Internet

Gaming Google

It’s widely understood that news organisations can find the going quite precarious in this digital age, with a reluctance on the part of consumers to pay for news, and advertising alone not bringing in enough revenues. So it’s perhaps not surprising that they should look at whatever advantages they can take, and some of these seem to be at the expense of “gaming” Google.

I’ll highlight a couple of things that do irk me a little. But it’s worth noting that while these work for news organisations, they probably won’t work for anyone else. That’s because Google tends to prioritise news outlets in search results that return news sources.

Generally speaking, if your search result is purely factual and not newsworthy then unless a Google “snippet” appears, the top results will be relevant sites, quite often including results from places like Wikipedia or Quora.

However if the search is about current events, then Google throws recently updated news sites in the mix, andthese will find themselves in a prestigious position near the top of the page. Most of the time, that’s because it’s relevant. Someone searching on a current event probably does want a news site at the top of the list of results, rather than some dated article that contains the same keywords.

But that means that news organisations can game the system a little, and here are two examples.

1. The Google Doodle

As anyone who ever uses Google knows, Google loves to replace its regular logo with doodles on its home page. These celebrate all sorts of things from anniversaries of famous people to major events that are happening. Sometimes the doodles are localised to specific countries or regions, and other times they run globally.

Occassionally there’ll be a really ornate interactive one that offers something like a game or even a musical instrument!

But what happens when you see a doodle that you perhaps don’t understand or that intrigues you?

You click it.

And therein lies an opportunity. Because what that actually does is perform a Google search on whatever the subject matter is.

If you’re a news outlet, you swiftly write a piece on the subject on the doodle, noting that Google is celebrating said subject, and you get it published post haste.

The result is that when user click on the doodle, they get a page of results on, say, clockmaker John Harrison. But near the top of the screen are some links to news sites’ “Top Stories” about the very same.

Sure, the Wikipedia piece is there, but the other stories are hacked together pieces written full in the knowledge that they will generate page views as a result of Google’s doodle.

There’s nothing particularly wrong here, but it does push other relevant search results further down the page.

2. When’s It On?

Another type of gaming that goes on is also based on anticipating what people are Googling. Often these will be based around sports events or TV series.

There’s a big fight this weekend, or a big game in the Champions’ League. Perhaps a really popular TV drama is returning to our screens.

In any of these cases, some people will Google something along the lines of, “When is the Joshua fight?”

Now there is some semblance of information being asked for. They do want a date or a time. Perhaps they want to know what channel it’ll be on, or how they go about getting access to that channel.

Into that void rush news outlets. They quickly author pieces providing that information, but usually padding it out beyond briefly stating the date, time and channel. If I were suspicious I’d suspect that Google’s algorithms downgrade stories that are too short. So they get bulked out. You try writing 500 words on when a football match starts!

To put this into perspective, a search for “What time does the super bowl start” – in quotes – returns 15,400 pages.

Yes, these are questions that people want answers to. But do we really need dozens of “news” stories on them?

Of course, Google can sort of kill this my providing the information itself. In some cases it does that, but it doesn’t stop the news sites offering their own pages.

I probably find the first of these two things more irritating that latter, but you still have to recognise these articles for what they are – cheap traffic drivers that don’t really offer a great deal.

Facebook Pixel Tracking

This morning Nieman Lab had a really good piece asking whether if there was a certain amount of hypocrisy coming from certain news organisations castigating Facebook for leaking data, when at the same time they’re helping Facebook collect more data on you.

Recall yesterday, when I said that some of Facebook’s data was missing from the download, and I highlighted Facebook Pixel? Quora is a good place to go and have a look (Note: Quora itself has a Facebook cookie):

The pixel is a transparent, 1×1, unique image file that can be embedded on pages outside of Facebook (unique = 1 per advertiser account). That image file, however, sits on Facebook servers. So, each time it is loaded, it increments counters on Facebook’s side.

…

And each time the pixel file is being seen by a user… Facebook servers can see which browser is used, which machine and which IP address. In other words, they are able to reconstruct that signature – they know which Facebook user has seen the pixel.

In essence, the Facebook Pixel lets you then target people who visit your site when they’re back on Facebook. And of course, Facebook now knows that you’ve visited a particular site, deepening the picture they hold on you.

And Facebook also has the Facebook Audience Network, which basically extends Facebook’s advertising business beyond the bounds of the Facebook website. In particular, they’re targeting mobile sites and apps.

Using the EFF’s excellent Privacy Badger browser plugin, I looked at some of the UK and US’s biggest news websites to see which ones allow Facebook to track you. This obviously isn’t a comprehensive list, but it gives you an idea.

Sites with Facebook Cookies

  • The New York Times
  • The Washington Post
  • Forbes
  • The Daily Mail
  • The Sun
  • Metro
  • The Times
  • The Economist

NB. These are at time of writing.

