Susan Ennis: From the Front Line of the Streaming Wars

The streaming world has grown complex. In simpler times, there was Netflix and Hulu, along with a handful of niche services to choose from. But now there are more than 200 streaming services crowding the marketplace, competing for viewers every day. The good news is that only about six or seven of those are dominant, but that doesn’t make the space any less contentious.  Though the field is turbulent, Susan Ennis, a former Executive V.P. at HBO, brings with her the expertise and insight that can help us put the streaming wars in perspective.   

ABOUT SUSAN ENNIS: Susan Ennis was Executive Vice President, Program Strategy & Planning at HBO where she worked for more than 30 years. During her tenure, Susan developed innovative programming scheduling strategies and advised senior management on key consumer trends and viewing behavior. She has since founded Susan Ennis Media Strategists in New York City. 

 

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Podcast Transcript

Eric Jaffe: Over the past decade the world of streaming services has become more and more crowded. Once upon a time, there was just Netflix and Hulu, along with a handful of niche platforms. But now there are more than 200 streaming services crowding the marketplace and the pandemic has only made things more competitive. While Netflix continues to dominate this space, rising players like Disney Plus and HBO Max, which both launched in the past two years have gained serious momentum. And that’s not the only big shakeup. AT&T recently struck a deal to combine Warner Media with Discovery, setting up one of Hollywood’s biggest studios to compete with a legacy media giant. Meanwhile, Warner Media CEO, Jason Kilar invited controversy after he announced last December that HBO Max would stream all of its new releases the same day they hit theaters.

My guest today is equipped with unique expertise to help us make sense of this dynamic industry and put the streaming wars in context. Susan Ennis was an executive at HBO for over 30 years, ultimately serving as Executive Vice President for original program strategy and planning. During her tenure Susan was one of the original architects of the HBO brand, including the groundbreaking hit making, quote Sunday night strategy and advised senior management on key consumer trends and viewing behaviors. In 2018 she founded Susan Ennis Media Strategists, a data-driven advising firms, serving digital media companies and platforms. Susan, welcome to Deciding Factors. We’re so excited to have you on the podcast today.

Susan Ennis: Thank you, Eric. It is great to be here.

Eric Jaffe: Before we jump into this streaming discussion I was just wondering, what were you watching during the pandemic

Susan Ennis: Perhaps from my HBO days, I am a little biased. I think HBO, even through the transition and merger with AT&T, they have continued to do really extraordinary programming. And for me, some of my personal favorites, way back when Band of Brothers, John Adams, and then somewhat more recently, Olive Kittredge, Mildred Pierce, and then really recently Mare of Easttown and The Undoing. All with really incredible talent.

Susan Ennis: The lovely Kate Winslet and Nicole Kidman and Hugh Grant. I’m also a big fan of, I wouldn’t exactly call it soap opera TV, but on Netflix, I have devoured during the pandemic 168 episodes of Turkish TV. There are some very excellent Turkish series on Netflix. And they have quite a bit of a following. Chances are, it’s nothing you would have ever heard of, but who knew that Turkey has a very big TV business with gems that I’ve either read about or found on my own and something called Black Money Love, it’s really amusing. And it’s great pandemic fodder because 168 episodes is a lot of TV.

Eric Jaffe: That is awesome. The streaming market is certainly a dynamic one. How have you seen it evolve from the launch of Netflix through 2021?

Susan Ennis: Yeah. Well, as you said, it is certainly an evolving and dynamic landscape. The rise of Netflix in many ways is really one of the great success stories. When you think about it from its humble beginnings, from an early disruptor of the DVD rental business in 1997 to its launch with its digital service. In the old days, it was not seen by many people at HBO as a real threat, made up mostly of old movies and old TV reruns. It really seemed as if it was not going to be something that HBO was going to worry very much about. That all changed. That all changed with the expansion of the internet and broadband and even little, little factors such as Reed Hastings, the CEO of Netflix. He was named business person of the year in 2010, by Fortune, the magazine owned by Time Warner, HBO’s parent company. Right around this time, HBO was finished with the Sopranos, new episodes of the Sopranos went off the year in 2007.

