The Netflix Paradigms

Updated: Feb 25, 2019


"Netflix now spends big-studio money on films..."

Warning!

What you're about to read is not a formal article. It is more like a long, one-sided conversation broken into 4 parts for easier consumption. If you feel strongly about anything this author has written, please be sure to let him know in the comments.

Enjoy!



In 2016 I wrote an article called “The Netflix Effect” where I projected that Netflix would become an even bigger dominating force than they already were. I also applied the same formula to Disney. Let's see how my projections are doing in 2019:


Part 1: Netflix

(Quantity over Quality)

I started the 2016 article by discussing Netflix's ability to use algorithms to uncannily predict what its subscribers would want to watch next, thus putting them in a position to analyze the size of the potential die-hard audience for any show they may want to bring on. I still believe that with the streaming paradigm I previously described, you only need ‘just’ enough viewers of any show to make it financially viable.


With the network/broadcast paradigm, executives cast their nets really wide and hope viewer numbers are enough to keep the advertisers happy. If the advertisers are not happy, they don't release money. If they don't release money, the show will have to be scrapped to make room for a show that may make the advertisers happy.


With digital streaming, you know exactly where these viewers are because they're able to give you individual feedback. Even if 'advertisers' are not happy, it costs you nothing (relatively speaking of course) to leave the show on your platform while you work on the next show. With digital streaming, there is no prime time as it were. There is no limited window of opportunity after which your show must be scrapped. Your show has the rest of eternity to build its cult following.

In fact, a cancelled show that has lost its window in the old paradigm can breathe new life in digital streaming. You’re not broadcasting one show in one time slot to as many locations as possible. You’re ‘broadcasting’ all your shows to as many (or as few) people as want to see them...at the same time. There’s almost no limit, in theory. In the new paradigm, not only will you find old shows, you will also find renewals/revivals/remixes/remakes of shows. Netflix has done a lot of this and they don't seem to be stopping any time soon. Here's hoping there'll, someday, be a revival of The Last Resort, a one-season show that ABC prematurely scrapped for whatever advertiser-jitters reason. That show was like 24 (the show) in a submarine… but I digress.


Since my write-up, Netflix has really upped their budget for acquisition of new content and for production of their original properties. They used to spend (almost formulaically) just enough to make their shows just good enough. They wouldn't regularly splurge excessively on big-name stars (though they've managed to turn some of their once-unknown stars into sorta-big names). Also, I get the sense that they won't need to go out of their way to woo established stars as more and more of them get dropped by the traditional systems. Netflix's originals are a decent product that meets (okay, slightly exceeds, nowadays) industry standards. The quality of "good enough" is gradually improving...and Netflix is more than keeping up.


However, I still maintain that the secret to Netflix's longevity will remain quantity and not quality. Their quality needs to be just good enough, but their quantity still needs to keep screaming "we've got waaaay more than you can ever dream of watching in your lifetime". Luckily, it still does.


I mentioned in my article that this new business paradigm reduces the fear-factor which comes from the economic pressure on networks to reach certain audience quantities or bust. I insisted that no individual show on Netflix has to pull the kind of crowds that advertisers love. Each show simply needs to pull in its niche audience, and since niches blend with each other in a smooth spectrum to make up a broad range of personal preferences, there will always be enough stuff for any single person to watch.


Netflix doesn't have to worry about the individual rating of an episode. They can present all the episodes (actually all available seasons) as one full meal to be binged. They can present all shows as being so many that even if you were to spend a straight year binging with your eyelids clamped open (like in yon movie), there will always be something to watch.

The old paradigm means quality shows in search of a large quantity of a limited audience. The new paradigm means a large quantity of shows each in search of specific qualities of a nigh unlimited audience. The only way for Netflix to keep this up is to proactively go out of their way to look for content.


Back in the day, the head honchos decided what movie/show got greenlit based on carefully plotted graphs and feasibility studies. These days, that process has been democratized and the honchos have even more pools (and genres of feasibility) to choose from. Thanks to the likes of YouTube and Instagram, there are now many ways to gauge the popularity of budding intellectual properties, and there are many more parts of the world to source such content from thanks to the global reach of social media, and the global spread of true talent.


The knowledge that they don’t desperately need any one show to be a massive hit emboldens executives to keep greenlighting and licensing shows. The price of failure is low (or at least, not immediately catastrophic) and the more shows added to their stable, the higher their chance of lucking into a huge hit, thereby improving the quality component of the machine. Wash rinse repeat. So not only do all these shows come together to form a huge 'Voltron' (quantity), they also lead to a higher chance of seeing more shows that can become behemoths in their own right.


"At the time of writing, they've had peaks as high $400"

Netflix has come along way from its underdog days. When I wrote my initial article. Netflix was selling at less than $100 per share on the stock market. At the time of writing, they've had peaks as high $400. More cable providers not only offer Netflix in their lineup, they now have it discounted as the go-to incentive for luring new subscribers. Netflix now spends big-studio money on films such as Will Smith's Bright (which was eviscerated by critics, yes, but I hope to address that in a later part of this series).

Netflix is now in contention for numerous prestigious awards including the Oscars! I’ll even go as far as saying Netflix might be the one to cause the Academy to eventually do away with the archaic requirement that contenders need to be screened in traditional cinemas. More on that later. Already, the Netflix brand is no longer seen as an upstart upstager aimlessly buying junk and throwing it at the wall to see what sticks. The Netflix brand is now a powerful brand that everyone recognizes as a real player. Well, everyone except, maybe, some other players themselves: networks and big studios (including theater chains). Talking about studios, now I must talk about Disney….

...to be continued. Next:

Part 2: Disney (The Merchandising Mindset)

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