Let’s have a round of applause for Netflix. In July the streaming service gave us Stranger Things; in August the stylish The Get Down launched; in September we (spoiler alert) briefly caught up with Pablo Escobar in Narcos, and in October Marvel’s Luke Cage made his debut as a series lead in the imaginatively titled Marvel’s Luke Cage. To have one hit show in a year would be good, two is great, but to have four in half a year – and we haven’t even mentioned Black Mirror – is unbelievable.
2016 has undoubtedly been the year that Netflix has achieved supremacy in home entertainment, but the streaming service remains essentially a technology company and it’s this – the ability to analyse vast amounts of data about its customers’ viewing preferences, so it can decide what content to buy and how much to pay for it – that is separating it from traditional television networks. But with each successful launch, it’s hard to argue against the fact that Netflix is becoming more than just a technology company; it’s becoming a media giant.
Thanks to its new status, Netflix finds itself in the unenviable position of having to compete with companies with much larger resources because being a television network comes at a cost. A massive, eye-watering cost. In a letter to shareholders that detailed Netflix’s results for the third quarter of 2016, the company announced that although quarterly global streaming revenue had exceeded $2bn for the first time, its net income for the same quarter was only £52m and streaming content obligations – the money Netflix pays to license, acquire and produce content – just reached £14.4bn.
Being a technology company, Netflix seems to see innovation as the answer to any problems it has, so in 2017 we’ll see at least another 400 hours of original content – from 600 hours to over 1000 – and rumours suggest that Netflix may introduce downloads by the end of the year. But can Netflix thrive in the new media world it has created? And more importantly, can Netflix continue to hit home runs when it comes to content?
Room to create
Netflix explains that it is able to create award-winning content because of its ability to “support programs for both mass and niche audiences alike”. In a letter to shareholders the company said: “Since we are not shelf-space constrained nor reliant on advertising, we have the luxury to tell all kinds of stories in less traditional ways. The growth of internet TV globally has ushered in a new golden age of content, with consumers everywhere enjoying unprecedented access to amazing amounts of high quality programming.”
Like any good technology company, Netflix monitors streams of data to predict what shows will work and what won’t. But it isn’t all about data. Netflix, unburdened by genre, advertising revenues or ratings, can pretty much commission what it wants.
“The worst thing you can do at Netflix is say that you showed it to 12 people in a focus room and they loved it,” said Todd Yellin, the company’s vice president of product innovation, in an interview with the New York Times.
Netflix doesn’t have adverts, so it doesn’t need to aggregate viewers for advertisers, care about ratings or make programmes that are written, shot and edited to accommodate commercial breaks. All of this means Netflix can afford to be bolder with its content. There aren’t too many media companies who will give a home to foreign language television programmes (Narcos) or programmes that have female or black leads (Jessica Jones, Luke Cage), but Netflix does.
There also aren’t too many television networks who give creatives the amount of freedom Netflix does. What started as a way to beat HBO to House of Cards has become Netflix’s standard practice, so shows no longer need a pilot and can be commissioned for multiple series without having to worry about ratings.
“Netflix are daring and try to tell stories that would never be aired on linear TV,” a spokesperson for Netflix told Factor.
Netflix eyes China
As Netflix attempts to get a foothold in new territories, like China, we’ll see more shows that cater to different nationalities and cultures. Netflix CEO Reed Hastings said at the DealBook conference in New York that the company is “hopeful that we’ll over time make a great Bollywood show, make a great anime show”.
The company is already experimenting with this. Narcos is produced in Bogota, Columbia, features Brazilian actors and is directed by a Brazilian, but most importantly is delivered in English and Spanish, which allows Netflix to target its Spanish-speaking audience.
50%, and growing, of nearly 1.4 billion people is the equivalent of hitting oil to Netflix
But it’s China that the company is really targeting because, as subscriber numbers plateau in Netflix’s established markets, China represents an untapped well. In a dollar bills appearing in Reed Hastings eyes and the sound of tills opening kind of way.
If Netflix wants to continue to spend lavishly on its own programming as well as secure licences for shows like Star Trek: Discovery and The People vs. O.J. Simpson: American Crime Story then it needs the increased revenue breaking the Chinese market would present. There’s a reason everyone from Disney to Apple wants to get into China: internet usage in China currently stands at 50% of the population, according to the World Bank. 50%, and growing, of nearly 1.4 billion people is the equivalent of hitting oil to Netflix.
“The regulatory environment for foreign digital content services in China has become challenging,” reads Netflix’s statement to investors on the subject of China. For the minute Netflix is attempting to solve its China problem by licensing content to existing online service providers, rather than operating its own service in the country, but the modest income this will accrue is nothing compared to the potential earnings that would come with getting Netflix into the country itself.
In Bill Hicks’ Revelations stand-up performance he ruminates on how the stunts in Terminator 2 are ever going to be topped. Netflix may be in a similar position now because it’s hard to come out with hit after hit after hit. Hicks suggested using terminally ill people as stuntmen; this isn’t an avenue Netflix is expected to go down, but the company has some, only-slightly less, outlandish plans.
Speaking at The Wall Street Journal’s WSJD event, Hastings said that in the long term “movies and TV shows will be like opera and the novel…There will be substitutes”. One possible substitute mentioned by Hastings could be “pharmacological” meaning Netflix is possibly considering an entertainment drug that viewers could use to put themselves in the midst of a story.
To be honest, the idea sounds like something borrowed from Bill Hicks, but it is indicative of what makes Netflix great. It’s a company that isn’t planning on letting its product become obsolete, and even though it becoming a television network, Netflix will never forget that at heart it is an innovative technology company. So while there probably aren’t any chemists working on Netflix’s pills yet, don’t expect the company to be satisfied with just producing hit television in the years to come.