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A screen made with real silver

Forbes gave us the news on Monday. Many expected it; many saw it coming and no one is really surprised. It’s ‘Netflix’s Worst Nightmare Is Coming True‘. Stephen McBride gives us: “If you’ve been reading RiskHedge, you know I’ve been warning to keep money out of stock market darling Netflix (NFLX)“, he was of course correct, yet I would not go there for different reasons, reasons he actually mentions in part. As we are treated to: “It comes down to the lifecycle of disruptive businesses. Netflix pioneered “streaming” video where you watch shows through the Internet rather than on cable TV. For years, it was the only streaming service in town. Early investors rode this first-mover advantage to 10,000% gains from 2008 to July of this year.” Many, for the most the investors rejoiced. I saw the loaded cannon in another direction. As Forbes gives us, we are treated to: “Netflix had planned to spend $8 billion on shows and series this year… now it’ll spend roughly $12 billion. It now invests more in content than any other American TV network” that is where the danger is. You see, the cold hearted calculation is: 137 million users worldwide. This gets us on average $24 billion a year, it looks good, but it is not great. You see, this only works if this goes on in the long run, whilst it requires growth, it also requires people to stay with Netflix for a long time. Now, both are an option, but they have muddied the waters in another way. First there are the loans and the interest is due, as well as the principle of the matter (aka, the loan). It is optionally not a big thing if things were great moving forward, yet they are not. I had an idea earlier this year and I thought that handing it to Netflix is a great way to gain momentum. You see, I have written 1100 articles within the last 6 years alone and as such I do have a few ideas running around in my head.

Yet Netflix has a no-unsolicited submissions policy, so until you have an agent and such, there is no option. They only accept submissions through a licensed literary agent or from a producer, attorney, manager or entertainment executive with the players that Netflix has a pre-existing relationship. This makes total sense, yet it also gives rise to a much more expensive track, and $12 billion shows part of that. From my point of view new ideas and optionally the most profitable ones are found in what some would call ‘the geek corner’, these people can often not relate, cannot present but they tell great stories, they are most often really cheap and original. It is a much harder sell, yet the entire expense track could be down by at least 10%, saving Netflix $1.2 billion on the spot. Then there is the international concept. Some TV series became great in their own way. Sweden had Pipi Longstocking and that become a much loved character on a very global stage. Another Swedish treasure was a 70’s series called the White Stone, based on the book by Gunnel Linde, Sweden had its own share of successes down the track and we realise that some might seem less interesting nowadays. The Netherlands had the legendary series ‘Kunt U mij de weg naar Hamelen vertellen meneer?‘ It was a song story by children based on the Grimm story of the ratcatcher of Hameln. The series apart from some a few episodes is lost forever, which is a shame as this was a cultural highlight for the Dutch. The French had Thierry la Fronde, La demoiselle d’Avignon and several more, all unseen by a global audience. It is an option, but is that the case?

No it is not.

Netflix has shown that their money is well spent; series like Sabrina, The Haunting of Hill House and Altered Carbon are amazing achievements. We can clearly see that billions were well spend, yet in this donuts for dollars world, the overall stage (non-advertising space mind you), the annual setting for their audience is set to a requirement of close to 365 to 700 hours of TV entertainment a year to keep them, which that adds up to Sabrina, Star Trek Discovery, Haunting of Hill house, the Good Witch, Marvel’s The Punisher, Lost In Space, The OA, Seven Seconds, The Rain, Requiem, 3%, The Innocents, Sense 8, Grace and Frankie, Godless, The Mechanism, Dark, The Crown, Marvel’s Daredevil, A Series of Unfortunate Events, Stranger Things, Lady Dynamite, Glow, Sabrina, Altered Carbon, Mindhunter and at least 20 movies. They need to pull this off each year, and that pressure with Disney+ also increases, as the chance of switching to someone else is more and more likely.

We get that there are series that will always take the cake (Game of Thrones), and in this we see that there is some space to manoeuvre, but it is not a lot. You see, if someone loses the interest for 3 days, they will wonder what Netflix is for and optionally cancel, especially in this economy. That is the clear math I saw at the very beginning. It is not the price; $15 (the medium option) is more often than not a really acceptable price to most people. Netflix got that right, they merely need to find another additional venue for materials, because the well of creation will soon dry up, not merely because there are other players on the field, it is that Free to air TV, and other medium are vying for that same pool of viewers. Netflix as the first one has an advantage, but for how long?

