Is It The Content Or The Packaging?

My partner Andy tweeted this yesterday and I replied:

Andy was referring to this tweet:

I was looking for some thoughts on whether these Netflix and Amazon shows are really the best content on TV right now or whether it is the packaging that has caused them to top the rankings.

Peter Kafka rightly points out that those rankings are suspect since they don’t include Game Of Thrones and other HBO shows:

But even if the list is suspect, I stick with the question. Do Amazon and Netflix greenlight better shows than their competitors or do they package them up better?

This response from Andy captures the answer that I believe to be true, the packaging matters a lot to the consumer and also impacts the creators and how they make the shows.

I also like this reply:

I’m not sure what “co-viewing” means but I get the rest and agree with it.

The high level point to me is that the packaging matters a lot. Over the top services, a direct relationship with the content producer, all at once release (promoting binge watching), and great content is the winning formula. Content quality alone is not enough.


Comments (Archived):

  1. aweissman

    I’ve also been thinking about this for a long while ( see, eg,…The change in context (“packaging”) can lead to a change in the content types – it is, in a way, potentially liberating to a producer or creator or artist, as they now have new guideposts (or no guideposts) within which to create.

    1. William Mougayar

      You ended with this, 2 years ago, “The golden age of film may be about to start.”How do you think we are doing so far?

      1. aweissman

        I should have said “video” but I think that prediction was pretty good, no? 😉

        1. William Mougayar

          yes, of course! but i was hoping for more than a yes/no answer 🙂

    2. Salt Shaker

      Binge viewing correlates solely to quality content. The packaging, distribution, etc., is all secondary to the programming, although the lack of encumbrances and creative freedom these services offer unquestionably is a draw for talent.

      1. Michael Elling

        Huh? What study do you base this on? It might be easier to binge poor quality rather than be forced to return to something weekly if it’s not that good. This is helped along by the ease at which the content can be consumed in vast quantities across many different contexts in such a short period of time; basically “killing” downtime, or what we used to do with paperbacks, magazines or newspapers that we carried around. Just look at the above link from the verge about how many episodes it takes on average to “hook” audiences.

        1. Salt Shaker

          The Verge piece references a defacto analysis of a successful series. Of course Netflix can identify when a viewer is “hooked” based on the frequency and timing of viewing patterns. My point is there’s nothing much to analyze or “hook” if the series is a dog. It all starts with product. No one binges at a restaurant that serves inferior food. I’m not saying binge isn’t part of their secret sauce, it is, but in no industry that I’m aware of can success be achieved w/ out a quality product. Conversely, in a subscription based biz, where churn is always a huge concern, I can see where binge can potentially impact Netflix disconnects, particularly if a viewer’s sole or primary reason for subscribing is tied to a particular series that can be viewed in a day.

          1. Michael Elling

            This is your supposition. Again, I ask that you provide some proof.If anything, the lack of a lot of good quality content on Netflix underscores that the packaging and delivery is equally if not more important.

          2. Salt Shaker

            Do you honestly think Ted Sarandos is telling his programming dept “don’t worry if our content sucks cause we have great packaging and delivery?” Do you think Netflix, or any other leading premium network/service, would be investing hundreds of millions of dollars in original content if it wasn’t the singular most important part of the food chain? Of course, packaging and delivery are important, and very critical to Netflix’s success, but it all starts w/ programming, and I say that, respectfully, as someone w/ years experience as an independent producer and marketing exec of TV content.

          3. Michael Elling

            No question of your experience. But you still haven’t provided any factual support for what you said. Based on 25 years studying communication and media subscription models here’s my 2 cents:1) for the price of 2 venti lattes from Starbucks per month spread across 1-3 people on average you have little chance of churn;2) with delivery (scale, performance, UX, cross-screen) that is leading everyone by a mile there is little chance of churn,3) with a very small selection of high quality content, a lot of long-tail “B” content and 50%+ junk you have very little churn because of the enormous range of choice. In the end satisfying diversity of demand is more central to the churn issue.Spacey said, “give them control.”So it’s price and delivery (packaging) followed by (quality) content.Having said that, there are 2 things I believe Netflix can improve on, namely a la carte pricing and delivery of real-time and premium content. Then they can satisfy ALL demand curves. They now have the scale to accomplish this. Packaging (pricing, access and delivery) is key to getting the leadership in content. This will happen very quickly in the next 3 years. Then it’s lights out LinearTV.

          4. Salt Shaker

            Healthy dialog, Michael.I’m obv not privy to Netflix’s internal data, but Fred’s blog is where folks, like you and me, can express various points-of-view and opinions, not based solely on facts or data, but conjecture and experience too. That said, a few years ago Netflix’s monthly churn was 4%, which frankly is nothing to sneeze at. Although the service no longer publishes its churn rate, they do acknowledge that original programming has led to reductions.Of course, any OTT service will have lower churn than a cable supported network because there’s no bundling and the consumer has a lower out of pocket expense. But Netflix, or virtually any premium entertainment service, doesn’t operate in a vacuum. The consumer likely subscribes to other services (e.g., Hulu, Amazon Prime, Spotify, Pandora, NYT, WSJ) and the price/value of all their sub services needs to be evaluated both individually and in a broader, collective context.Churn will always be a concern for any sub based business, and original programming will only continue to grow in importance for Netflix, as it has for HBO, SHO, STARZ, ENCORE, AMAZON, etc. No question linear TV is in decline, but it’s hardly on the ropes. Remember, there are millions of folk who still subscribe to AOL’s dial up service. Disclosure: I managed HBO’s advertising for 4+ years and ran marketing for a subscription based sports pub. I’ve also taught database marketing as an adjunct at NYU.Reasonable people can certainly disagree (until proven otherwise 🙂 Cheers!

    3. falicon

      I think you might be focusing on the wrong cause & effect here.I would argue that the cost of production and other former barriers to entry are the primary drivers to the “change in content types”…essentially, it’s opened up the flood gates on volume and that in turn has elevated the opportunity for new content types to be pushed and explored (some of which have hit & become the new “normal”).Context is all about the viewing/consuming experience…but that doesn’t fundamentally change (most) of world for the creator.Does a painter paint something different based on the frame it’s going to be displayed in? Does she consider where it’s going to be displayed? Does she consider the demographics of her audience? Probably in some cases & situations, but I still like to think that most “art” is born out of the desire of the artist to express something from inside…and to evoke specific emotions and thoughts in their audience…regardless of who that audience is, where they are, or how they are exposed to the art…*shrug*…it’s probably somewhere in the middle of what we’re both saying…

    4. fredwilson

      Does packaging drive content type or the other way around?

      1. aweissman

        I think the packaging drives the content. Other examples of this are twitter, Instagram, YouNow

  2. obarthelemy

    I remember reading a long time ago in The Economist that series are the new films, because series don’t have to cater to the least common denominator, can be successful in niches, and have time to build up characters and narrative.I think Netflix and Amazon are riding that wave. Recently, I have found myself concluding after several movies “well, this wasn’t as good as such-and-such episode of …. Maybe Netflix is regretting not calling itself Netisodes ?

  3. LIAD

    convenience trumps all.imagine a blue ocean style value canvas with factors of price/accessibility/release schedule/content risk appetite/ease of discovery etc – streaming shows kick TVs ass all day long have you spent watching a shitty tv show because you couldn’t be bothered to get up and find the remote control to change it?when’s the last time you watched something on your shitty small phone screen even though you had a ipad/laptop/pc to hand but didn’t want the gross inconvenience of moving.Expect them though to be disrupted by independent creators distributed through YouTube.Anyone have comparative viewing figures for ‘programme length’ content on YT vs AMZN/NFLX am certain if YT not smashing them now, will do shortly.

  4. Mario Cantin

    There is *too much* content, and many people (I was tempted to say the younger generations) consume their entertainment online and are just as happy watching YouTube, and so ‘grabbing something on Netflix’ is convenient, affordable and logical if they want produced content.It would seem safe to assume at that point that the channel becomes ultimately more important than the quality of the content, as long as it’s still ‘good enough’, obviously.My wife and I were watching Mark Wiens on YouTube last night, and I finally said to her, “Do you realize that we’re watching a regular guy eating food instead of watching a movie?”. If someone had predicted that I would be doing this five years ago I would have laughed. It’s the new ‘reality TV’.

    1. sigmaalgebra

      YouTube is terrific now and in time will get better. The huge advantage of YouTube is that it can appeal to a million narrow interests. For anything of mass market appeal, for me, no thanks. So, my guess is that video stories from Netflix and Amazon are not for me.

