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How Netflix wants to change television forever

Netflix (s NFLX) Chief Content Officer Ted Sarandos called his company’s newly-announced Disney (s DIS) deal a game changer when quizzed about it by Harvey Weinstein during Wednesday’s UBS Media conference. The deal, which will bring new and catalog titles from Disney, Marvel and Pixar to the service, marks the first time a major Hollywood studio has chosen Netflix over a traditional pay TV network.

But Sarandos also made it clear that he doesn’t just want to steal away big blockbusters from the likes of HBO and Starz. Throughout the conversation, he explained that Netflix aims much higher: it wants to change television forever. Asked about how TV will look like in five years, Sarandos replied: “It’s gonna look nothing like we’re seeing today.”

So what is going to change? Sarandos gave us some good clues Wednesday:

Ratings don’t matter. Come February, Netflix is going to launch two original TV shows, and chances are that millions will tune in to watch the new season of Arrested Development alone.  But don’t expect Netflix to brag about it. Sarandos made it clear that he won’t release any numbers, no matter how good they are. “It’s a really irrelevant number,” for a subscription TV service, he argued, because it doesn’t have to sell large simultaneous audiences to advertisers.

And what’s worse, once you start releasing these numbers, everything is going to get measured by it. Your new show isn’t as good as last season’s hit? Then it must be a failure. Well, in the case of Netflix, it may not, because audiences may discover the content over time. Sarandos said the same thing could be true for HBO, and argued that it was a mistake for the pay TV network to put such a big emphasis on ratings.

Time slots are for sports and talk. Netflix has a pretty straightforward understanding of the TV space. On one side, there’s content that works well on linear TV, like sports and nighttime talk. “The immediacy of Jon Stewart…. lends itself to linear business models,” Sarandos said. On the other side, there is scripted content, which comes with a much longer shelf life.

Sarandos made it clear Wednesday that he has no intention to mess around with scheduled content. And for good reason: Making successful linear TV, getting people to tune in every night at a certain time — that’s hard. “The most difficult thing in linear television is the pressure on the time slot,” Sarandos said. With a Netflix-like on-demand model, you don’t have any of those issues.

This is on the surface just a simple business decision – but it could foreshadow a much bigger change. After all, if Netflix is successful with its no-schedule strategy, should other TV networks stick to the schedule as their viewing is shifting towards an on-demand world?

In related news: Viewers don’t want to wait for the next episode. One of the biggest differences in the way Netflix approaches its original content is that it releases an entire season at the same time. Weinstein had some doubts about this approach, arguing that people who grew up with traditional TV may prefer a staggered approach, and that it may take away from word of mouth and other marketing opportunities. But Sarandos countered that this is how people already watch traditional TV, thanks to DVRs. And in the end, it’s giving subscribers what they want: “People have the most satisfaction with immediate access,” he said.

Creators love this as well. Turns out that there is an unintended side-effect of releasing an entire season at once: If you give people the ability to watch two to three episodes at a time, or an entire season over a two-week span, they’ll be less prone to TV schedule amnesia. Right now, many shows spend a number of minutes recapping the previous episode — which makes little sense if viewers finished the previous episode minutes ago. “If you don’t do all that, you have all of this additional story-telling time,” explained Sarandos.

TV is getting more personal. Netflix has been investing in personalization for years, fine-tuning its recommendation engine to highlight movies and shows you might like to watch. However, so far most of this has been happening on the household level. Now, the company is taking steps to differentiate even further. One of the first steps was Just for Kids, the UI that separates kids’ content from other streaming fare. Next up are efforts to take this even further. “There is all of these things that we are looking at (around) deep personalization,” explained Sarandos. “Voice recognition, visual recognition.” In the future, Netflix could be able to pull up a user’s personalized recommendations as soon as that person walked into the room, he added.

Image courtesy of (CC-BY-SA) Flickr user joe.ross.

19 Responses to “How Netflix wants to change television forever”

  1. So there is yet another pretender to the throne! Someone else is going to radically change an entire business model overnight and reign supreme (for the benefit of the shareholders) … Quite honestly the average person has to get up in the morning and go to work or clean the house, or go shopping, or do the laundry, or go to school, or LIVE. They work hard all day! They come home, open the front door, kiss the wife/husband/partner, kiss the kids, hug the dog and fit back into the evening’s ritual – perhaps even cook a meal…or they are both working and the family is scrabbling around to find time for kids pick-up, homework, chores, sports, hobbies, family BBQs, LIFE and all the things that the world delivers. Does anyone REALLY believe that we are glued to our TV screens 24/7 as if that is the only thing in the world. Why are TV shows scheduled, why are their ratings, why has the business delivered the same format for the last umpteen years in the way it has? Because TV has created a system that suits the masses. We adjust and organise ourselves to schedules. What is the best device for a busy family – PVR and Catch-Up TV (aka VOD). Unless Netflix can be the only supplier of ALL the Content in the world we will see that they are merely just another choice in a HUGE selection of TV offerings that we have today. All hail Netflix!

