Midterms! Twitter! Box Office! Predicting the Future is Still Really Tough!!!!
The Most Important Story of the Week for 29-Nov-2022 Part II
Let’s talk about “the wisdom of crowds”. Traditionally, this is the idea that if you independently ask a bunch of people for their opinion on something, as individuals, most of them are wrong, but collectively, their estimates are right. The go-to example is the “count the jellybeans” classroom experiment. A teacher or professor has all their students guess the number of jelly beans in a big jar. One or two students may be right, but everyone else is wrong. But guess what? The average of all of the guesses is often the closest guess or nearly the closest.
I think about this a lot when it comes to our current digital media ecosystem. You might be tempted to say, “Between social media, podcasts and newsletters, the crowd has gotten bigger, therefore the wisdom deeper.”
Actually, I worry it’s the opposite.
See, the wisdom of crowds depends on all the estimates coming in independently. If you had one student stand up front loudly yelling that there were, say 400 jellybeans in the jar, then other students may believe them, or at least don't want to seem like they disagree, and then the estimate could be off. Or, if everyone publicly declares their estimate, it makes this effect even worse.
(Can you see the implications for asking employees their opinion publicly at a big meeting? I once attended a training event in the Army, and at the end, a grizzled sergeant asked all the role-players what they thought of the students being evaluated. Sure enough, after the first two role-players identified the Captain as the weakest of the team, nearly every other student said the same thing. Herding much?)
Nate Silver talks about this with polling all the time. His system only works if each polling outfit publishes all of their polling results, regardless of how off those polls are from the consensus. If firms don’t want to publish their outlier results, then you aren’t getting the “wisdom of the crowd” but “herding around a narrative”. And that’s not more accurate.
I bring this up because one could think that the media’s reaction to something is “the wisdom of the crowds”. Take Disney’s last earnings report. After it came out, I skimmed their numbers and thought, “Hmm, a ho hum report.” And said as much on Twitter. I was busy preparing to go on vacation, so didn’t check the news until a week later, when I saw that Wall Street decided the report was NOT good, and Disney’s stock fell accordingly.
Interestingly, most of the journalists collectively agreed with Wall Street that Disney had a terrible, very bad, no good earnings report. But did they all individually decide that, or did they see the coverage and align with the herd? (And yes, a week later Bob Chapek was out for Bob Iger. Read my take here or in The Ankler here.)
See? It’s hard to get unvarnished opinions.
(I’ll note, on Sonny Bunch’s “Bluwark Goes to Hollywood” podcast, he and Julia Alexander expressed similar surprise to the vehemence of Wall Street’s reaction. I will add, Disney was kind of due for this correction, given their stock price had the highest price-to-cash flow ratio in entertainment, meaning they had the most room to fall.)
To continue my theme from yesterday, predictions are tough. On Tuesday, I tried to show that with the economy/recession talk. Today, we’ll focus on the larger “context” of the business landscape, context being the word I use for larger political, economic and social stories that aren’t entertainment industry-specific, but could impact this industry nevertheless.
So we’ll keep that theme going through the “other contenders” for most important stories.
Almost Most Important Story of the Week - Theaters Had a Terrible Turkey Day
The box office returns for Thanksgiving weekend were dismal, to say the least. The two main culprits are either Knives Out 2 (sorry Glass Onion)— which debuted in only 600 theaters (and their box office grosses are secret, though leaks have come out) and likely left tens of millions on the box office table—and Strange World, the latest animated Disney offering to underperform.
Needless to say, this wasn’t great for the “theaters are back” crowd. I thought theaters would be doing better by this time this year, maybe even “much” better. (See predictions are tough!)
“Who’s to blame?” is always the question we come back to. Some of this may be consumers who prefer home theaters, or are afraid of lingering Covid-19 worries, or just consumers who are lost to the theatrical experience altogether. I don’t deny that has had some impact.
But this tweet from NATO, the industry body for theaters, is pretty telling:
Indeed. As someone who collects nearly every streaming title released each week, it’s quite clear a lot of valuable inventory is being hoarded from theaters.
Look at this list of titles that came out the week before Thanksgiving:
At least four of those films (the three big budget family films and a reboot of a holiday classic) absolutely should have been in theaters, and you could make a case for the other two. (I even left off the new Blue's Clues movie on Paramount+.) It’s not like ten years ago these would have been straight-to-video films; if they didn’t go to theaters they wouldn’t have been made.