  5. William Mougayar

    I wonder where else does that concept analogy apply as well? In web content, I can think of the Buzzfeed, FlipBoard and Snapchat types where packaging is the starting point.

  6. sigmaalgebra

    Gee, good analysis about …, about TV? Gads. Last time I watched it in years was for the first Republican debate last year. To do that, I had to upgrade my service. I did, was sorry because soon enough the Internet had the debate video for free, and canceled the service upgrade.TV? Gads.

  7. William Mougayar

    This also proves that we want our video content chunked up, just like web content, and we will factor search/discovery efforts as part of the experience.

    1. sigmaalgebra

      > factor search/discovery efforts as part of the experience.Ah, this early in the morning, already a good day!

      1. William Mougayar

        that said, i’m not sure it’s a good thing necessarily, but it seems inevitable due to the fragmentation/decentralization of content.

        1. sigmaalgebra

          > inevitable due to the fragmentation/decentralization of content.So, let’s see: Some years ago, technorati was tracking 100 million blogs. Bet there are still a lot of blogs.I can never remember how many Web sites, URLs there are — a billion?How many videos on YouTube?Supposedly there are over 1 trillion Web pages.So, as Ben Evans mentioned a few days ago, and as you did, there is a need for search, discovery. Sometimes we toss in also recommendation and curation, maybe also notification and subscription.Ah, it warms the heart of an entrepreneur who independently identifies a market need and, later, sees others also notice that need, especially when that entrepreneur has in the interim worked out and programmed the first good solution with a good technological barrier to entry.

    2. Michael Elling

      amazing how you can watch 45 minutes of an episode in 2-10 minute chunks across the day using “downtime”. just like we did with that paperback or magazine or newspaper we used to carry around. need a good term for that; other than binging.

  8. awaldstein

    Yes of course, emotive messaging and storytelling is defined in part by packaging and presentation.But this topic–thanks @aweissman:disqus –touches on something else that I’m working on now which is that indeed we are not talking about film but about episodic TV and storytelling.About how it no longer requires us to suspend disbelief in the traditional way Artaud redefined it, and we become more connected, more identified with, more emotionally connected with the moral ambiguities of the characters.As today, that moral ambiguity is part of our culture today and a bridge that connects.And I think further, that this–episodic storytelling– is how we not only create art and tell stories but how we market our visions and communicate with our communities.Case in point is right here at avc. Episode xxxx.I haven’t thanked you Fred for this blog this year yet so–Thanks!

    1. fredwilson

      Our portfolio company Wattpad does episodic storytelling on mobile phones and is and has been a top three mobile app in the books category for years

      1. awaldstein

        Didn’t know that-thanks.Didn’t realize this completely till I was designing a content marketing campaign into developer communities. It struck me that the best pacing was episodic to drive engagement and attention and get feedback along the way.

  9. Phil Chacko

    The delivery model matters quite a lot and is related to the business model for two reasons: recommendations and self-selection binge bias.Netflix will produce maybe two dozen or more original series this year. Thanks to the recommendation engine, you’ll likely be presented with 10 or so of those. This means that as a viewer you compare Netflix’s best 10 *tailored to you* against ABC’s overall average. This is an advantage.Furthermore, when you check out a series, you’ll drop it and move to something else sooner if you don’t like it, and probably won’t bother to go rate it on Rottentomatoes. If you like it you’ll watch 10+ episodes and are much more likely to rate. This results in self-selection among raters pre-disposed to like the content.Overall this means that Netflix gets to benefit from a “power law” in its curation model whereby you judge it based on how well it’s personalized to you. It’s almost as though Netflix-produced content you don’t like doesn’t exist because you don’t see it. But that’s fine for the business model because Netflix isn’t constrained to the finite linear (ABC) primetime schedule.

  10. Kai Turner

    Other datapoints you might consider are:- Metacritic –…- Episode Calendar (trends) –…They provide perhaps a more balanced view that includes original productions by HBO, Showtime, AMC. Still supports the trend that preferred content is being developed outside of the traditional broadcast networks.

  11. JimHirshfield

    There’s also the value optimization factor. That is, if I’m already paying for Netflix I’m more inclined to seek out something to watch there versus broadcast TV because I want to make sure I’m getting my money’s worth of programming.

    1. LE

      Agree (although I have no clue what “value optimization factor” means). [1] Other big thing is Netflix et al is pre DVR’d. On TV I have to either watch or decide in advance what to DVR. Of course there is on demand with Fios but navigating the small remote control isn’t really worth that and of course the discovery is really hard as well.[1] And LMGTFY returns no results.

      1. JimHirshfield

        I made it up. It means, getting the most for my money.

        1. LE

          You must have been taking cues from Arnold who tends to write paragraphs like that.

  12. aminTorres

    If you make the content, then it is the content.If you make and distribute the package, then it is both the content and the package. If you distribute the content, then it is the package.(For media, the package and the distribution are often the same. )

  13. wjcohen

    I do think it’s the development/creative process – the streamers are greenlighting shows targeted at a smaller, passionate fan base rather than the broader network approach of making more inoffensive material people that can like, but not love. As a result, the best creatives (showrunners, writers and directors) are flocking to make shows for these platforms. (Of note is that the best creative talent are also overwhelmingly independent free agents, unlike say engineering talent that works exclusively for one company at a time.)Co-viewing (basically watching and commenting live with others on the Twitter – check last night’s Bachelor premiere) is sadly a disadvantage of these platforms, not a strength. When no one is watching simultaneously (and fears giving away spoilers) there is not much social echo. I miss that a lot. I devoured Transparent, OITNB for instance but there is no one to talk to about it online, unlike Empire, Scandal etc.

    1. Eric P. Rhodes

      @wjcohen:disqus @fredwilson:disqus I always thought co-viewing was more akin to co-reading in that you’re doing the activity simultaneously with other people in the same space (i.e., parents watching tv with children). But a quick search found that there is something called connected co-viewing which involves a second screen experience (i.e., co-viewing and tweeting). I learn something new every day!

  14. pointsnfigures

    This post strikes home. The other night, we were looking for a movie to watch. I perused Netflix. Saw nothing we really wanted to watch. Went to HBO Go, saw nothing interesting there either. I thought, why do I even have these services? House of Cards, Game of Thrones, Silicon Valley-it was because of certain original content programming. I was reminded of the Springsteen song “57 Channels and Nothing On”. I’d be willing to ditch the subscription, and pay for the shows. We need to unbundle Netflix etc.

    1. JimHirshfield

      At $8/month (Netflix), it couldn’t get much cheaper if you were to pay per show. And Amzn Prime Video is included at no extra charge with Prime

      1. Anne Libby

        Yes! Cost/service is definitely part of the picture.I cut the cord maybe 6-7 years ago after an astounding customer service service fail by TWC made me think, “I’m paying *what*?”

      2. ShanaC

        sort of – I have prime, but that doesn’t mean all the videos are free (I wish)

        1. JimHirshfield


          1. ShanaC

            Netflix’s answer is to block content/pretend it isn’t in system*, amazon is to try charging, but I also think that because Amazon wants to always make a sale, they may be turning off people quickly (especially on a laptop/some other device)*hence why the dvd business hasn’t totally died yet

    2. wjcohen

      Your subscription fee is our production dollars. Without upfront funds, i dont think much content will be made (or it will be like the movies where only projects with preeexisting fan base are made ie superhero stuff.) brands arent spending tens of millions on creative production unless their product appears in every scene, which is a bit inimical to the creative process.

    3. LE

      I perused Netflix. Saw nothing we really wanted to watch.You didn’t see something because discovery is a big problem on Netflix. Also the fact that there is no easy way to see a trailer and even confirm what you might want to watch. You have to start to roll it to see.And you can’t see what others liked (that you know) that you’d want to watch. Star rating system is messed up. Used to be it was what they thought you’d like now it looks like it reverted to what everyone thinks (traditional system). I’d be willing to ditch the subscription, and pay for the shows.Not going to work that way. One of the issues that I have with Amazon video (in addition to the really really poor quality what’s up with that?) is making a decision as to whether I want to pay $2.99 for something that I don’t know if I will like. It’s not the $2.99 or the $5.99 (or even deciding “rent or buy”) but the fact that I know the money might be wasted. Why? Because I’ve been primed by Netflix to expect free for everything. (Prime has free but it’s a really not easy to find anything on that at least Netflix markets things a bit better. Of course with Prime (or paid Amazon) you get trailers which is my other netflix complaint).Paying wasn’t a problem back in the video store days though. You picked up two movies and you were forced to like at least one of them or give them a shot past the first 20 minutes.

