In a world where movie and video streaming has become ubiquitous, Netflix – an online streaming platform has become the ultimate reigning champion of the industry. How did a company which started as an online mail order DVD rental service, go on to change the whole entertainment industry?
In order to truly fathom the success of Netflix, we must first find out what makes the company so unique and such a huge success all over the world. We will also find out more about the way in which the company uses big data and various algorithms to its advantage not only to satisfy its ever growing clientele, but also to stay ahead of its competition like Disney+, HULU, HBO Go, AMC among other streaming giants.
Let us begin our journey.
List of information in this article.
- Brief history of Netflix Inc.
- Major milestones of Netflix (1997-2020).
- What makes Netflix Unique?
- Why does Netflix want people to binge watch its shows?
- Pros and Cons of the service.
A little context on the beginning of content driven programming
In 1991, when the series ‘Twin Peak’ released, it changed the people’s perception on what they wanted to see on television. The show was considered unorthodox at the time, as it dealt with dark, gritty, strange and even disturbing subject matters. The producers of the show thought that it (the show), would be a bust and they would end up losing all their money. Instead the show’s edgy subject matter was so well received by the audience, that it sparked an unprecedented social revolution – solidifying the show’s massive success. Fans, enthralled by such a narrative delusion, could not stop talking about the series at work. They took full advantage of the water breaks they received to talk about the show. This is where the term ‘Watercooler Gossip’ stems from – the analog precursor of what is commonly referred to as ‘Going Viral’ – today. ‘Twin Peaks’ became the yardstick show of the 90’s – a time when quality content was hard to come by; conversation revolved around a few programs – a trick Netflix has been able to utilize to its fullest potential.
Curious as to how they did it? Well let’s find out, but before that a little backstory on the company itself.
Netflix: a Brief History
Netflix, Inc., commonly known as – Netflix – is a media-streaming and video-rental company. It was established on 29th August 1997, by American software engineers and entrepreneurs Reed Hastings and Marc Randolph. Despite boasting offices all over the globe, the company’s corporate headquarters is located in Los Gatos, California.
It is commonly believed that Netflix was established by Reed Hasting when he was charged $40 on late fees for a DVD that he rented. Not liking the idea of having to pay so much money on late fees for one movie, Hasting decided to start the world’s first online mail-order DVD rental company. Netflix’s website allowed people to rent DVDs online, and the movie would be shipped to them through the mail. Once they were done, they simply had to return the DVD, to become eligible to rent another movie. While this mail order delivery system competed to some extent with TV, it was competing directly with the established video rental stores like BlockBuster and Redbox.
Since the online mail order service provided by Netflix was such a huge success, the company in 1999, started offering an online subscription service. In this package, the subscribers would be able to choose multiple movies and TV shows (unlimited number for a flat monthly fee), from the company’s website. The chosen contents would be mailed to the subscribers along with a prepaid return envelope- making it easier and cost effective for returns. The move could be returned to any of the 100’s of distribution centers across the country. This scheme saw Netflix rise to new heights as people loved the convenience and the fact that Netflix had tens of thousands of movie and tv titles in their catalog.
Major Milestones of Netflix (1997-2020)
Netflix will be 23 years old in August 2020. A company that has been around for so long, has a lot of accomplishments to its name. Let’s review some of the major achievements of the company over its life-time.
Note: Only key achievements have been included in the list.
Now that we know the reason behind the establishment of Netflix, let’s dive a bit deeper, to find out what makes this company so unique and also look into the fact of how it uses the personal preference data of its subscribers – collected over the decade- to push through more location and culture driven contents to the millions of people who enjoy the companies services.
What makes Netflix Unique?
Netflix, like so many other companies – is afterall just an online streaming service. But, let’s face it, Netflix is not like any other streaming service, the omnipresent red ‘N’ says it all. Let us find out how exactly this came about.
With the success of the online mail order service, which morphed into subscription based service, and finally Netflix, became the all encompassing online streaming service that we know and love today. Reed Hastings, envisioned his company would one day, be capable of data transmission of content on different devices on the same network. This became a reality, when video on demand (VOD) became popular, it allowed the company to expand, and like many other companies at the time – it did. It broadened its scope to other playback devices like computers, tablets, game consoles and eventually to smartphones. This allowed the company enough leeway to partner up with other content providers – generally movies and television series – and deliver the content through the internet but without the need for users to subscribe to the traditional TV or satellite services.
Thesedays, Netflix, boasts more than 50 million active users in any given time of the day, from its massive 180 million global subscribers. With millions of active users, all the data that is generated each day, puts Netflix in a privileged position – when it comes to knowledge of its audience. Netflix uses this information to meticulously study all series and films it includes in its portfolio. The study analyzes – the consumer response to the content, the revenue generating potential of the content and above all the emotional reaction towards the contents. In an algorithmic context, trends, conversation topics, likes, shares and reaction videos – are a direct passport to visibility of the consumers: needs, wants and desires. Based on this, the architecture of its popular recommendation system is built, which exquisitely recommends contents in a hyper personalized way – in accordance to the users viewing choices.
Figure Source: www.statista.com
Millions of dollars spent each year on research and development, along with their own algorithm – the company has been able to isolate more than 2,000 clusters in various geo-locations throughout the world. It uses this data to estimate how many of the various communities might be interested in a certain series or movies. Once the information is obtained, it does everything possible to present the content in the most relevant and visually attractive way possible, to each of the users – who are part of the said cluster. This is accomplished either by notifying the contents release with a push notification or making sure the new content is the first thing you see when you open the mobile app, or, recommending the content when you come to the end series you are currently watching, or even creating a new composition which highlights the content when you access the service.
