
How Netflix outsmarted everyone else in TV - dsr12
https://www.recode.net/2018/8/23/17770896/netflix-reed-hastings-ted-sarandos-streaming-tv-media-jason-hirschhorn-redef-peter-kafka-podcast
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lostctown
As a technologist I couldn't be more impressed by Netflix's rise over the last
decade, but the old film artist in me kind of despises the direction they are
taking motion pictures.

I recently stopped using it and it was like walking out of an incredibly
comfortable, yet subtly depressing cave. I found it hard to get out of the
cycle of watching only films that I was likely to watch.

What humans will eventually discover after we've squeezed every last drop of
value out of the monolith ML systems of today is that many facets of our
culture do not benefit from traditional recommendations systems. Maybe a more
democratized and transparent system for model consumption could help. If indie
researchers and hackers can integrate their ML models into existing systems
and offer truly diverse ML models then maybe recommendations systems have
chance. But in their current state they are laughable representations of the
average taste of its users, which is generally not great.

~~~
menacingly
I agree. I think all data can tell us is what people _are_ watching, not what
people would get the most enjoyment out of watching.

It's like if a chef based a restaurant menu on the average diet of the average
person. You may find neat patterns and be able to hyperstimulate some drive in
people, but that's a very different thing than carefully designing a new or
engaging thing people didn't know they wanted.

It's sort of a guaranteed averaging feedback loop.

~~~
jancsika
> I think all data can tell us is what people _are_ watching, not what people
> would get the most enjoyment out of watching.

Just to be clear/nitpicky, you're talking about an algorithm that starts with
the catalog Netflix could afford to license at some moment in time, and then
maximizes the viewer's enjoyment for that limited set of content.

That's probably a vastly different level of enjoyment than starting with, say,
the catalog of available content listed in IMDB and maximizing for the same
thing.

~~~
gdfasfklshg4
Surely Netflix starts with the larger catalogue of all possible content when
deciding what content to licence and also what content to make.

~~~
jancsika
Sure. But they are still at best delivering "the most enjoyable experience
where the enjoyment is bounded by the content that Netflix can afford to
license."

A user can hit those constraints when they search for something that exists
but is not available on Netflix.

That point becomes noteworthy when that same content (or portions of it) are
available elsewhere on the net. In my experience this is typically through:

a) downloading a torrent of the content that is missing from Netflix

b) watching all or some portion of that content on Youtube

------
40acres
Netflix definitely found greenfield with their business model, however the
next few years will be decided by who can create the best original content.
Netflix has spent billions on content: signing popular writers / show runners
to long term contracts and picking up movies in the indie scene for
distribution. However I still don't think they've had a massive hit, nothing
Netflix has made can touch Game of Thrones or the Sopranos for cultural
impact, and critically even Amazon Studios has had an Oscar nominee (although
I think Beasts of No Nation was robbed for not getting a best actor nom).

Disney is rolling out their own streaming service and I'd bet that eventually
they will roll ESPN+ into the deal and maybe even ESPN entirely itself. I
think once sports gets into the mix the entire streaming domain will radically
change.

~~~
jbigelow76
_nothing Netflix has made can touch Game of Thrones or the Sopranos for
cultural impact_

I think House of Cards was at least in the same ballpark as GoT and Sopranos.
I think there is something to be said for brand affiliation as well, HBO was
already considered a great source of TV while Netflix was only starting to get
a fraction of that credibility. I could easily imagine an alternate reality
where we would say:

 _nothing Netflix has made can touch Game of Thrones or House of Cards for
cultural impact_

with the implication being The Sopranos being a Netflix property.

As with homeruns, HBO has more than its share of (sometimes critically
acclaimed) base runs (Veep, Boardwalk Empire, Entourage, Curb Your Enthusiasm,
etc...) as is does strikeouts (Vinyl).

~~~
40acres
I don't think House of Cards comes close really, especially now that Spacey is
out. Game of Thrones is a movement: cosplay, crazy fan forums, ultra wide
appeal, the filming location of King's Landing in Croatia is constantly
flooded by tourists because of GoT. House of Cards is a solid show, especially
season 1, but I'd say GoT is the biggest show in the world culturally right
now.

Good point regarding HBO's brand and their "good" shows; and I think it helps
to illustrate my point: Netflix has a lot of good shows, maybe even some great
ones, what I think they need, and what I think the other streaming providers
will need is really big generational hits that come out every five years or
so.

~~~
megaremote
> Game of Thrones is a movement: cosplay, crazy fan forums, ultra wide appeal

Sure, but that is just the difference between fantasy/scifi and everything
else.

You don't get cosplays of Tony Soprano.

~~~
dylan604
or do you? At least there would then be an excuse for Jersey ;-)

------
overcast
I'm nearly ready to cancel my streaming subscription. There is less and less
studio movies I want to see on there, and more Netflix originals. Not that I
have an issue with the originals, there are good ones, but there is seriously
nothing else worth watching. I still subscribe to Blu-Ray rentals for the
following reasons.