      1. falicon

        Interesting side note here, most of these apps have different interfaces/features for different devices…e.g. Amazon prime on roku isn’t too bad, slightly worse on xbox one, and not really usable at all via desktop or the mobile app & chromecast (unless you know what you are looking for)…imagine it’s also a completely diff. experience on a Amazon fire stick and/or an Apple tv.Key lesson (for me): It’s good to customize your app/experience to take advantage of what a platform has to offer…but not at the expense of cross-device usability and/or your users sanity.

      2. markbarrington

        Difficult discovery is a feature of Netflix not a bug. Distributing content to you costs them dollars. They would like you to discover enough to make a $9 subscription valuable and not an hour more.

        1. LE

          I don’t think so. Providing more value would allow they to eventually jack up the price from $9. Also your thought doesn’t explain the recent and frequent site redesigns.Retarding discovery is not a “hard chairs at McDonalds” [1] strategy on their part.What you are saying doesn’t make any sense if I am going to watch for 2 hours a night I might as well watch something that I like. Edge case unemployed bingers are not the core customer.[1] They don’t want people to linger hence the harsh lighting and uncomfortable tables and chairs (at least the last time I was there which might have been 20 years ago when I used the restrooms on a trip somewhere..)

        2. ErikSchwartz

          100% absolutely right.The goal of flat rate SVOD is to provide exactly enough content to keep you from churning, not create lots of great content to increase TSV.

  15. dan_malven

    As far as the list goes, first thought that came to my mind was its a biased sample. The people who rate the shows at RottenTomatoes aren’t necessarily representative of the total population. I think the subset of the population who are rating would skew more heavily to the binge-watchers.

    1. ErikSchwartz

      FWIW, Rotten Tomatoes is owned by Flixter, which is owned by Warner Brothers, which is owned by Time Warner.

  16. Aviah Laor

    Kevin Spacey’s detailed and really entertaining speech about this subject, and the new opportunities

    1. Michael Elling

      He should run for president.

  17. Salt Shaker

    Well, just look at the competitive landscape. There’s really nothing on. Broadcast networks gravitated towards reality programming cause episodic TV became cost-prohibitive, while reality was an easy, brainless, high margin solution. Netflix, HBO, Amazon, etc., can pursue quality, episodic series because–unlike the broadcast nets–they’re not beholden to Nielsen ratings, advertiser dollars, standards & practices, affiliate relations, local scheduling issues, etc. Their biz model is far more streamlined and less bureaucratic, but ultimately content–not distribution–will always be king! Creative talent is drawn to those services because they give the talent the freedom to do things. Netflix doesn’t shoot pilots or even do focus groups. These services have created an environment where they offer, at least the perception of, a different viewing experience (“It’s Not TV, It’s HBO”). Can basic cable and broadcast TV replicate? Of course they can, but w/ their biz model and internal/external impediments it’s far more challenging. They have far less rope and a low margin for error!

    1. wjcohen

      “Nothing on” is a bit extreme. The study Fred cites is all about quality metrics. But Nielsen says traditional TV and cable watch time is still more than 4 hours a day, most of it live. Netflix stingier with stats but crudely, given 69 million subscribers watching 100 million hours per month (fyi: these are global figures, not US) that roughly comes out to 1 hr 40 minutes a day at best (again, this is a crude estimate given paucity of data.) So new streamers are growing fast but TV has remained popular despite it all. The biggest stream watchers are also big TV consumers.

      1. Salt Shaker

        Broadcast network ratings/share has declined consistently for 20+ years. Live events, predominantly sports, has been the only consistent driver. Financial pressure drove broadcast nets to rely on a preponderance of low cost/high margin reality TV, while inadvertently creating a vacuum for quality, original programming that is now being filled by OTT services.

        1. wjcohen

          What broadcast lost over 20 years had been replaced by cable and now, DVR viewing (which ranks as the first or second watched “program” in many prime time slots.) So ratings/shares dispersed among different players. They have not yet eroded (except among younger viewers – but even they still statistically watch a lot of TV.)There’s a lot of good programs everywhere (Mad Men, Scandal, Fargo, Empire, Mr. Robot, Hannibal, The Americans, Downton Abbey etc.) I don’t think streamers have a monopoly on quality, just a better batting average re: quality to filler ratio.

          1. Salt Shaker

            Agree. “The Americans” doesn’t get the credit it deserves, btw. Awesome series.

          2. wjcohen

            One of my faves too! Can’t wait for the new season!I also like the co-viewing aspect of traditional TV, the live discussion during and after an episode as well as all the internet speculation about next week (ie Game of Thrones in particular.) I miss that with binge shows – I love many Netflix/Amazon programs, but part of the experience is missing. I think social has helped keep TV ratings/mindshare afloat given so much new competition.

      2. Chimpwithcans

        Americans watch 4 HOURS a day of TV????? Am i understanding your post right?

        1. wjcohen

          Scary/yes, per Nielsen.

          1. Peter Radizeski

            I wonder how much of that is Sports, not HBO or AMC.

        2. PhilipSugar

          The TV is on 4 hours a day. Watching?? Well it’s on probably 12 hours a day in my house in the kitchen.

      3. ErikSchwartz

        There is an intentionally deceptive game Netflix plays here.There are 100 million hours watched.There are 69 Million subs.There are tens of millions of more viewers who generate hours watched who are NOT subs due to password sharing.They are artificially keeping the denominator low to increase perceived engagement. This is why they do not crack down on password sharing.

        1. Peter Radizeski

          You really have a Netflix bias

          1. ErikSchwartz

            I think they are a great service. Been a subscriber since the beginning.I also think they are better at PR than anyone other than Apple.

    2. awaldstein

      good info, thanks!

    3. LE

      Broadcast networks gravitated towards reality programming cause episodic TV became cost-prohibitiveThat movement had its roots in writers strikes (not that reality tv didn’t exist in some form before that it did). After the networks saw they could do reality w/o writers and scripts (although there are reality scripts now of course) by accident they recognized the economic benefits. To bad for the writers I guess they aren’t as smart as they think they are. (Note similar disbelief with what the street smart Saudis have done with oil prices by the egghead academics, analysts and government people..)…

    4. ErikSchwartz

      Netflix went original content because rights owners stopped giving them back seasons of TV series basically for free (or thrown in with giant DVD orders). Once rights holders realized that they were HUGELY undervaluing their catalog NFLX pretty much had to get into bidding and competing for first run.

  18. sdso234

    Its the business model. No ratings pressure, and non-viewers subsidizing viewers (sound familiar?) make it easier for creators to focus on critics as opposed to audiences. Traditional TV has to satisfy 3 masters – audiences, critics and advertisers.

  19. Mark Essel

    Michelle (wife) and I finished all the Stargate content on Amazon and dead stopped during the garbage that was SG universe. It was great watching over the past year+ at our convenience commercial free. For Netflix we have a season of content for a handful of shows we’d like to watch as well – but there’s no great rush to watch it now.It’s hard finding time coinciding with interest to watch, even in the colder months. Often at the end of a day there’s some time for dinner and a few minutes of reading before we hit the sack and start all over again.

    1. falicon

      I usually have something streaming while working from home (though this past year I’ve spent most of my time in a WeWork space and not at home)…so I’ve gone through the SG stuff as well…SG Universe wasn’t that bad…not on par with the other stuff, but still better than nothing ;-)We should share/compare sci-fi lists…I’m always looking for more to throw into the queue 😉

      1. Mark Essel

        Sounds like a plan, will def review the list, the good the bad etc and share at some point…

      2. Mark Essel

        oh which we work, I’m down on wooster street with sp0n now, might be nearby for a fun lunch meetup. (usually in HQ mon/wed)

        1. falicon

          Houston and Varick…ping me any time you are free!

