The summer I turned binge-y

0:00This is Planet Money from NPR.

0:07Hey, it's Kenny Malone. And this episode is coming out on December 24th. And so we here at Planet Money, we would love to wish all of you who celebrate a very, very merry night before Stranger Things. Tomorrow is Christmas and Netflix is about to shovel like four hours of Stranger Things down our chimneys. Now, I had hoped that for this final season, Netflix might consider taking each of these highly anticipated episodes that cost like$50 million a piece on average and then release them episode by episode, week by week. But nope, Netflix is avalanching these directly onto the holidays. Four episodes onto Thanksgiving, three onto Christmas, and a two-hour final episode on New Year's Eve.

1:00And so that is why, I hope they're not listening to this, I will be sneaking away in the middle of my in-laws' Christmas festivities to binge watch, from what I've read, like three hours and 52 minutes of Demogorgons and whatnot. Because if I wait, I may get spoiled. This is the world Netflix has created. And it seems to be going great for them. You know, the little startup that used to lend us DVDs in the mail is now so big and powerful. It is maybe going to buy Warner Brothers and own Bugs Bunny and Tony Soprano and the Harry Potter movies. And the strategy of binge dropping entire seasons of television has arguably built that Netflix.

1:46Waylon Wong. Hello. What was the last show that you binge watched? Technically, it was. Oh, actually, I remember it was industry. Industry. It was industry. HBO drama. Yes, about young people working at an investment bank. So I probably - This is very on brand for Planet Money Indicator hosts. I know. Now, listeners, you may know Waylon Wong as co-host of Planet Money's Indicator, but she is also our staff secret pop culture weapon. And for an episode about the economics of streaming, about the decisions that have led us to this modern streaming world, and about the critically important question, to binge or not to binge, we needed Waylon Wong.

2:28Well, Waylon, I have brought you here because it is this binge model that I contend built Netflix into what it is. Yeah. And I think that the history is a story that can be told in four specific chapters. Each is their own television show. Oh. Intrigued? Yes. I'm not going to tell you the television shows, but I'm going to read a quote from each show as we go and see if you can guess. I'm not going to play it for you because it'll give too much away. I'm going to read it and see how you do. Is this a game show? Is this a show within a show within multiple shows? Game show within with a show. Yes, that's right.

3:04Are you in? Yeah, let's make a deal. Okay, let's go. Hello and welcome to Planet Money. I'm Kenny Malone. I'm Waylon Wong. Today on the show, putting all of your episodes out at the same time, the greatest decision in the history of television or ruining our lives. Did we, viewers, want this all along? Or did the companies want us to want this all along? Plus, what does the academic research say about whether it is better to binge drop or not? We have some data now. And Waylon, you're here for a fun, bingey, television-infused ride. I'm strapped in. I have my snacks. I have my water.

3:45All right. Due to the nature of this episode, we're going to end up naming all kinds of real big tech companies. And so we should say right here, Apple and Amazon are NPR funders. And with that said, Waylon, we're going to start with a little history. You ready? Mm-hmm. Okay. So the year is 2007. 07. What was going on in 07? So Netflix debuts a feature called Watch Now. Oh. The company, which was sending people DVDs, they had like 70 ,000 DVD titles that they would mail you. I mean, I got those DVDs. Yeah, yeah. It's how I first watched Itou Mama Tambien. That's how I first watched Infernal Affairs.

4:24See? And they debuted a streaming option for around 1 ,000 titles. Okay. So very few. Do you want to see what it looked like? I do. Like I have some screen grabs of it. Okay, let me share my screen here. Take me back. It is all very GeoCities looking. Yes. Angel Fiery looking site. Okay. For sure. And here are some of the titles available if you want to look. 12 Angry Men. Classic. Wow. Ben-Hur. It's pretty good. They launched with good titles. It was Casablanca, like Stone Cold Classic. Run, Lola, run. That's a fun one. And with your DVD subscription, you could stream six hours of these with your plan, which was$5.99 at the time.