And Sex and the City concluded its six year run in 2004. And Game of Thrones did not come onto the scene until 2011. And it was hardly the huge success that it turned into. So HBO was, I wouldn’t say struggling, but there was a time when HBO having sunsetted Sopranos, Sex and the City, the two big signature, original programs, they were really looking for the new, next best original. And that was the big game changer, when in fact House of Cards came on the scene, Netflix became a big contender. Netflix was negotiating for it along with HBO, Showtime, AMC. And as I recall, HBO very much felt that they had an advantage, they knew they had the money, they had the clout, they had everything that they felt they needed to win this very big prestigious, project. And surprise, surprise Netflix outbid, HBO and Showtime and AMC.

And importantly, not only did they outbid HBO, but they picked up two seasons. They did a two season pickup of 26 episodes, which HBO would never have done. And they also didn’t require a pilot. So in many ways with House of Cards, they really sort of changed the game a bit and really signified to Hollywood that they were a major player and that HBO wasn’t the only game in town.

So really I think of House of Cards as the real game changer in the television landscape. And then about the same time HBP decided they too had to be in the streaming business. HBO Go was available as early as 2010 as a kind of ancillary product to the main service. 2013, which was the year that House of Cards premiered, it in some ways really kind of launched the streaming era and the race to get on the digital platform. And it really was for them the big turning point. And right around then Reed Hastings said Netflix wants to become HBO before HBO becomes Netflix.

Eric Jaffe: So let’s talk a bit about how the sausage actually gets made. I’m curious, How does a platform calculate the likelihood of a show being a hit.

Susan Ennis: Well with something like house of cards, compared to a Sopranos, going into the House of Cards, you had big talent. You had Kevin Spacey, you had David Fincher and production oomph. With the Sopranos, Sopranos launched with a unknown cast. David Chase, the showrunner for Sopranos was certainly a known entity, but he wasn’t a household name by any means. I mean, nobody was watching Sopranos in the beginning. It wasn’t getting written about it really wasn’t until the third or fourth season that it really sort of broke through. And that was something that HBO was very aware of. But House of Cards, they took right out of the HBO playbook, they started with big names. And I also think one of the big advantages that Netflix has, and certainly had then is not only had they amassed this huge catalog, basically funded by the studios with all of the licensed programming, but they also, importantly had direct access to their consumer.

They had all that big data. They had all the information available about what they were watching, how often, when, and that helped them make decisions. They went on record saying their research said that their subscribers were interested in political dramas. And their research as well pointed to Kevin Spacey, being a very good cast member for that. So HBO was very disadvantaged in that it did not have a direct business, no direct access to its consumers, to its subscribers was all through the cable operator. HBO did a lot of research, but that’s certainly different than having the real data, the big data or the data analytics about what your customer is doing.

Eric Jaffe: When platforms are making decisions about how much content to produce, when they’re trying to fill their streaming libraries is it a highly quantitative decision where there’s a certain point that if they produce X number of pieces of content, there’s going to be diminishing returns. Or is it looser than that? I imagine that there’s a lot going on behind the scenes.

Susan Ennis: That’s an excellent question. At HBO it was a bit looser than that. Certainly before they had access to data, I mean, they always had access through Nielsen who was watching what, when. But even that was a very imperfect machine. Research was done. I did oversee research as well. So program research was done, but research was not the deciding factor in selecting to pick up a show or pass on the show. Often it was a talent issue, wanting to really cultivate and work closely with a writer or a director. Very often we would launch a new series and the first season wouldn’t be stellar. Either the ratings weren’t great or the weren’t great, but very seldom did HBO only do one season. They only committed to one season at a time, unlike Netflix, but they seldom would pass or drop a show after one season.

And they would always try to work with a director, show runner to make it better if there were issues. Now, of course there are some exceptions, there’s a notable exception. HBO invested a fortune in a show called Vinyl that Martin Scorsese had done with us. And after one season, which was perhaps unheard of that was it. They pulled the plug and that was a very unusual move. Even in-house HBO executives, weren’t always so eager to get a research report either on the ratings or how consumers were finding certain subjects, certain shows. And often felt it’s not a science, it’s an art.

And often people would talk about the research that was done on the very first episode of Seinfeld, the Seinfeld pilot. Apparently it was a disaster. If they had listened to research, they would have not gone forward with Seinfeld. One of the most successful comedy series in the history of television. Once Netflix and then others, and then of course even other paid TV services got in the act, it really raised the stakes and the antes and the competition for talent became very fierce. And show costs went up and appetites went up, everybody had to outdo each other. And I think HBO along with that took slightly fewer risks as the stakes were higher.

