The Cultural Algorithm

Picking your battles is key to box office success in Q3, 2022The end of another calendar quarter is nearly upon us. It's that time to look at the titles that have performed the best at the box office despite being forced to make content changes or being banned altogether. What's different about Q3 is that each of the top three titles fell victim to censorship. We've been saying for a while that everyone should expect more regulation and censorship, and so far, we haven't seen much to persuade us otherwise.

An event where time was well spent.There's an old sports adage: competition breeds success. And that was assuredly on display at this year's OTT.X conference.

Yeah, there are standards, but necessity is the mother of invention and change.Content is the fuel that powers M&E industry growth. To compete in an ever-evolving and expanding marketplace, writers, producers, directors, and distributors must find ways to differentiate themselves across audiences and markets.

Creativity happens typically without the oversight of laws, regulations, and guidelines. That is unless you live in a country where government officials look over your shoulder (they do exist). For most writers, however, you can write whatever story you want, up to a point.

Have the economy and increased regulation created content's "perfect storm?"Despite optimistic Q2/Q3 reports from studios and platforms and indications of no mid-year budget cuts, a real possibility remains that unless the economy recovers to where revenues are more stable, the next fiscal year could see reduced content budgets and fewer purchased titles.

Culture is the combination of language, music, geography, history, religion, and cuisine that describes people in different world regions. Culture permeates our identity; it is our societal fingerprint.

It's a challenging but manageable process if you know howImagine this scenario. You're a small production company, and you've just spent the last couple of years developing a series you're confident has international reach. Produced in the US in English, the story is an engaging drama, although a little edgy, with serious and comedic moments. The cast includes a broad mix of characters that reflect modern communities. Your lead character is a bisexual woman of color played by an up-and-coming actress who isn't yet a household name. The rest of the characters are a mix of adults, seniors, and children spanning many ages, races, identities, and religions. In each episode, renowned actors and actresses are cast as protagonists to attract viewers. Cultures typically portrayed as "the bad guys" are depicted positively.

What should content creators make of platform subscribers and revenue numbers?  If you listen to media pundits, analysts don’t expect Q2 of 2022 to bode well for linear or streaming platforms. Several said the industry was “ slowing down ” due to the state of the global economy. Market contractions are likely to lower ad revenue and impact subscriber totals. To some degree, the companies that have reported so far (more are coming this week) indicate the experts may have a point, but will it impact content development or market expansion?    Among earnings announcements so far:    Netflix posted a loss of 970K subscribers  Peacock netted no new paid subscribers in the quarter  Apple service subscriber growth slowed compared to previous quarters    Other prominent players in the streaming space are expected to report subscriber losses, slower subscriber growth rates, and revenues or earnings below projections. Fortunately, the state of the industry isn’t as bad as some like to paint it. In fact, none of the companies reporting earnings so far have announced a reduction in their content spending this year despite these challenging economic times.    Netflix  Netflix CFO Spence Neumann said in their Q2 earnings call , “…if you zoom out a bit and look at past economic cycles, at least in the US, most forms of entertainment have been fairly resilient to downturns.” People tend to keep streaming subscriptions as they optimize their entertainment spending. Neumann cited that operating income and Earnings Per Share (EPS) were higher than expected, and the company saw a 7.7% growth in screen time during the quarter. This growth included countries where the company increased prices. Bottom line: Netflix will not change its content strategy or curb spending.    Comcast  Comcast CEO Brian Roberts said during their Q2 earnings call that despite flat subscriber growth in the NBCU Media group, their investment in content was paying off. He cited upfronts generating “more than $7 billion in commitments, including $1 billion at Peacock” for the 2022/2023 season. Roberts touted the success of theatrical releases including “Jurassic World,” “Minions: The Rise of Gru,” and “Black Phone,” emphasizing that “great content attracts massive audiences.” Comcast indicated no intent to cut back on content development.    Apple   Apple’s commitment to content continues, with CEO Tim Cook saying during their earnings call that the company grew to over 860M paid members of Apple TV+, Apple Music, and Apple Arcade platforms in the quarter, generating $19.6B in revenue. Cook highlighted that in 2.5 years, Apple TV+ has “earned 250 wins and 1,100 award nominations,” including 52 Emmy nominations across 13 titles.    What this means for content creators is that, given the current global economy, there is no planned change in the amount of money invested in new content. Every major company that has reported quarterly earnings remains committed to its announced investment levels in new content development for 2022. That doesn’t mean they won’t adjust how or what they buy in the future. It means their focus remains on creating engaging content consumers want to watch. This is good news for companies that cultivate and localize content. It is a testament to their effectiveness in producing titles welcomed in over 200+ countries and territories worldwide.

The idea behind diversity, equity, and inclusion (DEI) in the media and entertainment industry is nothing less than demonstrating respect for other people and cultures, recognizing the creative talents of a global community, and establishing equal opportunities for everyone. With more than 12,000 titles produced yearly, it's fair to presume there should be plenty of opportunities to go around, right?