It must be said that I’ve not really gone into detail about Facebook’s business model here, but it gives you an idea.

And there’s a wealth of data being collected by many companies beyond Facebook – and a multiplicity of ad tracking cookies going around. Upwards of 20 cookies on a website is not unusual. Sometimes they’re just there for analytics purposes. All the advertising networks use them, with Google and Facebook being by far the biggest networks globally.

And there can be good reasons to use tracking cookies. This very site uses Google Analytics to count the number of people who visit, for example. I’ve embedded Vimeo videos and Flickr images on this site, and they have tracking codes built into the code I copy to this site. If you comment, there are various ways you can log in, and they have tracking codes too. I’d prefer there not to be, but if I want to properly use those sites’ services then I have to play ball with them.

While everyone kind of knows that the pair of shoes they looked at over lunch, but didn’t buy, is now following them around the internet, and that must be using some kind of tracking information, I’m not sure that many of us really understand how widespread this is, and how much data is being captured about us.

[Update: In related news, Mozilla has announced a Firefox plugin that stops Facebook tracking you around the web. Useful if you’re not already using something like Privacy Badger or Ghostery.]

Is Netflix Quite As Smart As Everyone Says It Is?

That’s possibly a provocative title, but I’ve come to the conclusions that while Netflix is very good at some things, I’m not certain that its recommendation engine is entirely as linked up as you’d think it’d be.

A couple of recent cases in point.

I was really looking forward to the new Alex Garland film, Annihilation. While I was slightly disappointed it wasn’t getting a cinema release, I was very pleased that Netflix was investing in it (well, buying the rights), and making it available to its subscribers. I dutifully searched for it ahead of its 12 March release, and added it to “My List,” Netflix’s somewhat clunky system for saving things you want to watch.*

Although I believe the film was made available at midnight UK time, but I waited until Monday evening to open the Netflix app on my Nvidia Shield and settle back to watch. I thought that they’d probably have the film front and centre when I opened the app. After all, it was a big coup them getting it. Plus I’d explicitly added it to my list.

There was no sign of it. It wasn’t in trending (too early I guess), or in any of the top lists of things I might want to watch. I ended up using Search to find it. It was – but hidden.

Then over this past weekend, while I was out and about, I got some Instagram advertising for a film called Paradox with Darryl Hannah and Willie Nelson. I’d not heard of it, but clicked through and saw video for some kind of western themed film. “I might watch that,” I thought – vaguely intrigued. Netflix are obviously promoting it, I’d catch up with it at some point.

Later, with that thought having drifted out of my head, I did open Netflix again in search of something to watch. Had I spotted Paradox, I’d have at least given it a second look.

But it wasn’t there. Or more to the point, it wasn’t obviously visible. In any case, because a film I’d seen promoted precisely once, was no longer in my view, I didn’t search for it. I only remembered this at all because I saw a second Instagram ad for it earlier today.

But again, it feels like Netflix is being a bit slow and doesn’t have all its ducks lined up. It’s not that I don’t think they can do some clever stuff, but they’re not as good as they make out.

Have you heard of a Danish comedy drama called Rita? Maybe if you’re Danish, but otherwise, you might not have. Netflix never recommended it to me. It was someone on Twitter who noticed it. It’s very amusing.

I started watching a Spanish series called La Casa de Papel. It’s a series about a gang of thieves who try to rob the Spanish Mint. It starts well, but like another Spanish series I saw on BBC Four last year, the strong hook doesn’t last the course, and we end up with an interminable number of episodes where not a lot happens, and the villain is really villainous. More plot and fewer episodes please Spain. I mention this because after I’d watched a few episodes on Netflix, the series promptly changed its name. It’s now called “Money Heist,” although it wouldn’t be obvious to those like me who’d started watching it under another name entirely. I had no idea what Netflix had done!

I’m always suspicious of over-claims about how briliant someone’s algorithms for discovery are – mainly because I’ve yet to experience anything that’s really that good. Amazon is pretty bad at recommending me books I didn’t tell it about, and music recommendation engines are pretty poor in my experience – especially if you move beyond the obvious.

Maybe they work for some, but I’m underwhelmed.

* I say it’s clunky, because it’s incredibly binary, and doesn’t allow you to make lists for different things. Furthermore, when you watch something that was on the list, it doesn’t then remove that item from your list. I’m also not aware that Netflix alerts you when something that’s on your list is shortly to be removed. Another useful feature.

Examining My Facebook Downloads

One very good consequence of the Facebook/Cambridge Analytica story is that a lot of people are discovering the surprisingly large amount of data that Facebook holds on them. The BBC’s Rory Cellan-Jones was “somewhat shocked” to see what it had on him. And The Verge has a good piece on the subject with particular reference to Android phones.

In essence, Facebook always asks for quite a lot of data when you install its apps, and people seem to be too quick to offer that data when it comes to installing those apps. Only now are they discovering what they’re sharing.