4:58Well, also six hours, that's maybe three movies, right? That's actually not a lot. And did I see Ben-Hur on the list? Yeah, Ben-Hur's on the list. You only get six hours and you watch Ben-Hur. That's basically all you're doing. Now, how, Waylon, do we go from a company that is now on the verge of not just including Casablanca in their streaming offerings, but owning the movie studio that made Casablanca. That, I will argue, all comes down to just a few key moments and a few key television shows in the history of Netflix. You ready for chapter one? Ready for your quote? Mm-hmm. Can you guess this TV show?

5:36Yeah, hit me. Just because you shot Jesse James, don't make you Jesse James. You're on the clock, Waylon. Is it House of Cards? You're ahead of the story. We are going there, but not yet. Breaking Bad? It's Breaking Bad. Oh. Breaking Bad premiered in 2008 on AMC. And sort of famously, the story of Breaking Bad is that, like, no one watched Breaking Bad for the first season, the second season, the third season. There's some caveats here. Like, viewership went up a little bit. But what changed the game was in 2011, Netflix picked up Breaking Bad and people started discovering Breaking Bad. They would watch tons of it.

6:15Now that you're telling me the story, I am trying to remember how I started watching it. And I wish I could remember because I'm like, was I on the Vanguard? Did I watch it when it was on AMC? Or was I someone who discovered it on Netflix? And I can't remember now. So ahead, and here is the single statistic that I think maybe changes television history. Are you ready for this? Okay, yeah. Okay. So the night before season five of Breaking Bad premiered, the final season, according to Netflix executives, they saw 50 ,000 people watch the entire fourth season ahead of the premiere. All in one day?

6:59All in one day. Whoa. I hope they got up for breaks. No. I would need lots of breaks. You're not made for this life, Waylon. I know. And I will say that show creator Vince Gilligan, when he won one of his Emmy Awards, was talking to reporters afterwards. And he said, quote, I think Netflix kept us on the air. Not only are we standing up here with the Emmy, I don't think our show would have even lasted. Really? Wow. Yes. The word was out that Netflix was changing things. Which brings us to, if you are prepared, key television show number two. Are you ready? Yeah. Money is the McMansion in Sarasota that starts falling apart after 10 years.

7:40Power is the old stone building that stands for centuries. I cannot respect someone who doesn't see the difference. House of Cards? Yeah, that was an easy one. All right, what do you know about House of Cards? Is Mahershala Ali in it? Yeah, I believe so, yes. I think that was my introduction to Mahershala Ali. Me too. Because I remember thinking like, wow, who is this guy, you know? Now, in 2012, Netflix launches its first original program. It's called Lilyhammer. It's about a New York mobster moving to Norway. But this is not the show that really changes television forever. The next year, in 2013, House of Cards was going to be, for Netflix, the big one.

8:15This was expensive. This was top-end talent. But, Waylon, how to release it? How? You've got to make a splash. Yes, well, Netflix had experimented with binge-dropping all of its episodes with Lilyhammer. But like, look, it had also seen that users like to binge old thrillers. I mean, we know that statistic with Breaking Bad, right? Like that 50 ,000 people had watched an entire season of Breaking Bad ahead of the final season. Like how many hours is that? Yeah, that would be, I mean, it's what it's like. Is it like 16 hours? Nine hours and 20 minutes ish, apparently. Wow. So Netflix is like, well, let's go ahead and release all of House of Cards at once.

8:56And, you know, it is easy to take this for granted now. But this was so abnormal. And it is very fun to go back and listen to coverage of House of Cards back then. Yeah, it's very fun. Good morning. And Netflix puts a new twist on its business model with a new political drama it's releasing today. All 13 episodes at once. Not just the pilot, but all 13 episodes of the show's first season. All 13 episodes today. Okay, here's a little. Steve Inertsik is interviewing someone who's written a book about Netflix. And that person says... All of those episodes are going to be put up at once, so viewers can watch them really in any order.

9:37Although this also means, doesn't it, there's not going to be appointment viewing. I'm not going to be eagerly waiting for the next episode of this and talking with people about the next episode of this. No, but I think that really works in Netflix's favor. The thing about the end of appointment viewing is kind of prescient. The thing about you can watch these in any order is really strange. You could watch them in any order. I mean, it's a free country. You can do whatever you want. But even the interface suggests that you go chronologically. It's not a choose-your-own-adventure. It's not supposed to be some formal experiment in television.

