How Netflix’s “Black Box” Shortchanges Content Creators

Gregory Markel
Jun 19, 2018 · 5 min read

By Alpha Networks

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By all accounts, Netflix’s Stranger Things has been a smash hit, bordering on a cultural phenomenon. The show has received near unanimous praise by critics and immense hype on social media. However, no one knows how many people have actually watched the show. It makes you wonder what kind of king’s ransom the Duffer brothers could have asked for in negotiations for season three.

Unlike shows that appear on cable and can be measured by Nielsen ratings, Netflix doesn’t release it’s viewership numbers. So while we can assume Stranger Things was a huge hit, we don’t know how big it’s audience actually is.

This gives Netflix a tremendous informational advantage when negotiating fees with content creators and rights holders. Without access to Netflix’s “black box” of data, it’s impossible for agents and producers to know exactly how valuable their intellectual property is to Netflix.

This fact has remained a problem, even as Netflix has grown to become the dominant force in the entertainment industry, with a higher market cap than Comcast and Disney at $170 billion.

Here are a few more stats to show just how dominant Netflix has become:

Given their incredible success, it’s fair for Hollywood creators to wonder if they’ve been getting a raw deal producing content for Netflix.

To get around Netflix’s “black box,” some journalists have been reduced to using clever methods like measuring Wikipedia searches of original Netflix content to estimate viewership numbers.

TV measurement firm Nielsen has even taken a crack at unlocking the mystery that is Netflix’s viewership numbers. They’ve started selling it’s Netflix data to clients using technology that captures audio of what subscribers watch, a similar technique to what radio measurement firms use.

Of course, Netflix has scoffed at Nielsen’s attempts to measure their subscribers, saying in a statement, “The data that Nielsen is reporting is not accurate, not even close, and does not reflect the viewing of these shows on Netflix.”

Given Netflix’s growing power in Hollywood, there are very good reasons for them not to release any of their subscriber data. As Ted Sarandos, Netflix’s Chief Content Officer explained, “Once we give a number for a show then every show will be benchmarked off of that show even though they were built sometimes for very specific audiences.”

So although Netflix’s unprecedented investment in content has been an a boon for content creators, the seemingly eternal adversarial relationship between distributors and creators remains. Each party negotiates against one another and withholds valuable data that could benefit each party. To this day, creators and rights holders — in TV, film, music and print alike — often have almost no visibility into how their content was consumed, and by whom.

This is an entrenched problem that has existed since the studio system in Hollywood has existed. So there remains an extraordinary opportunity for a new economic model to align the interests of distributors and creators once and for all.

A Level Playing Field, At Last

Alpha Networks has created a platform that aligns creators and distributors, who will both profit proportionally from any success. Since parties only pay and get paid for what is consumed, there’s no guessing or posturing as to the value of a given piece of content.

In the early stages the Alpha Networks platform will distribute, and in some cases commission, content in areas that our data indicates will be successful. Revenues will then be shared in a fair way by providing a transparent ledger of all relevant media consumption.

Content creators will then be paid proportionally based on how much of the Alpha Networks’ viewership they accrue, measured using the platform’s Proof of Engagement metric.

The platform’s architecture tracks and records each act of consumption by a viewer, which is then turned into transparent, actionable data to its networks, creators, and advertisers. Every user’s view is anonymized while retaining demographic-specific data, and then recorded on the blockchain for payout at the end of the designated period.

This allows for a revolutionary economic model to emerge, beyond “rate cards,” deficit financing, minimum guarantees, and multiyear licensing agreements.

Alpha Networks defines Proof of Engagement as a data point that can establish an interaction between a user and video content has taken place. These interactions can be any of the following:

1. Viewing a video for N seconds

2. Clicking on an in-video advertisement

3. Finishing an in-video activity, such as a questionnaire

Because Alpha Networks provides a transparent ledger of all relevant media consumption, there is no longer a need for adversarial negotiations between creators and distributors, because the essential data is no longer hidden in a “black box” by one party.

Alpha Networks also replaces the slow and inefficient economics of traditional media with direct, smart contract-driven micropayments. Rights holders receive direct payouts based on actual consumption, as well as access to a robust dashboard of analytics. With integrated wallet support, users can spend directly on a variety of goods and services directly from the main user interface. Advertisers will gain invaluable insights from Watson AI’s predictive analytics, automatic visualizations and customizable dashboards.

One of the primary functions of maintaining a sidechain of the main Alpha Networks blockchain is that content creators can get provably correct data analytics for any particular piece of content. This ensures that content creators have full transparency on how many views were generated, how many tokens were paid out, how many ads were clicked on, and how many viewers viewed the content.

Since it’s inception, Hollywood’s accounting practices have been deliberately opaque. It was made possible during an era when a very small number of entities controlled all content, production, and distribution. With the blockchain, these practices can be put out to pasture.

Alpha Networks disrupts Hollywood’s traditional economic model by outputting transparent, immutable records of the content consumed on its services. This fundamentally aligns all of the participants on the platform, which in turn increases the network effect for Alpha Networks.

Imagine a world where creators are no longer at an informational disadvantage. Where all the players: distributors, creators, and advertisers alike, are playing from the same deck of cards. Alpha Networks has created a platform that does exactly this, offering a democratized, transparent infrastructure for the next era of media. Join us in make it a reality.


The next era of media is here.

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