          1. Mark Essel

            Dude! You should swing by our office and meet the crew.will hit ya up

  20. Ana Milicevic

    The advantage that OTT providers like Netflix have over traditional TV is in granularity of audience and the viewing data to back up any assumptions: the bet is that any show of high enough quality will find a large enough audience on on-demand because it’s knowingly playing to a specific audience vs. mainstream, non-offensive stuff the networks play too. This is the same advantage that HBO and Showtime have, and indeed have been producing content that’s widely raved about. To a lesser extent basic cable channels like FX and AMC are honing in on this but the networks can’t (Breaking Bad, Walking Dead, Sons of Anarchy, Mad Men)– they need to play to some imaginary middle ground that doesn’t allow for much creativity or edginess. This is why a show like Kimmy Schmidt is a hit on Netflix and wisely passed on by NBC. Netflix knows the formula for show success & stickiness:…. TV networks still need to rely on the whims of an undifferentiated audience.So it’s both the content and the packaging, but more so than anything else it’s the audience and the data.

    1. falicon

      +100. FX and AMC are KILLER examples/additions to the conversation…but agree 1,000% with everything in your comment! 😉

    2. Kirsten Lambertsen

      Yes! NBC has to please advertisers. Netflix has to please subscribers. HBO is somewhere in the middle. And all the content reflects that situation.

      1. Wyatt Brown

        Any thoughts on who Amazon is subservient to? They seem to have their own psychological production and biz mission niche…

        1. Kirsten Lambertsen

          I’d have to say they’re in the same boat as Netflix. I can’t see “Transparent” getting produced for any other “master” but its audience. But maybe I’m being too simplistic there.

          1. Wyatt Brown

            Amazon is interesting because they are a ‘spectrum’ marketplace; Selling just about everything and anything. The other major content producers/providers/players are largely single-purpose. Yet Amazon manages to produce quality, like Transparent. Pretty impressive.

          2. Kirsten Lambertsen

            Yeah, when I think about it the possibilities are kind of staggering with Amazon, if they are able to make sense of allllll that data and translate it into original programming investments. Like @aexm:disqus says, it’s all about the data.

        2. ErikSchwartz

          It feels like Amazon’s originals are edgier.

          1. Ana Milicevic

            + @MsPseudolus:disqus @wyattsdisqus:disqusI’ll confess I didn’t see it coming w/ Amazon and largely thought their efforts in the premium video space would resemble Yahoo’s haphazard approach and insufficient investment. I’m very happy that this assumption was proven wrong but doubly so because Amazon, like Netflix, possesses granular viewership data (and when you bundle in other interest and intent data from our Amazon accounts its data set is incredibly comprehensive).

          2. ErikSchwartz

            How is there not a new season of Alpha House?

      2. LE

        NBC has to please advertisers.And the FCC.

        1. Kirsten Lambertsen

          True, who also have to please the advertisers 😉

          1. Mark Essel

            Hulu 🙂

          2. ShanaC

            and the public

      3. William Mougayar

        Great way of putting it!

      4. ShanaC

        Netflix has to please advertisers by having a deep content library, which they need to license. I can imagine a day where advertisers, as part of the deal to extract data out of shows for media buying purposes, require netflix to hand over data about said shows as well

    3. LE

      but the networks can’t (Breaking Bad, Walking Dead, Sons of Anarchy, Mad Men)– they need to play to some imaginary middle ground that doesn’t allow for much creativity or edginessActually it’s the FCC or at least that plays a large role in what they are able to produce.

      1. Peter Radizeski

        The FCC doesn’t play that big of a role.

        1. LE

          It is a violation of federal law to air obscene programming at any time or indecent programming or profane language from 6 a.m. to 10 p.m. Congress has given the FCC the responsibility for administratively enforcing these laws. The FCC may revoke a station license, impose a monetary forfeiture or issue a warning if a station airs obscene, indecent or profane material.See:

          1. Ana Milicevic

            I’d argue that every reality show is obscene, indecent and profane w/o a certain 4-letter word rolling out of a protagonist’s mouth.I also wouldn’t equate profanity w/ edginess or creativity (or lack thereof) so I, too like @radinfo:disqus , don’t think the FCC has as big a role in this.

          2. LE

            Nah I have to disagree with both of you intuitively and say this plays a large role. Think of it as having to be on your best behavior in some situations (around a customer or new inlaws or if you have a boss) vs. being able to be yourself with people that you know or don’t give a shit what they think. The fact that there is a barrier of any type will absolutely alter creativity.I had a client once who I was doing some work for who wanted to be notified of whatever I did and my strategy and play by play. Not so they could say “yay” or “nay” but just so they would know what I was up to. I said “sorry I don’t work that way, not going to agree to that it will mess up my creative brain to come up with novel solutions and strategy”. They were cool with that because they were a movie director (had something on HBO and in major distribution so wasn’t a nobody) so they understood what I was saying. Of course I knew that prior to working that angle. I ended up sharing things with them but because I wanted to and it was fun to do and in a way that didn’t limit what I was doing creatively.So my point is the restriction of the FCC puts a ceiling on things of course with extra brain cycles you could in theory get around that but it does have a major impact.It’s easier to be funny if you can say fuck here and there.

          3. Ana Milicevic

            “It’s easier to be funny if you can say fuck here and there.”Undoubtedly. But you can also say frak like in Battlestar Galactica. Or invent some other dirty word and see it transition into popular culture. Or use creative sound effects to mask the actual saying of something naughty like in Oceans Eleven. If the FCC was such a big consideration I’d like to think we’d see more creative innovation like this to get around FCC restrictions instead of the tired, reused storylines we’re seeing because the show’s audience is meant to be everyone under the sun from 18 to 81.

          4. SV Native

            How many times do you hear “F” word on Mad Men, Breaking Bad, Fargo et al? Sure it would be nice, but creativity can flourish from within constraints, sometimes can even spark something better…btw- anyone know what number are we up now for how many times we hear the “I told famous director my brilliance can’t be constrained and he loved me for it” story anyway? It is a great story every time 🙂

          5. Peter Radizeski

            Thanks for pointing out the rule. The FCC has only issued fines for nudity in the last 5 years – spurred on by hundreds of consumer complaints. Profane language is on every show today.

    4. William Mougayar

      I’m still puzzled that the TV networks aren’t taking digital delivery seriously and only have half-hearted efforts into it. They are making the same mistakes that print publishers did with the early Internet days when their online presences were 2nd class citizens, and not taken seriously. Now, they are totally under water and been dwarfed by online media companies. I just watched this morning a live event from a TV station in a different country via their mobile App, and it was an amazing experience. Come to think of it, the old satellite dish and old satellite receiver box are replaced by the Internet and a smartphone App; one invisible thing, and the other a tiny thing.

      1. Salt Shaker

        Basic cable networks (not premium) are more beholden to a legacy distribution model because they’re still very dependent on affiliate compensation. MSO’s compensate each network on their system a portion of your monthly cable bill. For example, ESPN’s affiliate comp is estimated to hit $7.00 per sub in 2016. With roughly 100M subs, that’s $700M a month or $8.4B in annual affiliate comp revenue. (TNT, the cable network w/ the 2nd highest affiliate comp gets $1.58 a month per sub). With so much cash on the table, you can see why these networks are afraid to change it up. There’s too much financial risk, even though the market seems to be moving towards OTT.

        1. Ana Milicevic

          Yep – this is why we’re seeing such pushback against an a la carte cable model. Someone needs to subsidize the more niche channels (and TNT is hardly niche!).

          1. PhilipSugar

            The pushback against a la carte is the cable companies realize that if they go a la carte like magazine or newspaper companies the same thing will happen to them: prices will go from $7.00/month to $0. So they bundle. If I got to choose which channels I would have many less and the overall revenue would be much less, maybe Fox Sports is good enough and if I can save $72/yr and Fox can make $12/yr why not take it, wait though…NBC owned by Comcast will give it to me to get viewership up.

          2. ErikSchwartz

            Bundles are not the idea of the MVPD. They are the requirement of the broadcaster.The MVPDs would LOVE to ditch tons of niche channels that the broadcasters force them to carry in order to get the top tier channels.

          3. PhilipSugar

            Yes MVPDs would love to ditch niche channels. But do you think they would be willing to go totally a la carte instead of bundling?

          4. ErikSchwartz

            I talk to MVPD execs every day. They would love to ditch the bundle. No one is carrying SundanceTV because they want to. They are carrying it because it is a requirement to get AMC.MVPDs would make MUCH more money with a la carte and have much lower programming expenses.

          5. PhilipSugar

            You know better than me. But if this is the case why can’t they offer a la carte with groups of channels. I.e. you get Disney or you don’t. Or are you saying Disney says everybody gets Disney or nobody? I still think they know they need each other, and if either decided to try and break the model, things would unwind fast.

