Tuning in to Netflix
The plethora of over-the-top on-demand TV businesses has been talked up as a threat to ‘traditional’ TV since the early 1990s, writes David Brennan, founder of Media Native. But maybe – finally – the threat is beginning to become significant…
I’ve been asked to chair panel sessions at two conferences debating TV’s future, and found it quite interesting how frequently ‘Netflix’ is being brandished as the latest threat to the TV eco-system, in much the same way as ‘Google’, ‘Apple’, ‘Tivo’ and ‘Facebook’ were in previous decades. My take on things goes back even further than that.
Back in the mid 1990s, I attended an ESOMAR/ARF conference in New York. In those days, we in the UK believed the USA could show us the future, whereas nowadays the flow of influence could just as easily be the other way around.
Anyway, one of the presentations was particularly memorable because it really did present a vision of the future, one steeped in evidence from a community that had been invited to that future and found it all to be a bit underwhelming.
That community was based in Orlando, Florida, and their special status had been due to them being invited to be part of Time-Warner’s ‘Orlando Experiment’, where they would be wired up with a version of the digital entertainment possibilities that were still more than a decade away.
The results of that experiment were being presented for the first time and, as a precursor to most other future-focused studies that were launched in the ensuing years, the main findings seemed to suggest that not a great deal was about to change!
Interestingly, one of the few areas of change which the good citizens of Orlando embraced was access to on-demand TV and film entertainment. However, when their behaviour was analysed, the key insight was that this would not be a major issue for the TV networks; it was far more likely to negatively impact the video rental market. The headline was not “ABC/NBC/CBS Beware!” but rather “Blockbuster Beware!”.
That has pretty much summed up the evolution of the premium VOD market to date. For many of the broadcasters on-demand has proven to be much more of a marketing tool for the linear stream than it has been a competitive threat; hence the reason linear viewing levels have remained remarkably stable, even as VOD viewing grows exponentially.
Meanwhile, exactly as predicted more than twenty years ago, the likes of Blockbuster have been driven from the High Street. So, on one level at least, the Orlando Experiment has been proven correct.
But, of course, nothing works in a vacuum and the same is true of on demand content. The combination of catch-up services from the broadcasters, pay TV bundling of on-demand content and the launch of a plethora of OTT services from the likes of Netflix, Lovefilm (now Amazon Prime Instant Video – catchy name!), Sky’s NowTV and Blinkbox has created a lively sub-set of the television eco-system, with plenty of competitive activity, cross promotions via their parent companies and – who knows – maybe the addition of significant investments in original programme content!
This last point was brought home to me very recently.
Although I strongly advise against paying too much attention to opinions derived from samples of one, in my own case that advice is sometimes ignored. For example, within just a couple of days last week, I had two conversations where I was asked for my opinion on the Netflix breakout show ‘Orange Is the New Black‘, which is due to commence its second season next week.
Although I have consistently stated that I have no need of any more television – my 300+ Sky channels plus extensive catch-up services already provides me with more than enough – the thought of being frozen out of these conversations made me rethink my position. Maybe there is more of a future for Netflix and its competitors than I had previously thought.
Certainly the numbers are looking healthy. Netflix now claims 44 million subscribers worldwide, a 10% hike on the previous year, with net income rising by almost 50% to $48 million (which is still small beer in global terms).
These numbers could be further underpinned by the “substantial European expansion” promised by Reed Hastings, the company CEO. In the UK, it has undoubtedly been aided by the clumsy rebrand of Lovefilm Instant as well as a fairly sluggish performance from its other main UK competitors.
According to Decipher’s Mediabug tracking research, around 14% of online users have a Netflix account, whereas Lovefilm/Amazon Prime has dropped to 6% and the rest of the market appears to be fighting for scraps.
This relates back to the reason for my renewed interest in Netflix’s performance: original content.
It is fascinating to see how the different business models of Netflix, Lovefilm/Amazon, Sky’s NowTV and Blinkbox have played out. The synergies with retail or pay TV platforms should provide unique opportunities for Netflix’s competitors, but it has been the brave decision to invest in high quality, original content that appears to have pulled Netflix far ahead of its rivals.
I’ve been quite dismissive about their content investment in the past, as it is a small fraction of what a broadcast channel produces and has previously been focused on updates or reboots of familiar TV shows like ‘House of Cards’, ‘Arrested Development’ or ‘The Killing’. However, shows like ‘Orange is the New Black’ have taken Netflix into new territory with genuinely high production values and an original ‘voice’, amplified by canny use of social media.
Hence my two recent conversations, and my sense of loss in not being part of the ensuing debates about the merits of the show in question.
This has happened before, when premium cable channels such as HBO (‘Oz’, ‘Sex & the City’, ‘The Sopranos’ and ‘Six Feet Under’) and Showtime (‘Weeds’, ‘Dexter’ and ‘The Red Shoe Diaries’) began to produce high quality and challenging content around the turn of the century, which has had a profound impact on the programme landscape to this day.
It worked for them, so why shouldn’t it work for Netflix? Otherwise, without original content, the Netflix experience sometimes feels like a rummage around the aisles of a mid-ranking Blockbuster store, full of stuff which, if I hadn’t seen it during its first run probably meant I wasn’t particularly interested in the first place.
Still, with a fair wind, a steady increase in connected TV sets and convergence between screens and – who knows – maybe the odd major deal with a TV platform such as Freesat or Virgin Media might help Netflix to dominate an increasingly accessible market. But the enthusiasm to partner with pay-TV providers might also mean that market remains a niche part of the wider eco-system (much as Blockbuster was; we just never saw it that way) rather than a major force for disruption.
Me? I’m still not planning to subscribe to a whole bunch of OTT on demand services just yet but I might go for the Netflix free trial period, if only to have my own opinion on ‘OITNB’. Mind you, I’m going to have to clear my planner first; there are still so many other superb series to keep up with!