The Evolution of Netflix and Online Streaming

Originally published in The UCC Express January 21 2014

When one considers the evolution of home media over the past two decades, it’s easy to see that a lot has changed. In the early 2000s DVD came to the forefront of home entertainment and remained the industry standard for several years. Around the middle of the decade came Blu-ray, which never really took off in the same way DVD did, but was an important stepping stone in the distribution of high-quality digital content. Now, in the era of high-speed broadband, things are changing again with the advent of Netflix. Although the company has been in existence since 1997 (originally as a DVD mail-order rental service), it is only in the last couple of years that the potential of online streaming of video content has started to be realised and Netflix is the vanguard of such a business model. For many of us, it’s hard to imagine life without Netflix. It has become the refuge of the college student, a place to escape to after a long day of procrastinating over college work, or indeed to soothe a painful hangover. Since launching in Ireland in January 2012, it has amassed over 150,000 subscribers and become a household name. Its ever-increasing popularity can be attributed to a number of interesting ways in which Netflix seeks to keep its viewers interested.

One aspect of Netflix that sets it apart from any other rental service is its bizarre array of categories. While traditional film rental outfits such as Amazon or even Xtravision will offer you the usual genres of Romantic, Thriller, Comedy and Drama, Netflix goes about seven steps further and offers an assortment of excellent classifications, from “Critically Acclaimed Exciting Movies from the 1970s” and “Feel-good Fight-the-System Action Comedies”, to the oddly vague “Bellydancing.” Recently I watched “The Hunt for Red October”, a film about a rogue naval commander aboard a nuclear submarine, and since then I’ve been inundated with suggestions for documentaries relating to submarines and nuclear weapons. In all, Netflix offers just under 77,000 genres, although that isn’t to say they all contain films — some are placeholders. There is method to this madness, however. By categorising every single piece of content that Netflix uploads to its servers with acute detail and assigning them one or more of its scores of micro-genres, it can easily see what’s popular with its viewers. It allows the company to acquire incredibly important information on viewership that up until this point simply was not available. In the film industry, ascertaining what’s popular at the moment is often a guessing game for film studios, which sometimes results in massive flops, such as Universal Studios’ “R.I.P.D.” in 2013, which made losses in excess of $52 million. Netflix can negate this problem, albeit on a smaller scale. By analysing exactly what its viewers enjoy and do not enjoy, Netflix can tailor its programming to what its viewers want. With 40 million subscribers world-wide, this is an extraordinarily successful business model, and one that’s leaving many traditional film studios and distributors envious.

Such accurate information on what viewers enjoy watching leaves Netflix in an incredibly advantageous position. In recent years, it has begun to exploit this. Original programming from Netflix has become an important part of how it keeps viewers interested. With such a profound understanding of viewer likes and dislikes, it is able to tailor what it produces to reduce the risk of a show’s failure. If Netflix understands its viewers to enjoy morally corrupt anti-hero characters such as Walter White in Breaking Bad, then the shows it offers will reflect this. If viewers enjoy dramas with long-running story arcs played out over a number of episodes, Netflix will offer similar shows. This is true of House of Cards, a Netflix original starring Kevin Spacey as a US Congressman with Machiavellian tendencies. Although Netflix doesn’t release viewer numbers, the show is widely regarded as a massive hit, collecting three Emmy awards for its first season. When Netflix knows what you’re into, you’ll keep using the service.

The idea of original programming from an online distributor is shaking up the television industry. House of Cards broke new ground in the entertainment industry in that it was the first Emmy- nominated tv show that technically wasn’t a tv show. Netflix was once seen as a place to put older shows out to pasture — but not anymore. It has become a safe haven for many shows; a launch pad and a financier for productions that wouldn’t necessarily get very far on television. For example, crime-drama The Killing has been cancelled twice by American network AMC due to lack of viewership. Twice it has been revived by AMC after seeing how successful it was on Netflix. Such a revival exhibits how Netflix is a different animal to traditional television. Dramas with long running story arcs such as The Killing do well on Netflix because the viewer is able to binge on several episodes in one-sitting, unlike traditional television. For the same reason, these sorts of shows typically do not do well in syndication, but on Netflix they’re there to watch in full anytime you like. The film industry is entering a time of great change. As the internet begins to allow for online streaming distributors such as Netflix to exist, traditional television has become threatened, particularly given the recent success of Netflix originals such as House of Cards and Orange is the New Black. Netflix, with its unparalleled knowledge of customer viewing habits, currently dominates the market. It knows which shows to buy and which shows to create. However, Amazon Prime now offers online streaming in a similar fashion to Netflix, and is even producing its first original programme, a political comedy called Alpha House starring John Goodman. This offers the first real threat to Netflix’s lucrative hold on the market, and could be the prelude to great competition for online streaming rights on television shows — something that could lead to more money being poured into original programming and could propel online streaming into becoming the industry standard for television shows.