A. Streaming quality is still poor, particularly audio. The bitstreams are
compressed beyond normal DTS/DD compression, and it sounds like garbage in
comparison to the lossless tracks on physical disks. To me the audio track is
90% of any movie.

B. It's impossible to find the vast majority of movies on streaming. If
something pops up, it disappears in a month or so. Out of FIVE HUNDRED
physical discs queued up, only TWELVE are available on streaming. I seriously
fear the day they get rid of physical disk rental all together. Their catalog
is expansive, and we have ZERO other options now.

I just bumped from 2 discs to 3 discs out at a time, because we no longer have
1 day turn around times on returning and sending out discs. It's nearly
impossible to get one back the same week unless you send it out Monday or
Tuesday.

~~~
ghaff
I still get disks for the same reason. Unfortunately they're literally letting
their back catalog rot with more and more in-print films no longer available.
Unfortunately at least some of them aren't available on a la carte streaming
services.

~~~
overcast
Really not sure what is going to happen to the cinephile demographic if they
do away with their physical library. I'm not going to deal with 8 different
streaming sites, all with poor quality.

~~~
rangibaby
There’s always TPB

~~~
ghaff
Which is pretty marginal for non-mainstream content. The answer is that you're
probably buying anything on disc that is at all obscure. Which isn't actually
that bad. DVDs aren't super-expensive for the most part.

~~~
jacobush
I buy, rip, and give away the disc.

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dcole2929
I think the "outsmarted" part is absolutely correct to an extent. They
definitely saw an opportunity that an entire industry didn't. They have
absolutely changed the direction of television in pretty much all respects,
from release cycle, to delivery to even marketing. However, I think the issues
that Netflix has largely encountered now that others are catching on are a
result of them not pushing hard enough. It's readily apparent that Hastings
and his team saw this opportunity, and were in perfect position to capitalize
on it but they didn't show enough faith in the model to make the sorts of long
term bets that could have built them an unassailable moat. You get all these
shows for whatever crazy amount that no one else would pay but you do
relatively short term deals? Certainly Netlfix was ready when the deals
started to expire to go all in on original content to replace the stuff they
lost, but knowing that the major networks were going to come at you hard once
they realized the opportunity they had signed away why wouldn't you push for
longer deals? I recognize the sheer economics of the issue but outside of the
originals Netflix is losing all the things that originally brought people to
the service. If they did 10-15 years it would have been impossible for anyone
to catch them as they are doing now.

~~~
lotsofpulp
I don't see why one would assume that Netflix had enough funds at the time to
secure rights for longer periods of time. Obviously it is Netflix's interest
to have as much content for as long as possible, so the only explanation for
why they secured rights for as long as they did was because they didn't have
sufficient resources.

~~~
dcole2929
I'm sure economics played a role but I don't overall find that to be a
compelling reason to not shoot for longer deals. They are any number of ways
to generate the money necessary and contractually they could have structured
things such that there were automatic extensions built in based on arbitrary
criteria. I think Netflix took a huge bet, and knew they were doing so and
thus hedged their bets. They either hoped they could re-negotiate better deals
later on or were scared the service would fail leaving them with huge
liabilities.

~~~
lotsofpulp
I would bet the media owners had some inkling that the internet would change
the nature of the game and the elimination of a middle man was on its way
(assuming net neutrality, but that of course has changed). Anyone in their
position would have been wise to let Netflix have the rights while they tested
the business model and/or the media owners themselves built their product, but
definitely not let them have it for any longer than necessary.

~~~
dcole2929
The problem is from all the evidence we have (granted it's all anecdotal) that
wasn't the case. Every interview, every story from this period times
reinforces the fact that Network execs thought they were getting a great deal
from a company that would never work. Every bit of data we have says that the
networks fundamentally believed there was nothing that was going to change the
status quo. They had every incentive given that belief to get as much money
from Netlfix as possible because what did they care. They already assumed
Netflix would fold anyway, so why not license things for 10 years or 15 or
however long netflix wanted if it got you x million dollars more. When netflix
went under they would have got back the content and kept the money.

~~~
lotsofpulp
I hadn't heard of that, and if that's true, then I see your point. But I'm
sure there were also hard decisions being made at Netflix about how much of
their limited resources to devote to developing their own media versus how
much to license.

------
sambroner
Will we end up paying Netflix, HBO, Hulu, Sports streaming the same amount we
paid for cable?

Maybe we get more granularity, but that comes with the overhead of managing
more subscriptions.

Who will laugh when we end up paying for a bundle of streaming services?

~~~
joezydeco
Probably more, since your cable company (sorry, that should read _broadband
provider_ ) will raise their rates to make up for the lost revenue in TV
services.

~~~
trca
This is actually not true. Smaller cable companies (so anyone smaller than
Comcast) traditionally make very little if any profit on cable TV. The entire
cost of the cable TV package is made up of the licensing and distribution fees
charged by the studios. A (will remain) unnamed provider in the northeast
region actually looses money per cable TV subscriber so they can stay
competitive against Comcast. They're very excited for the day they can drop
their Cable TV packages entirely and solely become a pipe.