Stephen McBride, a professional fund manager and the chief analyst at RiskHedge makes his financial case and that adds up to the findings I have. I am not sure on what the share price needs to be, yet his financial case and my mere view of the low average viewer gives light to a Netflix in trouble, how much is a clear unknown. Netflix has shown that with Sabrina and The Haunting of Hill House a new level of creepiness can be reached. Sabrina is a new take on what was fluffy, whilst The Haunting of Hill House had most of my friends scared beyond belief, so that series hit the mark. I saw the interesting catch on Lost in Space that after the original series and a movie can capture hearts all over the place, so Netflix is bringing the good stuff, no doubt about it. However, the entire setting is still low on hours. Even if year one for the audience is great, they will want more, or at least no less in the stage of year two and that is where I see trouble for Netflix. This business model will not work pumping billion after billion in a stage that grows ever more, and the path gets worse as more and more is borrowed.

That is the business case that is lost from the very start. This is all before we all realise that the need for Internet and 4K grows, so their infrastructure will shift within the next two years as well and their cloud will need a serious amount of cash to deal with that. I speculatively reckon that by 2021 (if Netflix makes it that long) will equal the NSA data server site at Camp Williams (Utah), so please take a moment to reflect on this. Netflix will in three years require the systems to facilitate to an audience and its hardware will be bigger than the Comprehensive National Cybersecurity Initiative (CNCI), with the ability to serve optionally a little over half a billion people. That is the path that Netflix is on and people wonder why I am overly negative. Well, overly negative is a stretch. It is the old fashioned sales pitch. A man sells his soul to the devil, the devil agrees and the deal is that he needs to grow his customer base by 20%. Those who know of the value of a chess set might know that one too. That man required as payment one grain the first tile, and double one the next one and so on, until all 64 tiles were paid for. 1,2,4,8,16,32,64,128 (totaling 255 grains) and that is merely the first row, after that it goes fast and by the last row it the tile payment equalled the total grain production of Russia. In customer base you require a customer base that surpasses the total population, or in this specific case the hardware of a former super power. Also consider that over time Netflix needs to open a similar base in Europe and Asia to maximise the streaming within the time zones. How much will that cost? Oh and before you think that this is it, how much power will it take to keep that running? It is set to be $50 million a year in energy cost and 1 million gallons of water a day (per base). That is if there are no power surges and other calamities giving hardship to all this. Now we see more and more providers handing out one year of free Netflix, they will have a deal with Netflix, yet year one is not the problem, year two is the bigger issue, content makes that a challenge and as is stated in Forbes: “Netflix has three bad choices: continue borrowing billions and bury itself deeper in debt… dramatically raise its subscription prices… or cut back on making new content“, if we see the three, we wonder what impact monthly increases does, I reckon that they could go for the option of one price (HD, 4K) at the same price of $16. Basically get rid of Normal and merely have basic and premium (for $5 more), it will give a boost and most people might not worry about the $5, knowing that they could always upgrade their hardware and get better viewing. Borrowing billions is a non-starter as I see it, it merely lowers the lifespan, yet the final option ‘cut back on making new content‘, is not set in stone. What if we go by ‘making different new content‘, are they exploring that? This is where the golden oldies might bring life to the amount of materials they get at a much lesser expense. Disney is all about the family and the younger viewers. Disney rules that land, yet in the 70’s we saw that Scandinavia had its share of series appreciated by kids all over Europe and that might lower the edge that Disney has (to a small extent).

In addition, making different new content might also increase the amount of content that can be made with $12 billion. I hope Netflix pulls through, when we are confronted with The Haunting of Hill House we see that they have amazing diamonds to offer any crown viewer and I am curious what else they can come up with, especially after Sabrina.

