they were paying for. Before the internet, pretty much every artistic industry had a publicly viewable, commonly accepted measurement that its artists had to worship or fear. In TV, there was this commonly accepted measurement with Nielsen, and in film, there was sort of commonly accepted measurement with box office, and in music you had the billboard charts.

all of these things where we just sort of trusted the number, even though the science behind a lot of these was inexact, or had flaws. And the Internet comes along and just sort of blows up the way we measure all of these things. It blows everything up, but not immediately. In 1997, Netflix is founded in California. At the time, the TV and film industry felt they had little reason to worry very much about Netflix. The company, after all, just sent DVDs in the mail to movie fans. A year later, 1998, Maya Hawk is born.

Two and a half decades later, she'll be on Netflix and she'll be confused by Netflix. But in the early years, nobody really saw what Netflix would become. So in the beginning, how did the entertainment industry view Netflix? Well, Netflix was seen as, I guess, a friend. You know, they had been the DVD by mail service, right? and that was a very popular consumer proposition, sort of initially disrupted the idea of Blockbuster, basically, sort of rentals. Their whole pitch was no late fees, return it whenever you want,

have access to all this catalog. It was a pretty small company for a while. It went public in 2002, I think, and they eventually vanquished Blockbuster, thanks largely to it being kind of too slow to react to this newcomer. And then in 2007 introduced the streaming service. And then in 2011, split the DVD service and the streaming service in one of the most famous moments in company history and probably the biggest disaster in company history. I remember this, Quixter.

Exactly. They decided to split the two services, rename one of them Quixter. And it amounted to like a 60% price increase for all of Netflix's customers and the number of people paying for Netflix 10. I was mad. I canceled my Netflix subscription, and then I remember, and correct me if I'm wrong, but Reid Hastings wrote an email saying like, hey, everyone's very mad, clearly this was the wrong call, we're undoing it. It's just going to be one company. We are going to do like streaming and DVDs, but we're not going to raise the prices on you. No, no. No. What actually happened? You're right that he ended up apologizing, because Reid had sort of forced through this change over the opposition of some of his peers.

and there was sort of this semi-famous meeting where he came and met with a lot of his senior leadership team and was very sad. I don't remember if he cried or not, but he sort of apologized for how it happened. They ended up recording this video, apologizing to customers that I believe got parodied on Saturday Night Live.

Wait, they did a video apology? I think so. This was like one of the first stories I covered in my whole career. But let me confirm this. I found the video. Yeah. October 19th, 2011, it's posted on Public Apology Central, which is a YouTube channel. And it's Reed Hastings, CEO and co-founder of Netflix.

I'm Andy Rendezich, and I head up DVD operations in Netflix. You get the feeling that Reed's in trouble with Andy. Like, Rick looks more contrite. We've been working for the past 14 years to build Netflix year by year into the best possible service we could build. We're making this video today to, apologize in person, or at least on camera, for something that we did recently. Watching this now, yes, it's a very funny and awkward corporate snafu, but also, Netflix

will definitely get the last laugh. They're making a big bet on the future, and that bet is going to hit. A few months ago, when we looked forward at our business, we realized, over time, DVD and streaming, we're becoming more and more different, and that we could do a better job for both services if we separated them. When we communicated that to our subscribers, and it involves a substantial price increase for most members, I didn't make the communication, and we didn't explain why we were doing it.

So he's not saying we're not going to do it. He's saying, I'm sorry for how we explain this to you, basically. Correct. And they did get rid of the separate name and the website, but the price increase stayed the same. So it was very much, it was very much like, we're sorry for how we did it, not for what we did. Right. Right, right, right.

Yeah. Yeah, this is the future. We could have, like, explained that more softly. It took very little time. It was within two or three years where, once again, everyone loved Netflix. And why? Because it turned out that the things that they were streaming were good. Well, the streaming service was a great invention.