“Yes, yes. Just install and let me get onto Facebook,” seems to be the default thought process.

Now I’m not going to pretend that I’ve always slavishly careful about those permissions myself, but I certainly wanted to see what Facebook holds on me. So I went to the Facebook Settings page and clicked on the Download A Copy link at the bottom.

Facebook first has to prepare the data, crunching it into a Zip file for you. You need to re-enter your password to begin the process, and Facebook promises to email you when the link is ready.

Based on others, I thought it may take a while to compile, but in face it took just 16 minutes. Fast considering the volume of data and the number of users who are perhaps also doing this right now. You have to re-enter your password a second time, and then the file downloads.

I’ve been on Facebook since 2007, and I thought that this could be a big file. In the end it was just over 1.1GB. I’ve uploaded a lot of photos to the service in the past, but particularly in the early years of Facebook, they heavily down-sampled those pictures. (Another reminder that you shouldn’t use Facebook as your only photo backup.)

Anyway, the file extracts easily enough and Facebook has built a fairly intuitive html interface for you to examine your data offline.

My profile data is an interesting place to start. Facebook seems to have detected a single family relationship. While relatively few of my family are on Facebook, some of those who are, were not picked up here as family members. If they don’t have the same surname it might not be obvious to an algorithm.

The interests section is very odd, and not very accurate. When Facebook first started, you just had empty text boxes to fill out. I wrote a general stream of consciousness about music, TV, movies and so on. At various points Facebook has tried to clean that up a little, isolating artists and titles, and linking them to official accounts or lists that it has.

But despite prompts to help them (and help me!), I never really played ball. So there is one novel listed in books, which I think I was probably reading at the time. There is one TV series – one that I absolutely do not recommend. Movies are a little more populated, but with films I may have referenced directly on the service rather than anything else. And music is very limited. Facebook really doesn’t know much about my media consumption.

In general, Facebook would learn a lot more about my media choices if they scanned through this blog!

Otherwise, most of the rest is either groups or people I’ve taken an interest in. I would say that they’ve used Instagram heavily for the latter.

Probably the most contentious area is the list of contacts. And for me, that’s a moment in time, when I did at one point let Facebook into my phone or Gmail account. The list of contacts is old, and while many of those email addresses and phone numbers still work, they’re cast in aspic. Over the years I’ve had any number of phones, and if and when I install a Facebook app, I never give permission for it to see my contacts.

My Timeline is as you would expect – everything I’ve written on Facebook. I link my Twitter account to Facebook, because I’m far more active there. All those Tweets are also captured here. But nothing I wouldn’t expect Facebook to have.

As I mentioned above, I’ve uploaded a number of photos to Facebook over the years. They tend to be more social photos than anything, and Facebook was an easy way to share with friends and work colleagues. Latterly, anything that I’ve cross-posted from Instagram shows up. [Update: A friend – on Facebook – noted that captions for photos are not included]

There are only a limited number of videos, again social, and no surprises.

Messages lists all my Facebook message and Messenger interactions. I loathe Messenger and don’t ever have it permanently installed (On occasion I’ve installed it for a short, but necessary period of time. I uninstall it immediately thereafter). Nontheless, again there were no surprises.

The data supplied by Facebook on “Pokes” (Remember them?) was incomplete. I only had one poke listed!

Security lists a variety of things including devices, and even IP addresses from which I’ve accessed Facebook.

The final two key pieces of note were Applications and Ads. I recently cleared out the list of applications that I allow Facebook links to. It’s always worth doing this on a regular basis. I know precisely which apps are currently linked, and there is a good reason for each of them. There are only five.

Ads are broken into three parts. There’s the list of topics that Facebook thinks you’re interested in. This is a curious mix of very broad things (“Music”) and very narrow things (“Dan Martin (cyclist)”). It’s reasonably fair, although I don’t really have a particular interest in Citroen, nor Motor Sports or Auto racing. And I’ve no idea why “BBC Radio Solent” is one of a handful of radio stations listed as being of interest to me [Update: I worked out that a former work colleague of mine works there now, and I’ve liked some of their activities]. They do at least list my current employer! My previous employer is not listed. It’s possibly that this list is dynamically updated and pruned accordingly.

Ads History claims to list all the ads I’ve clicked on. They only have two listed – both this year – and one without a named advertiser. This is clearly missing data. While I do recall clicking the one named advertiser, and although I rarely click advertisements, I have clicked others in the past. Incredibly, I once actually bought something on the basis of a Facebook ad! Extraordinary, I know.

Finally, perhaps most worrying for me, is a list of “Advertisers with your contact info.” Most of the list is made up of KLM subsidiaries. I once entered a KLM competition on Facebook, and must have agreed they could use my data. I rarely participate in competitions that require much data access for this very reason. Uber, Airbnb, Deliveroo and eBay Canada seem to have my details. But there are a hole bunch of seemingly related “Crowdfunding” companies who have my data. I’ve no idea how they got it, and more importantly, I’ve no idea how to remove it from them. In general it’s quite a contained list.

