Cross the Streams
Note: This week I stepped in to write an edition of Walt Hickey’s excellent Numlock News. A big thanks to all of you who subscribed as a result. Hopefully you enjoy reading about food lawsuits.
Streaming TV
We have talked about the troubling financial picture for TV streaming giants before, in the broad sense. ‘Peak TV’ is over, I wrote back in January. At the time, Netflix and other streamers were scrambling to staunch the bleeding from markets frowning sideways at their plateauing or declining subscriber numbers. The calamitous Warner Bros. Discovery merger had just dropped, and we were mere months away from them cancelling and removing popular shows from their subscription channels and shoehorning their vast library of reality show dreck into a newly rebranded channel (Max!) no one seemed to understand.
Then the writers strike happened and exposed the television industry’s soft pink underbelly:
Under the old TV model, if a show was a success, its creator stood to get rich on the back-end profits. With all of linear TV’s revenue streams combined (ads plus syndication plus overseas rights), a studio might bring in $3 for every $1 in costs on a hit. The problem for writers was that most shows flopped, so there was no back end to get a piece of. Streamers offered something different. Their model, called “cost plus,” might pay $1.30 to $1.50 up front, making every show a winner — just not a very big one.
The cost plus model allowed Netflix and other streamers to go on an absolute content binge over the last six or seven years, churning out hundreds of shows for their subscription platforms. The problem now is that big, splashy shows no longer drive subscription numbers, and when Wall Street decided to look a bit less favorably on subscriber totals as a sign of meteoric growth, companies became acutely aware of just how much money they were losing chasing prestige accolades:
Just ask Shawn Ryan. In April, the veteran TV producer’s latest show, the spy thriller The Night Agent, became the fifth-most-watched English-language original series in Netflix’s history, generating 627 million viewing hours in its first four weeks. As it climbed to the heights of such platform-defining smashes as Stranger Things and Bridgerton, Ryan wondered how The Night Agent’s success might be reflected in his compensation.
“I had done the calculations. Half a billion hours is the equivalent of over 61 million people watching all ten episodes in 18 days. Those shows that air after the Super Bowl — it’s like having five or ten of them. So I asked my lawyer, ‘What does that mean?’” recalls Ryan. As it turns out, not much.
Right. Thanks to cost plus, Ryan was paid up front and might be due a bonus if his show is picked up for further seasons, but it’s still less than he made writing shows for cable because they came with residuals. And Netflix didn’t pick up a hundred million dollars’ worth of new subscribers itching to watch The Night Agent, because there aren’t eight million Americans out there thinking ‘man, if only Netflix would release a gritty FBI agent thriller, I might be convinced to finally pull the trigger and subscribe!’
Studio and media executives could be excused for watching Netflix’s meteoric rise in stock value (the company is currently valued at fifty times its yearly profits) and thinking the solution was to embrace streaming and ride the lightning. The problem is that Netflix’s outrageous success was built on the backs of the traditional media companies - for years, they were able to license popular shows and movies from networks for pennies on the dollar because Old Media didn’t value streaming.
Once those traditional media companies pulled their content to use on their own streaming platforms, the market saturated, and people began to wonder why they were being asked to subscribe to seven different services. Streaming bills began to look an awful lot like the cable bills cord cutters eschewed in favor of this brave new digital world.
Now, media companies are scrambling to cut costs and produce paper profits, upending the years of willy-nilly production. HBO is pulling prestige shows from its library under its clownish new CEO. Unthinkable a few years ago, companies like Disney and Paramount are shelving content and cancelling shows for the tax savings.
Peak TV has peaked, and we’re on our way down the rollercoaster, but the good (?) news is the studios haven’t committed to a nuclear content winter. Netflix has pared back its ambitions, but it’s still churning plenty of new offerings to keep its 220 million subscribers happy. Your MAX app will be chock full of the worst reality television you didn’t know existed.
Like every cycle of financialization, the TV streaming bonanza has taught the people in charge absolutely nothing, and they’re merely licking their wounds, looking for the next new thing (AI!) to supercharge quarterly results - at odds with writers and potentially actors if SAG goes on strike - when they could have just stuck to making less television for network and cable and still banking outrageous profits on a model that wasn’t broken.
TV Ads
One ‘new thing’ streaming is experimenting with now is actually a very, very old thing that’s worked for decades. That’s right, we’re bringing ads back, baby!
Free ad-supported platforms are the fastest-growing part of the streaming business right now, and services like Tubi, Pluto, and The Roku Channel are starting to assert themselves as power players in their own right. Many of these platforms have been around for years, quietly amassing big content libraries and millions of users. And now, as users look for cheaper ways to get their entertainment and studios look for better ways to monetize, they’re starting to make more noise.
