How Netflix became a billion-dollar titan
economist.com
economist.com
Then, when Netflix started growing like crazy and the studios panicked. If Netflix was the only streaming service around, it would enable them to dictate licensing contracts. Suddenly, streaming was a real thing and they wanted to extract every cent possible from their content.
In order to slow Netflix down the studios pulled the majority of the "good" content from Netflix, and kept licensing them their b-movies and documentaries. To this day, you still don't see a whole lot of blockbusters or theatrical releases available on Netflix.
Netflix knew that they couldn't remain at the mercy of the content owners. So they leveraged their head start on content delivery by producing their OWN content only available through themselves.
It was a brilliant strategy, and I'm sure it took a lot of cajones to go down that path.
My only concern is they don't seem capable of letting things die. House of Card and Orange is the New Black both went from very good to terrible. If every hit series they make turns into the final season of "Dexter", it will cause issues.
The problem is less pronounced now that most shows are serials planned out years in advance, but it still happens.
Let me guess: UK/EU based?
It's easy to make a good season when you only have to write six episodes :)
Though, I guess they're already edging towards it with the ridiculous half-season break...
1. Yes - fewer episodes. In particular one of the main criticisms of things like the Netflix produced Marvel shows (Daredevil, IronFirst, Defenders, etc.) is that they would be much more effective if there were less episodes / season.
2. Actually having endings. If you skip the need to leave things open ended so you can have a 10 season run, you can actually tell a story arc with a beginning middle and end.
3. The UK TV model seem to allow more creativity. If a good producer/director/writer/actor team puts out a good series, they then move ahead and build out a new series with maybe some of the same "bones".
Good and bad with both systems.
I'm currently watching 12 Monkeys on Syfy (currently on it's 4th/last season). IMO this is a great example of a show that goes on just as long as it needed to and nothing more... Solid and tightly plotted all the way through.
Shows like NCIS, Law & Order, and Criminal Minds will literally run the same plot each episode. These are some of the most popular TV shows in history.
Studio executives don't want to accept that they have a hit show that doesn't cater to this demographic. Once the main story wraps up, usually after 4-5 seasons, the original creator will get fed up or fired because they are unwilling to drag the story out any longer. Then the studio brings in a generic writing team to transform the show into one of those a predictable rehash shows.
It never works because the people who are into those shows won't get past the first four seasons, and the original fans of the show get tired and stop watching.
However, Netflix has raw, unfiltered data directly from their customers. Keeping both of those shows running must make sense to them when taking the data into account.
I mean, yes there is probably a long tail of fans that will follow a show til it's dying breath.
I guess I just feel there's an intangible effect on a property when it's run into the ground.
For example, the second and third matrix movies should have no effect on my enjoyment of the first, but they do - it makes the entire property feel cheapened.
Unfortunately, it's next to impossible to find what I want through Netflix's interface. Somehow they have all this data on my watching habits and can't even get close to showing me things I want to watch. I depend entirely on review sites and recommendations from others.
However, the percentage rating alternative seems to tell me nothing other than a movie I haven't watched yet is a similar genre to movies I have?
Then there are the 'New' movies which don't have any rating at all yet.
The 'suggestions' also seem only to suggest stuff I've already decided not to watch.
There are thousands of television series and movies available to Americans on Netflix (less so in other countries, but the point still stands). Cable television doesn't offer a fraction of what's available on Netflix. I'm not aware of another streaming service that offers more titles.
What is Netflix's library "small" relative to? Again, just curious because I've seen this mentioned plenty of times, and I personally find there's an overwhelming amount of content on there.
One of my pet peeves is that they don't indicate that a show is in a foreign language with English subtitles. Why is there no way to set a flag to just show English-language content?
Others are fine with Netflix if it can offer them something to watch that meets their standards. It doesn’t matter if it was one of two or two hundred viable options. Netflix is able to do this for very high standards as well as middling tastes.
This is also known as maximizing vs satisficing^. Both ways of treating media are valid but there’s some friction when the collectors try to make the watchers feel bad (or when the watchers make the collectors look a bit irrational, as I’m admittedly trying to do with this comment.)
^ https://www.psychologytoday.com/us/blog/science-choice/20150...
Most recently, there is the response to their removal of user reviews. That I regret; I've found them useful, and even a bit more so with the removal of the "star" ratings for this overly simplistic and opaque thumbs up/down mechanism.