Yeah. People really like it. You know, it's now how we all watched. TV. And at that point, like, the rest of the people in Hollywood, did they understand, like, oh, their nice friend who, you know, happened to murder Blockbuster, but would never hurt them? Like, were they like, oh, our nice friend might not be so nice? Well, the traditional Hollywood studios were nervous about the collapse in DVD sales, which had become this incredibly lucrative business for them. Oh, right. And here was Netflix that came

along and was offering to license all of their shows and movies for a ton of money. And that seemed great to them. And they didn't really consider that that viewership on Netflix was going to steal people from cable and from movie theaters. Like Breaking Bad was a great example where it was a critically lauded show that a small number of people watched. Yeah. And then because you could catch up on Netflix,

it like blossomed into this mega hit in the last season. Yeah. And this was seen as evidence of what Netflix could do positively for your show. And there was sort of this notion that the audience for Netflix was maybe different from the audience for TV. Now, they didn't realize that that was because there was a new generation that was just going to watch Netflix and not TV and that more and more people would move over. Right. And it wasn't really until like 2015. 15 or 16, a few years after House of Cards,

and as Netflix had started to really grow a lot, that the Power SIPI and media realized that they had made a pretty grave mistake and helped build this monster that was going to destroy their business. After the break, streaming takes over and rewrites an entire industry. This episode is brought to you by Indeed.

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Welcome back to the show. So, February 1st, 2013, Netflix releases what will be the first big hit from a streaming service, the first piece of original programming to really break through, the moment when the Netflix Velasiraptor would first open the kitchen door with its little baby clause. It was a 13-episode season of a political thriller called House of Cards, where, and this was considered pretty crazy at the time, a fictional version of America likes a president who's not very honest

and doesn't actually care about democracy. For those of us climbing to the top of the food chain, there can be no mercy. there is but one rule. Hunt or be hunted. House of Cards would succeed, and it would be the beginning of the streaming revolution. But at the time, it was hard to measure how big the show was

because Netflix had made the decision, unusual back then, not to publish audience numbers. Do you know if there was any internal debate at Netflix about whether to do that or whether to do what they ultimately did and keep the numbers secret? The honest answer is I don't know if there was internal debate about viewership metrics at the time. But I think the business logic was a lot of the reason for ratings in television was based on advertising. Netflix didn't have advertising.

So then the only real reason to release it is sort of like bragging rights, if you will. And Netflix was so small at the time that it would probably make it look bad, honestly. You know, a House of Cards seemed like something that everyone was watching, but at the time, a minority of Americans had Netflix. So there were way more people watching CSI or NCIS or Grey's Anatomy or The Bachelor every week than watching House of Cards. So it was maybe, like, the reality of how many people were watching it might have been smaller than perception, and if you release numbers, you correct that in a way that doesn't actually help you.

Yeah, there was so much scrutiny of Netflix at the time or so much attention being paid you know, they probably just decided it was better to not do that. Right. It's very easy from our all-knowing present to make fun of the people in the past. Those dummies used to make so many mistakes. But in 2013, if you ran a broadcast TV network, here's how you probably saw Netflix. When House of Cards came out, Netflix had about 27 million American subscribers.

NCIS, one of the bigger shows on television that year, had about 22 million American viewers just on its own. That's one of your shows versus Netflix's entire service. So as a hypothetical TV network executive, you're still sleeping pretty well at night. Plus, you figure even if Netflix's numbers grew, they're just trying to make money the wrong way. In TV, you made money through ads,

which Netflix didn't have, or by getting cable subscribers to just pay you. The average cable package was 70 bucks a month. Netflix was only charging $799. These idiots from Silicon Valley were trying to replace a very good business model, TV, with one that, even if it worked, it would just make way less money. Who cared? This was not going to happen. The thing these executives could not predict in 2013 is that just a few years later,

they would end up dismantling their own lucrative business models to emulate Netflix. In the view of one veteran TV producer I spoke to, the networks would burn down what worked to copy something that Wall Street was convinced was the future. But all of that would come later. At the time, there was one group of people who did hope Netflix represented the future. Actors and writers.

They loved the company. And ironically, one of the things they loved was that Netflix didn't seem to care about ratings. At the time, that felt like sweet relief. For a lot of the writers and producers in Hollywood who had gotten very tired of being measured and having all these decisions made based on the Nielsen numbers and on financial metrics, having a service that basically said, we're not going to tell you, we don't care, make whatever you want, was super freeing. That's what gets lost in the strike is like for years, most creative people at least were thrilled that there wasn't traditional.

