Meeting Subscriber Expectations Every Time

Transcript

(This transcript has been edited for brevity.)

DAVID CARTY:  What better way to start your day than by waking up before the sun rise? Jumping in the water for a 2.4-mile swim, then, oh, a casual 112-mile bike ride, followed by, I don’t know, running a marathon? Oh, and you have to do it all in 17 hours. That’s called an Ironman Triathlon, and Stewart Frey has done three of them.

STEWART FREY: I couldn’t run, so I started swimming and biking. And then I’m like, hey, let me try a triathlon. So I did my first, which was what they call a sprint small race. And then from there, I just started doing going up the ladder of distances. Takes a lot of effort, a lot of time, probably a little too much time, but it is– there’s nothing like it. When you’re out there and you’re on the course all day, the race starts around 6:30 in the morning — and I’m not the fastest athlete out there on the course, but– I do it– out of the three of them, I’ve done one of the hardest courses in North America in Lake Placid in Upstate New York, which is phenomenal and beautiful. Just an exciting and really incredible experience.

CARTY:  Ironically, it was a calf injury that pushed Stuart into Ironman competition. He was determined to make the most of a bad situation. After three full and about a dozen half-Ironman competitions. I think it’s safe to say mission accomplished.

FREY: In 2012, I was training for my first half-marathon. I was running up a hill, and my calf just was not happy. And I couldn’t walk after that. And it took about six months to recover. It was a really bad tear.

But during that time, I started biking and swimming. And then when the spring came around, I said, hey, why don’t I sign up for a triathlon? Because now I have all three sports I’ve been working on, and I did a small little local race in Pawling, New York, and it was just an amazing experience. Everybody was like– they were so nice and friendly and they were like, you’re either going to love this or you’re never going to want to do this again.

One thing I’ve realized is that injury is opportunity. When in– during COVID– I think it was in ’21, I pulled both of my calves. And I went to physical therapy and realized the problem was my hips. I needed to build hip strength. So I built– I worked on hip strength, and I did a bunch of exercises, and when I did my next Ironman 22, I had– I beat my PR, it was a hot day, 30% of the people dropped out of the race, which is unheard of because it was so hot, and I had the best day ever had in Ironman. And that all goes taking that injury and looking for opportunity. And I tell that to people. I say, look, it stinks, you’re injured. You pull a calf, you pull a hamstring, do whatever, and you can’t run or you can’t do something that you usually do, but that’s an opportunity to look at why did that happen? And then build the strength necessary to make that area stronger than it had been before.

CARTY:  While Ironman competitions and triathlons involve individual force of will, Stewart has come to enjoy engaging with the triathlete community as it keeps him honest and motivated to keep going.

FREY: It’s just– yeah, I can’t express how important the community is. And it brings people together. We have a common– we have a common thing that we enjoy doing. And then we can hear about each other’s lives, what’s going on at work or at home, listen to them. Sometimes just need someone to talk to. And when you’re on a bike for three, four hours, you got plenty of time to have that conversation. But you’re hanging out with your friends and you see the sunrise over the lake or the river we’re at while we’re swimming. There’s nothing like it.

CARTY: This is the Ready, Test, Go Podcast brought to you by Applause. I’m David Carty. Today’s guest is Ironman– well, not the Iron Man, but an Ironman and media technology leader, Stewart Frey.

The media landscape is changing rapidly, from the shift to on-demand platforms to massive growth, and now an emphasis on profitability. The last 10 years has seen a remarkable amount of flux, but one thing that remains a constant– technical difficulties are a very bad thing. In fact, media subscribers are less tolerant of service disruptions and have more avenues than ever to exercise their power and opinions in the marketplace. So, media technology leaders like Stewart, whose previous stops include WWE and Paramount, are feeling the heat to deliver feature-rich, high-quality, profitable experiences all around the world in the midst of incredible external competition. No pressure, right? Let’s hear from Stewart on how media brands are threading that needle.

Media companies are facing a fundamental shift in both how they deliver their content and how users interact with it and pay for it. Can you give us a sense of how subscriber expectations have evolved over the past decade and how media companies are adapting their strategies accordingly?