10:12Easy to dunk on this all now. And then here's the best one, I think. This is a Marketplace piece. Okay. Instead of releasing a new episode every week, the streaming service is giving subscribers the entire season of House of Cards all at once. Yoris Evers is a spokesman at Netflix, and he says CEO Reed Hastings believes the traditional TV model doesn't reflect modern viewing habits. As Reed Hastings wrote, imagine if books were always released one chapter per week. But suddenly, somebody flips a switch and you can read the whole book at your own pace. That's the future of television, and that's what we call Internet TV.

10:47Internet TV is so funny. It's so quaint. It's going to eat our whole world, though. Internet TV. It's easy to forget that dumping all the episodes at once was a huge deal. I mean, Reed Hastings, what, compared it to going from serialized Dickens to having entire books like the Gutenberg Bible? I don't know. I think I'm getting my chronology. I like the idea that the Bible might have been serialized at one point. Oh, I can't wait for the rest of Matthew to come out. You're waiting for each commandment to be etched into the tablets. It's like, what's the next one going to be? Okay, so honestly, to some extent, the rest is history.

11:23The streaming wars kick off. Binge watch enters the Oxford English Dictionary. Everyone who has a streaming service has at least dabbled in binge dropping entire seasons of very expensive new shows. And we're all in a place where some of us are so annoyed about Stranger Things Christmas binge that they're doing an entire episode of Planet Money about it. Well, let's not name names. It's all fine. But what if, though, Waylon, what if it did not have to be this way? What if there were data saying it should not be this way? Which brings us to our penultimate show and quote. Are you ready for the quote?

11:57Yeah. But I'm too young to be the Pope. The young Pope? Yeah. All right. I got to admit, I made that one up because I've never seen a lick of the young Pope. But I assume he says that at some point. We'll explain all of this after the break.

12:17All right, Waylon, we have arrived with great anticipation, I'm sure, at HBO's The Young Pope. We have White Smoke. Yes. Third of our four television shows here. But before we get to how this factors into the history of binge watching, I would like to introduce you to a professor at Carnegie Mellon named Pedro Ferreira. Yeah, professor of information systems in engineering and public policy. One of the things Pedro studies is how the information we interact with and the businesses we interact with affect us and how we affect them. And he had noticed that there had been a decent amount of research already on how binge dropping and binge watching episodes affected the consumers specifically.

12:57And noting, for example, that spending too much time in front of the screen could be psychologically or mentally hurt the consumers. It doesn't feel great. I've done a few binges in my day. I don't feel great the next morning. I don't know about you, professor. Have you binged anything ever? I have binged many shows years ago. Name some names. What have you binged? Breaking Bad, The Wire, for example. One of the last ones that I actually binged a couple weeks ago was The Severance. So he was like, look, we've seen a number of studies from the consumer standpoint, but let's look at this from a firm standpoint.

13:31Like if you are a company making TV shows, what is the best way to drop this stuff? And so he got a chance to study data from a company whose name he was not allowed to name. Though I did ask him if it rhymed with Fletnix, and he can't say. But I don't, my guess is it's not. It's not. But this first study that Pedro conducted was specifically focused on the bingers. Like, what happens to the bingers when you drop entire seasons of content? And what we found in the end of the day is that binge watchers consume content at a pace never seen before in the industry. They exhaust the content. They're binging it.

14:14They're binging it. Yes, yes. In Insight, that's exactly what's happening. And so they exhaust the content of interest to them rather quickly, canceling their subscriptions until new content becomes available. And they're like, I'm done. I've finished your streaming service. Exactly. And so keeping binge watches from churning requires a pace of content production that the industry has a hard time coping with. Churning, the ultimate nightmare for streamers. Well, you should say churning is like subscribers quitting, right? They join, they quit, and like that turnover, that churn. No, I think it's also churn is one of these industry terms that comes up in all of the earnings calls.