When we consider this, how many have taken a look for the best TV series from the 70’s? I did and I reckon that this is not where we find the answers, there will be too many people remembering those, yet the international field where a local TV series makes it into the global population will be for the most real new stuff to many, there will be a risk, you see, for every remake like Three man and a baby there is the risk of having at least two mediocre versions like ‘the Birdcage’, and with an audience of 135 million moving towards 200 million diversity will be key. I am not sure how it is to be solved and the makers will have their challenge cut out for them, but the takings for them will be huge if they pull it off. In the end, the search for originality goes on and as we go for books, movies and optional video games (Alicia Vikander or Michael Fassbender anyone?) we see options. Yet how does it go when we go dark, really dark and we take a night at the museum into a very different direction? What if we push the nightwatchman into the Night watch and he has to survive the events of The Shooting Company of Frans Banning Cocq and Willem van Ruytenburch in 1640, where he has to survive the night, not get shot for optional accusation of theft of the 100 florins that each of the 16 members had brought as payment to Rembrandt van Rijn and get back out without leaving a mark. We might think it is fun to walk in on Hortense Mancini by Jacob Fredinand Voet, yet what happens when you end up in The Wayfarer by Hieronymus Bosch (1503) and you have to get back then?

We can add twists on nearly any TV series, but will it work? It is not for us to solve, it is for Netflix to find a solution and that is where the problem starts, I might phrase it wrong, the problem did not start there. We were informed last year that Netflix cancelled 21 series, it does not really matter why, number of viewers tends to be the most likely reason, it merely adds the pressure for new content to be created, remember that they need between 365 and 700 hours per viewer for them to remain decently content. And in that picture, creating new content is a lot harder than merely creating a new season, the ante is up for the creators and so is the pressure for Netflix.

At least that is how I see it, and in this, the cinema has a silver screen, Netflix will need gold to score and they have to do it 20 times over each year making the effort unfathomable and each year that they do pull it off will add to the legend that started as Netflix.

 

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A Marvel Time

So we heard the news, we read the stories and they are all beyond what most expected it to be. Not only is Black Panther in 9th position at present, it is still on the course to get to 8th position within 2 weeks, surpassing Harry Potter and the Deathly Hallows part 2. It is unlikely to catch up with his brother on 7th (Age of Ultron), which now implies that within the coming week 4 Marvel movies will be set in the register of the 10 most successful movies of all time. These are The Avengers, Age of Ultron, Black Panther and upcoming racing to number 4 or higher is Avengers: Infinity War. some of the players saw this coming (I was one of them), yet I was late to the party, merely because I never looked at some of the other numbers, for me it is and will remain the joy of watching a movie on the screen, preferably the big silver one. I expected this to some extent, as I mentioned it in my blog ‘the successful and the less so‘ last week, still seeing that the movie made a global $1,166,407,350 in 10 days is still hard-core awesome. And Netflix is picking up on it, and has been for some time. You see there is a good, an evil and a dangerous side to all this. When we consider the ones in Netflix Marvel’s Agents of S.H.I.E.L.D., Marvel’s Agent Carter, Marvel’s Inhumans, Marvel’s Daredevil, Marvel’s Jessica Jones, Marvel’s Luke Cage, Marvel’s Iron Fist, Marvel’s The Defenders, Marvel’s The Punisher, Marvel’s Runaways and Marvel’s Cloak & Dagger they might think it is all good and dandy, but the danger is that there will be too much Marvel on the retina’s and they will learn the one lesson that Paramount learned too late with Star Trek, too much of it is also not a good thing. I accept that like comic books I never read them all. I was nuts about Batman and the X-Man, and my youthful best friend was all about the Avengers and the Fantastic Four, so on Saturday we read the ones we bought and quickly exchanged them on Sunday to give back on Monday, a ritual that went on for years because as younger people our budgets were limited. The fact that we can let ourselves go on Netflix like a teenager who ‘accidently’ gets locked in the pastry shop all night long has several issues which we will not go into. The evil side (yes it is), is not how the approach is made, it is how it is translated to the screen, the fact that the social roles of Tandy Bowen and Tyrone Johnson are reversed, because in this day and age it would fit either way, but the darkness of the original comic books is lost when we see “acquire superpowers while forming a romantic relationship“, the actuality is lost, because in the actual story it was not some “superhero love story”, they were captured and experimented on to make drugs more efficient in creating addiction, the experiment went wrong and they acquired superpowers, they were set together in a deep bond because of the rage and violence, drawn together as they needed to rely on one another. That darkness that was the appeal for many who loved the comic and it all got a little more interesting as police detective Brigid O’Reilly became Mayhem. So we have a switched setting, that darkness gone and I am uncertain that ‘watering down’ American issues is any way to get anything done, that darkness held an appeal, that appeal is now lost. The danger is also escalating as more series take a ‘lighter’ setting to the visualised darkness that some readers embraced and watering down remains a bad thing.