          6. ErikSchwartz

            If you want the opportunity to offer ESPN it must be included in the basic tier, plus you must include a dozen other Disney owned channels (each of which you will being paying for).SlingTV talks about a la carte but they are a Disney Bundle, a Turner bundle and a Scripps bundle.

          7. PhilipSugar

            Do you ever see this changing? I know the cable companies don’t like it but if you are Comcast what would be your happy place?

          8. Michael Elling

            It’s happening in the area of mobile; both device and geo-location. Markets will move faster than regulations. But it would be interesting if FCC/DoJ-driven “equal access” could result from some legal action that breaks the logjam. Just like with mobile vs static processing, mobile vs fixed viewing will (already is) significantly alter the economics of consumption.

          9. Salt Shaker

            That’s why I think you’ll see more industry consolidation and acquisitions of 2nd tier cable nets. Perhaps AMC and Viacom, for example. They lack the leverage of Comcast, TW, Disney and w/ cord cutting MSO’s are paying more attention and investing more into broadband where the margins are higher and there’s more growth opp.

          10. ErikSchwartz

            The FCC needs to act in order for the cord cutting MVPDs to get access to programming that is currently blocked behind retrans consent and most favored nation clauses.FCC 14-261…

          11. ShanaC

            this oddly sounds like skillshare, or udemy, plus some other company.all of the content is niche

        2. William Mougayar

          Got it. Self-disruption is hard for big companies. I keep saying it’s better to shoot yourself in the foot than to have someone else shoot you in the head. But that’s easier said than done.

          1. PhilipSugar

            Self-disruption is BRUTAL for big companies. I have lived it. The problem is two fold.To really commit you have be willing to stop doing things the old way. That is so tough. People will say, but we’ve always done it this way, I don’t like the new way, you have to just be willing to get rid of them which is hard at a big company.The second is that you will go through a dip which means you can get rid of people, or be loaded with tons of people that will make work to justify their position, which will strangle the new way.

          2. William Mougayar

            we violently agree.

          3. PhilipSugar

            Yup and to do it you have be violent. You need to make up your mind beforehand if I hear somebody argue and purposefully not pull in the right direction, I need to fire them right there in front of people, tell them put their attitude and the rest of their shit in a box and leave right then.Said that, done that.

          4. awaldstein

            So well said.I did this when at Keynote under Umang Gupta. Brilliant tough leader.We were public though not huge but the pain required a lot of fortitude to manage.

          5. PhilipSugar

            You have to be willing to scorch the earth. Your management, your investors, your employees. You have to be willing to tell all to f off.

          6. awaldstein

            Yup.It takes enormous guts and self belief to be a real disruptive leader.

          7. Mark Essel

            Apple does this so well, iPhone & iPad eating desktops, bigger iPhones eating tablet sales. It’s a vicious but financially rewarding cycle.Amazon seems to quick copy or make wicked combos (prime and prime instant). I still wonder why they don’t have larger revenue.

      2. Ana Milicevic

        Yes – @stuartkmarvin:disqus’s point is one big part of the equation. The other is talent — there’s a pretty clear demarcation line b/w TV folks and digital folks (especially at the executive level) that’s just now getting blurred a bit. I was fortunate to skate around it while at SAS and other large cos who got to work with both sides but it’s glaring. The TV folks largely thought of digital as a rounding error (which given the size of TV budgets it often was) and in the process disregarded major consumer shifts. Turner’s attempt at TV Everywhere (the ability to sign in with your cable subscription and watch TV content on other devices) was a major step in the right direction but fraught with technical and regulatory challenges which is why we’re only getting to some semblance of cross-screen availability now in the US.

      3. PhilipSugar

        I would argue they are not. If print publishers got together like the networks do and the only way you could get any of their content was to get it all I’d be paying to get my news, just like I pay for cable.

        1. William Mougayar

          Good thing they haven’t figured that out, but mind you- paying $7/month to get a ton of good content might not be a bad deal, although the train has left the station on that one I think.

          1. PhilipSugar

            The train is gone. Just like the UP Express (love that during rush hour)

      4. markbarrington

        Watch out for the impact of the Nielsen Total Audience Measurement product as it rolls out this year. It makes streaming ad views count for networks on all devices. In theory it will unlock TV Everywhere for pay TV operators, and other online delivery for networks.

      5. ErikSchwartz

        The rights issues get very complicated. For broadcast the TV networks have already sold geo fenced access to the live feed to the local affiliates. The affiliates are then allowed to distribute the signal OTA and via MVPDs. Copyright is covered by compulsory license for MVPDs. But the definition of MVPD is stuck in 1992 so currently online video providers cannot be MVPDs (we have a working group that is hard at work trying to change that). The networks don’t have the legal right to sell it DTC. So the CBS app gives you your local CBS affiliate.All broadcasters are working very hard on TV Everywhere apps. They have made a ton of progress but their not as far along from a consumer experience standpoint as they should be.

        1. William Mougayar

          Right. Their attempts are hit and miss, and timid.

          1. ErikSchwartz

            It might be a pedantic difference but I think timid is the wrong word. They are severely limited by existing contracts of very long duration.

          2. ShanaC

            exactly how long?

      6. ShanaC

        yes, and no – small publishers need old school print to be legitimized and succeed. They feed off each other, because print/old school publishers (refuse to call them print only) haven’t died. And as baby web publishers grow, oftentimes they have similar economics for the actual creating of content.The larger problem is that there is always someone new and fresh to create something on the small end

    5. ErikSchwartz

      The other BIG advantage Netflix has over traditional TV is they get to make up their own metrics. Kimmy Schmidt is a hit on Netflix because Netflix tells us it is.

      1. Ana Milicevic

        Yes, but one can also argue that Nielsen ratings that we’re basing $70+BB worth of ad transactions on are so wonderfully archaic and hardly relevant in the age of delayed viewing. I’d rather believe someone with granular viewership data, ability to accurately predict (based on data they own) % of user base that will be interested in a show, and the ability to market to that audience directly at minimal cost than a panel of 20k households.Btw there’s an excellent Planet Money podcast on the changing economic model in Hollywood and focusing instead on overall ROI. The prime example is Blumhouse Productions (who produced last year’s Whiplash, but also the Paranormal Activity series whose ROI is just off the charts):

        1. ErikSchwartz

          I believe they have very accurate consumption data. I find it odd that they won’t share that data even with the show’s producers (Netflix doesn’t create shows, they just pay for their production and an initial rights window). They are not failing to share this data because it’s too good.Given their hit/failure ratio (as far as we can tell) is not dissimilar to cable I am skeptical of their claims to accurately predict hits.

          1. Ana Milicevic

            I think it’s hard to share consumption data without painting a larger context. For example, should they report on the first 3 months of consumption after a show is made available? The first 6? The first 12? If a show was seen by 500,000 users but only cost 50k to acquire is it a hit? Perhaps more importantly what would make a show a failure on Netflix, especially given their rather intricate licensing deals on traditional TV & cable abroad?Ultimately not sharing data at this stage can be construed as a moat — a producer armed with the fact that their last show was seen by X million people in Y countries over K months can be a powerful bargaining chip when negotiating the next project (whether you’re negotiating with Netflix or next door at Amazon).

          2. Mark Essel

            Interesting, so Netflix wields an ignorance bat at the bargaining table. Begs for third party analytics and deliver tools which provide (and encourage) them. Believe Vimeo is transparent with it’s producers in this regard (no hidden stats). I’m a little biased as I used to work there and had a great time doing so.

          3. Ana Milicevic

            I love Vimeo but don’t think it quite solves the distribution problem for premium content the way a Netflix does (Vimeo gives you a gorgeous platform, but as an author you’re still responsible for finding your audience, marketing to it, etc).Re: making stats public — I think this will change. Now that there’s competition from Amazon, HBO, Showtime, etc for the production of quality OTT content someone will be the first to offer data feedback as an incentive to producers. I wouldn’t be surprised if we start seeing it creep into contract language and get tied to talent compensation soon.

          4. Michael Elling

            I haven’t tracked them for a while, but if you dig deep enough, Netflix shares lots of data. It’s just that they don’t do it all at once in one spot in a way that gives competitors easy insights or hurts them at the content bargaining table. It’s funny how wrong the shorts have been on this one; especially as no other competitor has their scale and reach on both the supply AND demand fronts.

        2. ErikSchwartz

          BTW, no disagreement that Nielsen if F-ed up. But it is F-ed up in an understood and agreed upon way.