But what I haven't seen mentioned, but am now noticing, is that at some point they removed the year of release from at least their hover/pop-up descriptions. At the moment, and not in the right place to check, I'm not sure whether they are gone from their more details listings -- whose UI to access is an unwieldy pain in the ass, itself.
They just want you to see an interesting looking tile, that you haven't seen before, and click on it.
Never mind that the content behind it is most likely the same "minimally acceptable" c-list, maybe b-list, content they've been increasingly shoveling up for these past some years. Except for some of their headliner "original content". And, a lot of their original content listings are becoming similar stuff they slap their brand on, often acquired -- likely on the cheap -- from non-U.S. productions. (There's nothing wrong with non-U.S. productions, but there's a lot of inexpensive, second-if-that tier stuff in the rest of the world. And the good stuff is increasingly captured by other outlets maximizing returns and control over what Netflix will pay and offer.)
At least, that's the way I've come to interpret what I'm experiencing with them.
It's not a huge deal to save 6 months worth of Netflix, but as the monthly price creeps up, this is becoming more material.
Dark
Safe
Marcella
The Break
Le Chalet
Suburra
Happy Valley
The Fall
Santa Clarita Diet
Okkupert
The Rain
La Mante
Hotel Beau Sejour
Luther
Cajones are either drawers or Peruvian musical instruments :)
It kinda still is the case where I see so much missing from streaming services.... put it on there damn it!
Interestingly, the old Netflix DVD business is still alive and still profitable, though it's been rebranded as DVD.com - there's a piece about it here: http://fortune.com/2018/05/21/netflix-dvd-business/
If true, this is awesome and so much better (for me) than any streaming service.
Of course, in a nutshell Netflix is doing the same, only legally. Those companies were too early and too dodgy.
There's a few others that skirted around similar laws as well, like Aereo which was shut down for rebroadcasting OTA signals using customer rented antennas.
If you're the sort of person who decides they really want to watch Film XYZ and is happy to wait a few days for it, DVDs are perfect.
On the other hand, some people watch TV to fill an hour or two here and there on an ad hoc basis. If your approach is "I feel like vegging out now, so let's flip through the channels and see what's on", the instantaneous nature of streaming is perfect because you don't have to plan ahead to watch the things you're interested in.
https://wondery.com/shows/business-wars/
"Netflix vs. HBO. Nike vs. Adidas. Business is war. Sometimes the prize is your wallet, or your attention. Sometimes, it’s just the fun of beating the other guy. The outcome of these battles shapes what we buy and how we live.
Business Wars gives you the unauthorized, real story of what drives these companies and their leaders, inventors, investors and executives to new heights -- or to ruin. Hosted by David Brown, former anchor of Marketplace. From Wondery, the network behind Dirty John and American History Tellers."
For those with kids, it's a no brainer. Millions of subscriptions right off the bat.
Then imagine if Disney puts Star Wars exclusively on their service, same day or even before theaters. Millions more subscriptions. They could do this with all things Pixar, Marvel and other big Disney IP...
Now add on the merchandise. They'll have better data on exactly what people are watching, how many times they're watching it and can create offers based on that. The merchandising side is a huge advantage.
I'm starting to get a little worried about all of this vertical integration in the streaming industry. It would be nice if there were just 2 or 3 streaming-only services, preferably with heavily overlapping libraries, that licensed content from content producers. The way it's going, it looks like you're going to have start paying $50-60/month (Disney, Amazon, Netflix, Hulu, HBO) just to have access to all your favorite shows... which is pretty much the reason people ditched cable. At least it's on demand now, I guess
Netflix had a relatively brief moment in the sun where they could buy lots of content cheap because streaming was add on revenue to the production companies. That's not going to keep happening for much longer.
IMHO, I think we will end up back to a cable like situation. It doesn't make sense to pay two middlemen for access to content. In other words, I don't want to pay Comcast and Netflix to deliver Disney's content. Eventually, we will end up with ISPs providing access to a handful of streaming services each with their own exclusive content.
Packages will also come back because they make economic sense. Ultimately, the NBA, NFL, MLB, NCAA, et al will get more money from a streaming sports package than trying to sell individual streaming services.
This illustrates just how much a Founder CEO who has the right mix of smarts and boldness can be absolutely vital for a company. I cannot imagine a generic MBA CEO doing such bold and aggressive moves with Netflix, that the founder CEO has been able to do.