Eric Jaffe: So do you remember that will Smith movie Bright from a couple of years ago? It was kind of critically panned, but it was a massive, massive success on Netflix. It felt like it was basically made in a lab to address the exact demographic that Netflix thought it would be successful with. And it worked. Has Netflix sort of moved the ball forward on that front and is HBO now trying to catch up? And in your mind, does that represent progress or something else?

Susan Ennis: Yes and no. I don’t think to rely on algorithms too much, but creative talent is necessarily the way to go. I think it’s excellent to be able to know what your subscriber, what your customer is interested in and you can offer up what they do on. But I think If too many decisions or things are pigeonholed based on these algorithms, I think you get yourself into some trouble and I don’t think the creative community would look kindly on that. And I think it’s less about that and more about helping give direction, looking at big trends and big issues facing subscribers and consumers, and then looking as well at their inventory of movies and the talent that are in it. The stars, the actors, actresses in these films. Who resonates with what?

Eric Jaffe: So could you talk about how Netflix and HBO think about subscribers? How do they think about getting new ones? How big of a problem is churn and how closely do they watch their user retention rates?

Susan Ennis: Starting in 2019, the streaming wars really heated up with the launch of Disney Plus and Apple TV and then Peacock and Paramount Plus and of course, HBO Max joining the Amazon’s and Netflix’s and Hulus. Obviously we then entered the pandemic and 2020, which was supposed to have been sort of the year of the streaming wars. In fact, it was the year where all boats rose. Basically everybody benefited and it was exponential growth for all of the streaming services with the pandemic and being home bound. People were watching a lot more television were streaming a lot more, gaming a lot more. On average five plus hours a day. So there was a big surge in subscriptions, a big surge in usage. And with that a big increase in the monthly bill that most households were paying. So I think obviously with the pandemic kind of waning, let’s hope, there’s a real interest to see so how is it all going to shake out?

Are these levels going to be sustained? What also happened during the pandemic and again, if anything, it just hastened the trend that we’d already been seeing is the real demise of cable. Of linear and traditional TV. Cord cutting was already rampant, but with the pandemic, with the surge and interest and appetite for streaming services, all that was accelerated. I think what you’re already beginning to see, already the first and second quarter results for this year, certainly the first quarter results. We began to see a slowing, a post pandemic slowdown, certainly for Netflix and certainly for Disney. Not so much a slow down for HBO Max because they weren’t growing at the same pace. And I do think that they are going to face an issue with churn. It’s critical that these businesses continue to grow their subscriber base.

And frankly at 200 plus million subscribers in the world, how much more of the world is Netflix really going to get? And I think that’s one of the reasons Netflix is actually investigating password sharing. We’re not going to see the kinds of leaps and bounds and doubling. It will continue to grow, but they will experience churn. I think you’re only as good as your last big hit. One of the things that was driving that was the free offers made by the new entrants. Three months free, a year free. That certainly up to their subscriber numbers. And I think, for example, that really helped Apple TV Plus they basically gave it away for free for a year to anybody who bought an Apple device. But those numbers were artificially inflated and probably wouldn’t stay that high.

I think the Netflix numbers, they weren’t artificial. Those were unbelievable increases. It took them, and the street and everybody by surprise. But I think they also realized and predicted that they were not sustainable. Just in terms of growth, that they wouldn’t see the kind of growth. They haven’t lost subs, but the 10 million subs they added in the quarter, those days, I think are probably behind them.

Every month you extend a subscriber life, by every month that it’s extended is incremental revenue. I mean, it’s a numbers game. So I think they’re very conscious of that. Because sometimes when they make pickup and drop decisions, it doesn’t seem to make a whole lot of sense. There’s nothing obvious about why they didn’t go forward. So my guess is, it is in the numbers and the numbers don’t lie. If a subscriber only watches one hour a month, they are 50% likely to disconnect.

If we increase it by one hour, they are three times as likely to stay. So they have all that and they know exactly what they need to move the needle even by very small fractions. And it doesn’t take that much. Because literally every month matters for example, they can play the game just by varying when they premiere a show. They’ve gotten very smart about when during the month they will premiere show on the off chance if they begin it too early in the month, there’s no question somebody will have finished the whole thing that whole month. And then there’s a possibility that they’ll disconnect. If they premiere it towards the end of the month, there’s a good chance they won’t finish it in that first weekend. And you’ll get an extra month. If you can keep somebody over three weeks, instead of three days, the weekend, you’ve done that much to move the needle in terms of subscriber life. So they’re very reliant on big data and they have it and they’re lucky they have it. And I think they’re very good at analyzing it.