14:52I think the idea is that you want to hang on to people because it's quite expensive to get them back. you then have to send them, I don't know, all the promos and all the marketing and it's expensive to do that. But yeah, so like churn is the whole ballgame. And what Pedro had been finding in that first study was that bingers are high churners. Like once they run out of stuff to watch, they're like, I'm out, I quit. And so if that's true, I asked him though, like, well, then wouldn't, wouldn't it matter which company you were studying? So like if we're talking about a Netflix versus a smaller company that has fewer offerings?

15:26Yeah. So that's a very good question. I can tell you that our experiments over the years run on different catalog sizes exactly to solve that. And in Confidence, I have some of the larger providers streaming that rhyme with all those words that you mentioned, telling us that we also find exactly the same result. So if you're catering to bingers, this is maybe backfiring. Like they check out, they churn. And here's the thing. Those hardcore bingers, Pedro realized, were a very small part of the audience, like maybe five to 10 percent. Well, I don't know. It's I mean, way back when you shared that stat about 50 ,000 households or 50 ,000 accounts who watched a whole season of Breaking Bad in one day.

16:09And that is a small number, right? It's not like a huge number was enough for Netflix to really pay attention. But it's still a small number, right? So I would imagine that kind of extrapolates to a relatively small percentage of super users. That seems to be generally true. Okay. So he and his regular co-author, Miguel Godinho de Matush and Samir Mamadousin wanted to know what about like the rest of us, how do we react to different drop strategies? So Pedro and company partnered with an international telecom company that I believe is different from the first study. Although he, again, cannot tell me which one it is.

16:46I can't, sorry. Even if I ask nicely or should I not even It's not one of the ones that you're thinking about. Okay. Okay. But the bonkers thing about this company is they were willing to let him mess around with the release schedule of some pretty big deal shows. We were allowed to release these shows with a random number of episodes to different random sets of consumers. So some restrictions, but allows us to randomize the number of episodes. This has got to be really exciting as a researcher. Like, this is a pretty wild opportunity to get to play streaming God with people's release schedules.

17:20That is true. This is an experiment that we have tried to run for a good half a decade before we actually were able to do it. Of course, I would prefer to do it with 40 titles instead of just four. But this gives us a window into results that I think make sense. So ultimately, they were allowed to kind of manipulate the release schedules of four shows. And those shows were Waylon. Number one, Big Little Lies. Uh-huh. Watched it. The Muppets. A show called Unforgettable. I have forgotten this one. I definitely forgot that show, too. I'm sorry. I'm sure it's great. And then finally, finally, of course, The Young Pope.

17:59Ah, The Young Pope. Professor, do you remember the plot of The Young Pope at all? No. Young Pope, I have not seen. There's a lot of memes about Young Pope. I don't know if you knew. There's like a funny picture of Jude Law as The Young Pope sitting in a lawn chair, smoking a cigarette. This goes on the internet all the time. I don't know if you ever see this. I saw that picture. And one of the things that we tried to do was, although I didn't watch a couple of these shows, we wanted the shows to be representative of what people like. Because if we were running an experiment with shows that no one cares, the results would not just be informative.

18:31A few really key things about the four shows that were chosen here. They were all first seasons. So like, let's say one show had a more highly anticipated second season. Like, that wasn't going to be a factor. Also, these shows had already launched in the U.S., but Pedro and his fellow researchers had surveyed the international audience they were about to serve these shows to and found that, like, people didn't really know about them. Even something like Big Little Lies, which I would have assumed kind of had a following, didn't seem to be the case. So they're all kind of starting from square one.

19:06That seems smart. Okay. Now the terminology I had not heard is that we are testing a drop model, like binge drop, all the episodes at once, versus a drip model, weekly model. This is the paradigm. I like this language. I had never heard this before. Do you like drop versus drip, Waylon? Yeah, I do. Very succinct. So the game here is like, can churn be minimized? Which model is minimizing churn the most, drip or drop? And so Pedro and co-authors wait like three to four months, and here is what they find. So first of all, as we know, there are people who only want to binge content, and that's it.

