Michael Moss’ “Sugar Salt Fat,” the latest in the “there’s no food in our food” book trend, details how processed food companies spend enormous amounts of money on R&D to get the public to eat as much of their product as possible. Brilliant minds collaborate to find what they call the “bliss point” of new foods using a combination of chemistry and advanced mathematics. They optimize the shape, color, and consistencies of food to make them as appealing and addictive as possible while using industry lingo like “mouthfeel” and “flavor burst” to describe and measure the success of their work. The stakes are hundreds of billions of dollars, and the results are products like Lunchables, where an individual children’s meal can contain up to two full days worth of sodium and saturated fat.
I couldn’t help but think about the similarities between processed foods and the most popular online content these days, specifically the viral-content factories Upworthy and Buzzfeed. Like the food scientists at companies like Kraft and General Foods, these companies do an amazing job of constantly researching the best ways to get people’s eyeballs on their product. I have a great deal of respect for the technologists, product developers, and research analysts at these companies who have enabled their editorial teams to perfect the skill of writing the most sharable and clickable titles on the internet. Even if you don’t actively visit Buzzfeed.com, you are no doubt familiar with their style of click-bait titles like, “29 Things That Are Way More Important Than Work Right Now” and “The 19 Worst Things Ever” that have become ubiquitous in all of our news feeds. If you actually click through (and based on the numbers, most of us do) you will often find that these articles are not much more than a half-assed list of animated GIFs of other people’s intellectual property.
Upworthy has also figured out a winning formula for social distribution, even when they are just re-packaging someone else’s YouTube video. In an online presentation they explain their social-first strategy. Their two primary tactics are using software that selects the headline with the highest click-through from a pool of 25 options, and being meticulous about every image and piece of copy used to promote their content on Facebook. Their titles are even more ridiculous than Buzzfeed’s; “Walmart Went On The Record About What It Pays Its Workers. It Didn’t Count On Us Knowing Math.” and “What They’re Trying To Do To This Man Is Rough, But What He Says At The End Is Devastating” are two of my recent favorites.
What Buzzfeed and Upworthy are doing with online content is finding the mental “bliss point” of the internet. They are constantly tweaking their mixture of ingredients to optimize the “clickability” of their content, and their numerous iterations are creating a product that values convenience over quality. Reading Buzzfeed instead of a book or newspaper is like snacking on empty calories instead taking the time to prepare a healthy meal. It’s easier and provides instant gratification, but in the long term it’s as bad for you as the mouthfeel of a chemically-altered salty sweet flavor burst.
I watch the Emmys the same way I watch the Superbowl. I’m a little curious, but mostly just because everyone else seems to care about it so much. This year I am going to be watching because I have a prediction that “House of Cards” is going to win in one of the big categories.
The Emmys are voted on by the Academy of Television Arts & Sciences – a group made up of more than 15,000 actors, directors, producers, and other people with various jobs you would see listed in the credits of a television show. This is a group who has come to understand that their best interests are served by having new distribution outlets such as Netflix, Amazon Prime, XBox, YouTube, Yahoo, Hulu, etc…
These “over the top” outlets have been thriving for years as distribution outlets for non-original content and consumers have fully embraced them. Binge-viewing of TV shows is now a mainstream occurrence and the ability to catch up on previous seasons is the reason why shows like “Breaking Bad” continue to gain more viewers in each consecutive season. More recently these companies have started to create original programming, recognizing it is the biggest driver of new subscribers and the best way to reduce churn. Critical recognition is the only thing missing to fully legitimize these companies as producers of quality content.
I think that either Kevin Spacey will win best actor, or “House of Cards” will win best drama series. It’s going to be tough because while “House of Cards” was a great show and Kevin Spacey gave a compelling performance, they are still underdogs compared to the other nominees in both categories. But I believe the voting body for the Emmys will act in its own best interests. For many voters, even if they think another nominee is more deserving than “House of Cards”, it will be hard for them not to reward the nominee that will ultimately deliver more work and more opportunities for themselves and their peers.
UPDATE: I was wrong! The biggest win for HoC was David Fincher for “Outstanding Director For A Drama Series”. However, I was correct in my prediction that I don’t really care about or watch the Emmys. I read about the winners this morning. Last night I was watching “Breaking Bad” like everyone else.
A few months ago I took part in some conversations with the steering committee of the Entertainment, Media, and Technology (EMT) group at NYU Stern. The purpose was to make sure that the EMT specialization prepares students to work in the space where media and technology continue to converge. We discussed the ideal level of understanding of technology that an MBA student should have. It was acknowledged by the group that people on the business side never understand technology as much as they should, and that this disconnect often lead to a competitive disadvantage in many companies. Questions were raised about teaching MBAs the technical details about platforms and how content is distributed. When it was inevitably asked – “Should we teach them how to code?” I started to think about it in the context of my own education.