measurement. Like, everything was new and different, and they'd gotten very tired of the way that TV operated because networks were owned by big corporations and decisions were made based on the bottom line. And Netflix felt like this freewheeling new place that offered them all sorts of new opportunities. Right, because they're like, oh, don't worry about it. Like, don't worry about it. We're not going to jam a bunch of numbers in your face and tell you your failure. Like, just make something cool and artistic and, like, don't worry about it. Exactly. In 2013, when the websites started to make TV shows, they were actually seen as havens from the tyranny of the old ratings-driven system. Broadcast networks, those were the places that made creative people feel

like they were making capital C content, like they worked in a factory. In 2013, CBS's big show for you was NCIS. If you didn't like NCIS, you could watch NCIS Los Angeles. The next year, 2014, CBS had a big new show called NCIS New Orleans. But, but But over at Amazon? In 2014, Amazon was making transparent, Joey Solway's show about someone discovering their gender identity late in life. Amazon, the company that ships toilet paper to your house in 30 seconds while making you feel like you're making the world a worse place. Amazon was behaving like an indie studio. And somehow that all felt completely natural. The honeymoon lasted a few years.

Viewers got a lot more TV for a lot less money. The people making the TV often got bigger checks up front than in the past. how many people were actually watching these shows did not seem that important anymore. Except to reporters like Lucas, who had to somehow figure out what was popular enough to be worth writing about. That had become a guessing game,

even for a hit like Stranger Things. In terms of how we gauged stranger things, you know, it was really, I would say, anecdotal. Really? Yeah. You know, you could see what the conversation was on social media. You were using what people around you were talking about. You were using its impact on Netflix subscriber growth the next quarter. You're using the fact that they did a

really good job of coordinating all this media coverage. I think there were already kind of Halloween costumes, that sort of thing. There were just all these completely imprecise ways of deciding that that was a popular show. The one thing that sort of indisputable is that Netflix wanted to make more of it and Netflix talked up how popular it was and they don't do that with everything. Right. If you couldn't tell the absolute level of success it had, you could tell that relative to other Netflix shows, Netflix was putting editorial weight behind it. Yeah. And they did share some information with creative partners. Now, it was fairly limited, especially back then, but Netflix has over the years had these specific times where they check in with the creative

folks on a show about how title is doing. Typically, it's been sort of after a week or two weeks and then again, after a month, where they basically give an update on this is how it's going, this is how we're feeling about it, this is what's working, this is what's not, and also other metrics that matter to them. Is it attracting new customers? Is it doing well in a particular market? Is it doing well with a particular demographic? You know, they have what amounts to a status update. This status update, that's what Maya Hawke remembers getting. She says she doesn't doesn't actually remember a meeting or a phone call, just that the news kind of circulated among the cast. That numbers were good at first, and then after that, crickets. By 2019, when

that third season of Stranger Things aired, the people who made television shows, their feelings about streaming were starting to shift. By that point, a lot of viewers had made the jump from traditional TV. Netflix was at 61 million North American subscribers. The tech companies had power now, and it felt like it. They were the new bosses. At some point, people are making TV shows start to change their tune, and there's grumblings about this lack of transparency. Can you explain when that happens, how that starts, what's going on? That one's been pretty gradual.

Part of it was when shows started to get canceled, and Netflix also started to get a little more discerning as to what mattered and didn't. Because one of the reasons why working with Netflix was liberating at first was, yes, there were no ratings, but also it just seemed like Netflix wanted to make whatever, your idea was. But as Netflix became more and more established and more and more powerful, it had to act like any sensible business and sensible TV network and start canceling shows that

weren't working and prioritizing shows that were and being a little more selective. But because there wasn't as much transparency and viewership data, you had creators who didn't fully understand why their programs were getting canceled. Right. And because Netflix was operating at such a high volume, there were so many shows that ended early in, So there was this narrative that took hold that, like, Netflix canceled everything after two seasons, which, at least when I dug into the data was, was not really true. Netflix's cancellation rate was comparable to most TV networks. It just operated at such a scale that it was canceling so many shows. So that was definitely a big part of it. But there was definitely this moment where as Netflix got more and more powerful, people started to say,

Shouldn't we have some idea of why it's making decisions and how, and wouldn't it be great if we knew how many people were watching these programs? People found themselves wanting to better understand the algorithm that had taken over the American entertainment business. In 2021, Netflix co-CEO Ted Strandos seems like perhaps he is ready to surrender to the world's curiosity. Let me have some slides, Rick. Let me put them up. Oh, look at this. This is like us being super transparent with you. Don't tell anybody.