Notably, Facebook does not have a list of my outgoing or incoming calls, and it’s not had access to any SMS messages I’ve sent. I’ve never given permission, and never wanted to use one of its products as my default SMS app.

The most sensitive data is my list of contacts. But that data is old and is not being updated since the Facebook app on my current phone does not have permission.

As I’ve said repeatedly on this blog, I’ve never found Facebook the most trustworthy company. But on the other hand, there aren’t any surprises to me from what Facebook has in my data.

I think that there are some incomplete aspects of it. I’ve clearly clicked on more ads that Facebook is admitting – but perhaps they delete that data after a period? Less importantly, the list of Pokes was incomplete. I mention that only as it suggests that this might not be a truly complete picture of my Facebook activity.

But I also know that if I carried out the same process for Google, it would be a lot larger. Google has all my email. It has all my contacts. It stores documents, photos and videos for me. I use its browsers multiple times per day. It knows what YouTube videos I watch. It knows what music I listen to. I’ve had phones running its software for years. They know where I go.

In all of that respect, it’s potentially a much scarier proposition.

And yet, I do have more trust in Google than I do in Facebook. Perhaps that’s misplaced? Perhaps not. But in general terms, I think people are clearer in their knowledge of how their Google data is used.

Auditing who knows what about you is important, and we should all be doing this on a regular basis. It’ll be a much bigger job, but it looking at my Google Data might be worth doing too…

[UPDATE]

It’s probably worth highlighting a few things that you don’t get from this data.

  • Likes – Given that a key part of the Cambridge Analytica story is about trying to determine OCEAN psychographic measures from Facebook likes, a record of comments and pages I’ve “liked” is data that’s relevant but not here.
  • Facebook Pixel data – Facebook Pixel is the technology that Facebook uses to determine where users also go. While that could be websites that simply allow you to comment via your Facebook login, it might as well be websites that you never realised had installed the pixel. In effect, when you visit such a site, Facebook knows about it. It gives them some of the data that Google collates about you via its ad networks.
  • Geographic data – Facebook loves to know where you are. I mostly have this turned off, but couldn’t definitively say that this has always been the case. While Google has its Timeline History that tells you where you’ve been, there doesn’t seem to be an equivalent for Facebook’s location data. Incidentally, if you’ve never explored that Google data, I’d urge you to. You’ll be delighted, scared and possibly both. (Note to crime drama and fiction writers: Nobody ever uses this, although I understand it potentially increases the difficulty in plotting your story as mobile phones in general have.)
  • Whatsapp or Instagram data – I’ve noted that some of my Instagram information does seem to have fed through to parent company Facebook’s data. But that doesn’t seem to be the case for WhatsApp. Within the EU, Facebook has been limited quite significantly about how much data it shares. The UK’s Information Commissioner made that very point again recently. But it’s worth noting nonetheless.

Netflix: $8 Billion and 700 NEW Shows?

How much programming is Netflix actually making?

The answer is a lot, but I think that the widely reported numbers are a little misleading.

Heavily retweeted earlier today was this:

I’m not trying to pick on one person; these are figures that have been reported elsewhere.

Most pieces reference a Variety story: Netflix Eyeing Total of About 700 Original Series in 2018. But you’ll note that the Variety headline includes the word “total” in it.

The key section of Variety’s report is this:

The “700-range” figure [Netflix CFO, David Wells] cited includes 80 non-English-language original productions from outside the U.S., such as psychological thriller “Dark” from Germany and “Club de Cuervos” from Mexico. The total encompasses both new and existing original series (such as “Orange Is the New Black” and “Narcos”). [My emphasis]

In other words, this is a cumulative figure and represents the total number of original series on the platform.

It does not mean an additional 700 originals!

The Variety report is based on an investment call that Netflix had, and as is the way with these things, the transcript of the call is available online.

Here’s the relevant section:

Unidentified Analyst
Right. So moving from maybe the big-picture stuff to more into here now. What are your priorities for 2018? Where are you focused and where is the team focused in making sure the company executes this year?

David B. Wells – Netflix, Inc. – CFO & Principal Accounting Officer
Well, I think — a lot of what you hear many of us say is internal execution, right? So we think we have a large market. We just talked about there’s so many more nonmembers than there are members, and so our focus is really to continue to improve the product that we have. We’ll be adding increasingly more and more of our originals in our global content. This year, we’ll have 80 originals in the global category, meaning these are non-English language original produced content things, like Club de Cuervos, Dark — O Mecanismo is a new one coming from Brazil. And so the — our muscle in that area is increasingly being built and exercised, and I’m excited about lots of great stories coming from different parts of the world. And again, people seem to love high production quality and a good story. It doesn’t really matter where it comes from. So I think our focus is building out our production muscle, building out our global production muscle, increasing our product in various parts of the world. We’re the newest in Asia. So I’d say it’s continuing to sort of localize pieces in Asia, continue to improve the product there. But we also have an eye towards not losing our leadership position in other parts of the world as well. So it’s not like we’re not also improving the Americas.

