Tech Brew Ride Home - (Bonus) Is The Netflix Algo Broken? With Julia Alexander @loudmouthjulia

Episode Date: August 17, 2019

On a recent weekend longreads segment, I recommended a piece by The Verge’s Julia Alexander asking whether Netflix’s recommendation algorithms were broken, or maybe borked. We’re going to talk a bit about that today, but since Julia is on the Streaming Wars beat at The Verge, you know how I love to talk about the streaming wars, and we are right about at the point where the battle is going to be joined in earnest.  Sponsors: CognitoHQ.com Wix.com/podcast :) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to a weekend bonus episode of the Tech Meme Ride Home. I'm Brian McCullough on a recent weekend Longreeds segment. I recommended a piece by The Verges' Julia Alexander asking whether or not Netflix's

recommendation algorithms were broken or maybe just borked. We're going to talk a bit about that today, but also since Julia is on the streaming wars beat at The Verge, you know how much I love to talk about the streaming wars. and we are right about at the point where the battle is going to be joined in earnest. So more about that. Please enjoy. I don't follow the... Actually, I don't follow Netflix closely enough to know this, but somehow a bunch of shows got canceled lately that got on my radar.

Like, I guess they must have been high-profile shows. And I would have to imagine that this happens all the time, but somehow it feels different. Like, has there been a bunch of shows that have gotten the acts lately? I think we're seeing a couple of things happening. We're seeing a couple. So the first thing that happened is two shows that were beloved by bands and critics called Tuka and Bertie and the OA, Tuka and Bertie being an animated adult series and the OA kind of being a sci-fi, weird niche show, got canceled. The first, Tuck and Bertie after one season, the OA.

way after two seasons. And we're seeing, I would use the word outrage, which I don't usually use, about their cancellations. The interesting thing about this is that canceling shows us for one or two seasons is not particularly new for traditional broadcast television. This happens quite often. But the difference is that up until a couple of years ago, Netflix wasn't really canceling anything. Netflix was increasing spending size on content, and the idea was just buy, buy, buy, and they'll live on the platform, and we can build our own library. So I think what we're seeing happen is people realizing that, oh, Netflix has actually become this type of cable, this type of network that we're used to seeing on traditional TV,

which they never position themselves as. So there's this really big moment of confusion happening among Netflix stands and then people who just watch television. So the idea essentially being the longtime gravy train where they'll they'll fund anything you want, they'll bring back any show you want and let it run for as long as the showrunner want it to go, that that gravy train is coming to an end. And we've heard rumors about that, right, that maybe internally they're trying to watch their pennies a little more and they've been telling people internally that maybe shows that are kind of weak have to go. Right. So Netflix uses a specific type of measurement

to determine whether or not a show should be renewed. It's called efficiency. That's what they refer to it as. Efficiency to Netflix essentially means when we release a show, will it attract new subscribers, and will it keep those who are at risk of canceling their subscription? Will it keep them?

And so shows like Stranger Things, both of those, Stranger Things New Season brings new subscribers and tends to keep subscribers who are maybe thinking of canceling. a show like Tuka and Bertie does not. Now, the issue, as Tuka and Bertie creator, Lisa Hannawalt, tweeted, is that when you think of Stranger Things, think of the amount of trailers and tweets and marketing and then the front

page placement that show got from Netflix. When you mentioned something like Tuka and Bertie or the OA, one, it didn't get much marketing, which has always been an issue with television. But the difference is when we think of Netflix, which is an internet TV type thing, Netflix relies heavily on a recommendation algorithm for a lot of its shows. It's not actually similar to YouTube because there's so much. Netflix has the idea that we are going to recommend to you things that we think you would like based on what you've watched. So if the algorithm doesn't recommend a show, then we don't know how many people

