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Death to demographics
5 THINGS WE LEARNED FROM VULTURE’S LOOK AT NETFLIX’S BUSINESS MODEL
With more than 125 million paid subscribers (which translates to about 300 million actual viewers) and a dynamic streaming platform that has changed the game for how we consume television, Netflix has quickly morphed into a small-screen titan.
In a deep-dive feature, Vulture’s Josef Adalian gives readers a behind-the-scenes look at just how the company works, chatting with everyone from chief content officer Ted Sarandos to vicepresident of original content Cindy Holland. Adalian gained unprecedented access from a company known for keeping everything from its ratings numbers to its viewing algorithm secret.
Here are five of the story’s most interesting revelations:
THE BEGINNING OF THE BINGE
After evolving from a Dvd-mail-out company to a streaming platform, most of Netflix’s initial success came from its first original series, House of Cards. Set to debut its final season this fall, minus a post-scandal Kevin Spacey and led by Robin Wright, the network has expanded far beyond the series with its original content, planning to spend a whopping $8 billion just this year. The key to its mass spending is that, unlike other networks, Netflix doesn’t pay millions for pilot episodes that may never get picked up or are unceremoniously cancelled mid-season. Instead, the network invests in a series right off the bat, only giving it the green light if it seems promising for a full-season order and “binge-releasing.” By buying an entire season and then releasing it at once, Netflix also managed to kick off an era of binge-watching that has come to define its entire viewing model.
TASTES AND TRENDS
Although Sarandos says Netflix bases their series renewal and purchase choices on “70 per cent gut and 30 per cent data,” the company’s much-discussed “algorithm” plays an important role in its decision-making. Instead of audience demographics, executives focus on what they call “taste clusters” or “taste communities,” and zero in on trends in viewing habits. By being able to track and monitor what one niche audience likes compared to what one massive one likes, the company can approximate exactly what mix of genres and character types could appeal to them next, and project just how well they might perform. A “bundle of niche viewers” can then generate as significant, reliable business as a major property, like, say, Stranger Things.
DEATH TO DEMOGRAPHICS
And that’s not only monitored by what viewers choose to watch, but by something as seemingly minute as the images that represent each show or movie to different subscribers. The series GLOW, for example, will have a range of images, which are randomly assigned to each subscriber. The network tracks which images receive more clicks and by which taste cluster, and whether it’s via the app or the website, meaning there could be “eight per cent for this one with Betty Gilpin; the Marc Maron one gets six per cent.”
Instead of focusing on age, gender and regional demographics as cable networks do, Netflix looks at these trends, because, as Sarandos says, “it’s just as likely that a 75-year-old man in Denmark likes Riverdale as my teenage kids.”
GIVING THE GREEN LIGHT
Sarandos also trusts his large team of executives, whether it’s the head of documentary, international or unscripted content, to go with their gut — even if he disagrees. It’s how the company manages to scale so much content, allowing it “to operate like 10 or 15 semiindependent entertainment companies.”
He admitted he didn’t approve of either the Nina Simone doc What Happened, Miss Simone? or the mockumentary series American Vandal. After fighting about the former for six months, Sarandos admitted to being “100 per cent wrong,” regretting not pushing it out sooner after it became a big hit for the network.
Meanwhile, the latter is already in production on a sequel.
MORE, MORE, MORE
Another key metric for Netflix is 28-day viewership, which monitors how many people complete a full season of a show within the first four weeks of its release. The network is also looking at what series new subscribers watch first, which tips off execs on what series drove new viewers to sign up for Netflix, keeping everything geared toward growth.
This is a company that began with 33 million global subscribers before House of Cards premièred to more than 125 million today. According to the Wall Street Journal, as cited by Adalian, it will potentially have 200 million by 2020, and 300 million by 2028.
It all bleeds into the same ethos the company holds dear: “More shows, more watching; more watching, more subs; more subs, more revenue; more revenue, more content.”