Unidentified Analyst
You mentioned 80 global originals. That’s TV series, so that’s distinct from your film strategy?

David B. Wells – Netflix, Inc. – CFO & Principal Accounting Officer
Yes. That’s distinct to film, and it’s even distinct from television series that you might describe as sort of global, like Orange Is the New Black or Narcos. These are things that are produced in a non-English language market. So I just want to make that distinction. So there’s even more than 80 that are sort of for the global market. If you think about the total number, it might be somewhere in the 700 range.

That makes clear that there are 80 original “global” originals – non-English language originals. And there are 700 in total. They obviously measure movies differently, and categorise them separately, but then they are still both commissioning original movies and also buying them outright after festivals such as Sundance, beyond the regular licencing of movies from studios. Ted Sarandos, Netflix’s Chief Content Officer has previously said that they will release 80 original movies in 2018.

But how do you even determine what is a Netflix original? It’s not that simple.

Stranger Things or Narcos are relatively simple. They’re 100% Netflix. But for others it’s less clear. For example, in the US, the science fiction series The Expanse appears on SyFy, but it counts as a Netflix original in much of the rest of the world. Star Trek: Discovery appears in the US on the CBS All Access streaming platform. Everywhere else it’s a Netflix Original. Troy: Fall of a City is currently airing on BBC One and was co-commissioned by both the BBC and Netflix where it’ll appear globally.

Even seemingly homegrown series like Orange is the New Black and House of Cards, aren’t strictly Netflix exclusive. Orange is the New Black is currently airing on the Sony Crime channel in the UK, having done a deal with Lionsgate the producers. In France House of Cards originally aired on Canal+ since there was no Netflix in France and the producer, MRC, was able to sell it to them. On more recent 100% Netflix commissions, it has reportedly tightened contracts to prevent that programming appearing elsewhere – unless they choose to allow it.

In any event, a Mashable report makes clear that this 700 number includes some of these co-commissioned series:

A Netflix representative told Mashable that this content budget includes properties we already know and love like Stranger Things, as well as licensing content from partners like AMC’s The Walking Dead.

Note that The Walking Dead is not available on, for example, UK Netflix, because Fox International has the rights and they distribute it on Sky’s platform in boxsets.

It should also be pointed out that “originals” can include one-offs as well as series or seasons of shows. Think about all the stand-up comedy specials that Netflix is commissioning.

So to summarise, there will be 700 originals in total at the end of 2018, which includes new commissions, previous commissions and co-commissions.

Netflix is definitely spending a lot, although it’s in the ballpark of what other large media companies also spend each year. But it’s not launching new series at the rate of two a day!

They’re also losing money – negative free cash flow in the parlance. I’m not arguing that there isn’t an underlying business model that makes sense, but it’s worth noting all the same. The theory is that as they build up their library of originals, they don’t have to licence as much third party material (See also the recent news that Disney won’t renew their Netflix deal and will shift their output to their own new streaming platform).

Netflix faces the issue of needing to have relevant programming in multiple local territories, and while there’s value in older series, viewers will continue to seek new programming. Netflix will have complex calculations about how much it needs to spend on new programming versus catalogue versus subscriber growth versus how much it licences. It’s a complex grid.

Administrative Note: HTTPS

I forgot to mention it when I switched it on recently, but this site is now HTTPS enabled. That should mean that in browsers like Chrome you see a nice green “Secure” label to the left of the URL.

What did I need to do to get this to work?

Not a great deal really. My host, Virtual Names, has enabled Let’s Encrypt the free open certificate authority. That involved a quick email to my host and within minutes they had moved me across to an appropriate server.

Then I added the WordPress plugin Really Simple SSL which took no real set-up.

The final stage is to change the Site URL and WordPress URL in the WordPress settings, and away you go.

Well it was that straightforward for me anyway.

(OK – I realise that I don’t actually have much on this site that really requires SSL. The most interaction you’re going to have with the site is leaving a comment. But nonetheless, HTTPS URLS are becoming more important, and most of the web is going that way.)

If People Think It – Does It Matter If It’s Actually True?

In this week’s excellent episode of the Reply All podcast, Alex Goldman and PG Vogt explore the question Is Facebook Spying On You?

In particular, a number of people are of the belief that the Facebook app is listening to what you’re saying and that’s the only way to explain why things you were talking about with your friends are suddenly appearing as ads in your Facebook timeline.

