Early in January this year, a little post-dinner time, a handful of Netflix employees gathered in the cavernous, but empty Palazzo ballroom of the Venetian in Las Vegas. This was a rehearsal to the big announcement that was going to be made the next morning at the annual Consumer Electronics Show – a very big deal of a conference for the tech industry. Netflix had been patiently waiting for this moment for the longest time; they were secretly plotting on how much further they could expand the availability of their entertainment streaming service that was already available in about 60 countries up till then.
Previously, Netflix had been entering one or two countries at a time, they aimed to turn this trickle into a waterfall. It was going to move into 130 new countries all at once, including major markets like Russia, India, and South Korea (Netflix is only still “exploring potential partnerships” in China). This was the kind of future Netflix executives had envisioned for a very long time: to become what Facebook is to social media, Uber is to transportation, or Amazon is to electronic commerce.
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It’s safe to say they got there 11 months later.
“Pilots, the fall seasons, summer repeats, live ratings, all hallmarks of traditional television, are falling away because of Netflix,” said Ted Sarandos, the Chief Content Officer at Netflix, who runs the Hollywood side of the business, striking deals with major networks and studios. Unlike on a network, that need “home runs” of their shows to maximize viewers and generate revenue, he continued, Netflix also values “singles” and “doubles” that appeal to narrower segments of subscribers.
Sandros further added, “For years, consumers have been at the mercy of others when it comes to television. The shows and movies they want to watch are subject to business models they do not understand and do not care about. All they know is frustration—this is the insight Netflix is essentially built on.”
Sarandos credited his new-age approach of Big Data Analytics to figuring out what kind of television content connects to the audience these days. Netflix’s ability to analyze vast amounts of data about its customers’ viewing preferences helped it decide what content to buy, what kind of a schedule to draw up for the month, and how much to pay for it.
What else makes them stand out is their ability to deliver on-demand and commercial-free streaming, on any device. Recently, Netflix went a step ahead and added the much awaited offline viewing feature by enabling mobile downloads. You can now Netflix offline (yes, it’s a verb too now) by adding your favorite TV shows and movies to your apps download library.
The other thing that turned things around for them and helped them stand out from their competitors (AMC, FX, etc.) was that they refrained from doing “reruns” of the already aired shows. They ventured into producing and acquiring original material produced exclusively for online streaming purposes, a very different business from licensing someone else’s shows.
Netflix broke onto the scene with its original, House of Cards, that was famously helmed by David Fincher, a director extraordinaire (read Fight Club, Seven, Gone Girl). Sarandos offered Fincher a reported $100 million for 26 episodes (spanning two seasons)—a ridiculous sum for an hour-long drama.
The gamble paid off. 2013 was the year Netflix finally became a household name with its high-voltage political thriller, House of Cards.
With a strong data analytics model in its arsenal, today, Netflix has decoded its user base’s television watching patterns, which now spans over 190 countries. Of the more than 125 million hours of TV shows and movies watched per day, a newly-discovered binge-watching trend caught Netflix’s fancy. A peculiar trend was discovered: 36% of its members have been accommodating TV shows with movies into their binge-watching routines.
It was also found out that when members moved from one series to another, 59% of the time, they took breaks (1–3 days) before starting a new series. During these breaks, 61% of those 59% members even watched a standalone title (documentary, movie, or a stand-up special).
Netflix also studied the kind of “in-betweens” members preferred watching whenever they decided to switch series.
Some pairing examples include the lighthearted The Princess Bride with the quirky series, Unbreakable Kimmy Schmidt, and the comical portrayal of 2008’s global collapse of the economy in the Christian Bale starrer, The Big Short, to the dramatically-comedic Orange is the New Black. Easy-watching went together and so did political satire.
Some unusual genre pairings were also observed that on further examination and analysis revealed a common undercurrent to them. Switching from the haunting portrayal of war in Beasts of No Nation to a similarly haunting portrayal of US politics in the series mentioned earlier, House of Cards (Kevin Spacey at his best), was not so much different after all; there was blood on everybody’s hands.
Though comedy stumped Netflix. Their data analytics team figured out that after binge-watching a horror/psychological thriller series, users usually turned to comedy, a breather of sorts before jumping into yet another nail-biter. For instance, more often than not, users viewed Zootopia right after watching Netflix’s original summer blockbuster, Stranger Things.
Image Courtesy: Netflix
Netflix, since its debut in 2007 (that began as a DVD-by-mail service), saw a six-fold increase in its revenue, it grew from $1.2 billion to $6.8 billion in 2016. With more than 81 million subscribers, that pay close to $8 to $12 a month, have been observed to slowly but unmistakably give up cable TV for internet television. Stats say, over the last five years, cable TV lost 6.7 million subscribers, and as expected, a considerable chunk of the new-age viewers (70%) report having never subscribed to cable in their lives.
Today, Netflix has become Wall Street’s darling. Its shares closed at $120.81 last Friday, thanks to the latest announcement that now allows users to download selective movies and TV show, instead of the previously stream-only option.
A failed internet connection? Not a problem anymore. You can still tuck-in cozy and binge-watch all through your weekend.
With its intelligent business model and a keen observation of its user’s watching patterns, Netflix has been constantly upping the ante of new-age television watching, but it also acknowledges a growing threat from other big players like Hulu, a similar video-streaming platform formed from the alliance of 21st Century Fox, Disney, and NBC Universal; and the giant, Amazon, which has been aggressively buying original series too.
But Reed Hastings, Netflix’s CEO remains enthusiastic, “All TV will move to the internet, and linear TV will cease to be relevant over the next 20 years, like fixed-line telephones.”
From the left, Reed Hastings, chairman and chief executive officer, and Ted Sarandos, chief content officer
Image Courtesy: The New York Times
Hastings in January had said, “While you have been listening to me talk, the Netflix service has gone live in nearly every country in the world but China, where we also hope to be in the future.”
This was the big announcement at that conference. I can feel the hair stand up on the back of my neck.
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