Serandos is on stage at CodeCon in an interview with Kara Swisher. They're sitting in big red leather chairs, and there's this black and white slide with a bunch of data. So we're not trying not to be transparent. We're trying to be representative. So in this case, we talk a lot about the folks who choose to watch. So in the first 28 days of a release of something, this is the millions of counts that started. Individual accounts. Individual accounts.

This is available, correct? This is particular. No, this list has never been seen in this form. Okay. The slide includes data for a bunch of hit shows. Bridgeton, Tiger King, Stranger Things Season 3 is on there. You can see 67 million accounts watched at least two minutes of the show in the first 28 days were released. It's a little confusing.

A month later, Netflix starts publishing a weekly top 10 list, most popular shows and movies across different countries. Stranger Things obviously appears on these lists. But rather than saying how many accounts watch the show, Netflix now gives us hours viewed, In the week, it was on the top 10, which as a standard of measurement is a bit mystifying. Can I send you what I found and you tell me what you make of it? Sure. Okay. So yeah, it's a thing that says it's the first Netflix top 10.

But if you go to that week, it's just like hours viewed, which I find to be a very confusing metric. You and everyone else. I mean, Netflix has gone between a few different metrics. They actually changed it again recently. So now the top tens have both the hours viewed and the number of viewers. It's very confusing. Suffice it to say, you just have to have a minor degree in Netflixology to figure out what's going on and what's working. Without getting into all the math, it appears that the most recent season of Stranger Things was viewed about 140.7 million times.

Could be more people watched since, you know, people view scary shows with friends. but let's say 140 million views. Those are good numbers, a fraction of the royal wedding, but a hit in any era. Although, again, Maya Hawk and everyone else in the world knows stranger things is a hit. It's not about that. The assumption at the top of this story, and I've seen this assumption all over the internet, is that this data is obfuscated because of greed. The streamers want to keep their profits to themselves, and if the hitmakers knew how big their hits were,

they demand more cash? Lugas says he thinks that's part of it? Yeah, I think so. I mean, I don't know that it started from that position, but there's no question that not sharing viewership plays to the benefit of these companies and that the one time I was leaked a lot of the internal metrics that Netflix uses to assess shows, they completely freaked out.

And in some ways, tried to say it was like, you know, trade secrets. So I am not skeptical of the idea that Netflix is looking for any advantage that it can have, but I am skeptical of the idea at this point that Netflix is trying to use the lack of data transparency to not pay people enough, in part because one of the ways that Netflix went about convincing people to work with it, and its model is different from other networks in that it buys everything up front. It sort of treats everything as a modest success.

So it's not short-changing in a sense there. But then there is this idea that we now have enough data. Netflix publishes weekly ratings. Nielsen publishes weekly streaming ratings. And there are a ton of third-party measurements that measure certain aspects of shows that we kind of know what the big hits are.

Yeah. But we don't know how bad the failure are. So, like, the idea behind what you're suggesting is that in a world where no one knows how many people are watching something, Netflix gets a luxury of pretending that their failures aren't failures. Do you see evidence for that? It's hard for me to say that they're pretending their failures aren't failures because I don't have the data. But there's the vast majority of shows released on streaming, not just on Netflix, but on Amazon, Hulu, Disney Plus, Peacock, Paramount Plus, max, don't chart anywhere. For one, no service other than Netflix releases weekly ratings. So we can

give Netflix all the crap in the world for not being transparent. But they are at this point more transparent than any of these other companies, at least as it pertains to streaming viewership. So we can't know for sure. But the question in Lucas's mind is whether it's possible that streamers are hiding their data less because of the hits like stranger things and more because of all the flops. The shows that burn a gazillion dollars on CGII then disappear. in the flood of too much TV. This Halloween, you will probably not see people dressed up as Norrie Brandyfoot or Mason Kane.

And if you don't know who those characters are, you're in good company. Are the streamers greedy? They're companies. I don't even know how to answer that question. But I know they want to make money. And I believe the biggest threat to their future earnings is not actors and writers. It's the possibility that Wall Street investors might suddenly decide that this business is crazy and overvalued.

If their viewing numbers came out and told the wrong story, they could lose a lot of money and fast. Better to keep Maya Hawke and Lucas Shaw and you and everybody else in the dark. Of course, you never know. The fight around the strike, it could change all that. I will say, just as a person who loves stories, I feel pretty invested in what happens here.

