Netflix Doesn't Care If You Watch Their Shows
This week, Netflix announced its latest earnings. It's a pretty boring document but buried beneath the numbers and talk of "Diluted EPS" was a fairly astonishing revelation.
"Since the launch of The Ridiculous 6, Netflix members have spent more than half a billion hours enjoying the films of Adam Sandler."
Forget the fact Netflix's 99 million subscribers (expected to pass 100 million any day now) have that much time on their hands, what was really surprising about Netflix's announcement was the fact it existed at all.
Getting viewing data out of the company is usually more difficult than getting a decent movie out of Adam Sandler (The Ridiculous 6, Sandler's first Netflix movie, currently has a 0% score on Rotten Tomatoes. Sandy Wexler, his most recent effort, is on 31%).
The company's so guarded about their viewing figures that, in January 2016, the NBC network launched their own investigation, hiring a firm to calculate the numbers–and discovering that NBC's biggest shows were more popular than Netflix's.
Publishing the result was a win-win gamble by NBC–either people believed them, or Netflix would have to prove them wrong with precious, precious information.
Netflix's reaction? Firstly to state that the findings were "remarkably inaccurate". Then, to take steps to prove it.
Here are some actual Netflix numbers
"The methodology and the measurement and the data itself doesn't reflect any sense of reality of anything that we keep track of," Ted Sarandos, Netflix's Chief Content Officer, said. "I hope no-one's paying for [the data, which was] really remarkably inaccurate."
NBC's claims annoyed Netflix enough for them to hire leading TV rating service Nielsen for the first time, allowing them to rank one–just one–of their shows.
According to the measurement service, 6.7 million people watched Orange is the New Black's season-four premiere from June 17 (when it debuted) through to June 19. Over the same period, 5.9 million people watched the season's second episode.
For comparison, in Nielsen's live-plus-three-days ratings for the same week, the June 19 episode of HBO's Game of Thrones was cable's most watched show, with 10.4 million total viewers. The June 13 season premiere of TNT's Major Crimes ranked second with 5.8 million.
Point made, Netflix went back to keeping their (House Of) cards close to their digital chest, and haven't announced anything since. Until now.
Netflix's secret masterplan
Why now? We'd argue Netflix had a very different motive for casually dropping the Adam Sandler info into a document that boasted about loads of different shows (without giving us specific viewer figures for any of them) this week.
It was to generate something they prize even more than binge-sessions: headlines.
It was pretty obvious the Sandler reveal would be headline-generating news (it's still being reported days after the information first dropped), even if it hadn't been perfectly timed to tie in with Sandler's latest negative-review generating machine Sandy Wexler (which came out at the same time).
Netflix doesn't usually release its viewing figures for one reason: because they're utterly meaningless to the service.
Unlike traditional television companies, it genuinely doesn't matter if people are watching their content or not. But it does matter if people are discussing it.
Now, we're not suggesting that Netflix doesn't care about quality. Far from it. The Netflix (and HBO, and Sky) business model is based on subscriptions, which means they place far greater value on four journalists writing snarky articles about half a billion terrible man-hours featuring Adam Sandler than they do on four hundred subscribers who don't talk about what they watch.
Word of mouth is what streaming services like Netflix value above all else – they don't care if you lose interest in Daredevil season two halfway through your binge, as long as you tweeted about how excited you were to watch it in the first place. Because someone might have read that tweet and decided to sign up.
Why piracy is good news
It's why, in February, at the Mobile World Congress show in Barcelona, when Netflix CEO Reed Hastings was asked by the on-stage interviewer about piracy, Hastings joked he hoped pirates would download White Helmets, Netflix's Oscar-winning one-off.
That's a pretty astonishing statement from the CEO of an entertainment service – but it actually makes sense in this context. If a pirate raves about White Helmets to her mates, a documentary not enough people are talking about, maybe some of those mates will sign up for a subscription to watch it.
Netflix's original content's primary requirement is that it becomes a conversation-starter – so that anyone out of the loop will have to sign up to contribute.
With Marvel shows, that's easy. They have a built-in audience that's very vocal about what they like (and don't like, which might explain why Netflix still views Iron Fist as a success, despite the fact critics were almost exclusively talking about how bad it was).
Marvel's movie division successfully makes people feel they have to buy a ticket for the next superhero sequel or face becoming excluded from the pop culture conversation, which makes it the perfect brand for Netflix to align itself with.
Then there's House of Cards, which combines two things journalists love to discuss–politics and David Fincher. With that project, you've got an angle that suits TV, movie and even political news outlets.
Framed in this way, pretty much all of Netflix's choices make sense, whether it's 13 Reasons Why (a YA adaptation based around an intense and important conversation topic: teen suicide) or Dear White People (a TV adaptation of a great, but relatively obscure, independent movie that discusses race issues in-depth).
Each of Netflix's originals answer two important questions: does this fill an audience gap? And will it get people talking? (with the balance generally heavily in favour of the latter).
Here's how Hastings contextualised 13 Reasons Why during the WMC discussion. "We have a very controversial show coming out in about six weeks, called 13 Reasons Why. It will be very controversial because it deals honestly with suicide. It will bring into the open the conversation about teens and suicide."
This commitment to conversational content does involve some occasional risk-taking but, at this point in Netflix's business model, the negative consequences are minimal.
According to Hastings: "I think everybody looks at a business like ours and says, 'Are they going to be able to finance all those great investments?' But we have a market cap over $50 billion and $3 billion-$4 billion of debt. So it's like having a million-dollar house and having $50K of debt on it. It's really not that scary on a million-dollar house."
(Man, you know you're successful when your go-to metaphor is based on paying off a million-dollar home).
This model means Netflix can even make their competition work for them. Hastings has described Netflix's competitors in the past: "If you don't watch Netflix some night, what do you do? Sometimes you watch a movie, sometimes you watch sports, sometimes you're on YouTube or Facebook or Snapchat. We compete broadly for screen time – that's not just against a TV provider it's against all the things you do with that screen."
But when your shows are being broken down on YouTube, discussed on Facebook, or turned into a meme on snapchat ("Welcome to your tape" is the latest Netflix viral, inspired–darkly–by the tapes in 13 Reasons Why), your enemies don't look quite so threatening.
And what about the future? Hastings' immediate ambition is to get "everyone in the world" subscribed to Netflix. Beyond that, he believes within the next 20-50 years we're going to see the rise of "serious artificial intelligence."
Netflix's CEO posits that humans will either have been augmented by AI by that time, or the machines will have taken over the world. "Will we be entertaining you, or will we be entertaining AI?" Hastings joked.
As long as those robots can talk to each other, we get the feeling Netflix won't mind either way.
This story originally appeared on Digital Spy.
* Minor edits have been made by the Esquiremag.ph editors.