Making sense of streaming.

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Why Streaming Services Are So Secretive

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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Streaming is the future of entertainment. Everybody knows that, right? What we don’t know is how many people are actually watching or listening to what on which streaming service, how much money they’re spending and who is getting the money. This is a business that so far is characterized by extreme opacity.

As former Talking Heads singer David Byrne complained in a New York Times op-ed over the weekend:

Perhaps the biggest problem artists face today is … lack of transparency. I’ve asked basic questions of both the digital services and the music labels and been stonewalled.

Byrne laid most the blame for this at the feet of the music labels and their nondisclosure agreements. But there does seem to be something about streaming that discourages the release of actual numbers.

Here's Bloomberg’s Lucas Shaw, tweeting from Netflix’s presentation to the Television Critics Association last week:

In explaining why the company doesn't divulge anything but anecdotal information about the audience for its shows, Netflix Chief Content Officer Ted Sarandos had this to say to the TV critics:

The shows are built and designed and we test them based on the audience we believe the show can attract. And it’s successful when it attracts that audience segment. None of those shows are designed to attract the whole 65-million subscriber base.

Netflix doesn’t sell ads, so Sarandos is under no external pressure to report how many people are watching what. The company’s goal is to increase the number of people willing to pay for Netflix subscriptions. Releasing viewership numbers apparently doesn't help with that.

At Amazon the goal of streaming is to get more people to sign up for Prime memberships, after which they’ll buy more power tools. Really, that’s what Chief Executive Officer Jeff Bezos recently told the Hollywood Reporter:

When people join Prime, they buy more of everything we sell. They buy more shoes, they buy power tools and so on.

Bezos also said Amazon will probably never release viewership numbers because, “I don't want our team obsessing over ratings. I want them obsessing over quality.”

This is really interesting. And maybe it’s a good thing. After creating and starring in the brilliant but perennially ratings-challenged “30 Rock” for NBC, Tina Fey co-created “Unbreakable Kimmy Schmidt” for Netflix. She said last week that she liked not knowing exactly how many people were watching. The Los Angeles Times reported:

“We know Ted is pleased,” she said, adding that it “feels” like more people are watching than they did with “30 Rock.” “But we don't have any numbers. It's very freeing to be away from the ratings system.”

Not all streaming services are this opaque. Ad-supported YouTube tells everybody how many people have watched every last video on its network (although it’s not absolutely clear how long one has to watch to count). And the music streaming services have to provide an accounting at least to those who own the rights to the music they play.

But on the whole the streamers are in a very different position from past purveyors of entertainment. TV and radio stations couldn’t tell how many people were watching without viewer surveys, and thus needed services such as Nielsen and Arbitron. Book publishers and music labels eventually got paid for every copy sold, but relied on point-of-sale measurement services (most owned at this point by Nielsen) for timely information.

The streaming services, meanwhile, already know exactly who is watching or listening to what, and when. They start out with a huge informational advantage over everybody else -- advertisers, artists, music labels, movie and TV producers, potential competitors. So while in some cases it will make sense for them to share that information, especially when advertisers are involved, it will still be their information to share.

Right now there is an added reason for streaming services to be cagey about releasing numbers: they might disappoint. Nielsen is moving toward what it calls “total audience measurement” of time spent watching videos and listening to music. And in the first quarter of 2015, the time Americans spent with streaming services was still a small fraction of the hours devoted to conventional TV and radio.

It’s a growing fraction, though. Eventually, streaming probably will be the dominant way for entertainers to reach audiences. We may never know exactly how dominant, though.

  1. I wish I could tell you exactly what the fraction is, but Nielsen doesn’t provide all the information needed to calculate it. My best guesstimate from their data is that streaming accounts for around 10 percent of video and music consumption.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net