It can be a little weird to celebrate Hollywood, a lot of what it makes sucks, but it really is one industry America has built that is exceptional. Television, film, these stories are how the country talks to itself. We go into dark rooms and we watch each other's dreams.

Somehow, we built a vibrant industry around that very strange practice, but now the people in that industry are saying it might be broken. I think that's why they want to see the numbers. I think it's why, in the end, they probably won't. in the beginning part of your career,

you were like, hey, I think the internet's really going to change how we watch things. And at that point where you were saying that, the business model of how we watch things kind of made sense. It was like, you might go to a movie and you pay for it and then people would put that on the scoreboard. You might watch TV, which would be either supported

by advertising or cable, which you paid for. It all felt like we understood the business, even if the business was random in terms of what succeeded and what didn't. Now, there's like a thousand streaming, companies making a million TV shows a day. Like everything's IP, like so much stuff is getting made. It doesn't feel like the economics of the business makes sense. It feels like more TV than any reasonable person can watch. And it feels like frothy and VC funded and like quantum

economics and like tomorrow is it all going to be there or not. I think part of people like Maya hawk wanting to, you know, see the monitor they're not showing, is to understand, like, how stable is this business? You're a person who predicted that this would happen. Do you think it can continue like this? In its current form, no, because it's not a stable business right now. I think there's been too much money being spent on too many projects and too many companies competing for a finite amount of attention.

it's why we've seen a bunch of consolidation among media companies over the last few years. It's why people expect it will continue to see consolidation. But I don't believe that streaming is a failed experiment, as some would have you believe, or that it's a terrible business. It seems clear that streaming in its current form is not as lucrative a business as cable was or is. and the decisions by a lot of these companies to spend a bunch of money on stuff for streaming and a bunch of money on stuff for linear

and a bunch of money on projects for movie theaters, it was just too much. So we're at this great reshuffling or rethinking of kind of the last eight to 10 years in entertainment where we had the birth of streaming really, let's say like House of Cards in 2013, and we're sort of naturally

10 years later, now have this two big strikes, stock prices crashing, layoffs, firing, mergers. It's all a shakeout of how streaming is reshaping film and TV. And the one thing that we know is that streaming is here, not going anywhere, but everything else is sort of question mark. We're recording this on Wednesday, September 6th. In one of your most recent newsletters, you said that while none of the sides have come to an agreement in the strike dispute yet, Netflix seems the most willing to give up their data. If that really happens, It does come after we email Netflix and ask for comment. Do you think that search engine made this happen?

I mean, I think the impact of search engine has no limits. Thank you, Lucas. You've already changed the way people drink airport coffee. One question at a time. Lucas Shaw, he writes the excellent newsletter screen time. Stick around after some ads for a brief recommendation from search. engine, it also has to do with Hollywood. Ambition comes in all shapes and sizes.

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and how streaming companies work, I have a recommendation. One of our favorite podcasts is called The Town. Lucas Shaw, our guest, is a very frequent guest on the town, but it's hosted by Matt Bellany. It's funny, it kind of does one of the things I think podcasts do very well, which is that it's this very inside specific look at a very specific world by people who understand that world. But somehow even as an outsider, if you listen for a few weeks, you feel like a Hollywood insider who understands everything. Also, Matt and Lucas Bicker a lot, which is just very enjoyable to listen to because they both know their material very well.

So check out the town if you're curious. Surge Engine is a presentation of Odyssey and Jigsaw Productions. It is created by me, PJ Vote, and Shrithy Penmananey, and is produced by Garrett Graham, and Noah John. Theme and original composition by Armand Bizarian. Mixing this week by Rick Kwan. Fact-checking by May Abdullah Hulu. Our executive producers are Jenna Weiss-Berman and Leah Reese Dennis. Thanks to the team of Jigsaw. Alex Gibney, Rich Porello, John Schmidt, and Kevin Plunkett. And to the team at Odyssey, J.D. Crowley, Rob Morandi, Craig Cox, Eric Donnelly, Matt Casey, Casey Klausor, Morricoran, Josephina-Fran, Kurt Courtney, and Hillary Schoff. Our agent is Orrin.

Rosenbaum at UTA. Our social media is by the team at Public Opinion, NYC. You can follow and listen to Search Engine with PJ Vote. Now, for free on the Odyssey app, on Apple Podcasts, or wherever you get your podcasts. Thank you for listening. See you next week.