Slight Tweaks to the Netflix Model

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This week was a battle for the most important story between three related streaming stories. Who won? Well, Netflix, but not for the story you think.

Most Important Story – The First Netflix Original on Linear Broadcast

To steal from my own Twitter feed, Netflix is lauded as THE truly innovative company in entertainment. I read this all the time. And when they launched (ten years ago!) they really did change a lot of things: tons of episodes to watch on demand. All episodes released at once. Thousands of shows with scrolling. Recommendation algorithms. That really was a change in how the model worked.

Since then? Well, they’ve taken a lot of hard line stances:

– Never releasing originals in a week-to-week format.
– Never introducing live streams of shows.
– Never doing sports programming.
– Never releasing movies in theatrical windows.
– Never releasing original programming on linear or other platforms.

That’s a lot of “nevers” for a company that’s trying to be innovative. (In my head, I want to write a satirical HBR article called, “Innovation comes from Never”.) But it looks like the last two points may change, just very gradually. And not by Netflix’ choosing.

You probably missed this, but starting on this week, Bojack Horseman, the critically-acclaimed (?) Netflix original animated series is now airing on Comedy Central. The short explanation is that the distributor and production company retained linear rights after a hold back window for Netflix. So they sold it to the highest bidder.

Personally, I don’t mind this for Netflix. They don’t have a say either way, but they should really how premieres of existing shows off network help boost the ratings. Let me provide a personal anecdote to explain. I’ve wanted to watch The Magicians for a while now, but don’t currently have a Netflix subscription (we just weren’t using it). As a result, I never went over there to catch up on the previous seasons. So as each new season is released, I never bothered to catch up becuase Syfy never did a marathon of previous episodes to let me catch up.

But, for some reason, reruns of the season 1 recently appeared back on Syfy’s linear broadcast. Now my wife and I are debating turning Netflix on just for that show. (Or apparently the Syfy Now app has those episodes. We’ll see.) As a result, I may watch season 4 next season if I can catch up in time.

The point is that allowing sampling for bingeable shows will push people back to whoever has the most episodes. If you don’t have Netflix, then Bojack Horseman is dead to you…but for the people who just watch Comedy Central, they may get hooked and join. I’m sure there are other examples of streaming shows appearing on other platforms. I know HBO has put some of their very library shows into broadcast, and maybe some other Netflix originals appeared in other countries in different platforms. Either way, I’d say this is an experiment worth taking. Good luck Netflix, even if you didn’t want this.

Other Contenders for Most Important Story – Warner Media will have three tiers

I’m tempted to start this sub-section by blasting Warner Media and being as snarky as I can. It’s easy to make fun of them because they are doing something different, and different is easy to mock. The blink reaction I had was, “You’re going to try to go up against Netflix with three different, confusing price tiers? Really?”

Wasn’t I the guy on last Friday’s column bemoaning that executives don’t make strategic decisions, and instead often just copy the other guy? If Warner Media announced a new all-our-content-in-one-place bunder for $10.99, that would just be an aping Netflix strategy. And I’d have criticized that too.

So credit to Warner Media for trying a new offering that could maximize revenue. And really, we shouldn’t criticize an offering until we know what it is. And the upside could be that their top “bundled option” really is a better Netflix, with live channels, sports and more TV/movies. If the other tiers work to upsell into the valuable tier, I’ll probably get behind that.

The key is really the process that went into the three tiers. Was this process focused on what customers wanted and how best to serve that, which inevitably improves the bottom line? Or is this a compromise set of tiers balancing dozens of competing fiefdoms within AT&T? My guess is the latter.

The downside is that they launch this new offering, but what happens to HBO Now, DCU Now, DirecTV Now and VRVO and their dozen other SVOD offerings still exist? At which point, do they cut the cord on those, so to speak? Could all the AT&T/Warner SVOD offerings cost hundreds all in? That seems crazy.

Other Contender – Netflix Cancels Daredevil

This is the streaming story you probably saw. And saying “cancelled” is probably hyperbolic, since it more “wasn’t renewed”, which yeah, is cancelling it, but feels anachronistic in a day-and-age when shows are more like limited even movies.

To steal from myself on Twitter twice in one article, the initial blink reaction of Twitter–”This is because Marvel is owned by Disney and Disney is launching a streaming service”–is a bit premature. First, Netflix likely had a very long time period for the initial licensed run of all these series. My guess is 7 years after the last season premieres. So even after Disney launches its SVOD platform, it could be five years before we see Marvel series migrating over there.

That said, Netflix still likely had its reasons: money and ratings. First, Marvel series are expensive. I don’t know how much, but I know when Netflix was bidding initially they had competition and that drove up prices all around. So these shows have big fees with big budgets, which is why Netflix has been trying to drive down the number of episodes per season from thirteen to ten.

As for the latter reason, well here’s my controversial take that isn’t controversial if you think about it: Daredevil’s “ratings” (such as they are in streaming) likely weren’t very good. The logic being, even an expensive show is worth it if it drives the viewers. This logic has worked for years on broadcast and cable. CBS pays Warner Bros. a hefty fee for The Big Bang Theory. As long as the costs are below the revenue (which comes from high ratings) they pay it. Same for ABC and Modern Family. This logic applies to streaming, even if most other business logic doesn’t.

I’d add a creative take that Netflix felt creatively the shows weren’t performing. It seems like all the Marvel series have had to replace multiple showrunners. So likely all these factors combine: the shows were expensive, creatively they were hard to make, ratings were down AND Disney is doing its own streaming thing, so no need to keep paying the competition. But it wasn’t just the last part.

Lots of News with No News – AT&T/Warner Media has a new streaming boss

I read the news/quick profile of Brad Bentley and I wish I could tell you if he was going to be good or bad or indifferent. Unfortunately, the guessing game of who is good and bad at Hollywood is something I’m not good at. (I also don’t think anyone really is good at it. But that’s an article idea for the future.) Still decisions are being made over at AT&T.

Long Reads of the Week – Why Is Netflix Waging War on Box Office by Kim Masters

I discounted the news that Netflix giving Roma a limited theatrical run wasn’t the monumental deal others made it out to be. (The Ankler echoed this take.) In that vein, I recommend Kim Masters piece here, bemoaning Netflix lack of transparency. It really just asks why Netflix continues to hide all data, even the performance in this specialty release. That by all accounts was good!

I’ve been writing a longer piece on Netflix hiding/selectively releasing data and I’ll repeat its main point here: data asymmetry generally benefits Netflix and we should be mindful of that when writing about them.

The Entertainment Strategy Guy

The Entertainment Strategy Guy

Former strategy and business development guy at a major streaming company. But I like writing more than sending email, so I launched this website to share what I know.


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