Now in fact there are lots of reasons why Facebook could know this information, and the episode digs into the issue of online ad tracking, which is remarkably sophisticated these days – and/or creepy. Facebook tracks your internet behaviours across many sites who use the Facebook Pixel. Essentially it’s tracking code that follows you around vast parts of the web. It’s this technology that also explains why that pair of shoes you were looking at during your lunch break then follows you elsewhere around the web.

Facebook records thousands of pieces of data about each user, and then further utilises location data from the app and location data of your friends’ apps. In turn this means that you might see products that your friends were looking at because it can infer that you might have mentioned them. (Interestingly, just after listening to this episode the Facebook app on my phone performed quite a sizeable update that required me to log in again. The first thing it asked for was permission to turn on location services. Denied!)

This remarkable technology, along with smart algorithms that will make inferences based on people’s behaviours means that as Facebook says, it isn’t actually using the microphone on your phone to listen to you.

But the tracking they manage seems to be practically magical to many people, so they infer that Facebook must be listening in!

So my question is this: Does it actually matter that Facebook isn’t using the microphone on your phone. If their tracking is so exceptional and accurate, that it becomes creepy, people will rationalise it as meaning they must be doing it.

And if people believe something to be true, it really doesn’t matter if it’s not actually the case.

Note: I write all this in the knowledge that I have microphones in my home that do stay live all the time, and report data back to Amazon and Google. The difference is that I trust those organisations more. It’s difficult to put my finger on why that is, but it feels that they’re more up front and honest about what they’re doing.

Facebook, Amazon and the Premier League

It’s nearly time for the money-go-round… sorry, merry-go-round, that is the Premier League rights auction for seasons 2019/20-2021/22. We’ve just started the second season of the current deal where Sky and BT between them have spent £5.1bn for the current round of rights. Recall that last time around, this represented a colossal 71% increase in revenues.

That money, allied with ever-increasing overseas TV rights, fuels the UK game. But there were questions about how much further rights could increase next time around. Sky and BT represent the only “broadcasters” who are likely to bid next time around, and assuming that each is broadly happy with its lot, you wouldn’t expect rights to increase substantially.

Indeed, it seems as though the current set of rights have caused some real pain to the broadcasters. Sky has broadly speaking cut back its sports coverage, losing men’s tennis, and reducing rugby union coverage. Anecdotally, it seems that more coverage is coming from Sky’s studios rather than sending production teams to events.

One way or another, Sky has tried to avoid massive increases to consumers, although prices are going up.

So if Sky and BT are fairly maxed out, how do Premier League clubs get some big increases next time around?

Today The Guardian reports that Manchester United vice-chairman Ed Woodward says that Amazon and Facebook will get into the game.

As far as everyone is concerned, these companies bring untold wealth. They could be game-changers – pardon the pun.

Well of course Woodward would say that. And I’m sure that Amazon, Facebook, Google and Apple will run the numbers. But at over £10m a match under the current contract, they’d need a compelling case. With the possible exception of The Crown, that blows all top TV dramas out of the water in terms of costs.

A lot has been made of Amazon taking on ATP Men’s Tennis in the UK from next year. They’re paying around £10m – the same price as a single Premier League match – for a year’s worth of tennis. Sky is said to have wanted to pay less than last time around, so it was to all intents and purposes giving up on the sport. They’d already dropped their US Open coverage.

For Amazon, tennis is a bit of a trial. Perhaps it’ll get them new Prime memberships, or make current members happier. But it’s not a massive cost. It’s not a multi-billion, multi-year commitment.

That’s not to say that one of GAFA won’t buy rights, but that’s a much bigger step. And what does that really get you?

All of this is before considering whether every football-loving household in the UK has enough internet bandwidth to support a live HD (or 4K) stream.

I could be wrong. But I’m not convinced just yet.

Netflix and Disney

Last week came news that Disney would be pulling its movies from Netflix at the end of the current arrangement, and that Disney would in future launch its own streaming service. This licensing agreement generated a vast amount of coverage, much of it ill-informed, and ignoring wider issues in the market.

There are a few key issues to discuss here.

Disney Films on Netflix

Netflix originally signed a deal with Disney back in 2012, whereby Netflix took over from a previous Pay TV deal Disney had with Starz. Library films became available immediately on the streaming service, while Netflix gained the Pay TV window rights for new Disney movies (including Marvel, Pixar and Lucasfilm) released theatrically from 1 January 2016. In reality, that means first-run films would appear from late 2016 when the Pay TV window opened.

A Note on Windowing

It’s probably worth detailing how movie studios traditionally “window” their wares.

The Theatrical Window is usually first, and theatre owners demand that films don’t get released for usually three to four months (it varies by territory, with countries like France enforcing much stricter rules). Then is the so-called Video Window with digital pay-to-own (e.g. iTunes or Google Play Video) and physical DVD and Blu-ray releases. The former is often released a week prior to the latter. Then, a few months later, comes the Pay TV window, when films end up on premium cable and satellite channels like Sky Movies in the UK, or Starz in the US. After that initial Pay TV window, films may then go into a Second Window with perhaps a free-to-air broadcaster, or streaming service like Netflix or Amazon Prime.

