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Do Box Office Numbers Even Matter Anymore? Talking Suicide Squad with Nick Cherrier

Tien Tzuo
CEO, Zuora

Last week I read an interesting article about the debut of The Suicide Squad (which I caught on the plane — I give it a thumbs up), and I thought I’d talk it over with Nick Cherrier, a media expert in our Subscribed Strategy Group. Enclosed is an edited transcript of our conversation.

Tien: Welcome, Nick! Last week, the Hollywood trade publications like Variety and The Hollywood Reporter declared The Suicide Squad a failure because of its relatively weak box office numbers. But as other people pointed out, the film actually did really well on its home streaming service. Almost three million people watched it on HBO Max, compared to 2.2 million people for Wonder Woman 1984. Here’s what LightShed Partners’ Rich Greenfield tweeted about it: “Dear Hollywood Press: you are making a huge mistake calling films failures that stream day-and-date at no extra cost on streaming services. @SuicideSquadWB has great critic/viewer ratings and is streaming at no cost on @hbomax driving sub growth.” What’s your take?

Nick: Well the first thing I would say is that if you’re tying your value metric to a market that’s decelerating, you should probably be looking for a new one, right? Theaters have been challenged for a long time. In the 1950s, everyone thought television would kill them. In the 1980s, everyone thought VHS players would kill them. But now they’re probably facing their biggest threat yet. In 2019 their overall revenue got eclipsed by streaming, and the pandemic has only accelerated that shift. So it’s not crazy to think that companies like WarnerMedia (who owns HBO) and Disney will start looking for new markets, and new ways of measuring success. Box office numbers are still important, but they’re becoming less important every day.

I’m actually surprised that a big streaming service hasn’t bought a theater chain yet. Everyone’s trying to go direct-to-consumer, to go omnichannel, to give their customers cool new experiences. Offering a theater experience to your customers would be a real differentiator. Maybe if you’re a platinum subscriber you get a certain number of free tickets a month, you get access to special premieres, you can get together and watch Stranger Things or Ted Lasso. To be honest, the cinema industry desperately needs something like that.

Agreed. I wrote a byline for The Wrap about this earlier this year. Right now theaters are basically just in the popcorn business. Going back to this idea about value metrics. The business press is still hopelessly obsessed with unit sales: phones, cars, sofas, you name it. Who cares how many iPhones Apple sold last year, particularly when almost half of their revenue comes from services? The real question should be: how much revenue are they generating per customer? The car companies aren’t there yet in terms of a hugely significant portion of their revenues coming from digital services, but in ten years they will be.

Unit sales should all be considered lagging or supporting metrics. They are tied to legacy models of measuring success. If companies are going to succeed, they’re going to have to start looking at alternative business models. Everyone’s experimenting right now. I actually think it’s pretty interesting to compare how HBO Max is approaching big new debuts as opposed to Disney Plus, which charges $30 for new movies.

Now, Disney Plus has been a smashing success straight out of the gate. They can probably afford to be a little more aggressive with looking for alternative revenue streams, like my colleague Stamos Kanellakisdescribed in his piece on biphasic monetization strategies. HBO, however, is still building its audience. They’re looking at new releases as a way to lock in retention and combat churn. It’s a very competitive market, and anytime someone signs up for another month of your subscription service, you should consider that a win.

And HBO Max is still getting a huge amount of valuable user data from a big release like The Suicide Squad. I’m sure they’ve got a brand new cohort of new subscribers that signed up just to watch it. They can learn how the film affected promotions and discounts. They can use it to recommend older stuff from the archive. They can use it to prepare for big upcoming debuts like Dune. It’s sort of like the way astronomists study events like lunar eclipses. Discrete impacts like this generate all kinds of data.

And the ultimate expert on usage data, of course, is Netflix, who thus far have refused to budge from a flat monthly price! I actually think if they were going to start unbundling and experimenting with advertising, they would have done it by now, which makes me think that they have a strategy not to. If they were going to do it, they would have done it already. Who knows what will happen as they get into new features like gaming, but as the space gets more crowded, it’s turning out to be a differentiator for them. I think a lot of subscribers appreciate the fact that it’s an ad-free experience.

Media is always fun to talk about, but what are some key lessons/takeaways that other kinds of subscription companies can learn from all of this?

Lesson one is don’t chain yourself to a shrinking market. Maybe you’re not in an industry that’s seeing as much drastic change as movie theaters, but if you’re in a contracting environment, you need to create a new one. It’s fine to do something that might seem a little crazy at first because you’ll learn a lot through experimentation. As you’ve pointed out before, Tien, in industry after industry, unit sales are declining, but usage is going through the roof. If you’re not pursuing some sort of usage strategy, you should at least be thinking about it.

And my second piece of advice would be to study subscription market leaders to see how they implement pricing and promotions. You can learn a lot from them. They probably have way more resources than you and have teams of data scientists looking at all this stuff, so you might as well try to learn from their successes or failures. Nothing is a coincidence! Even if their execution isn’t flawless, there’s always a reason behind why they price something a certain way. You don’t have to be Netflix to learn how Netflix thinks.

Finally, it all boils down to creating an engaging service, right? So what’s your company’s equivalent of a happy surprise that keeps people coming back? What’s your equivalent of The Suicide Squad? One thing that gets lost in all the talk of revenue is whether the movie is any good or not! Opening weekend box office sales aren’t going to tell you that, but usage numbers on streaming services are a pretty good indicator of whether the product really has legs or not. I actually haven’t seen it yet. What did you think?

I liked the Shark Guy.

Okay. I’ll look out for him.

Thanks Nick!

Thanks Tien!

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