FREY: Sure. So I almost want to take us back even earlier. So when I started in media in 1999, we had one platform, and that was television. And everything– how we measured it was Nielsen. It was really simple. And then in about the mid-2000s, file-based delivery and file-based processes became available. And then you started seeing platforms roll out. You start seeing it start on people’s browsers. I remember one of my co-workers at the time showed me a Netflix browser playing. He was watching shows on Netflix on his browser. Like, wow, so where’s the DVD? Where do you put it? No, he was watching on his browser.

And look how that has grown. And if you look, when I joined WWE in 2016, we were one of the top three OTT platforms at the time. It was just Netflix, Major League Baseball, and the WWE Network. And then you fast forward four years from there to 2020, everybody was going direct-to-consumer. And now you had people thinking like, OK, I have a finite amount of money. I have my cable bundle. I have these 10-plus services I need to pay for. And then in addition to my internet service as well.

So it has gotten– it got very complicated. And now we’re even and now we’re seeing today the world just starting to– we’re starting to see a lot of the services starting to merge together. And I think that’s where the consumer expectation is coming in. I think people are getting tired of spending a lot of money for all the different services they need to do. You’re starting to see a lot of churn on the services, more than you’ve ever seen before. And the one thing that seems to be keeping people on the services is sports right now. So sports, especially in the US, sports has become a big definer if people can– if these services can keep their subscribers. And then you have the challenge between events. So I think consumers today are still trying to figure it out. I think there’s a lot of opportunity there in the market.

But I also think subscribers are trying to figure out where do they want to spend their money? And on what services they do. And how do they manage it. Because if you’re subscribing to five to 10 services, and now you have to figure out, well, do I keep this service, do I cancel this service? What do I keep? And some of the services have gotten very expensive. I mean, YouTube TV, when I started, it was $35 a month. And now it’s up to $75, $80 a month for a lot of channels I don’t really watch except for the sports. So it’s– I think subscribers right now and what we need to think about what they are looking for is– I think it’s still evolving. I think it will settle. I think we’re starting to see the market itself settling around, like I said, these bundles. You have ad tiers coming on as well. We’re offering lower priced services so that– but you have to sit through ads. Yeah, so it’s definitely an evolving space.

CARTY:  Right. And to the point that you made earlier, I still remember where I was when somebody explained to me what YouTube was for the first time and how crazy a concept that felt like at that time, and now it is very much not the case anymore.

But as we continue to see this shift toward profitability as opposed to growth that we had seen for the last few years, what does that mean for subscriber expectations and profitability? How is that going to continue to drive change?

FREY: It’s interesting. When you look at profitability versus gross, one of the biggest– I listen to this podcast recently. And as we’re talking about Netflix moving to an ad model, Amazon has moved to an ad model, what’s really interesting is the matrix that people that the market is looking for for these services. And it’s now engagement-focused. It’s not subscriber growth. Because engagement measures how much people are on the platform– the longer people are on the platform, the more ads you can serve them more, more opportunity for them to watch ads or be part of that ad experience. And then obviously the ad rates go up, you make more money.

So I think that’s really where everything is being focused now, is on engagement. And I think how do you– how do you– these services have to– it all goes back to one simple thing– content is king. You can have the greatest service, but if you don’t have the right content, people aren’t going to be on there. So it was– it’s this fundamental shift we’re seeing now. Always focus on content that hasn’t changed, but how much money– these services are all– pretty much all of them, I believe, except for Netflix, are all losing money, but they still have to invest in good content to keep their subscribers. And then you have the sports side as well, the sports rights business, which is still growing. I think latest I read, NBA is going to be signing some new deals. They got Amazon in there. They got an NBC, and they’re going to be making a good amount of money there as well. So it’s still going to require a lot of investment. And it’s going to be interesting to see from a platform perspective who survives.

CARTY:  Right. And to your point here, I imagine success in profitability in media is a bit of a juggling act between innovation, quality, and diversity of content. Content is king like you were just saying. How can media companies strike the right balance? There’s a lot to juggle here. But how can they strike that balance to retain subscribers and meet their business goals?