Obviously with both Netflix and Amazon active in making and acquiring films, they can choose to either go straight to streaming, or miss out some of the other windows. And there is talk of a Premium Video On Demand (PVOD) window between 30 and 45 days after theatrical release that would be priced high for early streaming access. Theatre owners worry about such things because if you know you only have to wait thirty days, then you might not bother going to the cinema to see a new film.

The key thing throughout all of this is that films tend to get less valuable as the windows progress.

At the time of the Disney deal, media estimates were that the deal was probably around $300m a year for Disney, and was seen as a good deal for all concerned. Netflix paid big, but got big films as a result. Disney dramatically increased what Starz (or HBO or Showtime) would have paid, but as a studio they couldn’t miss with their Marvel films alongside the relaunched Star Wars series, as well as their high-performing Disney and Pixar output.

Now the deal is coming to an end, and films released from 1 January 2019 will not appear automatically on Netflix. Furthermore Disney is launching its own streaming service. More on this latter point below.

Cue lots of words about how this could be the beginning of the end of Netflix. The thinking is that if Disney can do this, then surely others can too. And that breaks Netflix’s model.

Well only up to a point.

It’s worth reiterating that this was a US only deal. The deal does not, and did not apply elsewhere. That’s not to say that Disney material hasn’t and doesn’t appear in other territories. It does. Star Wars: The Force Awakens was released just ahead of 1 January 2016, so didn’t make it to Netflix US. It did appear on Netflix in Canada however. Meanwhile Netflix UK has a number of Marvel films on its service, although these are second window films. They have already had runs on Sky as part of Sky’s deal with Disney (In the UK, Sky has exclusive Pay TV deals with most of the major US studios, usually locking out competitors for twelve months).

In Netflix’s recent earnings release, they reported that they had 94.36m paid memberships of which 49.38m were in the US. That leaves 44.99m outside the US, and that’s important. Within the next two or three quarters it seems likely that international will outstrip the US in terms of paid subscriptions. While that isn’t reflected in profits (international rollout is expensive), it’s important to remember that Netflix US is not the same as other versions of Netflix. Due to the way that the entertainment industry has historically worked, rights are sold on a territory by territory basis. Furthermore, different studios may own the rights to different films in different territories.

What this all means is that while Netflix losing Disney seems like a big deal, on further examination its notable that the deal didn’t extend to other territories. And those territories are growing just fine without Netflix serving up first-run Disney films.

Disney Already Streams

The other big part of this was that Disney announced that it’d launch a new Over The Top (OTT) streaming service once the Netflix deal ends.

A fact that has escaped many – including a large number of British news reports – is that Disney already has a streaming service. It’s in the UK, it’s called DisneyLife, launching at the end of 2015. Originally priced at £9.99 a month, making it more expensive than Netflix, in time it dropped its price to a more palatable £4.99. For that you get unlimited streaming access to Disney and Pixar movies, as well as all Disney’s TV programming. That amounts to about 400 movies available. The TV programming is both live and on-demand box sets. The service also offers Disney music and audiobooks, and it offers a 10% Disney Store discount.

That all said, new Disney films still get onto Sky Movies before they reach DisneyLife (in other words, the service doesn’t offer first run films during the Pay TV window), and Disney still sells its top films to free-to-air broadcasters like the BBC. I assume that maximising audience also means maximising merchandise revenues from those later rebroadcasts.

Whether Disney renews its Sky agreement in the future, or goes it alone in an attempt to bump up overall revenues will be worth looking out for. But it would seem that the UK has been used as a beta test market for the newly announced Disney service.

(Note that DisneyLife is a different service to Disney Movies Anywhere, which is Disney’s own brand download-to-own digital service.)

It’s notable that the UK DisneyLife does not include Marvel or Lucasfilm output. That’s likely to be either because Disney already had lucrative deals in place with Sky or others at the time of launch, or that including that output it doesn’t make quite as “clean” a service. The audience for Frozen is different to the audience for Ironman.

Perhaps, in time, Disney will want to include these properties in its streaming service, but I’m not sure. The core Disney (and Pixar) offering is very defined and a parent subscribing knows what they’re getting from a service. Offering a film like Deadpool (15 rated in the UK; R rated in the US) would not work. Yes — I know Deadpool is a Fox film and not formally part of the “Marvel Cinematic Universe,” but the possibility of R rated Marvel material is still there. Season 1 of Jessica Jones was rated 15 for its DVD release for example.

Finally, Disney just bought BAMtech, the streaming specialist company that was originally set-up in-house for Major League Baseball to stream their fixtures. It was spun off by them to offer streaming support to many companies around the world, and now Disney has bought it ahead of a larger rollout of a streaming service. Doing streaming well is hard as many companies have learnt to their costs, so this pay prove to be a very wise investment.

