• ndsgmedia.com

Netflix's Numbers

Updated: Mar 15, 2019

Netflix recently issued a few selected viewing stats for the market to consider. What's surprising is that they seem to have pointlessly succumbed to the pressure of releasing any data at all. Clearly any number they produced would be instantly savaged by their competitors.

True to form Tony Hall, Director General of the BBC, in a recent conference (February 2019) compared Netflix's proudly announced headline worldwide 17m viewers for The Crown to the finale of The Bodyguard. He sanctimoniously berated Netflix for spending multiple millions in getting no more viewers over a full year and across all international markets for a full series than a single episode of a much cheaper BBC drama got in a month in the UK alone.

Of course the DG forgot to mention a few salient other facts about his beloved Bodyguard. That it was made by ITV studios as a co-production with, er, Netflix. So his brilliant show was in fact made by the very same production company owned by his direct terrestrial rivals and co-produced by the very same people he is indirectly criticising. Netflix's second run rights are significantly enhanced by it's terrestrial success.

The DG's point about The Crown vs Bodyguard is a typical one used by incumbents who feel the need to rationalise their own stasis. It deliberately (or perhaps even worse accidentally) completely misses the point about Netflix's strategy to build subscribers around headline, high-end locally produced content.

Criticising Netflix for this is about as valid as criticising Sky for spending £millions per game for their Premier League rights. Or, a bit more contentiously, taking chunks out of Discovery for their tedious sentimental documentaries that barely make a BARB dial flicker. For Sky the strategy of spending on premium product that not many people watch has worked out brilliantly. Discovery built an even more lucrative business around content distribution irrespective of its terrible viewing numbers or mediocre content.

Netflix's high budget low volume focused strategy is rational but high risk. Clearly their content is not watched that much. Why would it be? If Friends is their most watched content (another data point they revealed) it just shows how little the actual viewing is and how they under serve their audience with content they watch. If there's any conclusion you can draw it's that their customer acquisition marketing strategy is bang-on.

Tempt customers on to the service with loss leaders, price the product minimally, then hope that inertia and the offer of an occasional new show they may watch will be enough to keep churn negative. So far, for Netflix the strategy is working. But the costs are huge and bankrolled by the US revenues that justify and pay for high debt. The likelihood the business will ever be profitable uncertain.

That same strategy is shown with Amazon who announced that the universally panned, uber-expensive, pointless, shaggy leather Grand Tour was a great success being the most popular show on the service. So successful in fact that they decided to scale back commissioning to the occasional special. But Amazon's Prime TV is a basket case product proposition. This doesn't matter as instead of debt the business is founded on the massive magic money tree of Amazon. So it can carry on producing terrible shows and burying them in an unwatchable interface indeterminately.

It's ironic that VOD services supply hugely accurate and extensive data points around viewing and take up. But these are largely irrelevant to business model dependent on a smoke and mirrors marketing & content strategy that doesn't really care whether people watch or not.

7 views0 comments

+44 (0)7711037285

©2019 by ndsgmedia.com