After writing Wednesday’s essay on the “Lord of the Rings: The Rings of Power”, I realized Warner Bros. Discovery’s cancellation of the direct-to-streaming movie “Batgirl” reveals an additional, important perspective.
The WarnerMedia executives who approved the "Batgirl" production sought to monetize a popular DC character with younger generations and new demographics, as The Hollywood Reporter’s Richard Newby wrote: "An Afro-Latina-led Batgirl movie, directed by filmmakers of Moroccan descent, and starring a transgender Asian woman (Ivory Aquino), would have generated some positive buzz for the studio that wants to assure its audience that it’s committed to diversity."
Buzz is awareness, which is the top of any conversion funnel. But the direct-to-consumer (DTC) model is about aggregating and executing against valuable first-party data, which falls further down the conversion funnel.
Amazon is betting $1B on “The Rings of Power” to capture valuable "Lord of the Rings" and J.R.R. Tolkien fans, and WarnerMedia was betting 0.6% of that on “Batgirl”. However, the consumer data Amazon will gather is exponentially more valuable to the marketplace than the data Warner Bros. Discovery could have gathered had it released “Batgirl”.
That difference fleshes out a complicated dynamic now playing out in streaming, and also driven by the shift towards gaming and ad-supported models: what was the long-term value of the consumer data generated by the consumption of “Batgirl”?
“Batgirl” Data
“Batgirl” is interesting because it plugs elegantly into something former WarnerMedia CEO Jason Kilar explained to Puck’s Matt Belloni in broad brushstrokes about the data they valued from a streaming subscriber:
A metric called “first views” - or the first thing someone who subscribed to HBO Max you substantively spent time with - which was “a good indication that this was probably what compelled” them to subscribe; and,
The metrics of how many watched the movie, because it was “an indication that you’re delighting customers each month.” (and if they didn’t watch anything, it was “a pretty good indication” they would churn out the next month).
I think “Batgirl” was targeting a bunch of buckets of demographics that WarnerMedia was targeting as "first views" subscribers, and many are easily identifiable:
Fans of Batman
Fans of the Batgirl character
Latino and Afro-Latino fans of DC comics
Black fans of DC comics
LBGTQ+ fans of DC Comics
Michael Keaton returned to play his version of Batman from 1989’s Batman and 1992’s Batman Returns, and fans of his look a lot like me and older (and may already be subscribers who need to be convinced not to churn out).
These types of consumers offer value to WarnerMedia in two ways:
As Kilar says above, understanding what compels newer generations of fans of DC to subscribe so that they can ideally engage with more DC content on the service and not churn out; and,
As HBO Max with Ads grows, so will the value of its first-party data on a younger, more diverse audiences that may be harder to reach elsewhere.
Latino audiences are particularly valuable. WarnerMedia had previously targeted them with last summer’s release of “In the Heights”. I wrote about WarnerMedia’s release strategy for “In The Heights” last June (note: on Substack archived).
For that movie, Warner Bros. distribution chief Jeff Goldstein implied to the Associated Press (AP) the broader business objective was 55MM Hispanic and Latino Americans would spread word-of-mouth to a Latin American and Caribbean population of 652MM. But the objective of the movie was also to help simultaneously drive adoption of HBO Max in 39 territories in Latin America and the Caribbean.
"Batgirl" seems like it was planned as an important next step in this targeted audience outreach.
“Batgirl” & Gaming
We can go one step further and imagine “Batgirl” was intended to help to drive awareness and adoption of its “Multiversus” multiplayer game, which will launch this week. As Kilar told Recode's Peter Kafka last December 2021:
...the biggest opportunity in storytelling is to pursue a strategy that we have and let me explain what I mean by that. Which is, if you’re going to invest a lot of upfront capital in creating beloved characters in worlds, I think it’s only natural if you have the capabilities and if you have the skillset in terms of leadership and talent to be able to lean into telling those stories, both in a linear fashion with narrative storytelling but also an interactive fashion with gaming. And so we happen to have that conviction, we happen to have that skillset - both at the leadership level and at the software developer level. So we're able to do it and we're able to do it with confidence and high judgment. Very few companies on the planet or in that position because gaming is hard to my earlier point and it’s not for the faint of heart.
This answer sums up elegantly why “Batgirl” was approved, and also why Warner Bros. Discovery management killed it: CEO David Zaslav and his team lack fo the conviction, lack the skillset for both narrative and interactive storytelling,
If I were to guess, WarnerMedia’s business objective with “Batgirl” that justified the $60MM direct-to-streaming budget was to supercharge its twin initiatives of growing HBO Max and growing “Multiversus”. The best outcome would be an HBO Max subscriber with a "Multiversus" account and playing with the Batgirl character or Batman because of the movie.
In that outcome, WarnerMedia would monetize the user in two ways (HBO Max subscription and in-game purchases in "Multiversus") and have a far more robust, data-driven picture of the consumer than competition like Paramount or NBCUniversal, who seem focused only on gaming.
“The Rings of Power”
The objectives WarnerMedia was pursuing under CEO Jason Kilar seem advanced when compared to the subscription and ad-supported models that its competitors are pursuing in streaming. They each and all strive and struggle to build a case to both consumers and advertisers that they are valuable sources of streaming entertainment that demand annual subscriptions.
But, “The Rings of Power” highlights how WarnerMedia’s ambitions for “Batgirl” seem modest, if not marginal, in comparison to Amazon’s spending $1B and leveraging all of its technological might to drive a global hit. WarnerMedia likely envisioned the success and defined the Return on Investment (ROI) on $60MM into “Batgirl” in terms of HBO Max sign-ups and in-game purchases in “Multiversus".
For Amazon, CEO Andy Jassy recently wrote to shareholders, “The Rings of Power” is one of a number of “unique benefits” to “make Prime even better for members”. In other words, the measure of success for “The Rings of Power” will be in sales of Prime memberships and retail sales. Moreover, it will also be using the data it gathers from sign-ups to power its $31B Amazon Advertising business.
In this light, Warner Bros. Discovery’s decision to cancel the release of “Batgirl” is understandable: management may have realized that it did not have the skillset as past management and therefore could not generate the same ROI “Batgirl” as previous management could. That is a reasonable basis for killing the movie.
Conclusion
How else will Warner Bros. Discovery compete in streaming if it does not value the information and business potential gained from converting valuable demographics to HBO Max subscribers? How will it keep those subscribers from churning out if it does not offer complementary services like gaming that brings their understanding of consumers?
In short, how will it compete against the likes of Netflix, Amazon or Apple?
I think WarnerMedia management’s ambitions for "Batgirl" put them on a course that put them marginally closer to answering these questions with more sophistication than its competition but less sophistication than Netflix, Amazon or Apple can deliver. The difficult question posed by the looming global success of "The Rings of Power" is, would a more sophisticated model for producing content for DC fans have mattered in the long run anyway?
I don't know if I have an answer yet. There could have been a viable, consumer-centric business. I don't know if it would have been enough against the likes of Amazon, but I also don't think we yet know what "enough" is in a business model that merges gaming and streaming.