The future of TV is free, it has ads, and it involves a lot of channel surfing.
I don’t know how many times we’ll be able to make the joke of tech inventing something that has existed for a century, but we don’t appear to be in any danger of running out of opportunities. Free streaming services are growing in appeal with a fundamentally different model - they have to hook you with a show you want to watch, not hope your endless scrolling through a confusing UI filled with shit you don’t care about eventually leads you to The Night Agent or a Korean strength competition show (real).
In a way, tech has taken traditional television and made it jankier, because rather than scrolling through a cable guide (ugh!) you now have to scroll through seven different free apps (yay!) without visibility into what they may have on them. That said, the incentives for free streaming are different, which means they have to design their apps to be as user-friendly and as ‘sticky’ as possible to keep viewers on them, because they make money off ads. Some apps have done away with logins entirely and will let you watch whatever you want with a simple click. Imagine that!
If you’ll indulge me, let’s talk a bit about how television advertising works. Network and cable advertising is generally priced by potential audience size - for instance, you’d pay $5,000 for an ad that reaches a couple million people, or $200 for an ad that reaches a hundred thousand. Do all those people have their televisions on watching CSI: New Orleans at that very moment? Of course not, but Nielsen averages indicate it’s thirty percent or blah blah whatever. Traditional television advertising is notoriously difficult to measure, because despite the most paranoid fantasies of anti-government cranks, we don’t have tracking devices in every television. Or, at least, the ones we do have aren’t providing data back to advertisers.
TV ads are great for networks because they can put an arbitrary price tag on their inventory without providing evidence of efficacy. For most advertisers, this vagueness is understood as a cost of doing business. I’ve run television advertising myself, and for all but the most targeted direct response campaigns, tracking performance is nearly impossible.
Streaming ads are handled somewhat differently, because their digital nature allows for the tracking of impressions, or the number of times a video is played on a device. Rather than citing ephemeral Nielsen numbers, platforms can sell on a CPM basis, which may trick advertisers into thinking they’re getting more granular data that will allow them to perform a cost-benefit analysis on their spend. Good luck with that! TV viewers are strange beasts, and while streaming services may allow users to tap on an ad or a link overlay to visit a website or shop for a product, I doubt many of you plan on interrupting your episode of Project Runway to buy cleaning products.
All this is to say advertising is fantastic for media companies, because advertisers have no way of knowing how well it’s working, and they’re under pressure to make sure their brands are heavily saturated across every market. Streaming seems cheaper because Tubi might sell you a package of a million impressions for X thousand dollars which seems way better than paying NBC ten times as much for a thirty second spot on a national network show that can’t guarantee a million viewers. Advertisers love feeling like they’re getting a deal.
So, is ad-supported streaming better? It’s a more sustainable model, to be sure, because brands have billions of dollars a year to spend on ads, and that money won’t go away because they get annoyed scrolling through seventeen recommendations for ‘Gritty Comedies’ comprised of a bunch of old Will Farrell movies. Keeping the interest of two hundred million fickle viewers is incredibly difficult even if you’re spending tens of billions on new content, while convincing a company to part with a few grand to run their ads during reruns of Seinfeld is about the easiest job you can have.
Even Netflix has realized they make more money on their cheaper plans supplemented with ads, because of course they fucking do! So, basically, we spent ten years barraged with insane amounts of content as every media company chased Netflixian share price growth and subscriber numbers, when the easy money was in front of them the whole time: ads. It’s always ads.
Tesla
We have been talking about self-driving cars for what feels like forever, in part because self-driving cars are still not a thing, and will not become a thing any time soon. This hasn’t stopped the California Department of Transportation from issuing approvals for the robotaxis clogging San Francisco’s streets or Mercedes’s new ‘Level 3’ self-driving system on certain highways under specific conditions:
The 'DRIVE PILOT' system can only operate on highways during daylight at speeds not exceeding 40 miles per hour, the DMV said.
Wow, what a glorious future we live in, doing 40 miles an hour on the highway without our hands on the wheel (the driver’s face must be visible to the in-car cameras at all times, which isn’t creepy at all.)
If Mercedes is the first level 3 to win approval, that means Tesla’s ‘Full-Self Driving’ is level 2, which means it should be more restricted than a Benz doing 40 on the highway. Right? Haha, no of course not, because Teslas allow their occupants to do all sorts of far more dangerous shit:
The vehicle, a 2019 Model S, was going at a “high rate of speed” around a curve at 11:25 p.m. local time when it went off the road about 100 feet and hit a tree, Constable Herman said. The crash occurred in a residential area in the Woodlands, an area about 30 miles north of Houston.