Wouldn’t a Ryan Reynolds/Will Ferrell joint do well at the box office? Or Slumblerland, a big budget adventure film starring Aquaman? Same for Disenchanted? The first film earned $340 million on an $85 million budget. As is, all will compete for the same eyeballs in a crowded streaming market on the same crowded weekend.
I’ve seen some folks put the lack of theatrical titles blame on Disney or Warner Bros. or other traditional studios for pulling titles from theatrical. (Like A Christmas Story Christmas or Disenchanted.) And yes, they certainly share some of the blame. But to me, the real folks avoiding theaters are Apple, Amazon and Netflix. Those are three of the biggest spenders competing for talent (and driving up prices), but they’re not putting films in theaters. Partly because they don’t have to, because profits have been, until recently, second to growth.
And here’s the good news: even the Tech giants may realize they need theaters. In another story that could have been the “most important story of the week”, Prime Video just changed their mind and will commit at least $1 billion per year on theatrical releases. If theaters get more inventory, it could help their top and bottom lines considerably.
Other Contenders for Most Important Story
The U.S. Midterm Elections and How It Will Impact Entertainment
At the end of October, one thing was very clear:
Democrats were going to get crushed in the midterms.
Sure, the polls didn’t predict this—the polls showed that the election would be very tight!—but everyone else did, especially political experts. A “red wave” was coming to wipe away Democrats. The wave would be fueled by fear of crime and worries about inflation. Historically, this isn’t even a hot take; after all, the “in-power” party always gets crushed in midterm elections.
Oh wait, the polls were right?
I quoted Nate Silver yesterday, and I’ll cite him again, because his average of polls was pretty damn accurate. Will he get credit for this? Of course not! One of my friends compared Nate Silver to a Keno machine. And then that friend proceeded to mischaracterize all of Nate Silver’s predictions. And I’m sure some of you saw Silver’s Twitter feud last week too.
I think Matt Yglesias explained it best in a since deleted tweet, which went something like:
Polls, pre-election: This election will be very close!
Pundits: The polls are always wrong!
Election results: The election was very close.
Pundits: The polls are always wrong!
I’ve made this point before and I’ll make it again: no one can predict the future. People often assume that data journalists and such can predict the future—which they can’t—but if they can’t, they’re useless. In reality, everything is probabilistic. And data is really helpful!
The polls were actually more accurate than most of the pundits out there. So again, be careful with predictions!
Two other points.
First, “inflation” was supposed to drive the red wave and it mostly didn’t change voter’s minds. That feels important, implying that consumer worries about inflation may not match the hyperbolic news coverage. That’s good news for the economy.
Second, there is also absolutely a role for political machinations to impact the economy. Specifically, if you’re the out-of-power party, it behooves you to amplify any and all bad news about the economy to worry voters. I think this happens and it's partly why I no longer trust polling on consumers’ economic opinions, since it’s tied to their political beliefs. See, the biggest driver among Republicans worried about the economy was the election of Joe Biden. That makes…no sense?
At this point, it’s pretty clear: about one third of America’s populace’s view of the economy is untethered to reality, but to their personal politics. And this obviously will show up and keeping showing up in dire poll numbers, but not personal behavior. But don’t get cocky Democrats; you’re getting progressively more partisan in your economic outlook too.
Of course, I should tie the midterms to the business of entertainment. If Democrats had lost control of the Senate, it could have really hamstrung President Biden’s regulatory/executive agenda. As is, Biden can continue to appoint FTC, FCC, and SEC commissioners (if he needs to), along with all other executive positions.
This will allow regulation to continue, including the push for renewed antitrust legislation. That push more than anything could (emphasize could and the caution about making predictions) hamper future M&A.
Speaking of predictions, in most mainstream outlets, the conventional wisdom is that the FTC/DoJ are still mostly impotent to stop major mergers. This is because most antitrust “experts” were trained from the 1980s on to look kindly on almost any merger of any size or scope. The entire push for renewed antitrust enforcement (the “New Brandeisians”) could be revolutionary precisely because it’s pushing back against that entire order.
But will it succeed? That’s what makes predictions tough, because we don’t have any data to model. So we’ll see.