19:47The like true hardcore bingers. And guess what? when those people were randomly assigned stuff weekly, they were not happy. First, as we would expect at this point in time, there are some people that when the content is released or on one episode per week or two episodes per week, they don't simply engage. Those are your extreme binge watchers that just don't care. That's not their pace. They show up and they're like, there's only one episode of Big Little Lies? What am I wasting my time for? Exactly. Exactly. Pedro's point is, uh, is that when people who only like to binge were randomly serve their episodes week by week, they basically hated it and didn't watch it.

20:28And, uh, yeah. Well, it makes total sense. Uh, yeah. Seems pretty obvious. But Waylon, where this got really interesting for me was when they looked at the data for everybody else, like, you know, the people who are not hardcore bingers, what they found was that people who are randomly given their episodes in a weekly drip instead of a binge drop had way, way lower churn rates. Like they stuck around much longer. What we found was that the people in this segment were subscribing the product 50 % more than everybody else. 50 % more? 50 % more than everybody else. So meaning they would continue the subscription at a rate that was 50 % higher than everyone else.

21:10Then everyone else being the people that were given all episodes of the shows at the same time, which is a big, which is an extremely big difference. Okay. Okay. So they hung on to more customers who were getting them dripped. Yes. Drip was better than drop. And that is because, of course, people had to stay subscribed if they wanted more of the show that they were watching. But also, Pedro says, that resulted in people discovering other shows on their own. As people repeatedly come to the platform, they need to repeat their visits every week. And there's only one or two episodes available. They find themselves with some time on their hands.

21:48They go in search for other things. Now that you've produced this study that says like, hey, the drip might be better in many, many, many cases. Have you been hearing from other streamers? And what have they been telling you? They have been telling me something that we just talked about, which is the world is very dynamic. In the end of the day, it's a matching problem. I need to do the drop for the binge watchers, and I need to do the drip for everybody else, so I need to know who's who. I don't think that drip can be done just drip, and drop cannot be done just drop, because not everybody is a binge watcher, and vice versa.

22:25So are we drip dropping? Are we not drip dropping? What are we doing? Well, okay. Pedro's finding is that drip was better than drop. Like weekly releases reduced churn compared to binge drops. But there's a bunch of caveats here. So we're talking about specific kinds of shows. This is an international audience. And the average age, I should probably say, is like 49. And so, you know, instead of saying always drip, Pedro says there might be some kind of other optimal solution where you find out which kinds of shows work better as a drip versus a drop. And then who are the targeted audiences? Are they drippers?

23:03Are they droppers? and then a streamer might want to customize releases based on that stuff. You know what I mean? Now, has Pedro watched The Summer I Turned Pretty? I did not ask. However, it is bizarre that you're mentioning this because are you aware that The Summer I Turned Pretty is the show that gets mentioned as a case study of thinking outside of drip versus drop paradigm? No, I brought it up because I thought it was like a glorious return to the drip model. Okay, all right. So, well, it is in fact our final chapter. Do you want to, since you already mentioned it, do you want to do the quote?

23:40Yes. I had one. Okay, go ahead. How about, I'm going to, can I look it up so I, um. Yeah. I evict you from my heart. Oh, it's almost talking about the binge model. We're going to get back to Netflix in a second because why are they still doing this? But do you want to, you want to talk about Summer I Turned Pretty? I will admit I have not watched it. Really? I missed the phenomenon. Yeah. You should watch the show. I know people are on different teams. Like they think this - Team Jeremiah versus Team Conrad. All right. And is there a right answer? Yes. And the right answer is Team Conrad. Is the right answer?

24:11Okay, all right. Right answer. But I mean, you know, people will come - Definitely write in if you disagree with Waylon. Oh, they will. And send it directly to wwong at npr.org. But okay. We really went right in on this. So let's back up for a second. Waylon, do you want to tell the people who missed Summer I Turned Pretty about this? I would love to. It is based on this YA romance that was super popular by the author Jenny Han, who also, I believe, is the showrunner. It's on Amazon. And they released it week by week and created some huge social media appointment TV kind of viral collective shared experiences that I certainly participated in.