might have actually liked it, might have not, because we don't know how many people actually saw it on their account. And that's the big difference between Netflix and the way that shows are spread and traditional linear TV when you think of like you open up your TV guide. And at 8 p.m., there's the same show for all of America who are watching. Right. So I think I mentioned to you, I featured your medium piece about this a couple weeks ago. I'm just going to actually, I'm going to quote from it real quick. You wrote, I'm the optimal subscriber for Netflix to recommend Tuka and Birdie 2. Not only have I watched every episode of BoJack Horsman more times than I can remember,

but I watch every cartoon Netflix releases. So the idea would be if Netflix's algorithms work the way that we assume they do, even if I never would have gotten Tuka and Bertie on my launch screen, you clearly should have. Exactly. And I didn't. And so what do we know? about why that might not have happened?

That's the frustrating thing for us, and I would mention even more for creators, where we don't know what that didn't happen. And Lisa Hannawalt, but again, the creator also doesn't know. And so we've seen Netflix respond to these kind of situations. We've seen CEO Reed Hastings and Ted Sarandot, who is Netflix's chief content officer. They've basically come out over the past couple of investors calls and said, we want to be more transparent with creators. We want to tell them how many people are watching their shows. We want to explain to them what's going on, but we're going to have to do that at our own time.

Remember, this is a network that not even two or three years ago, their creators were sitting at a roundtable, I believe, talking to a Hollywood reporter, and Jenji Cohen, who created Orange of the New Black, easily one of Netflix's longest running shows, if not actually its longest running show, saying Netflix is great. The only things they tell me when it comes to ratings are it did good or it did very good. I don't actually know. Right. Even the showrunners have absolutely zero data. They used to have zero data. I believe Netflix is now beginning to be more transparent, but it's not like every creator is being told. It almost feels like a select few are being told how much their shows are doing.

It's part of that because, you know, Netflix's model is we buy everything. There are no residuals. You don't have ownership, although maybe that's different for like the, um, uh, for some of the larger people and some of these deals now with, with these 250 million dollars deals. Maybe that's different. But is it because since they own it, they don't have to tell anybody? I think it's because they don't have to, because Netflix has always positioned itself as not TV. Like it's a network, but it's not a network because it's on the internet, because they do everything differently. Think of how Netflix releases TV, right? Everything comes to it. once, you watch it when you want.

So we're not going to have first day window, second day window, week windows publicly. They have it internally. They're looking at it internally the same way HBO executives would look at their internal data. The difference is we can see how much HBO or NBC is doing it because we have Nielsen writing. And we can clearly see, yeah, no one's really watching this. Maybe it's the time slot, but maybe there's just not enough interest.

So we're going to cancel a show after one season. Again, this is normal. This is how television works and for good reason, so that they can put their funds into a show that might do better. But with Netflix, because everything is so secretive, we don't know what's doing well and what's not, and creators don't know. And so it must be so frustrating to see your show we canceled after one season,

not know how many people watched it, not know how many people's homepages it even appeared on, and then see Netflix strike $250 million deal, with the creators of Game of Thrones or 300 million or I think it's 350 million deals with Ryan Murphy who created American Horror Story. And that's got to be, as understandable as that is from a business perspective, because again, Netflix is looking to compete now. It is, I imagine, really daunting to creators. And Netflix used to be this really great haven for creators who could do stuff that typical podcast television just wouldn't have let happen. Yeah, but I just kind of have to, I have to believe that it's maybe a have and have not situation because I have to believe that like David Fincher, if David Fincher wants to get some sense of the numbers, they're going to tell them. I imagine.

Yeah, maybe I'm wrong about that. But let me come back. What was the, what was the metric that you said? It was the efficiency that they use? Yeah, it's called the efficiency metric. Okay. So let's come back to your example. You should have gotten Tuka and Bertie.

if there's a new season of MST 3K, that should be first on my screen. You know, but I wonder, because I've been trying to think about why this, like any kind of rationale for this. Like, is it a situation where they, I mean, they know who we are. They know your, you know, young, urban, you're not going anywhere. You're not canceling your subscription. And so it's not that they feel like that they can abuse you and not entertain you. But like maybe they just don't, like they're putting their efforts elsewhere and so they're not going to. But then even why would they do that?