          1. ShanaC

            It is F’ed up in a way that the data is used to talk about how election ads are bought and sold by stations and candidates.Aka, arbitrage central if you are in politics

    6. Marcus Detry

      Was just going to post the same. It’s all about the data. They know more about what will keep consumers stuck to their couch.

    7. Pete Griffiths

      This is all getting a bit circular.You can’t please advertisers or subscribes without a compelling experience for your audience. It doesn’t matter how you segment the market or how prized this or that demographic may be. Packaging matters but content is absolutely critical and the truth, painful though this may be to executives, is that audience data is remarkably unhelpful to creators.

      1. Ana Milicevic

        For creators perhaps but not for producers who can now better understand what to expect from certain creative content. And compelling experience for a wide audience is considerably harder to orchestrate than a compelling experience for a smaller but well-defined one.Data helps you understand what to package, how, and for whom. OTT has very granular data and they’ve certainly turned that to an advantage.

        1. Pete Griffiths

          This is the kind of observation that I think seems to make a lot of sense and indeed has some truth to it, BUT imho is much less true than one might imagine. The idea that producers can use data to better understand ‘what to expect from certain creative content’ is appealing and they would love it to be true, but it is incredibly hard to apply as a meaningful heuristic interfacing with the creative side of the business. It is easy to imagine you are doing it and benefiting, but I think it is enormously more difficult to control creative processes for commercial benefit than one’s intuition might suggest. There are certainly businesses where market research is of tremendous benefit, and I am not suggesting that it is useless in the area of creative content, but it is very very difficult to realize. If you think that the difference in perspective between engineering and product management is big in tech I can assure you that it is seamless compared with the difference between executives and creatives.I would make another observation. ‘Producers’ in TV often include the writers, but it has not been my experience that they create shows in the light of an understanding enhanced by audience data. There are certainly independent producers who are not writers and there are network executives who are not creatives and these are the ones who have to bridge the gap between data and art. It just is very very hard.

          1. Ana Milicevic

            I agree it’s hard but so is everything new. Again, I wasn’t talking about using audience consumption data to influence the creative process directly. I see it as more of a value add: e.g. understanding that S1 of your show has attracted a large urban female audience when you thought it would appeal to suburban families. Is that kind of data point actionable to you as a creator? If you can find a way to weave it into the creative process sure — for example, it may influence things like location choices, apparel, styling, etc. if not the story arc directly.You might find this Planet Money episode interesting too:

          2. Pete Griffiths

            I think that’s a fair point. I can see that kind of data point being actionable to me as a creator.

          3. Pete Griffiths

            check this outpainfully accuratenow add big data to the executive…

          4. Ana Milicevic

            :)This and Peep Show are absolutely stupendous and so well-written.

    8. ShanaC

      wait, what? how much data are they not reading from the cable boxes.I mean some of the answers are there – there are media buyers who are arbitraging this misunderstanding, so what is up on the network end?Furthermore, with early episodes/recaps/extra content on the web + understanding who is sticking via chatter/other social media avenues, they could proxy the audience type somehow. This strikes me as them misunderstanding the assets they do have.

      1. Ana Milicevic

        Piecing those together in a timely manner is a colossal analytics effort today. Netflix is vertically integrated. A show airing on NBC airs on NBC, NBC’s app, Hulu, every cabsat provider’s OnDemand app, DVR, TV Everywhere, etc. Then there’s the supporting content (digital clips, interviews, etc), social media chatter, sharing, etc. None of this is in a centralized, easily accessible place and each medium has different constraints on what can and can’t be tracked. It’s a wonderful mess.

        1. Michael Elling

          And the beauty of that from a demand perspective is that I can easily watch anytime, anywhere, anyhow. That’s what makes binging on Netflix so easy. Elsewhere, it’s a chore. So packaging and delivery are the cake, with original content the icing.

    9. JamesHRH

      Short dumb obvious answer – Netflix is not network TV.They are the #1 provider of what they do when they do original content, as no other provider packages and delivers it the way they do.Analysts like Richard Greenfield @ BTIG Research are now yelling at the top of their lungs that networks are walking dead men.

  21. falicon

    1. content quality alone is enough *if* you’ve already built an audience (see Seinfeld)2. distribution and choice are the biggest drivers for those without an existing audience (how and why agents, producers, labels, etc existed in the first place)3. packaging can help speed up affinity and imprint brands better, but is the weakest link in the conversation (people love to binge but it’s generally not a deal breaker once hooked on the content)4. co-watching is still huge in my book…it’s the shared experience of the content in about the same timeframe as other people. It’s part of what makes live sports interesting (we experience it all at the same time). it drives the water cooler talk (we started to lose a lot of this with cable and the internet, on-demand streaming, etc has only chipped away at it more and more). Now it’s mostly just the 1st few days (or hours) of content release.5. Overall I agree with your conclusion though – finding the right mix of these variables is the current key to “making hits”. (BTW, this applies to apps and most software too; it’s all ‘content’)

  22. Kirsten Lambertsen

    Gotta disagree. While the format is important, no packaging can catapult a crappy show (“Star Wars” prequels not withstanding).”Breaking Bad” wasn’t bingeable.Another example: I’m a superhero enthusiast. Try watching “Arrow” or “The Flash” and then watch “Daredevil.” No comparison. Not even close. “Daredevil” isn’t just better, it’s great content, period. If “Daredevil” had aired on “regular” TV in episodic format, it still would have been a hit.Binge watching is important, but it isn’t the secret sauce when it comes to the original programming that Netflix has put out. It’s the secret sauceThe idea that it influences the creative team has merit, though. Doesn’t explain “Breaking Bad,” but still is a definite possibility.

    1. Michael Elling

      Breaking Bad was AMC. It points to the other aspect of Netflix’ appeal that cable networks use them to generate audiences in advance of the upcoming season. This has happened to me with AMC, TNT and CW. The problem most often is moving from Netflix where I am binging past seasons to LinearTV OTT/DVR for the current season which is a horrible experience. So I believe a lot has to do with the packaging (no ads, all at once) and delivery (real-time, anywhere, anyhow). In fact, if it’s not totally compelling, I will wait 12 months to get the content on Netflix to view it “properly”.Netflix’ CDN scale is truly enormous. Few appreciate that one of the reasons that the experience is so good most of the time is the investment they make in transcoding each video 120+ ways to be viewed across 1200+ devices/screens. Also the amount of content they cache at the edge is ridiculous. And they do all of “it” (transcoding, transport, caching) for less than 5 cents a video hour watched.Their problem and others allude to it here is that they have to move from a flat-rate, all you can eat, model to per minute and per segment consumption to really capture the mobile and premium/live segments. They are smart folks and have spent a lot ($2bn+) expanding internationally since 2010. (This fact and the way they acquire and depreciate their content directory is where the bears have got the story wrong). Once they’ve grabbed enough geography and can create infinite sub-“cultural” channels, (and importantly scaled even more on all 3 fronts) they will likely turn their attention to the above content and delivery markets and formats.Then it will truly be lights out for the current LinearTV model. What’s the value of a large percentage of 6bn smartphones watching live or premium events in 10 years? Netflix is far ahead of the competition in getting to this endgame.

      1. Kirsten Lambertsen

        Hadn’t seen this until today. I wasn’t aware of the mechanics of Netflix driving next-season views. That’s really interesting, and it made sense as soon as I read it.All content being equal, the format *does* matter, of course. But I still wouldn’t watch “Arrow” even if it was a Netflix original 😉

  23. JLM

    .Recycling old ideas in new wrappers, old wine in new bottles, has been around for a long time and episodic entertainment has been around for a long time.When you read The Count of Monte Cristo in some form of academic punishment way back then, did you know that it was an episodic thriller that was released in 139 episodes in the 1800s and that it drove the circulation of the newspaper up by a factor of eight?This serialization was released in something called a “fueilleton” which is like a style section of a newspaper back in the day.Harriet Beecher Stowe’s 1851 Uncle Tom’s Cabin was released as a forty part series in the The National Era. Tolstoy’s Anna Karenina was a serial release as was The Brothers Karamazov.Many American literary magazines, Harper’s/Atlantic Monthly, were essentially serial formatted platforms for authors whose work merited interest but who did not have their own platform. Today, they would all have websites.The business aspect of it is equally intriguing. Back in the day, it drove increased readership, circulation, ad rates, etc.Today, a series — particularly the popular ones — is able to command recurring revenue of $0.99-1.99/episode at the retail counter or a monthly fee of $8-12/month wholesale.This is much more money than a book or a movie given the same amount of talent and story line.The last aspect that is relevant is the ability to gorge on your favorites in a typically American instant gratification feast.The reason why content providers are releasing entire seasons at once is because the junkies will watch — pay to watch — the entire thing at the same time. Thereby dramatically compressing cash flow while founded on economies of production.The last half pound of pasta costs the restaurant nothing and yet it is the most marginally profitable element of the financial equation.The more things change, the more things stay the same.JLMwww.themusingsofthebigredca…

    1. Girish Mehta

      Yup. Other examples – Arthur Conan Doyle wrote Sherlock Holmes stories for serialization in the Strand Magazine. Alexandre Dumas wrote The Three Musketeers also as a episodic serial. Dickens’ first book, The Pickwick Papers, was written as a serial for publication. Episodic format is not new.