Disney Going It Alone is not Replicable

The reason that Disney is able to even contemplate a full-service streaming offering is because it has uniquely strong branding. Even the very youngest Disney film viewer quickly learns the name of the studio it comes from. They want to visit Disney Stores or visit Disney Theme Parks. I’m not at all sure that other studios have such significant branding across a wide range of output.

For example, do you know which studio is responsible for the Despicable Me franchise and its related Minions? How about Kungfu Panda? Or Shrek? Or Lego Batman?

All of those have been incredibly successful properties, but they don’t have the same consumer recognition at a studio level. I’m not saying that they couldn’t try to do the same, but that it would be hard. Most consumers, unless they work in the industry, have little to no knowledge of which studio produced which film. In today’s world, where budgets have soared, there are now multiple opening production logos at the start of feature films usually indicating many companies have stumped up the budget. What films would even be in Dreamworks or Universal branded OTT offering?

The regular concern you hear about Netflix is that its reliance on third party programming leaves it vulnerable. What if other studios pulled their output to get onto

I’m not saying that Warners, for example, couldn’t launch an OTT service off the back of their DC Universe films, but that might be a bit of a stretch. A handful of Batman, Superman and Wonder Woman films does not make a full service, even if you throw in some animated and direct-to-DVD material.

A case in point might be Sony’s Crackle service which, although advertising funded, has not really broken through in the years it has been operating. Perhaps its biggest original hit, Comedians in Cars Getting Coffee with Jerry Seinfeld is moving to Netflix.

How Many Streaming Services Are Sustainable Anyway?

In the US, the market seems to have reached the point where cable cords are being “cut” in sufficient numbers to be of major concern to the industry. Where once a consumer might spend $100 a month on a few hundred channels, only a few of which they actually watched, they’re now increasingly choosing a mixture of “skinny bundles” (Perhaps $20-30 a month for a handful of key channels, possibly internet streamed), and OTT services (Perhaps HBO Now to get Game of Thrones and Veep, or CBS All Access for The Good Wife spin-off, The Good Fight, and the upcoming Star Trek: Discovery – which notably will be a Netflix exclusive outside the US). Currently, that’s a cheaper option than the $100 bill. But how many services cumulatively would a household buy?

In the UK, the market is slightly different, but beyond Netflix and Amazon, I could also subscribe to Now TV (for subscription free Sky TV), or something like Mubi for arthouse films.

Amongst many others, the BBC and ITV recently launched BritBox focusing on UK shows that are otherwise not sold to US broadcasters. There it competes with Acorn TV’s similar streaming offering.

Meanwhile sports organisations and channels from MLB to the NFL, and the NBA to NBC Sports Gold offer paid OTT options.

How many of these individual packages is one household likely to pay for? 2? 3? 5? More?

NBC has recently announced the closure of its comedy-focused Seeso network, when many might have thought that it was NBCU’s foot in the door into the paid streaming marketplace.

It’s worth remembering that the cable bundle offer meant you get quite a lot for your money, even if you don’t watch much of it. For example, perhaps you don’t watch the food TV channels

A la carte OTT offerings mean that if you’re not interested in food networks, then you don’t subscribe to them. The corollary of that is that if you do want to watch food TV networks, you’ll probably have to pay more to see them.

The economics of 100m US cable subscribing households all contributing perhaps $0.50 a month to make the channels viable with a monthly revenue of $50m. If only 5m viewers choose to watch, they would need to pay $10 month to achieve the same revenue for those channels.

It seems likely that a lot of more niche channels will become unviable without a significant number of subscribers prepared to pay a significant fee to see them.

Netflix in the Future

Netflix has made so secret of wanting to own more of its own programming. Whether it can become completely dependent on acquired programming is questionable, and perhaps isn’t really in its business plan. But beyond the not-insignificant production costs which are eating money, once it has built up a significant library, it becomes a more attractive proposition. That is, assuming that future generations will still be at least partially interested in today’s television. While Dumbo and Snow White are ageless, it’s not clear that the same is true of House of Cards.

Netflix’s international ambitions are not insignificant either. To achieve success in these markets invariably means locally produced programming. Making locally produced shows in France, Germany, India, Brazil and the UK is not cheap. But to break properly into these markets, that’s what Netflix has to do, and that does mean a huge cash burn.

It would be a fool who tries to predict the future of a company like Netflix, and I’m not a fool!

However, I don’t see the end of Netflix’s Disney deal as nearly as groundbreaking as some would position it. Netflix probably does need to broaden its portfolio in terms of earning income. Notably they made their first acquisition last week buying the comic company Millarworld which gives them access to a number of comic book characters as well as opening a new revenue stream. It seems that owning a comic-book franchise is critical for any serious studio. Could this be the start of a wider investment portfolio which supports the main subscription offering, but provides some diversity of income?