Because there's no extra cost to serving you stuff that will keep you coming back. The big thing that is happening and the reason that we are now talking about the way that Netflix is changing is because for the first time in a few years, in a very obvious and tangible way, Netflix is changing. And the biggest reason for that is because, well, there's two. But it all comes back to competition. Now, for the first time, Netflix is actually going to have competition. They've been able to run, they've been able to basically monopolize streaming prestige type TV on the internet. And now, in the next eight months, Netflix is going to have huge competition from like mega conglomerates, including Disney, AT&T, NBC Universal, Amazon, and Apple. Like it's people, especially when you look at Amazon, Apple, AT&T, and Comcast, there's a lot of money coming in from different areas that they can invest into content and not necessarily have to worry about it as much.

Because they're, especially you think of Amazon, right? Amazon's making money on the retail side. Prime video for them is like a fun thing they could do and it definitely drives part of their business, but it's not the core of their business. And that sets up up, that sets them up in a really interesting way. Netflix doesn't have that. Netflix, all it has is content. And so with losing series, like friends in the office, which I refer to as snack type content, it's what you stay on Netflix for, it's what you finish stranger things, but then you don't cancel because you want to watch the office.

Losing that and then not having any major shows that right now really can compete with Disney, which is launching its service next month. all of that points to Netflix needing to change how it's doing its business, like point blank. And so the efficiency model comes into play because the efficiency model goes, we don't have time anymore to say maybe the show picks up in season three or four and it doesn't matter. It's adding to our library. They need to say we need a hit every single quarter to continue bringing people in. I actually did a small segment this week about Big Bang Theory and two and a half men are probably going to go to HBO.

max for like a billion dollars or something like that. I saw you on Twitter talking about how Seinfeld is the next big one to go and is probably going to have some sort of huge bidding war, but it's like weirdly super, super complicated in terms of like who the hell actually

owns this. Seinfeld is, I should write an article about this before my visitor tells me to, but Seinfeld is a really interesting position. Seinfeld almost like friends are even more confusing.

Essentially, Seinfeld aired in the 90s as an NBC show. NBC then sold the digital rights to Warner Media. Warner Media sold part of those digital rights to Sony. And Sony was the one

who negotiated with Hulu, now owned by Disney, to have Seinfeld on that platform. So when Seinfeld comes up for renewal, on streaming, I believe it's 2021, but it might be 2020. There's five major companies that to an extent have a hand on Feinfeld. And that doesn't even talk about bidding.

That's just like, hey, some of us, like, we kind of have a right to this, but we also kind of don't because so much of it was sold so long ago, which gets into like the really interesting part of streaming in general, which is these companies, no one's. really had the foresight about what was going to happen on the internet. And so everyone sold their rights in like the early 2000s, 2010, everyone sold their rights. And now they're all clamoring to like fight to bring them back because they're launching their own streaming services and they're building it around exclusivity, which is why you're seeing shows like friends and the office sell for $400 million, $500 million for like five-year contracts.

Well, because, you know, even eight or five years ago, they were all thinking that this is just, this is free money that's just landed in our pockets. It's just additive. But now each and every one of these is like strategically crucial. It's like it's a choke point. And so it's more valuable than just, you know, making $100 million here and $100 million there. Yeah. I mean, you think about Harry Potter, right? Harry Potter one of the biggest franchises in the world with bar. none. Warner Brothers, who owns Harry Potter, sold the digital rights to NBCUee. They were like, yeah, we don't really need these. I'm going to sell them off to you. Now, Warner Media is about to launch

HBO Max, which will include both TV shows and movies. Having the Harry Potter collection would be great for them, because the one place you can watch Harry Potter, except that NBC Universal, which is also launching a streaming service, has the streaming rights to Harry Potter. I believe

through 2024, It might be through 2025. So that's a huge franchise that because WarnerMedia was like, we're just going to license all of our content. We're going to give it to Netflix. We're going to give it to NBCUNY. Now they're fighting hard to bring it back, but they have all these deals that they have to like wait out or basically buyout.