If you want a company that really pivoted, Nokia is a better example[1], yet many of those changes only happened long after its founders were dead.
[0] https://www.recode.net/2018/4/7/17208804/amazon-private-labe...
They have about 4 million DVD customers versus 115 million streaming.
This may be partly due to the USA's unique combination of a well functioning postal service, large population, and lack of broadband penetration in rural areas.
If you venture out to Alaska, the Dakotas, West Viriginia etc there's tons of places where there's a post office but no or shitty broadband.
Being able to drive into town and pick up a stack of blu-rays at your PO box, and send back the old is extremely useful in such areas.
The existing model was open to disruption, but more importantly the intrinsic attributes of a book itself made it perfect.
Huge market, non-perishable, substitutable, easily shipped, similarly sized, with an incredibly long tail of varieties
How many other goods fit those criteria?
The linked to one is a paragraph or 2 with the above link at the bottom.
We (as consumers & residents of an economy) need to pay attention to what Peter Thiel called "monopoly" when he (playing provocateur) said that "competition is for losers."
The reason Netflix became so successful, and managed to play with the entertainment oligopolies is that they built and control a bottleneck. They are the biggest streaming company, one of a handful in any given market.
Terrestrial TV came with frequency band issues. Broadcasting had to be licensed so everyone wouldn't step all over eachothers' signals. This resulted in a structural oligopoly, where only a handful of licencees could broadcast.
Then cable came. This came with physical infrastructure, and structural tendencies to local monopoly. They also developed an oligopolistic industry structure, where licensing and content acquisition is only really possible if you are fairly big.
Now internet. Online, Netflix and other streaming companies have built their companies specifically around the goal of owning a bottleneck.
This time, there is no tangible reason for it. It's just a tendency of digital services that one service "wins" a race to monopolize a sector.
There are a ton of inefficiencies in an oligopolistic market. I pay for house of cards by subscribing to Netflix. You pay for American gods by subscribing to Amazon. Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. The reason Amazon and Netflix want this situation to exist, is because it maintains their respective "moats." There is no string underlying economic (pertaining to resource allocation and scarcity) reason for it.
Basically, we need to watch out for these intermediaries. They are very innovative and consumer friendly in their first decade or two. That's how they succeed at first. Later, they succeed by maintaining their monopolies any way they can.
Unfortunately makers aren't the ones controlling the content. You forgot about the Studio Oligarchy that wishes to control exactly how and when you consume their content. They can negotiate higher royalties out of the likes of Netflix and Amazon through exclusivity.
Another tactic employed by studios is artificial scarcity. Disney is a pioneer in this technique and routinely locks movies in the vault until demand peaks then releases them at $25 a pop which is a premium over all but new releases. When was the last time you saw Alice In Wonderland for $9 at Best Buy? Never.
The studios are even starting to roll their own streaming services to compete with Netflix and Amazon. This is why Netflix, Amazon, Hulu, and now even Apple are becoming their own studios. Because the streaming business itself is dying and you either need to be the content provider or the service provider to survive.
Eventually studios and ISPs are going to start merging into one proprietary pipe.
In what sense is the company that plans, funds, creates, and delivers a show an "intermediary"?
> Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers.
You are proposing that all content should be free. You just don't realize that's what you're saying. You believe you should get Amazon content for free because you pay for Netflix. You argue this doesn't de-fund, but it does, because if I can watch Amazon content for free, I'll cancel my subscription to Amazon. I'll pay for the cheapest streaming service that exists if it somehow grants me access to the entire world of content. Universal access would mean a race to $0/month.
You believe you should get Amazon content for free because you pay for Netflix.
It's impolite to tell people what they believe, or what they said, so I'll take these as conversational questions. In any case, I do not. I am pointing out an inefficiency, a suboptimal economic resolution of the kind a more competitive market dynamic would tend to minimise. The primary reason intermediaries pay extra for exclusivity is exclusivity, cutting out their competition. This doesn't generally happen in markets with enough buyers and sellers.
If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods.
I am pointing out that your claim is fundamentally contradictory. You assert that universal access would not "defund", but your universal access idea is predicated on a free market driving down the cost of access across the board. It realistically cannot be both. You can't have Netflix bundle Amazon content and vice versa and not expect a drop in total revenue. Sure, you'd expect some additional subscribers, but you'd also expect current dual-subscribers to cancel one of their subscriptions[1], and you'd also expect Netflix and Amazon to be reduced to competing primarily on price, driving revenue down. Exclusives drive an increase in funding because they encourage the market to pay for more than one option.
