The digital revolution has completely changed the way we buy and rent movies. Netflix, Amazon, Apple, Google and other on-demand entertainment service providers have made the brick-and-mortar video stores irrelevant.

In July 2018, in Bend, Oregon, the last standing Blockbuster store shut its doors for good. That’s quite a comedown from a decade or so ago, when the chain boasted 9,000 locations around the world. Something similar has happened to bookstores. Though many are still standing, Book World, the No. 4 chain in the category, liquidated itself last year.

Fearing a similar fate, many of the entertainment giants are consolidating. AT&T bought Time Warner. The Murdoch family agreed to sell most of 21st Century Fox and set off a bidding war between Disney and Comcast.

While digital distribution is a major impetus for this displacement, that doesn’t explain everything. The companies replacing  video stores and bookstores — Netflix and Amazon — are also known for their effective use of data. Both use consumer data to recommend new content (and products, in Amazon’s case) to consumers. Both use streaming services to ensure a steady stream of actionable customer data.

For entertainment companies, this threat encompasses more than a shift in consumer habits. To remain viable, such entertainment providers need to cultivate and skillfully use data the same way. But how to do this?

Start streaming

This fall, Warner will launch DC Universe, a  digital subscription service for fans of DC Comics.

This is the first such blockbuster from the studio. AT&T has announced that it plans to offer digital streaming for Warner Bros.’ catalog of TV shows and movies next year. Rival Disney too declared  its plans to offer a streaming service next year.

These moves could be interpreted as an acknowledgment of the primacy of streaming. Consumers spoiled by Netflix and HBO Go want unlimited access to content on the devices of their choice.

While that’s true, there’s another plot development which can’t be ignored: the use of streaming to provide a stream of actionable data and insights about viewers.

Another innovation common amongst streaming service is content recommendation engines. Netflix has claimed their recommendation engine saves the company $1 billion per year by reducing customer churn. But recommendation engines can also be used to forecast the potential home video audience for a given property.

Use data to enhance content development

American novelist, playwright, and screenwriter William Goldman once lamented that studios passed on many films that went on to be blockbusters for other studios. That led him to declare that “nobody knows anything.”

That may have been true at one point, but streaming services now provide a wealth of actionable data. By keeping close tabs on what viewers watch and categorizing that data, streaming companies can develop “taste communities.” Such communities illustrate overlaps between actors, directors and genres that would otherwise have been obscure.

Studios can use such data to develop new content. But studios have other tools at their disposal. The most tried-and-true method of enhancing an entertainment property’s performance is to look at social media. You can start to predict how a show will do by looking at the number of followers an actor has, what they say in social media and how popular they are. This is such an established fact that as far back as 2016, directors were casting movies based on the actors’ social media following.

Other data like reviews, box office performance and marketing spends can help create models that boost performance. For instance, box office revenue and Wiki edits correlate at 87%. Box office and YouTube trailer views correlate at 78%.

Finally, there’s segmentation, which divides the potential audience into likely rabid fans, people who will never watch and people in the middle a.k.a. “persuadables”. Targeted marketing and advertising via programmatic can help reach those audiences with the right messaging.

Reality check

This vast array of data is a break from the days when studio heads had to rely largely on intuition to make decisions. However, there is an element of serendipity about entertainment that will never make forecasting 100 percent accurate. Data analytics isn’t a silver bullet, but it can identify opportunities that no one else sees.

As Ted Sarandos, Netflix’s chief content officer, has said, creative direction is still based on “believing the storyteller.” Hopefully, that approach will lead to more content that surprises and delights fans rather than make them feel like they’re being marketed to. If so, that’s the kind of Hollywood ending that will please entertainment execs and fans alike.

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