Jack O'Toole argues that Netflix is taking over the world, one subscriber at a time.
Every so often an invention or company comes along that has a lasting effect on an entire industry. The CD made the cassette tape obsolete, the smartphone rendered the GPS as unnecessary and now streaming service Netflix looks like it’s about to change how we view and consume media for decades to come.
Software developers and company founders Marc Randolph and Reed Hastings started Netflix in 1997 as an online portal to rent videos, after Hastings was famously fined $40 by a video store for returning Apollo 13 past its due date.
Today, Netflix is a multinational provider of on-demand media, available to stream via the internet in over 60 countries throughout the world, with over 69 million subscribers, and more than 34,000 hours of TV shows and movies available to stream.
After a prolonged period of sustained growth during the early to mid-2000’s, Netflix has grown exponentially since its launch into the international market in 2010 and it’s now starting to have a genuine impact on ratings and the television industry as a whole.
Investment research company Sanford C. Bernstein reported that Primetime television audiences are down 9% year on year as a result of the rise of sites such as Netflix.
Furthermore, Wall Street research firm Pacific Crest reported that the number of households with cable television has fallen 10% in the past five years, while Netflix has seen the number of households with the service nearly doubling - to 35% from 18% -since the third quarter of 2011.
Netflix has taken advantage of the television industry’s inability to adapt to the on demand requirements of the modern audience.
It’s not just the instant accessibility of sites such as Netflix that attracts consumers from the now seemingly archaic forms of satellite and cable television: it’s the content that these sites produce, with Netflix now rivalling traditional networks when it comes to critically acclaimed productions.
With 45 Emmy nominations to date and 31 nominations at the 2014 Primetime Emmy Awards, Netflix has more than doubled its nomination tally from 2013 when the streaming giants had Netflix original productions House of Cards and Arrested Development nominated for awards.
House of Cards has proven to be a huge success and the breakthrough achievements of fellow Netflix originals Orange is The New Black (also critically acclaimed) and the wildly popular Narcos, have solidified Netflix’s position as a genuine contributor to critically acclaimed programming.
The original productions, or “Netflix Originals”, have also been a very big hit with Netflix subscribers as the company claims that “nearly 90 percent of Netflix members have engaged with Netflix original content” - a fact that they views as "another indicator that we are on the right path."
The Netflix originals have done wonders for the company in not only engaging with current subscribers, but also in attracting new viewers and helping the company grow and break into new markets.
House of Cards, Orange is The New Black, and Narcos are among the best shows in television, but House of Cards in particular broke down barriers that no other show had done before when it premiered back in 2013.
As Forbes’ magazine contributor Greg Satell noted back then: “It’s the first major TV show to completely bypass the usual television ecosystem of networks and cable operators. It’s also the first time that a series has released an entire season (thirteen episodes) all at once, for viewers to watch at their own pace.
"Finally, it’s the first time that programming has been developed with the aid of big data algorithms. That’s a lot of firsts.”
Releasing every episode of a series at once has created this “binge-watching” culture among users where viewers will seemingly watch an entire series in a relatively short period of time, but the data algorithms that Satell alludes to is where Netflix has really captured the advantage over cable television.
The award winning House of Cards was given the green-light on the basis that Netflix knew about the viewing habits of its 33 million users. Netflix knew how many users watched movies starring lead actor Kevin Spacey and the director David Fincher, and, through its tagging and recommendation system, how many sat through other similar political dramas.
It spawned a new process in production and a winning formula for Netflix that has defied traditional television approaches and changed the way that television executives and consumers think.
Netflix trust in their analytics, and that the data given will result in a series success. While not every Netflix original has been successful, the shows that have been have allowed the company to trust in their processes and continue to break boundaries as a result.
The originals are cheaper to produce, are tied to analytics as opposed to corporate preferences, and have caused an outbreak of sites trying to replicate their success; with Amazon, Hulu, and now Apple all running similar ventures.
If CEO Reed Hastings is to be believed, then television will be a thing of the past by 2035, and while Netflix may not be the market leader in streaming services at that time, they are for now the pioneer in a new era of entertainment television and are a company that looks as if they may have changed the industry forever.