Eric Jaffe: So I want to be sure to ask you about Warner Media CEO, Jason Kilar. Do you think his decision to release all those Warner films on HBO Max was a smart move?

Susan Ennis: Yeah, well that decision was made in 2020 in the midst of the pandemic. He was looking, I think first and foremost, at launching and growing and throwing everything he possibly could at making HBO Max a success. Even the very name Warner Media, they very quickly got rid of Warner Brothers. And if you looked at how the reorganization within the company had shaken out, it really felt in some ways to just an observer that the studio had taken a bit of a backseat.

So on the one hand he did what I think was a very strong move, to do whatever he could to bolster the launch of HBO Max and help that grow. And it’s certainly signals that the commitment of the company was really, everything was about HBO max. And I guess to some extent, and if you were on the movie side, if you were on the Warner Brothers side, and certainly if you were one of their producers, you would be very upset about the decision being made without being briefed ahead of time.

It’s a huge decision in terms of the monetary implications. It changes the whole model of the business. The whole notion of the opening weekend. How do you assess how a movie does if you’re opening it on your TV and in theaters? But at the same time, what choice did he have? I mean, what harm was done because these were films that, unless you just held them launched during a pandemic when movie theaters were shut.

So I think it was a wise decision, but he should have gone about it differently. He should have gone to the creative community, gone to the directors and producers, the Chris Nolans and said, “Look, I love your movie. We want it to succeed. This is what we’re proposing and to get them on board.” And he didn’t do that. So I think they lost a lot of talent, I gathered they had to actually pay them considerable sums of money. There was a very large sum of money floated around. It cost $200 million to sort of make nice. I don’t know the details of that, but it doesn’t surprise me. And since Jason Kilar was not a Hollywood guy, I don’t think he realized what a decision like that and not bringing them in early on, the impact that would have on his standing in that community.

Eric Jaffe: Lastly, Susan, just to zoom out for a moment, what implications do you think the growth of streaming has broadly for American culture?

Susan Ennis: I don’t think the movie business is dead. I mean, I think the pandemic changed everything. Nothing’s going to go back to the way it was, it will be different. But I think there are all kinds of signs that the movie theater business isn’t dead. The opening weekend recently in Los Angeles, after it, post-pandemic had opened was an absolute record breaking weekend for the theaters. So I think these worlds can coexist. I think there are people who will just ,from now on prefer to see these films in the comfort of their own home. And those that will always when given a choice, when it’s safe, go to the movies to do the movie experience. And I think movie theaters are getting nicer. I think the theaters are recognizing the competition that they have from the streaming networks, the streaming services.

So I think these are worlds that can coexist. I don’t think it’s one or the other. Premiere some things on the streaming network, charge extra for some of them as Disney has done. Be very specific about it might completely depend on the actual title. His decision was to put the entire 2021 slate up. And in fact it might be more kind of a film by film. Tenet was a tough movie to do that on because it was a big high production value film, which clearly would miss something on a smaller screen. So I think on a film by film basis, one can make some interesting decisions as well as see how certain films have done to date. Because they will have enough information under their belt when this year is over to decide if they want to continue this strategy or scale back and become some sort of a hybrid.

Eric Jaffe: Awesome, Susan, a fascinating conversation. I really appreciate you coming on the show today. Thank you so much for being with us.

Susan Ennis: Pleasure. Thank you.

Eric Jaffe: That was Susan Ennis, former Executive Vice President for Original Program Strategy and Planning at HBO. As I think back on my interview with Susan, I’m struck most by her ability to straddle two worlds that might otherwise seem like they have little in common. On the one side executives, making business decisions based on data and research and on the other directors, writers and actors dedicated to creating their art.

Susan and her peers have proven that the two worlds can coexist and the proof is in their success. We hope you’ll join us next time for a brand new episode of Deciding Factors featuring another one of GLG’s network members. Everyday GLG facilitates calls with experts across nearly every industry and geography, helping our clients with insight that leads to true clarity. Feel free to leave us a review on Apple Podcasts. We’d love to hear from you. Or email us at decidingfactors@glgroup.com if you have feedback or ideas for future show topics. For Deciding Factors and GLG, I’m Eric Jaffe. Thanks for listening.