Why does Netflix want you to binge watch its shows?
Netflix, like any other streaming service, makes money when people sign-up for its services, and loses money when people choose to withdraw their subscriptions. This being the case, the efficiency of a content is measured in relation to the number of hours a person spends connected to Netflix’s platform. When a content (movie or series) is consumed by the masses intensively, the chances of the show being renewed are very high. On the other hand, if a show is not well received by the clientele, the chances of that show being terminated rises significantly. Therefore it is safe to assume that, whether or not a show is being binged, is one of the determining factors in the decision of whether or not the show is renewed. This assumption is confirmed by the showrunner of ‘One Day at a Time’, Mike Royce – who in his tweet encouraged fans to watch as many episodes of the season, as soon as possible, by stating that Netflix made the decision to renew contents based on data from the first two weeks.
Every action that Netflix takes is planned, co-ordinated and has a specific objective behind it. Binge watching also has the objective of promoting a private viewing experience, which ends up having a public dimension. Binge watching reinforces the attachment between the viewer and the character of a show. This is largely due to the fact that the brain generates dopamine – a pleasure inducing chemical signal in the brain- when we do something we enjoy. This is a natural and innate rewarding mechanism which helps us to reinforce the activity being carried out – like watching a show. In other words, our brain sends positive and euphoric sensations throughout the body, so that we continue to watch the program in question.
The moment we get hooked on a series – the pleasure and the bond we feel towards the show, compels us to talk about it to our peers – seeking to amplify the satisfaction and the emotional camaraderie with others. What Netflix ultimately achieves by driving the binge are extraordinary peaks of social conversation, very advantageous in achieving greater popularity of its programs, which become a trend and manage to attract the attention of new masses of audiences.
Now that we have an in-depth understanding of how Netflix works, let’s look at the positive and negative aspect of the multi-billion dollar streaming giant.
Advantage and Disadvantage of Netflix
Like anything in this world, Netflix the behemoth streaming service also has its own set of advantages and disadvantages. The table below lists out the distinguishing attributes of the services provided by the company.
|1||Netflix’s services can be enjoyed from any electronic devices included but not limited to Desktop, Laptop, Smartphone, Gaming Console, Smart TV – making it very simple and easy to use.||Netflix is constantly developing new contents, getting access to new contents rightaway is a problem – especially if you are trying to access it outside of the USA. This can be quite frustrating at times.|
|2||Unlike TV where advertisements are rampant, shows streamed using Netflix has no commercial interruption – making it easy to enjoy the show without disruption||As Netflix carters to subscribers all over the world, it distributes its contents in accordance to where the subscriber is located. This restricts access of some contents within its catalogue, which can be frustrating at times to people trying to access geographically restricted contents. For eg: Shows which can be easily accessed by people living in the USA, might not be accessible to someone living in Nepal or Bhutan.|
|3||Netflix has tons of shows in its catalogue, which included many of the shows that we already like. On-top of that, the streaming service has a lot of original contents which has been developed specifically for Netflix.||A fast internet connection preferably a fiber optic connection is required in order to enjoy uninterrupted streaming of your favourite show or movie. While this might not be an issue for developed countries, it is a big inconvenience for anyone located in under-developed countries.|
|4||Being an online service, the majority of the shows which are in Netflix’s catalogue can be downloaded to your phone or computer – which can be enjoyed offline or on the go.||Unlike spending money on purchasing DVD or Blu-Ray disks, where you will own a physical copy – you will not own any contents available in Netflix’s catalogue. You are only paying for the privilege of streaming the contents wherever you may be located.|
|5||Netflix provides a variety of subscription plans for its clients. One can choose the plan which is suitable to your personal needs. You also have the choice to upgrade or down-grade the subscription plan, if necessary.||Anyone who has a data cap placed on their internet by their ISP, will be at a huge disadvantage as streaming a movie – specifically HD shows will drain the data very quickly and you might run out of your monthly quota pretty fast.|
|6||With the basic subscription starting at only $7.99 – it makes the service affordable by majority of the world’s population.||Due to licensing issues of shows with major TV broadcast companies, Netflix’s library is outdated. Networks aren’t willing to let Netflix load up its library with recent content, for fear of losing out on revenue from the shows.|
|7||As the service allows access to thousands of movies and shows (irrespective to the subscription plan) makes the streaming service a valuable commodity.||For someone who is used to channel surfing and watching whatever is playing, you always have to pick something, and sometimes this isn’t that easy.|
The aforementioned distinguishing factors might make you think it is worth obtaining a subscription when it has severe limitations. The service has its merits like everything else, so whether or not you decide to obtain a subscription is totally dependent on your wants and desires. However, to make the decision easier, you will be able to find a short comparison between the major streaming services.
Netflix already has culminated a massive loyal fanbase with shows like: House of Cards, Stranger Things, Black Mirror, Ozark, Orange Is The New Black, The Witcher, Peaky Blinders, Better Call Saul ( A spin-off of the AMC series ‘Breaking Bad’), Dare-Devil, Making A Murderer, Narcos, Sense 8, amongst many others. But, in 2018, the company climbed to new heights when the it premiered international originals from Denmark (The Rain), India ( Sacred Games), Mexico ( La Casa de las Flores) and Spain (La Casa de Papel) – which was met with jubilant reactions around the world – solidifying Netflix’s dominance over the streaming industry. Whether or not you like the streaming services, Netflix, has been able to assert its dominance in the streaming industry with years of service and a team who knows its audience and ways to not only keep its millions of subscribers happy but, making them coming back for more. All in all, Netflix is here to stay.