I got my undergraduate degree in electrical engineering at Tufts University, and became a software engineer immediately after graduation. Having that kind of a technical education and learning how to approach technical problem solving at that early stage of my life was something that helped me immeasurably in my career. I started my MBA at Stern 12 years later. I found the program to be tough, but mostly because of the high caliber of students and professors. The concepts themselves seemed very basic. Once you’ve had to use Fourier transforms to solve signal processing problems, wrapping your head around Porter’s Five Forces isn’t very daunting. Getting the technical education first, and at an age where I was able to absorb all of that information was key.
When it comes down to it, a really smart engineer can learn business concepts much more quickly than a smart MBA can learn technology. That being said, I agree with the steering committee when they quickly came to the conclusion that teaching someone “how to code” is its own specialized master’s program and not something you can tack on to the MBA curriculum. There’s a lot of value to a good MBA program, but if you are looking to be an innovator or an entrepreneur in the media business, I recommend learning how to code over getting an MBA. It’s tech-driven companies like Google, Facebook, Amazon, and Netflix that are disrupting the media industry. And it’s people who code who are leading the charge and changing the landscape of this industry.
I was recently interviewed by the EMT association at NYU Stern School of Business. I was part of the EMT student group (Entertainment, Media, and Technology) so it was a huge compliment to be included in this new video series. They did a great job producing the video. Check it out here:
Early last week, my wife and I realized that the same three DVDs from Netflix had been sitting in a pile for the last four months. This was not the first time it had happened, but I finally decided to act. I downgraded our plan to one DVD per month with unlimited streaming. Before the change to my account even took effect, Netflix announced their pricing change, so I just cancelled the DVD option entirely.
The tech blogs jumped all over the Netflix pricing change. Business Insider even ran a quick pollwhich showed that 41% of people would cancel their Netflix accounts entirely, while 35% would take the same streaming-only option that I did. I highly doubt that 41% will quit, but I do believe that a significant portion of customers will opt for streaming-only. Netflix customers realize that having instant streaming available at any time is just too convenient.
The tone of this media coverage is all the same — Netflix has made a mistake and they are certain to lose market share to competitors. It is quite similar to the coverage earlier this year when the New York Times announced their paywall. I was attending a product development conference in March where the subject of the Times paywall came up repeatedly. Everyone was extremely critical about this move and was quite sure it would fail. One brave person spoke up and said that he thought we were underestimating the Times. He said that they had done years of research and reminded us that the Times was an early adopter of the internet and has been much more successful there than any of their competitors. I’ve always held the Times in high regard, so I was even more inclined to agree with this lone dissenter.
The media coverage in the first few months after their paywall announcement focused on the same short term effects — losing customers and market share. But both the Times and Netflix have a history of thinking long in their overall strategy. The Times only required a very small amount of subscribers this year to break even for lost advertising revenue. The number thrown around was approximately 100,000 and they surpassed that within the first few months. There were also articles criticizing how easy it was to circumvent the paywall. Linking from search results and social sites don’t count towards your 20 article per month limit, so people could seek out links to articles rather than visit directly. They could also use multiple browsers or just delete their cookies. I feel confident that the Times could figure out how to plug these holes, but they clearly don’t want to. They’ve done enough to capture the 95% of people who can’t be bothered to circumvent the paywall. By keeping these holes open they have also helped to keep more traffic to deliver ad impressions and raised the number of print subscriptions (still their primary revenue source). They have also mirrored the non-digital world in that the Times is something that you pay for, but you can still get it for free if you put forth enough effort. Social linking, hunting down search links to articles, and deleting cookies is just the digital equivalent of taking your friend’s finished newspaper or picking up a discarded copy on the subway.
The New York Times paywall is a big step in a larger long-term strategy to change the landscape for newspapers online. They are evolving so they can continue to succeed as the internet disrupts their industry. They, along with a few other industry leaders, are recognizing that they must not only change their business model, but also slowly change their customer’s fundamental expectations about paying for content on the internet. They know they must succeed where others, like the music industry, have failed, and they seem to be on the right track.
So what about Netflix? They have established themselves as a company that thinks long. It’s worth noting that their name, “Netflix,” implies merely a combination of internet + movies. Nothing about DVDs or “discs” or the mail, which was their only business for many years. That wasn’t a lucky choice over “Netdiscs” or “Mailflix.” They knew what they were doing when they chose the name because they understood the future of their industry. I think there are a number of long term reasons why Netflix made this move. They need more revenue to pay licensing fees to content providers, so a price hike for the more expensive option (DVDs cost Netflix about ten times more to distribute) makes sense. Another reason is that by having fewer people go the DVD route, content providers may be inclined to license more of their titles to Netflix for streaming. Right now their streaming service has only 20% of the selection of their library and includes the worst of the worst (like every straight-to-video movie ever made). Netflix has so much market share that shifting 35% of their customers to streaming-only could force content providers to offer their newer and better titles to Netflix’s streaming service. Netflix has already played the biggest part in killing the local video store, now they may have enough market power to kill the DVD entirely.
The flood of criticism towards the New York Times has been reduced to a trickle now that the paywall has been relatively successful. I suspect the same flood of criticism being leveled towards Netflix will dry up as well once it becomes clear what their true long-term plans are.