> If there were only two or three retailers in a market, they'd be cutting exclusivity deals with wholesalers or manufacturers of goods.
It happens all the time. Crate and Barrel sells exclusive furniture designs. So does every other furniture store. It's not hurting the market and in fact increases choice because most retailers actively pursue the creation of new exclusives.
[1] There aren't a lot of people paying for HBO Go and HBO Now. Once you've got access to the content, you don't pay for it in other ways as well.
If this competition is about catalogue, I don't understand why they didn't try to purchase Time Warner or 21st Century Fox like Disney or AT&T did. Are they betting they'll get a better chance by producing their own content or teaming up with Disney?
What a refreshingly sober perspective (probably why I kept it in mind).
https://www.youtube.com/watch?v=tCn4hdTI2jc&feature=youtu.be...
It fails miserably for me, at least with their recommendations, but it seems to work for most people based on Netflix's stock price growth. Someone is out there watching those 5000 shows imported from China with no English dub, and in big enough numbers for Netflix to consider it a wise investment.
Apple undoubtedly has some significant hurdles to jump over in this space but a lack of cultural understanding is not one of them.
Maybe they have that skillset too. It doesn't follow intrinsically though.
(And also has an interesting parallel with Apple starting to obsess about odd things customers don't really care about)
They also have Jimmy Iovine and a bunch of former Hollywood execs running the business side of things. I was just trying to point out that of the major tech companies, Apple probably has the best “cultural” bona fides by a wide margin.
> also has an interesting parallel with Apple starting to obsess about odd things customers don't really care about
Can you give some examples of what you see fitting into this category?
Most of the standard HN gripes.
Design prioritized over regular hardware updates for existing product lines. Mobile emphasis to the detriment of desktop and developer. Touch Bar. Keyboard changes to an already loved design. Pursuit of thinness / lightness past the point of utility. iPhone stiffness issues. iPhone antenna issues. Severe macOS functionality regressions / bugs in updates.
Apple makes a great product, so I'm not bashing. But their priorities seem increasingly myopic, and they're losing the forest for the trees.
Like it or not, you're not the type of consumer Apple values highly. They need customers like you, but they're only willing to put forth the minimum effort to hang on to you.
We can quibble over whether or not the Touch Bar is an improvement or a regression, but dust jamming keyboards that can't be decapped?
That's someone taking their eye off the ball of customer experience. Not just for power users, but for all users.
I would agree that producing TV isn’t a Steve Jobs “bicycle” move, though, and that’s the same with the non-swappable-parts strategy they employ in hardware, even though the software is liberating and creative. I think they are pursuing the right strategy, but wouldn’t it be great if Apple’s content push could come more directly from users’ copies of Final Cut Pro?
(I’m a power user and Marco Arment doesn’t speak for me.)
(This is not a rhetorical question.)
US movie studios and television production are more costly than they need to be, because they need to pay for the barnacles and rent-seeking cruft that attached themselves to the industry when they were operating for a half century with an oligopoly on distribution.
When challenged by upstarts, they reduced costs by making crap reality shows and squeezing established franchises to death theaters. They are a business, and at this point, they will be squeezed by Amazon & Netflix.
If Amazon prime becomes a household good, meaning it sees wide adoption by a large viewing segment which doesn't care about seeing high quality content, that puts Amazon in a great position to churn out bad shows with popular appeal.
I doubt this is real, at best it's US only.
They are slowly becoming popular in India and Japan as well. So their US growth might be slowing down but definitely not international.
Peering cost is too high for someone sitting in Asia to enjoy quality streaming from Netflix from NA datacenters. Youtube does the same thing, only they are many many times bigger (in terms of GGC penetration all over the world). This is why most people rarely get buffered youtube even at 4k, unless your ISP is shitty.
I've built deep learning recommendation systems in production for clients with millions of users and it's sometimes surprisingly difficult to beat the "most trending <products>" baseline if all you care about is views/purchases. It will in the short term to meet business goals, but it hurts the user experience over time and will inevitably increase churn.
(I couldn't read the full article as I didn't have access, so not sure if this is touched upon there.)
This is all subjective but, I do believe that the 10 movies that Disney produce will be far superior than any of the 73 movies that come from Netflix.