Streaming Killed the Video Star
Part 1 of The Chronicles of Streaming — Netflix brutalises the box office
Pop culture changes quickly. The medium(s) behind it change a little slower but I think that, particularly over the last couple of years, we’re beginning to see tech-driven, manifest changes in the way that we consume artistic content across the board. The future is here just not evenly distributed. That axiom remains well-intact. Here we’re going to take a look at variable impacts that tech has had on music and on TV. Streaming is the connection, yet what’s happened and looks likely to continue in both those markets is rather different.
Netflix…the vampire squid of teenies pop culture. In a matter of years we’ve come accustomed to bingeing on 4k HD delights. The company has popularised a format of series with which we are all now intimately familiar with: intrigue, astonishment and confusion all satisfied in an abundance of available episodes. Watch a series over a weekend, then choose your next (invariably Netflix Original content) out of a selection of thousands more. Tired of episodes and series? No problem, just go ahead and delve into the back catalogue of documentaries. I recently watched Icarus — which turned out to be an accidental expose/fantastic piece of investigative journalism on state-sponsored doping of Russian athletes.
This magical world of endless entertainment and associated addiction comes at a price. Netflix’s costs per user have been growing at over 6% per year.
Netflix’s costs per streaming customer
All that goes into producing everything that anyone could ever possibly want to watch from the comfort of their own home. This breadth is a massive part of Netflix’s defensibility. Content is hard and expensive — an execution play — so if you pull it off, you’re winning. Theirs is an intelligent, informed breadth of content though. Unlike terrestrial TV, cable and Sky; Netflix deliver their content through apps so they know lots of useful stuff about you. When you watch. How you watch. What made you switch off, and when. They probably know a great deal more owing to some high-tech eavesdropping.
Streaming video, and the intelligence gained from it, has given Netflix the platform to vertically integrate. The direct exposure of the video production value chain to the consumer has doubtless benefitted each actor in that chain. Of course, the more users, the more data, and then the better Netflix gets at fulfilling demand. Netflix’s is a formidable flywheel and competitive advantage.
The more users…
This all means that Netflix can commission and release programmes with a significantly greater degree of predicted success. Ever wondered why the BBC pump out period drama after period drama? It’s because millions of people who watch series on the BBC like period drama. Does the BBC know much more about those people? Not really. Does the BBC know much more about the millions and millions who don’t love period drama? Not really.
…the more data…the better the outcome
Netflix’s onward march knows no end. They consistently achieve beyond analysts’ commercial expectations too (notwithstanding this last quarter). As a result, the company has been richly rewarded in the public markets. The HBOs of the world have, predictably, been penalised. The direct competition isn’t the only group that’s suffering at the hands of Netflix, the box office has been bent out of shape too.
Hollywood has been accused of being fresh out of ideas. People have been pointing to the seeming lack of investment or focus on anything new. The chart below shows those films with the largest opening weekend takes in history.
There’s something that all these films have in common: they’re all sequels or part of established hit franchises. They’re films with big budgets, yes, but they’re also packed full of already-loved characters and run to a story-formula with which the viewer is as familiar as they are comfortable. It’s not particularly innovative, but how could it be? The levels of quality that we all now expect from long-form video content coming out of a screen have been changed forever. Hollywood can’t afford to take gambles just like the BBC can’t afford not to pump out period drama.
This is brought into even more acute focus when you take into account the relevant price of a cinema outing or a TV license. The incumbents are playing a game against a company that’s moving faster and offering better and cheaper products that are improving at a rate that they can’t really match. Hollywood can’t afford to take gambles just like the BBC can’t afford not to pump out period drama.
Of all the things that you can spend your money on, why bother spending the cash to go and see Solo, aside from it being pretty rubbish, when it comes at a price greater than your monthly Netflix subscription?
Building upon the foundation of their direct, deep and detailed connection with us, the viewers, Netflix has defined what we have come to expect of video content in terms of price, quality and accessibility.