The men were 59 and 69 years old. One was in the front passenger seat and one in the rear seat, Constable Herman said.
Despite sporadic reporting on isolated events of Tesla users behaving badly, both the company and its many sycophants have insisted for years that Autopilot and FSD are safe, with Musk claiming his tech is actually safer than human drivers. Fortunately, we now have new data from the NHTSA on just how safe Tesla’s driver-assist features are and it’s pretty terrifying:
When authorities first released a partial accounting of accidents involving Autopilot in June 2022, they counted only three deaths definitively linked to the technology. The most recent data includes at least 17 fatal incidents, 11 of them since May 2022, and five serious injuries.
[…]
Since the reporting requirements were introduced, the vast majority of the 807 automation-related crashes have involved Teslas, the data shows. Tesla — which has experimented more aggressively with automation than other automakers have — also is linked to almost all of the deaths.
736 of 807 reported crashes have been Teslas, and 11 people have died in the last year. The study is preliminary, so the full results could be even worse.
How bad is FSD compared to human drivers, accident-wise? As much as ten times worse:
Yet if Musk’s own data about the usage of FSD are at all accurate, this cannot possibly be true. Back in April, he claimed that there have been 150 million miles driven with FSD on an investor call, a reasonable figure given that would be just 375 miles for each of the 400,000 cars with the technology. Assuming that all these crashes involved FSD—a plausible guess given that FSD has been dramatically expanded over the last year, and two-thirds of the crashes in the data have happened during that time—that implies a fatal accident rate of 11.3 deaths per 100 million miles traveled. The overall fatal accident rate for auto travel, according to NHTSA, was 1.35 deaths per 100 million miles traveled in 2022.
This is what happens when a car company run by a fickle billionaire is allowed to roll out unproven, poorly-conceived technology to half a million cars with a name that indicates it is something (Full!) it is absolutely not. Tesla fans take Musk at his word, and drive his cars irresponsibly, and people die. The NHTSA did force Tesla to issue a recall on its FSD systems, but as the accident and death tolls mount, one hopes they or some other governmental agency takes more concrete steps to rein in Musk’s wildly irresponsible marketing of a product that is ill-conceived, poorly executed, and downright dangerous.
Ken Paxton
Boy oh boy, it has been a busy couple of weeks for embattled Attorney General Warren Kenneth Paxton, Jr. First there was the news that his real estate buddy Nate Paul - the guy who renovated his house, hired his mistress, and showered him with campaign donations - was arrested by the FBI and charged with bank fraud. If I were Ken Paxton, I would not want the guy at the center of my pending impeachment trial in the Texas Senate sitting in federal custody contemplating ways to get his sentence reduced. No sir!
Then, two days ago, a Texas criminal appeals court ruled that the securities fraud case against Paxton that’s been pending for eight years will continue in Houston, rather than Paxon’s home county.
Listen, I am not one to traffic in conspiracy theories, but one throughline in American politics tends to be that if you are a powerful person, or in the direct orbit of powerful individuals, you may receive favorable treatment if you stand credibly accused of doing crimes. Is it a complete and total coincidence that within three weeks of Paxton’s suspension from his role as AG his primary accomplice is arrested by the feds and he’s finally going to stand trial for securities fraud? Maybe! But given how much deference is given to powerful defendants in this country, it raises an eyebrow or two.
Short Cons
SFist - “A stunning 20% of all applications to California community colleges are now “ghost students,” that is, scammers using someone else’s name to pocket the financial aid and never show up for a single class.”
Bloomberg - “Crypto exchange Binance and related entities shuttled some $70 billion through accounts at now-defunct Silvergate Bank and Signature Bank from 2019 up until this year, including “large amounts of money” flowing in and out within days, according to new details revealed in a filing Wednesday.”
Mission Local - “That year, CO2 emitted by Uber cabs in California reached an estimated 494,000 metric tons, numbers comparable to the 2020 Caldwell Fire in northern California, which burned 81,000 acres of land.”
LA Times - “The Bakers accuse [Daymond] John and some of his associates and partners — including one former contestant facing felony charges — of misleading them, trying to take over their business and depriving them of the profits from potentially lucrative partnerships.”
Bloomberg - “US consumers are increasingly using such installment loans to pay for everyday items like groceries, highlighting the financial pain wrought by the worst inflation outbreak in four decades.”
Know someone planning on launching a subscription-based streaming platform? Send them this newsletter!