The Cultural Algorithm

What should content creators make of platform subscribers and revenue numbers?  If you listen to media pundits, analysts don’t expect Q2 of 2022 to bode well for linear or streaming platforms. Several said the industry was “ slowing down ” due to the state of the global economy. Market contractions are likely to lower ad revenue and impact subscriber totals. To some degree, the companies that have reported so far (more are coming this week) indicate the experts may have a point, but will it impact content development or market expansion?    Among earnings announcements so far:    Netflix posted a loss of 970K subscribers  Peacock netted no new paid subscribers in the quarter  Apple service subscriber growth slowed compared to previous quarters    Other prominent players in the streaming space are expected to report subscriber losses, slower subscriber growth rates, and revenues or earnings below projections. Fortunately, the state of the industry isn’t as bad as some like to paint it. In fact, none of the companies reporting earnings so far have announced a reduction in their content spending this year despite these challenging economic times.    Netflix  Netflix CFO Spence Neumann said in their Q2 earnings call , “…if you zoom out a bit and look at past economic cycles, at least in the US, most forms of entertainment have been fairly resilient to downturns.” People tend to keep streaming subscriptions as they optimize their entertainment spending. Neumann cited that operating income and Earnings Per Share (EPS) were higher than expected, and the company saw a 7.7% growth in screen time during the quarter. This growth included countries where the company increased prices. Bottom line: Netflix will not change its content strategy or curb spending.    Comcast  Comcast CEO Brian Roberts said during their Q2 earnings call that despite flat subscriber growth in the NBCU Media group, their investment in content was paying off. He cited upfronts generating “more than $7 billion in commitments, including $1 billion at Peacock” for the 2022/2023 season. Roberts touted the success of theatrical releases including “Jurassic World,” “Minions: The Rise of Gru,” and “Black Phone,” emphasizing that “great content attracts massive audiences.” Comcast indicated no intent to cut back on content development.    Apple   Apple’s commitment to content continues, with CEO Tim Cook saying during their earnings call that the company grew to over 860M paid members of Apple TV+, Apple Music, and Apple Arcade platforms in the quarter, generating $19.6B in revenue. Cook highlighted that in 2.5 years, Apple TV+ has “earned 250 wins and 1,100 award nominations,” including 52 Emmy nominations across 13 titles.    What this means for content creators is that, given the current global economy, there is no planned change in the amount of money invested in new content. Every major company that has reported quarterly earnings remains committed to its announced investment levels in new content development for 2022. That doesn’t mean they won’t adjust how or what they buy in the future. It means their focus remains on creating engaging content consumers want to watch. This is good news for companies that cultivate and localize content. It is a testament to their effectiveness in producing titles welcomed in over 200+ countries and territories worldwide.

The idea behind diversity, equity, and inclusion (DEI) in the media and entertainment industry is nothing less than demonstrating respect for other people and cultures, recognizing the creative talents of a global community, and establishing equal opportunities for everyone. With more than 12,000 titles produced yearly, it's fair to presume there should be plenty of opportunities to go around, right?

Age ratings are coming to a platform you most likely use -- from TikTok rolling out content with a maturity rating system to prevent young audiences from seeing inappropriate videos to content regulators worldwide who have increased the extent to which they examine content for age and cultural appropriateness. We've previously discussed regulators' increased focus on violence , LGTBQIA+ , and cultural issues in film and television. As demonstrated by three announcements this past week, age ratings are making their way onto all types of media platforms.

The media is currently reporting and hypothesizing how a recession could impact the M&E industry. Will it reduce subscriber numbers, jobs, stock prices, and revenues? Who stands to win or lose? These are essential industry questions, but only one deals with the core product the industry creates: content.

Four of the Top 10 Q2 in-quarter film releases (three were in the Top 5) were banned in major film markets for culturally objectionable content, yet still broke revenue records . As we'll show, it doesn't take much to run afoul of regulators in today's top global markets.

As Covid-19 concerns persist and stay-at-home/social distancing continues, it's difficult to find a single industry unchanged. Even streaming companies, most of whom just gained a bevy of new subscribers, have changed their services. In early April Netflix dropped streaming quality in order to ease overworked broadband servers as people increasingly plopped down in front of the TV to escape the current state of things. In addition, the streaming company announced that they will alter specific elements of the parental control features. Among the changes-in addition to rating-is a new capability to filter based on titles . Though the broadband restrictions are easing as the pandemic limitations ease, the filter settings are the new standard.

With the unprecedented increase in the number of platforms available to consume content and the seemingly ever-increasing number of titles, parents are rightfully concerned about the type of stories their children can watch. One way parents or family members can determine whether a specific title is appropriate is an “age rating.” We’ve discussed in previous posts what age ratings are, how they differ between film and TV, and how they vary across countries. In this post, we examine the content regulators that assign ratings and how they perceive their role in ensuring safe and quality entertainment content is available for families in theaters and online.

Preparing a title for a global release is complex. Many components must be in place prior to starting a deliberate and complicated process. You’ll need a final cut, an accurate final script, trailers, posters, targeted markets, a release schedule, and an understanding of how cultural, regulatory, and political factors impact age ratings. These are critical components to the process, and missing even one of them can threaten the success of the entire localization project.

Following the latest VOD and OTT company M&E earnings, subscriber reports, and layoffs, one of the observations is that content acquisition budgets will shrink worldwide. There are several reasons for this: increased competition, increased production costs due to global price inflation, resulting pressure on studios to reduce costs to maintain profitability, and the concern that Netflix's subscriber loss will spread to other parts of the industry.