And so that's why you're seeing shows like two and a half men and the big bank theory being reportedly like looking to be reportedly sold for $1.5 billion. dollars because these shows they think will act as the exact type of snack content that they need. Right. Your concept of the snack television is in a way for certain use cases more valuable than the, oh, I've got to see that new show, it's appointment viewing, it's whatever, or it'll draw new people in. Like, people need that snack comfort food TV. Right, because that's exactly. You need your temple. I think, and this is where Disney is perfectly situated because Disney's going to go, we're converting a bunch of our movies to be Disney

Plus exclusive. I just saw, excuse me, just saw a report that Obi-1, which was originally going to be a standalone movie, is probably going to be a standalone Disney plus either film or series. So Disney has the ability to every quarter say we're going to have a huge, huge tent pole thing that's going to bring people in. They also have a ton of old movies and TV shows. that people really want to continue watching. So Disney's situated where they're going, not only are we the cheapest streaming service at $6.99 a month, but we also have everything that you want.

Right. They have the snack because of the Fox deal. They've got like the Simpsons and Family Guy now too. Yes, exactly. I think they have like National Geographic, you know, to compete with Netflix's kind of nature documentary. They're in a situation where, you know, CEO Bob Iger of Disney on a call with investors

said, this is the most important product launch of his tenure. And this is a man who bought Pixar, Lucasfilm, Marvel, and Fox. Streaming is everything. Real quick, before I let you go, let me just get your take on a couple things. You wrote recently, near and dear to my heart. You wrote that Star Trek is probably Viacom CBS's best chance at winning and streaming, which is ironic considering how they've mismanaged the Star Trek property for 20, 25 years. But go into that a little bit because I am all in on the Picard show and I'm already planning my wrap-up podcast. Yeah, I mean, so essentially it's the Disney play. It is for the first time CBS and Biacom, which originally split in 2005, I believe, they're back,

which means all the rights to Star Trek are back with one company. So they can do the multi-level. We're going to release a new movie. We're also going to release a animated series on Pluto TV, which is their free streaming service. Then we're going to release even more CBS-L-access shows. And all these are going to play into the same universe, right? So this is what Disney's doing, which is like you have to go watch the movie, but then something in the movie will reference something in the show.

So you have to go and watch the show. CBS is one of the few, few conglomerates that can actually get. the other way with doing this because they own so much intellectual property that they can do this with Star Trek admission impossible. And it's like, we're just going to build worlds that will bring people in. Once they're in, they have arguably the biggest library out of any streaming service. Like they have a huge archive of shows that people want to watch. And so it's like once they fix CBS all access, so that it's no longer a piece of garbage to actually watch, it is, it could shape up to be a huge competitor because Viacom and CBS are now one company. That means that digital rights,

which is the heart of the streaming wars, are all under one roof. So that's basically what that is. What's your take on how many streaming services most people will subscribe to? Because people are openly saying this. It's not going to be seven. What do you think? Could it be three? This is the other piece that I used to write. You know what people keep forgetting. getting when we talk about streaming wars is sports. Oh, I'm not forgetting that. The most important streaming service in my life is my NBA league. And that is like the one thing I wouldn't give up.

And that's $18 a month. Let's round up to $20. That's $20 a month that I'm paying for something. I can only, you know, on my budget, I can maybe add a couple more. And honestly, Netflix right now is not one of them. I'm looking, for me personally, I'm looking at, you know, I may at least cash rich $20. Disney's bundle, because that's $13.

And I get three services, including Hulu and ESPN. ESPN. And then, you know, for me personally, I think I would spend the money on HBO Max, even though it's the more expensive one, which we think is going to be about $16, $17 a month. In terms of the content I want, I'm paying for HBO now. I use HBO now more than anything, and that's already $15 a month. So I would probably get rid of Netflix in a heartbeat. And I think that's scary for Netflix.