      1. JLM

        .This generation did not invent sex or serialization?Even Frankie Underwood and Claire, no? [Beware obscure House of Cards reference noting that Frankie is from Gaffney, SC where they have the water tower on the Interstate that looks exactly like a lovely woman’s derriere. Claire?]JLMwww.themusingsofthebigredca…

        1. Girish Mehta

          Netflix’s House of Cards – Based on BBC’s House of Cards back in 1990.In BBC’s House of Cards (1990) – Francis Urquhart’s characterization was in turn directly inspired by Shakespeare’s Richard III written back in the 16th Century AD.Great content travels across centuries and across formats…

          1. JLM

            .We are all indebted to Shakespeare. In some way.JLMwww.themusingsofthebigredca…

          2. Girish Mehta

            Richard III got me thinking about a line by another Richard…Richardthe LionHeart. From ‘The Lion in Winter’ (what a movie that was). The movie was in turn based on a Broadway play by James Goldman.From a Broadway play to a Hollywood movie to a Sorkhin TV Show in the 90s.“You chivalric fool, as if the way one fell down mattered !”“When the fall is all there is, it matters”.

          3. ErikSchwartz

            That is one of my top 5 favorite movies.

          4. Girish Mehta

            First time I watched, when it ended…I simply restarted and started watching again. Had to savor it once more.I usually end up with 27 movies in my top 5. This one is special….Tour-de-force performances by Peter O’Toole and Kate Hepburn.

    2. Salt Shaker

      A potential downside of binge or “instant gratification feasting,” as you call it, is churn. I can literally sign up for a month of Netflix, watch what I want in a week, then disconnect at the end of the month. Would be curious about the impact a binge option has on Netflix’s churn, for example? Back in the day, I did a fair amount of work for HBO and the network’s monthly churn was off the charts, in part driven by the network’s own monthly promo strat and low $9.95 install rate. (They made it easy and not costly to come and go.) More stability came w/ HBO’s focus and investment in original programming, which was staggered and delivered w/ out a binge option (e.g., led to more continuity and stability).

    3. ShanaC

      So was nearly all (I’m not sure, but definitely most) of Charles Dickens’s work. In fact, the ending of Great Expectations was changed before publication because of a reader demands due to the way it was serialized…

  24. Vitor Conceicao

    I think that there is another very strong factor. Netflix and Amazon are playing a completely different game than the TV channels. They don’t need to produce shows that everybody likes.They can focus on smaller niches and get those people really in love with what they are producing without having to “dilute” the the show more “popular”.They just need to build more shows and each focused on one specific niche instead of having less shows that appeal to a more broad audience.This is a huge game changer in this industry.

  25. TeddyBeingTeddy

    “Sell the sizzle, not the steak” – Sizzler CEO and Co-founder (probably the author)

  26. Ronnie Rendel

    I love the Netflix original on Bobby Weir – yes, Shana, I watch Netflix 🙂

  27. LE

    or whether it is the packaging that has caused them to top the rankings.Netflix is able to run unlimited promos for their content which I see every time I go to their site as suggestions to watch. (House of Cards when that came out as only one example..) I also constantly getting emails saying “we think you will like this”.Traditional TV otoh has no easy or cheap way [1] of notifying me of things that I would like to watch [2].Interesting that the Netflix series ‘Making a Murderer’ made the evening network news last night (NBC) because of the buzz that it has created:…I didn’t think it was that good I don’t even know if I will finish it.[1] It canabalizes ad revenue when they do. Or they have to barter with someone to promote.[2] Problem for someone to solve btw.

  28. LE

    Do Amazon and Netflix greenlight better shows than their competitors or do they package them up better?They are able to promote them better as mentioned in my other comment they have near zero promotion costs. It’s really that simple.

  29. Wyatt Brown

    I am curious how much each of the respective content marketplace UIs affect this investigation? Is poor UI-UX overcome by the other elements that Fred and Mike discuss; Format, binge, co-viewing, curation? I pay Amazon, but I do not love “discovering” new content/programs in their marketplace at all.

  30. BillMcNeely

    Speaking to Netflix what I am impressed with is thier email followups.I watched Marco Polo last year and they sent me a notice about a 30 minute program based one of the characters.Earlier I received an email about Narcos, Making a Murderer all shows I would not have been aware of.One complaint I do have is it would be cool if they pushed me into other generes. I watch a lot of documentaries and education type shows.Maybe they could offer up suggestion on dramas and such. Expand my horizons,

  31. ErikSchwartz

    Until Netflix releases viewer numbers we’re all just editorializing on their PR.

  32. dovcohn

    Perhaps the positive ratings of Netflix programming is based on the “Netflix and Chill” afterglow”?

  33. Chad Wittman

    Makes me wonder about the parallels with news publishers… it feels like we could use the same logic to conclude this approach must also be dominating their space (Buzzfeed). Although, I’m not sure Buzzfeed is really a news publisher or if they’re a content creator (producer).I’ve been fascinated with the NFL integration with Twitter Moments. I no longer need ESPN (packager) to be the middle man between myself and the content. I see highlights, when I want them, directly from the brand who produced them. This seems like the future to me, direct access between brand and consumer, no packager needed.Packagers seem to be needed for new emerging technology, but not once that new technology is “understood”. I tried to capture it via a crudely drawn graph (attached).

  34. Kirsten Lambertsen

    It would be interesting to learn which services everyone here uses and pays for. Netflix, Hulu, Amazon Instant Video (much of that content has to be rented or bought), iTunes (for movies and tv), etc.I subscribe to Netflix and use Amazon Prime and find between those two I can watch just about everything I want (I’m not a heavy tv watcher). I only use iTunes for stuff that I want to be able to watch on a plane/in my hotel room. I don’t think I’ve ever used Hulu. I have little kids, which heavily influences my behavior.

    1. Joe Cardillo

      I’m probably not a good sample b/c I am really cautious about my headspace, but I usually buy Netflix 3 or 4 months out of the year and let it go dormant the rest. W/Amazon I just buy full series a few times a year that I really want to see.

      1. Kirsten Lambertsen

        Yeah, I think I may be an outlier, too. Now my kids, on the other hand, not at all 🙂 They are without question the reason I have a Netflix subscription and am a heavy buyer on Amazon Instant Video.

        1. Joe Cardillo

          My niece & nephews are like that also, jams my mind how much of their world is on a screen!

  35. ErikSchwartz

    I love the packaging of binge watching. So do my kids. Many people do.But the economics of binge watching new programming (not back catalog) are fundamentally flawed for any business model other than PPV.At the most base level a TV series is something a video delivery channel (OTT, network, whatever) pays for in order to engage an audience for a period of time in order to monetize them either by wrapping ads around the programming or having the viewer pay a subscription fee.House of Cards costs Netflix $100M for the first two seasons, $50M a season, about $3.8M an episode, that’s a little high for scripted but not out of line considering the cast expenses. If a season of HoC is mostly consumed via binge watching over a weekend Netflix has paid $50M to keep viewers engaged for 2 or 3 days.That is going to be hard to sustain.

  36. Kevin Hill

    Could you say that maybe to make great TV the writers should be your target market, not the audience?

  37. Eric Woods

    HBO and SHO have been arguably the best at content for some time now. Will their foray into OTT change this NFLX/AMZN love fest?