FREY: Some media companies have seen this, but I wonder how many of them jumped into direct-to-consumer without thinking how much it costs? Because when you go into direct-to-consumer, you become a technology company. Because unless you’re– unless you’re outsourcing to a third-party white label platform, you are essentially becoming a technology company because you now have to build software that runs on CTV platforms, that runs on your iPod, on Android, browser, Roku. All different platforms all require different technical teams.

And you then have to build the whole product side out to make sure you’re delivering good customer experience, test side out. And then when you start looking beyond, say, the US domestic market, you then have to start thinking localization. And I think that. A lot of them took for granted how easy the affiliate world was when they were in the cable world. So what the cable companies need to do is to continue what they are doing. They have to continue investing. Without investing in the technology, the underlying technology and all the services that are required for it, they’re not going to have a good consumer experience. And consumers have gotten so– expect a good experience. Because when they go to a– if they go on their phone and they go to watch something and it doesn’t work, 10 years ago, I think people would understood and had a little patience. Nobody has patience anymore. They go to Reddit, they go to Twitter, and that devalues your brand.

So I think media companies need to keep investing in the technology, the technology needs to get better. They need to invest in the content. And they need to invest in the video quality as well. I mean, I think people expect a good quality experience. It’ll be– what’s going to be interesting, to, is where AI fits into all this because AI, hopefully, will allow a better consumer experience on their platforms so people can get better recommendations so they can go on the platform, find what they’re looking for much better, and then when they’re done, then be enticed to watch something else. So hopefully that has a positive impact on engagement. Should have a positive impact ideally on video quality because something– intelligence there, making sure it’s sending you the best quality video that your player can support.

And then obviously, who knows where it’s going to be on the content side. If it’s going to help drive content. Especially– you got sports, it can drive clips so you can go back and see what you’ve missed. But from a– can it create a series? Can it create a movie that’s going to be– is it just going to be this so much content out there, sort of what we see today, but probably you watch maybe one-tenth of one-tenth of one-tenth of 1% of it? Or is it going to be something– or is it going to be able to create compelling content? And how long is that going to take? And what’s the impact is that going to be on the other content that’s already there?

CARTY:  Right. It’s fascinating to think about. And what better time to ask you about data than right after we bring up the AI point. But how can media companies better leverage their data to understand and meet the needs of their subscribers? You talked earlier about how engagement is a big metric now. So I imagine there are certain things you can pull from that. But are there any examples that come to mind of data-driven insights that directly affect the product or the customer experience?

FREY: Yeah, absolutely. So what I did at Viacom/Paramount, and what I did when we put together a WWE was we spent a lot of time– we realized that data when we launched– when we were launching and updating our WWE Network, that data was going to be the core. Data was going to allow us to not only understand what consumers were doing, but allow us to put together a nice consumer experience.

So from a simple perspective, we created a model where people can– they have a main show like Wrestlemania. But then underneath it they could see The Kickoff because we linked that The Kickoff was part of the main show, but it was a different show in itself. And it wouldn’t exist without the main show. So we came up with this idea called supplemental. And ideas like that, where we built out the whole model, we created a labeling infrastructure, we labeled our content, we labeled our talent, we labeled our events. And then because we had done all that work and we were building out our data lake and data warehouse at that time, we were able to then start putting our data scientists, we were able to start taking the data that was labeled well and had governance around it and then start doing predictive analysis. And they were looking at, well, what groups were– how do we maintain– how do we retain our subscribers? We had– every month or so we’d have a big tentpole event. And a tentpole event is just like it sounds, it’s like a circus. Everybody comes to the event, the tent goes up. When it’s done, the tent goes down. So when the tent goes down, we want to make sure people don’t cancel their subscriptions.

But we had to see and analyze subscriber behavior. So we’re able to group subscribers into different cohorts. And then we saw some subscribers, if they followed certain patterns, they like to watch older content. So then we can then start presenting– creating rails for them that when they left the main show, say, hey, here’s some older content you might be interested in. Other subscribers like to watch newer content. Like to catch up on recent weekly events, weekly shows like Raw and Smackdown, so we can then present them with those options, too.

