This is extremely nerdy, but this Project Zero writeup of how NSO created its iMessage zero-click iMessage exploit is absolutely incredible and well worth a read.
On to the update:
Formula 1 and Netflix
The 2021 Formula 1 season was the most-watched ever in the U.S. with an average of 934,000 viewers across ESPN, ABC and ESPN2, up 54% from last year’s delayed, shortened campaign (608K), up 39% from 2019 (672K) and up 25% from the previous all-time high of 748,000 in 1995. The season concluded with a 0.55 rating and 963,000 viewers for last Sunday’s race at Abu Dhabi, up 77% in ratings and 84% in viewership from last year (0.31, 523K) and the largest audience ever for the race.
Max Verstappen’s controversial win delivered the ninth-largest F1 audience ever on cable. Seven of the top ten came this season alone, with June’s French Grand Prix (1.06M) and July’s British Grand Prix (1.03M) trailing only the 1995 Brazilian Grand Prix (1.74M) as the most-watched in cable history.
I’m not going to comment on the actual results of last weekend’s race; I know enough to know what a truly terrible idea that would be! What is notable in this excerpt is that the big increase in ratings was not simply down to the fact that the season came down to the final race and, controversially, the final lap; rather, the increase is a season-long phenomenon.
I find this story absolutely fascinating for a whole host of reasons. Start with the concept of sport itself: I freely admit, as a hardcore fan of the NBA, that a huge part of the allure is the soap opera nature of the entire spectacle. Some of that is about personalities and personnel changes, but more of it is about the uncertainty of who will win or lose, and the impact that has on a particular player’s long-term legacy, something NBA fans take very seriously.
Here’s the thing, though: the biggest reason why I love the NBA is that I grew up watching the NBA on NBC every Sunday afternoon, and attending Bucks games once or twice a year (I will always be grateful to my father for making sure that I saw Michael Jordan in person). I have context, and opinions based on accumulated knowledge, in addition to a genuine love for the sport.
What, though, of the new viewer? The NBA, particularly Steph Curry, can be magnetic enough to draw in new viewers, but even so the league’s ratings are in long-term decline; how is it possible that F1, a sport where the biggest stars are wearing helmets, succeeding not only by their skill but also by the technical and financial acumen of their teams, is doubling its audience year-over-year?
The answer is quite straightforward: Netflix. From the New York Times in July:
“Drive to Survive,” the Netflix series about Formula 1, has offered an intimate look into a notoriously secretive sport and, to the delight of its executives, has drawn the American fans they have been eager to attract for years.
“I think it’s got to be the single most important impact for Formula 1 in North America,” said Zak Brown, chief executive of McLaren Racing. “Almost every comment you get from someone out of the U.S., they reference ‘Drive to Survive.’ People are going from ‘I’ve never watched a Formula 1 race in my life’ to ‘I’ll never miss a Formula 1 race again.’”
Once you accept the idea that sports are an unscripted soap opera, the opportunity F1 and Netflix seized becomes more apparent: film during a season — when things are unscripted — and then create a show afterwards; now you have a script, and it’s still a soap opera!
This isn’t an entirely new idea; HBO has been televising NFL training camps for its show “Hard Knocks” since 2001, and one of the more under-appreciated elements of the NFL’s success is its self-produced NFL Films reviews of the week and season that was. Those shows, though, are largely catering to fans that already exist, simply because the big American sports are so pervasive. It’s kind of like the Twitter marketing problem: the reason why user growth is challenging is because everyone knows what Twitter is and has already given it a try; convincing them “it’s better this time” is more difficult than getting them to try it in the first place. F1, at least in the United States, had the opposite problem, or more accurately, the opposite opportunity: introducing the sport to millions of people who had no idea.
Netflix and Sports
There is more to this story than the soap opera nature of sports; the most historically famous team in Formula 1 is Ferrari, while the most dominant team for the last decade has been Mercedes; that’s important context for this tidbit about Drive to Survive:
Eight of the 10 Formula 1 teams agreed to be part of the first season, minus Ferrari and Mercedes. “They had more to lose,” Holmes said. “I think if one did or didn’t do it, the other would do the same. They were very focused on winning the championship.”
Missing the two most famous and successful teams did not stop the first season from being a success. Fans learned about the inner workings of the sport, the personalities, politics and pettiness. By the time Season 2 began filming, Ferrari and Mercedes had changed their minds.