  38. markbarrington

    [long time lurker, first time poster. hi!]”Content quality alone is not enough.”. If that means not enough to get a good rotten tomatoes rating, I agree. If it means not enough to get a good audience, to be enjoyed, or to be financially successful then its a stretch.The financial meaning of a show to a TV Network and to Netflix is so different that it’s becoming difficult to compare or even talk about them as the same category of thing.The Nielsen TV rating system is so engrained into the business of regular TV that the knee jerk reaction to any idea that a show is valued by rotten tomatoes ratings or awards or anything else is to scoff. “Show me the ratings” is the cry that goes up.But all that matters to Mr Hastings is subscriptions garnered and minimizing churn. He doesn’t care directly if you watch the show. Only that you are prepared to sign up on the prospect and not churn on the reality. For Netflix industry awards, rotten tomatoes ratings, critics reviews and general zeitgeistiness is absolutely critical.I continue to think that Netflix vs Pay TV vs TV Networks is not the zero sum game that is typically reported. Netflix subs overwhelmingly are Pay TV subs too. Netflix’s reported viewing hours are not reflected by a corresponding drop in TV viewing hours. Right now it seems that good content will find an audience, and that audience is not yet saturated.

    1. ShanaC

      HIII!!!You’re pointing out something very critical – for netflix, their depth of very specific data means even if they can’t get you hooked in to their specific content, they can get you involved in something else you are going to be into.Interesting, Amazon has failed to do this, even though they have more dataHow do you think data interplays with subscription churn in this case?

  39. Salt Shaker

    Everyone thinks binge is the bomb, but I can see how it possibly can also retard revenue. All subscription businesses, in varying degrees, have a churn problem. Subscribers come and go and retention is always of primary importance for a premium TV network, streaming service, mag publisher, etc.Let’s take Netflix for example. Suppose they buy a 16 episode package from the producers of “House of Cards” and offer it up via binge viewing to their subs. I can watch all 16 episodes in 1 day, possibly over one or two weeks, but likely will view all in less than a month. If “HOC” is my primary reason for subscribing to Netflix, and given the high viewership of that show it likely is a key driver for many subs, then I’m done in a month’s time. In and out in 1 month w/ only $8.99 in rev to show for it. Conversely, if Netflix programmed the series over 16 weeks, 1 episode per week, they’ve got a captive audience for a minimum of 4 months, w/ $36 in per sub revenueHard to question Netflix’s biz model cause they’re obv killing it, but binge does potentially have some disadvantages, particularly in a high churn industry.

    1. JLM

      .Buying the entire season is a knee jerk reaction to churn. If the season is discounted for a volume purchase it is also a full season purchase which puts a bandaide on churn.JLMwww.themusingsofthebigredca…

  40. Semil Shah

    With your ending, perhaps the same could be applied to VC funds.

  41. Pete Griffiths

    For those with a serious interest in this topic I strongly recommend:Difficult Men: Behind the Scenes of a Creative Revolution: From The Sopranos and The Wire to Mad Men and Breaking Bad Paperback – July 29, 2014 by Brett Martin

  42. Pete Griffiths

    En passant I should mention that the biggest victim of the DVD and now the streaming of whole seasons has been the Dick Wolf style of TV show wherein basically the same plot is turned in every week. The huge advantage of the format in the old days was that a viewer could miss any number of episodes and then plug back in and have missed practically nothing. Most legal, cop and medical shows had this format. A modern example is ‘House.’ The problem this format faces is that unless it is truly exceptionally witty when you binge watch it rapidly becomes apparent that you are watching the same episode – you are in Groundhog Day.The converse effect has been that shows which rely on the audience having viewed earlier episodes have been truly unleashed and we are now in the golden age of TV writing.

  43. Andrew Badr

    I’d bet that network shows would get significantly higher ratings if they didn’t have ads.

    1. ErikSchwartz

      You are right.But how would the networks pay for them? TV shows exist on broadcast television so that networks can sell advertising around them.

      1. Andrew Badr

        Well, I don’t think they can. Broadcast TV, at least for entertainment, is not a good business anymore.

        1. ErikSchwartz

          Neither is flat rate SVOD.

          1. Andrew Badr

            Like Netflix? Why not?

          2. ErikSchwartz

            Netflix PE is nearly 300. How are they going to 10X their revenue to bring that down to a sane (albeit still high) PE ratio in the 30 range?

  44. Mike P

    Didn’t expect to be on AVC.’Netflix and Chill’ jokes aside, ‘co-viewing’ refers to the experience of people/families getting together to binge watch and enjoy Netflix shows together. IMO the social element makes the show that much more enjoyable to watch, leading to a more favorable rating.NFLX put out a press release a couple years ago on a small study they did on binge watching, etc.61% binge watch 2-3 episodes regularly.38% will binge watch solo but 51% prefer to watch with at least one other person.39% of TV streamers who prefer to “save” TV shows to watch at a later date choose to stream saved series or seasons when the person they want to watch with is available.

    1. ShanaC

      it happensIs this a new form of the water cooler effect?

  45. ShanaC

    a) This sounds like the medium is the message – it is both or neither norb) so why is netflix killing it, while amazon comparatively is struggling enough to mail me a paper letter to try Prime Video (true story)

  46. sachmo

    I personally think the reason why the ‘all at once’ release succeeds isn’t as much about binge watching as it is a more carefully considered series…One huge difference between American cartoons and Japanese anime for example, is that american writers will often keep dragging series on and on, without a clear direction for where the story is going.Whereas in Japan, most of the anime is based off of Manga, and everything is completely story-boarded out. So the plot-lines of your typical Jap anime show *BLOW* away anything produced in the US. You can have these crazy sci-fi plots where the characters are slowly discovering some tremendously awesome secret.I think the production style that Netflix and now Amazon are employing forces the writers to consider the plot of the entire series from beginning to end, and this is resulting in more well written stories. It also helps that Netflix and Amazon are flush with cash, so no expense is spared, and they are willing to take risks, because initially at least they have nothing to lose.I do not believe it’s just about the packaging. I think the content is genuinely better.

  47. Robert Heiblim

    I agree it’s a lot about the packaging of it, as well as the ability to aggregate audience regardless of location. The geo boundaries for cable or broadcasters along with set times make these attractive on their own. It really is competitive but not at all the same.

  48. Michael Chou

    They are one thing. The new delivery model (OTT on demand) popularizes the new use case (binge watching) which demands new format (season-not-episode-story) and provides new data (on-demand watching preference).

  49. Vasu

    It’s amazing this applies to all industries (insurance, b2b saas, retail, consumer finance), including media, but innovating on the core good/service being consumed (i.e. insurance plan, the software tech, a shirt) is being more commoditized than ever before.what consumers are directing their time and dollars towards are those brands that offer the best experiences around the core good / service. so if ‘content’ is the good/service, the delivery model and business model are the customer experience.

  50. Tiffany Bloom

    Co-viewing = Nextflix & Chillin’ … 😉

  51. Satyajay Mandal

    I think that it’s the content,not the packaging

  52. Gustavo Melo

    There’s very little doubt in my mind that the same shows, greenlit and produced for traditional networks, would not enjoy the same success – at least not without significant changes. To be successful, they would end up being different because the process of building an audience and the experience of watching them would both be different.I’m not even sure if it makes sense to compare a netflix or amazon original to a traditional network show – they may be sufficiently different beasts because of the differences in packaging, experience, and the business process differences that I’m sure exist behind the scenes when it comes to greenlighting and producing.By netflix’s own admission, they set out to not only produce original content but also to find a ‘better format’. So I think it’s impossible to separate the success of the shows from the changes to the format and process of producing and distributing their shows.Though this may be a better question when posed to the people involved in creating, writing, directing, and producing netflix and amazon shows – does the new approach lend itself to a better / higher quality product all other things being equal? Typically these professionals have a great internal compass for how much of an impact the process has had on the quality of their output.

  53. LE

    So there’s a ton of pent up talent in LA, NY, and around the country, including undervalued, underemployed actors and scriptwriters.What do you mean “undervalued”?

  54. wjcohen

    Netflix/Amazon/Hulu only has attracted best of the TV creative class (and film) – there are no rookies or indie artists producing there. (Not to get inside baseball but HBO should get props for taking a few more chances on new voices: Lena Dunham, rookie showrunners on Game of Thrones, upcoming Issa Rae, etc.)

  55. ShanaC

    Not really.From what I have heard on the street, you get essentially the same contract as an actor through the union whether on the internet or on TV or on cable

  56. Joe Cardillo

    Oh, I meant that I use / consume very little entertainment media. So if you’re trying to figure out what people typically do, I’d probably be an outlier to be discarded.