So using the data is really– without the data, you’re just throwing– you’re just you’re just taking guesses. You’re just taking guesses on what they– what people are looking for. And you can us– and being able to analyze the patterns and group people together and then being able to predict and say, hey, why don’t you watch this? And then measure that, too, so that you can then say, hey, is this– are we being successful here? I just– I gave this group, I said they should watch this. Is it working? Are people staying on the platform? And then you start building out– and the model only gets smarter and smarter the more you use it. And the whole key behind that was data.

CARTY:  And just to put an eye lens to that, you’re speaking to the importance of recommendation engines and content personalization. Super important when we’re talking about maintaining subscribers. So as we put this AI lens on it, what is the key to making effective use of AI in content personalization and recommendations both now and in the future as it evolves?

FREY: Yeah. Well, one thing is, you want to make sure you have your data shop in order. A lot of companies don’t. They haven’t spent the time to govern their data, to model their data, and to even identify what’s the important data. When you run your own service, you have a ton of it. And you have to be able to identify what’s important, where do you want to spend your effort on, make sure it’s properly labeled so you can train your AI engine.

And that’s for those folks that own their own DTC platform. For those folks that are licensing out their content, it gets a lot more complicated. And that’s where you want to work with your partner because as a content owner, you want to have enough data so you can really– so you can market to your fans. And if you don’t have that– if you don’t own the direct-to-consumer experience, the amount of data you have is limited. And you want to work with your partners so they can share data with you. There’s a concept called clean rooms where you guys– you and the partner share data together. And it’s anonymous, so you’re not linking to individual subscribers. But it allows you to start understanding who’s subscribed and the effectiveness of your marketing. Because you as content owner want to increase the value of your content. You want to market to your fans. But at the same time, you sold your rights to someone else who’s displaying it. But they, ideally, also have incentive because they want subscribers, they want engagement, they want to increase retention. So it’s so critical for you guys, for you to partner together.

And I think AI is going to be a driver of that because if you’re a content owner and you want to be able to use AI to really effectively market, you need good data. I mean, you can have open rate on emails, but that only tells you so much. So you have to work with your licensee– your license partners for you to share the data so that way, you can be a good– you can help promote it, but at the same time they want to promote it, too, and it’s back and forth with the data. But I think that that’s only going to increase the need for true partnerships between the content owners and the people who are serving the content.

CARTY: Streamers are introducing new ad supported tiers and likely personalizing and localizing those ads more and more in the future as well. What’s the best way to approach innovative, yet high-quality ad delivery?

FREY: I’m going to answer this from a consumer. Some platforms– I think Peacock does it very well. 60-second ad pods during their VOD. And I’ll stay on and I’ll hang out. Other platforms, they’ll have a three, four-minute ad pod for VOD content and I lose interest. So let’s say the first thing that they need to do from a quality perspective is my personal– now I’m answering from a consumer– is have shorter ad pods. But data is critical to that. When you start looking at– one of the interesting things that streaming provides is the opportunity to target ads, especially as we’re looking at digital ad insertion where when the ad pod comes on, you can target use services like FreeWheel and other Innovid out there, et cetera, to use the programmatic ad insertion so you can target ads to the individual. So you could be watching a show, I could be watching a show, and we get very different ads. But all that’s dependent on data.

And the challenge there with the data, too– and it’s a good thing as well, is the privacy laws. So these services are collecting data. There’s only so much they can share. And they and they have to keep it anonymous. I think it’s going to evolve over the next couple of years as the privacy laws get stricter. If we have a national privacy law in the US, that’s really going to change things. And I think we do need one, at least to standardize on what we want to do here in the United States. You have GDPR in Europe.

So data drives programmatic advertising. And the challenge is going to be to find the right data. Because if you looked at the way things used to be served over television, or even a lot of the streaming services, it was the same ad for everybody. And then that doesn’t– based on this generic– this general idea of what the households looked like, this show, usually you have males 18 to 45 watching it, so I’m going to target them with this ad. But programmatic advertising really allows you to target– if you know– well, I know this family. They’re watching this family show. They’re in New York City. They have kids because they watch kids programming. Maybe they’re in the market for a new car. So let me target them– or even better, they’re in this part of Westchester that has a high income. So let me target them with a BMW ad, while this other person maybe is in a different part of New York and I’ll target them with a Jeep ad. The opportunity is there. I think the big challenge is going to be the data. How do we collect the data in a private fashion, make sure that it’s well-formed, and get it out to the right– to the programmatic ad services so it can provide the right ad for the consumer?