We acknowledge what Marvel has achieved and we are in awe and in desperate need to view of what comes next, but by saying that, we need to see that some of the darker parts have their own appeal, it was voiced many times with Logan (2017), the darker side was well captured and it was widely regarded as the best Wolverine movie of the lot, Wolverine basically left on a high and that should have been comprehended by those in charge of the Marvel IP.

I believe that to some extent, the Rotten Tomatoes score seem to indicate my version of deviation from the comic books when we see the Punisher with a mere 62%, yet as I am extremely unaware with the some of the comic books, I cannot explain Iron Fist (18%) and the Inhumans (10%), I am willing to wager that the oddity of the Inhumans is more like the Guardians of the Galaxy (little exposure to either comic book), yet the movie got it just right, whilst the Inhumans on the TV series might have (speculative) faltered there.

I reckon that we all have our guesses on that; I am merely telling you that my guess will be as good as yours. It is actually a shifting situation, as the fans got introduced that the Marvel series are moving to Disney, there is a side of me thinking that this is a bad move, not that they move to Disney, but that they move away from Netflix, you see, Netflix has massive momentum and Marvel alone cannot create that momentum for Disney overnight. They need to realise that they are poisoning their own well, they are setting the stage where they decrease momentum. Netflix has 118 million paying viewers, there is definitely space for a second channel and by the time Disney resets its brand to ‘include’ the mature watchers, they will optionally have lost 3 years and many millions, so whilst we see nearly a dozen series take hit after hit on amount of viewers, how do you think the future for all these productions are set? It is not merely the advertisers who take a back gander in all this, whomever is making that decision at Disney needs to realise that they are undersigning close to $200 million loss for longer than a short term, so by the time the momentum is back on the road half a billion is gone, with almost no option to recapture that, do they not realise that?

And no one is insensitive to the Marvel Universe, most of us have been exposed (beyond the comic books) through animation series, TV series and other means of exposure like video games and we all know it works, yet in that light being extra careful, not brazenly blunt is the way to go for a long term setting with a fickle viewing audience, because DC is just one step behind. They had several fumbles and whilst the relaunch series started their successes with Smallville (2001-2011), they still have the same issues that Marvel has. I believe that Constantine showed part of that flaw. It has the goods, yet in my personal view was not willing to be dark enough, it is a view that Europeans and former Europeans share and in all that it is an important side, because they are 50% of Netflix at present and they represented 61% of the Avengers: Infinity War revenue (actually the non-Americans are that), but a massive part is Europe and in the equation of revenue that is a lot more important than the producers realise. You see Cate Blanchett, Hugh Jackman, Chris Hemsworth, Benedict Cumberbatch and Tom Hiddlestone are not just excellent actors, they are non-American actors and that ‘non’ part is equally important. Europeans seems to be identifying themselves easier to these actors which is becoming more and more of a factor. And that is nothing negative on the quality of any of the American actors, which is of the highest quality. So as we realise that non-American parts are increasingly important, why is the embrace of the story so often too deeply soaked in American ‘value setting‘? It is not merely that a person like Mark Wahlberg was in Boogie Nights, he was awesome as an actor, it was merely the setting and directness of Boogie Nights that captured the global heart, the fact that this movie was American in origin was even more astounding. That is the captured emotion Marvel (DC also) needs and I believe from my side that going deeply dark on some of the series will not be negative, most will see it as a refreshing side to a comic book universe that has many colours. I believe that in that regard Witchblade was made too early, it merely got through 2 seasons, like the Darkness (also a Top Cow production) it was deeply dark and as special effects could not match the comic books (it pretty much can today) as well as the need to be dark as hell (pun intended) showed over 20 years a setting embraced by many readers and mostly appreciative of the amazing illustrations. Marvel still has a few option (they have loads actually), yet the setting of a darker presence they have the series Moon Knight, which ultimately led to the Secret Avengers (how secret can a comic book actually get?). Even as it started with the inclusion of Captain America, Black Widow, Ant Man and War Machine, it would also give us temporary people that have been in several comics like the Avengers and Thor (Valkyrie), X-Man (Beast) and New Warriors (Nova), Moon Knight, even as you might have seen him in a comic or two with Spiderman, remains unknown to a much larger audience. It would also grace presence from Hawkeye (played presently by Jeremy Renner) and Venom (agent Venom), the Flash Thompson version. So not only are a few characters darker, the interaction might allow for a level of darkness, or perhaps better stated ‘living via less legally accepted values’ to interact with the greater good. It is a part that Civil war scratched on, yet as we know that it had been in the central side of many comic books for the longest of times (the DC Azrael series as well as Knightfall), the acceptance that we have that by the book never gets us anywhere and going overboard to the extremely other side is also accepted as ‘existing’, those who are in denial of that existence, please look up ‘mercenary’, ‘Blackwater’ and ‘Aegis Defence Services’, so there is that to consider. We are already seeing the reality of certain places and the issues they provide and solve (and create). So part of Moon knight is already fraught with examples that go back to the Congo and as present as Syria (some Russian corporation), the absence of that darkness is in the end not a good thing, things become ‘too vanilla’ is perhaps not the right tone, but when we consider the near impossible achievement that Avengers: Infinity War created, we need to see that staying on that exact course is not achievable as it started with almost a dozen other movies (3 Iron Man, 3 Thor, 3 Captain America, 2 Guardians of the Galaxy, 1 Dr Strange, 1 Black Panther and several Spiderman’s), so that foundation was well designed and part of the creation of the hype, but pulling that off again might not be possible to that degree. Now it becomes a melting pot of settings between light and dark, good and wrong, evil and optional.