  2. Overall, like any of these kinds of grandiose change-the-world comments you need to take them with many grains of salt.

    First off, no one is going to move away from some kind of number. If you need to sell 50,000 cars, you need to reach “X” amount of viewers to generate “Y” amount of people who put your brand on their short list. If you need to sell 50,000,000 tubes of toothpaste, the dynamics are different. What you are willing to pay or not pay for any message depends ultimately on the audience delivery, on how well-targetted the audience is and on how engaged they are.

    Second, at the bottom of it, Sarandos is still talking about a very passive delivery system when many modern media have moved away from that. What should happen is the contrary: Netflix ought to be able to talk to an advertiser and say: Oh, you want 10,000 men who are between 30 and 45, who live in the New York-Washington DC corridor and who like cars actively… don’t worry, we’ll deliver your message to them for $X.

    Third, whatever delivery you have or don’t have is not going to radically change the game unless advertisers move away from the very stale :30 spot. In Argentina, for example, one can buy television by the second, so if you have a message that only takes 18 seconds, you buy 18 seconds. Also, advertisers need to move away from “the” spot and realize that different spots are needed to address different groups, that spots go stale quickly and one needs more of them.

    Fourth, for all the grandiose stuff, I would say that 90% of all advertisers are really worried about their sales here and now, a model with no ratings, with no time slots… some advertisers (like Procter and Unilever) will experiment, but there are tons who really worry about their sales and their ability to put metrics to those sales figures.

  3. Domino Theory

    80+% of the TV entertainment is either on-demand or DVR’d. I can access Comcast and HBO on any device I own. Though I subscribe to Netflix streaming, I”m not sure why. I haven’t used it in months.

    Netflix is not changing the current trajectory; they’re just one of many players in the on-demand, streaming space that are all riding the same wave.

  4. Steve Symonds

    This guy should become Netflix CMO because his claims are pure hype. Look, Netflix absolutely desperately needed this deal. They paid an obscene amount of money…which is the ONLY thing these days that moves the needle with Disney/ESPN.

    Why? After Starz pulled its assets, Netflix was instantly became “The House of B, C, and D Title Horrors”. A few good titles but mostly crap. So Netflix was DESPERATE to keep Subscribers from abandoning ship — and to provide a credible asset base in the face of Amazon and Blockbuster launches. Over-paying like they did to support their share price and silly P/E is about as “shocking”: as Captain Renault announced at Rick’s American Bar.

    Problem is — this does NOTHING to fix Netflix’s totally broken biz model. Let’s see how many suckers go for the chum.

    • Chuckish

      Exactly. How anyone acts like Netflix is the future is insane to me. Every time they raise prices a cent, subscribers revolt. To keep up with what they’re paying for good and original content, they’re going to have to at least double or triple their prices and keep all their current subscribers. That just won’t happen. Netflix is going to die, it’s not a matter of if but when.

  5. ChickenLittle

    Stephen – NYC hit the nail on the head with regards to the delay in availability. Case in point: they are shouting to the heavens about this Disney deal….When is Disney going to be on Netflix??? IN THREE YEARS! Quite frankly, I think deals like that are only going to frustrate consumers. One day, your favorite films are in your “collection,” the next day “POOF” they are gone simply because you didn’t choose the right service. Granted, in this case you have 3 years to prepare for it.

  6. Stephen - NYC

    “TV schedule amnesia” – I like that phrase. I certainly do not like the recaps that shows do. “24” was notorious for spending the first 2 minutes telling us what happened last week. And shows that recap what happened just before they went to a five-minute commercial break waste more time too. Time that could be better spent getting back to whatever it was we were watching. I just wish that the shows could make it to Netflix sooner. I have decided to wait until a show has been canceled or there are at least 2 seasons worth to watch online. I don’t want to watch 13 or 22 episodes only to find out that the current season isn’t going to be there for another year. I can wait for it all to be there.

  7. Chris W.

    Those are some pretty fanciful assertions.

    I’m sure if the ratings for these new Netflix original shows were high, Netlfix would release them. It’s great that some shows (probably not many) may break out weeks or months after they begin, but I’m not sure how that helps to sell advertising up front.

    As for filming and releasing an entire season of a brand new and untested program all at once, that is a huge gamble to take on a regular basis unless it is a fairly low budget production.

    Finally, for all the talk of “personalization,” the Netflix streaming website is woefully primitive in terms of customization features – you can’t even sort the queue by genre, let alone do any kind of advanced search based on popularity, director, actors, year, language, etc.

    • You can’t even base Netflix original shows off ratings. Its On Demand? Customers can watch the show whenever they want. It’s not a scheduled show. I also have not really seen any issues with the customizing Netflix to my likes. I mean they have made it pretty damn easy to do.

  8. I think one thing that has plagued Netflix for years was is stale availability on the movie front, but it has really shined in being an outlet for marathon viewing seasons of television shows you are JUST wanting to get in to viewing.

    Though I don’t think they will single-handedly do any real damage to the traditional television model, they do raise valid points that have me interested in how they plan to evolve the streaming business model. We’re definitely in exciting times!