CARTY: Now, we’ve talked quite a bit about the subscriber experience, and it’s really a multifaceted topic. At the end of the day, all of these elements, they have to come together in a way that’s cohesive for the subscriber to remain on the platform. What’s the best way to validate the subscriber experience, both at a point in time and as you continuously add new features?

FREY: Because of the amount of platforms out there, it’s not easy. You have– like I said, you have all the different CTV platforms. You have Samsung, you have LG, you have Roku, you have Amazon Fire TV. And then you have the iPod– your– iPod? You have your iPad, and then you have your phone. And you have to make sure that they all work and they all provide good consumer experiences. And you have to figure out what platforms you really want to target because there’s so many out there. What we did was we would test internally. Especially for our US audiences, it was much easier because we didn’t have to– we didn’t have to be concerned with– we were– from a licensing perspective, we were in the United States, and we could– when we were on Peacock, we can easily go on Peacock and see how our product was doing. Or if we were– we had our own own-and-operated, we can do that as well. When you start going internationally, it gets a lot more complicated because you’re dealing a lot of the services. Especially if you license your content, you can’t get on because of the VPNs are locked down

So we used companies like yourself, like Applause. And you guys were great. And you would go in, especially during our live events, and help us make sure that– help us give us a sense of the quality of the experience. And even for our WWE Network, because we don’t have people sitting in all these different countries. And we want to make sure that the video experience is good. But then also, when we had, for owned-and-operated, our WWE Network, that the entire process was working correctly. That people can go in there, sign up, use their credit card, that it was working just as like it would work in the United States, it was working well in Indonesia and working well in Argentina and in France. So that was– using third-party services was a big help for us because if people can’t subscribe, we don’t make– we lose revenue and our fans aren’t happy.

CARTY: Lightning round questions for you, Stewart. What is your definition of digital quality?

FREY: Consumer experience, 100%. That when a consumer goes to their platform, that they’re getting an experience that keeps them on there, keeps them engaged, doesn’t get them frustrated, and there’s minimal friction.

CARTY:  What is one digital quality trend that you find promising?

FREY: One digital quality trend I find promising is services are starting to look at– and especially when you’re looking at sports, they’re starting to get reach over dollars. So they’re starting to look at, how can I put this– my content out there so it has the widest audience and not be concerned with, well, let me just make the most amount of money possible, which then frustrates the consumer because they can’t find where the content is. And a great example is as the new NBA deal and other sports properties as well.

CARTY: Interesting. What’s your favorite app to use in your downtime?

FREY: YouTube.

CARTY: YouTube. Any particular content?

FREY: Oh, I’m a big One Bite Pizza fan. So I’m familiar with One Bite Pizza reviews. I mean, my wife, when she hears the intro music coming on, she’s like, ‘Aw, this again?’ But every night I look forward to the One Bite Pizza reviews. And I find it very relaxing and makes me think about where I want to get my pizza next.

CARTY: And finally, Stewart, what is something that you are hopeful for?

FREY: I’m really hopeful about this whole new AI. I mean, everybody’s talking about it. I remember a couple of years ago when 3D came out, everybody was talking about 3D was going to change the broadcast industry. You go to NAB, everybody was talking about 3D, and then two years later, you couldn’t even find 3D set of glasses on the floor. But I think we’re– I think this is different.

I think this is going to make for better quality. I think it’s going to improve video streaming localization so that you can see– you can watch videos from other countries and have a much better localization experience. I think it’s going to prove accessibility. I think it’s only going to help it improve captioning and descriptive audio, which is phenomenal to help those people that need it.

And then lastly, we talk about captioning, I think it’s– I think– I’m hoping that it helps answer the question why we all have captioning on when we watch video– when we watch video on Netflix and on the other platforms. Why do we need the captioning on? Can there be something else running in the background to figure out to make the audio better so we can stop watching– looking at captioning while watching TV shows?