Because I bet you there are a lot of people who are like, well, I know I can have HBO and I'm going to enjoy it. And I know I can have Disney. I'm going to enjoy it. And I know I need one of my sports things, whether it's NHL, NBA, NFL. Netflix is now... Netflix has always weirdly always shied away from sports. Like every time people have asked them that, they're like, yeah, that's not our ball. I think if there was ever a company that was going to get into sports, that wasn't Disney because they own ESPN.

It would be Amazon because they're already testing it. It works for them. And more importantly, the cost to license sports is immaculate. It is not immaculate. It's insane. Insane. It's just insane. And so you think about the companies that can actually viably do this, Amazon is like one of the few because Amazon has so.

much money coming in from retail and from other areas that it's like, sure, we can spend the money and we don't have to think about it. It's like, yeah, it's a bet, and it'll probably pay off, but who knows? Now, they haven't said much. We know they're testing with NFL. We know they're testing with other things. But if anyone's going to try to do a huge actual sports play, I think it would be Amazon. It sounds like you're a little more concerned about Netflix. I'm going to talk to Matthew Ball next month, who, you know, is the... the Uber Netflix bull in terms of like Netflix is playing 11th dimensional chess and all this stuff.

But am I reading you right that like if you were Netflix, you're a little worried right now? So Matthew Ball is like a hero of mine. I just want to be Matthew Ball. You can tell me that. Okay, okay. But I think, you know, I think I wrote the one of my articles, Netflix will be fine. The thing that everyone kind of forgets when we talk about Netflix is that they've hit, not their, they haven't tapped out on the United States, but most of the people in the states who are going to have Netflix accounts have a Netflix account. And they know that. Netflix isn't worried because Netflix is like one of the only streaming services that is affordable and global. You know, they're looking at India. They're looking at Latin America. And the great thing about this is that they're spending a lot of money in these regions. They're ordering local shows.

local movies and those movies and shows, at least according to Sarandos and Hastings, are performing super well globally. It's why you have a lot of people in the states who are obsessed with Latin America or sorry, South American shows. They're seeing this content play where they're like, you know, we can, Disney can maybe build 12 million subscribers in its first year in the States. We're going to build 20 million subscribers in India and other parts of Asia and other countries around the world. So Netflix is going to be. be fine. I think they probably are like, how do we keep reinvigorating content for our domestic audience? I think they're wondering, how do we define who we are when we've got competition that is

very definable? You know, you think of like HBO is definable, Disney's definable. So I think what we're going to see is then doing, trying to cultivate a voice, so that way people know what they are. But Netflix is going to continue spending money on content. They're going to continue building. So they're going to be fine. I just think I am kind of like Netflix hasn't done much for me. You're personally bearish in your own personal life on Netflix. I've meant to do a piece on this myself. To me, the biggest issue for Netflix is Disney because it prevents Netflix having control over pricing power, which inevitably Disney will bring up their price too, but until that happens, Netflix is stuck in the water, and I wonder

what that does to their long-term spreadsheets and things like that. Okay. I'm going to let you go. This is the last question. Do you have a take on Apple's morning show teaser trailer? I said this to someone, and they said, please don't write that take. But my take is that as someone who's liked the newsroom, I'm excited for Apple to basically try to do its version of the newsroom. I think it's great talent.

It could be a disaster, and I'm still like, I'm here for it. Yeah, I'm excited. I love how the legacy of the newsroom is the greatest show that everyone hate loves. And then the ironic thing is, is like, this is a show about a medium and a format that essentially streaming has made redundant. It's a weird. Aaron Sorkin. Yeah, yeah, yeah. Okay, anything you want to plug?

No, I follow our streaming. coverage on theverge.com where we're going to be doing a lot of it. Loudmouthed Julia on Twitter. Thank you, Julia.