Philosophically we could speculate that we are shaped as people through the interaction of extremes, so ignoring the other side, or perhaps trivialising it through caricature characters like MODOK (Mechanized Organism Designed Only for Killing), we can giggle on it in the comic books in an obsolete episode (read: one off), yet when it becomes the main boss in a TV series, the people will change channels to watch the late news pretty quickly. I believe that making Constantine much darker, by adding these options and by not making Cloak and Dagger some love story, momentum could have been gained. There are plenty more opportunities there, yet I feel that the overall package might at some point become lesser. I feel that the evidence shown in the movie Watchman, the darkness that Rorschach represented was perfect, overall the exposed darker side was what made the movie an absolute gem and of course there was no lack of evil when we saw a blonde version of Matthew Goode playing Ozymandias (nyuk, nyuk, nyuk).

So if that one side of Marvel can get addressed they will optionally be having an even bigger marvellous time than they are already having. there is larger premise to my consideration, we see this over the ages as Marvel has had its share of ‘darker’ characters, it is seen in Spider Woman, who is originally set as “In her first appearance, Spider-Woman was to be an actual spider evolved into a human as imagined by writer/co-creator Goodwin. Her debut was shortly followed by a four-issue story arc in Marvel Two-in-One in which Wolfman presented a different origin retcon as he felt her original origin was too implausible for mid-1970s readers“, it was the sales of Marvel Spotlight#32 that took it to a new level. Even now as we see gene splicing, we see the setting of adding to the human gene, yet the setting of adding human sides to the other gene is still a little far-fetched, yet in 40 years we have gone from ‘too implausible’ to merely ‘implausible’, so there is progress. In all this we have the presented setting like the movie Ex Machina, Kirk Langstrom (man bat character from Batman), Venom, my favourite Alex Mercer from the Prototype series and last but not least the original X-man Beast both the Kelsey Grammer and the Nicholas Hoult edition. There is a league of settings that Marvel (as well as DC) already offered and it seems they are stepped over (read: partially ignored), not merely in one part as they weren’t as successful as the Asgardian characters or the billionaires Bruce Wayne and Tony Stark, we can debate that all day, but the American setting is getting more and more ‘wrong’ ((less accepted might be a better term), implying that darker series will be a lot better received that most American producers can fathom, I merely need to point at the success of American Gods to make that point.

So let’s see that we can all have a marvellous time between now and 2020 (when the Infinity War hype passes), because after that we still want to go to the movies, watch Blu-ray and Netflix (those who have not passed away by then that is).

Was that dark enough? Have a fun day today!

 

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