“It showed me a new angle to attract a new audience, different to how I perceive F1,” Toto Wolff, team principal of Mercedes, said in 2019, explaining why the team got involved starting in Season 2. “This is why I decided to join and be part of Netflix in 2019.”
This is about as clear an articulation of the power of an Aggregator as you can ask for. Mercedes and Ferrari were worried about giving up their secrets, but they were more worried about missing out on new fans, particularly in the lucrative American market.
What is interesting is that Netflix is getting as good as it is giving; again from the article:
Netflix is protective of its viewing figures, but according to FlixPatrol, which gathers data on movies and TV shows, “Drive to Survive” ranked No. 1 for TV series worldwide shortly after Season 3’s release in March. It also brought in more viewers than the first season, something Holmes said was “unheard-of.”
“I’m told by Netflix that 99 times out of 100, the second series never quite delivers the same audience as the first series, and so on and so forth,” Holmes said. “Series 3 did more than Series 1. The completion rate and the speed at which the completion rate takes place went up as well,” which suggests that people were bingeing on the series.
This is only one show, but I wouldn’t be surprised if this is the sports effect: while a fictional show might run out of material and steam after a season or two, the uncertainty of sports means that new material is being generated constantly. This results in a virtuous circle where the show produces new fans, who then start following the sport, who then return to the show looking for behind the scenes content, spreading the word to others along the way — I’ve certainly heard far more about F1 over the last few months than basically the rest of my life combined!
This also suggests a much more compelling entry point for Netflix into sports beyond simply buying live TV rights, which I have always been skeptical of given Netflix’s business model-driven preference for evergreen on-demand content: just as Netflix realized it made more economic sense to produce shows, not buy them, I wonder if the company might pursue much deeper relationships with sports leagues that allow the streaming company to not only have access to these content machines but to also profit on the upside of the interest they can generate. Sure, the actual broadcast of races might end up on ESPN, but it seems clear that Netflix has made F1 more valuable even as it pays for the right to broadcast its inner workings.
YouTube TV vs. ESPN
YouTube TV and Disney are coming down to the wire on a new agreement to keep Disney’s networks, including ESPN and ABC, live on the Google-owned live-TV streaming service. With the contract set to expire late Friday, YouTube TV customers may lose access to ESPN, local ABC channels, Freeform, FX networks, National Geographic and more if the two sides fail to reach a new deal. But if Disney’s channels do go dark on the service starting Friday, YouTube TV will discount its subscriptions by $15 a month, bringing the monthly cost down to $50, as long as the networks are unavailable, YouTube said in a blog post.
The safest bet is that this dispute is resolved before Friday’s deadline and YouTube TV continues to include the full slate of Disney channels; YouTube has made a habit of negotiating in public, as it recently did with Roku. It would be fascinating, though, if it didn’t, and that is very much within the realm of possibility, for the same reason that regional sports networks are in trouble. I explained in October:
The second problem comes down to the how the Internet has changed distribution. I mentioned the high cost of switching MVPDs [Multichannel Video Programming Distributor]; you needed to run a wire, or install a satellite dish, etc. By extension that meant the MVPD had already made a huge investment in infrastructure, whether that be cable lines, fiber, or satellites. This further meant that every marginal customer was very valuable (in that they provided extra leverage on those fixed costs) and worth keeping (because they were hard to acquire). vMVPDs, though, just use the Internet; there are no fixed costs to leverage, and switching is much easier. It follows, then, that there simply isn’t the economic motivation to serve a tiny portion of consumers that must have local sports games, especially if that means jacking up prices for everyone.
ESPN attracts far more customers than a regional sports network, thanks not only to having the most important games in the major sports, but also because it has a bundle of different sports; Disney has further extended its relative power by bundling a whole bunch of non-sports channels with ESPN. That doesn’t change the fact, though, that because it uses the Internet for distribution, it is economically viable for YouTube TV to forego a chunk of its addressable market in a way it never was for cable or satellite MVPDs, particularly if it can then offer a much cheaper offering to everyone who doesn’t care about those channels.
That noted, I suspect that Disney’s bundle is broad enough, and the potential hit to YouTube TV’s reputation with people who actually want to watch things like F1 significant enough, that this threat will prove to be an empty one. What is clear, though, is that Disney should learn the lesson of Drive to Survive; indeed, the potential interplay between streaming dramas and live sports is one of the most compelling reasons as to why it makes sense for Disney to not spin out ESPN, beyond, of course, the bundling that continues to give it negotiating power with MVPDs.
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