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jefe_
The other day I noticed the drama films on Netflix this month are very strong.
Led to realization that as time passes, the licensing costs for media often
decline. When Netflix started streaming in 2007 films that were 5, 10, and 15
years old (less expensive) were produced in 2002, 1997, 1992 respectively.
Someone starting college in 2007 would have been between 4 and 14 years old
when those films were released. Today, the same 5, 10, 15 targets hit years
2013, 2008, 2002. That user from 2007 is now ~30, and would have been between
14 and 25 when those films were released. As time passes, Netflix will be able
to offer more relevant content to their core users at a lower cost. It seems
some of their recent original content fills some of the programming gaps for
younger users. They are positioned very well.

~~~
jetrink
Interestingly though, they have very little content that is 40+ years old. In
the United States, there are currently just 10 films available from the 1960s.
Five of those are Bollywood films and three concern Barbara Streisand. There
are only four films from the 1950s, including White Christmas, which always
make good August viewing.

There are so many amazing films from those two decades. Where are they?

~~~
jedberg
Locked in vaults on deteriorating film masters. It's really hard to find
original masters to digitize the older you get. You can't just grab an old
laserdisc and encode it -- the resolution isn't good enough. You need to find
the old high res film masters.

As the AI gets better for restoring old film, it might become possible to find
old laserdiscs or even VHS to use as a master, but right not, that's not
really possible.

~~~
peeters
I mean the work has already been done for a heck of a lot of those films
though right? A quick search shows _oldies.com_ having 500+ movies from the
60s available in blu-ray. I would assume the rights to those digitalizations
belong to the same owner as the rights to stream in most cases.

~~~
jedberg
> I would assume the rights to those digitalizations belong to the same owner
> as the rights to stream in most cases.

Not in most cases, no. Usually everything is owned by someone else -- even the
audio and the video are usually owned by separate companies.

Also, the originals that those blu-rays were digitized from are most likely
the film masters themselves, which would have to be found again, and possibly
restored again. You'd be surprised how easily studios lose their film masters.

------
sarcasmic
The 'old guard' wasn't wrong; Netflix pretty much were suckers for licensing a
bunch of old content. The part in the transcript where he presents this as a
stroke of genius that led to the pivot to original content is a rosy-glass
view that gives Netflix too much credit. In my opinion, this fate came about
entirely because of the content owners and not because of Netflix.

Netflix basically needed to bootstrap its streaming service with content, so
they paid a bunch for syndication. They then sold an all-you-can-eat plan at a
low price. Their success butted against pay-per-view providers, other
syndicators, and content owners: Netflix blazed the trail and proved that
people sign up for video-on-demand in droves if it carries content people want
to watch, and is cheap enough to where one doesn't have to think about every
view. But this devalued the content, so studios yanked their newer seasons and
put them on knock-off platforms for a separate subscription.

This development meant Netflix had to start making deals with less controlling
content providers, or produce content of their own. On the other side of the
house, Hulu was able to justify its price point by offering current seasons of
popular shows, and being a joint venture of influential content owners, but
single-owner offerings struggled for customers, unless the IP was exceptional.
This is why HBO hasn't yet died in this space, and Disney will likely succeed
on their own, but also-rans no longer offer enough in a crowded market.

By the end of the article, they do descend to reality and identify the magic
formula: Netflix makes money from the subscription, and a constant flow of
offerings both strong and mediocre will tide the user over to make them not
consider cancelling. And in time, the ever-expanding catalog is insurance for
a change in market headwinds.

The key, though, is will Netflix be able to convince the consumer to part with
their money when other platforms with the same business model offer a more
compelling catalog? In the long run, that remains to be seen.

~~~
GW150914
I’m not seeing a better catalogue for comparable money, just endless
fragmentation with layers of paywalls to access content. What Netflix and
emerging platforms have convinced me of is the value and necessity of piracy,
ormthe promise of a better future of media consumption will be undermined by
greedy rent-seekers. I have no doubt that within a decade they’ll have managed
to make the price of access to content more expensive in terms of money and
effort than cable ever was.

~~~
lotsofpulp
If you can click a button and get the content, then there is no necessity of
pirating. Perhaps you don't want to pay what the owners are asking, but that
doesn't "necessitate" stealing it.

The only time I can think of being forced to pirate is when legacy licensing
crap keeps you from being able to watch it where you want, when you want it.
But if it's available to buy on iTunes or Amazon or wherever, and all you have
to do is pay, then you're either choosing to pay what the owner is asking, or
steal it.

------
lmilcin
Well, I don't agree on the "outsmarted" part. I have basically seen all there
was to see and new material trickless too slow to keep me. My family is still
hooked but they aren't too happy either. If they don't find a new way to keep
audience they will soon face prospect of people being bored and leaving for
somewhere else.

~~~
makira
All my recents searches for old movies were vain. Last Sunday, I wanted to see
'Little Miss Sunshine (2006)', result: not available (in Canada anyway).
Unsubscribing has started to cross my mind.

When I subscribed for Netflix, the motivation was a large catalog of old
movies, cool stuff from other countries (I remember watching TV series from
Iceland that were great), no ads. But the greatest selling point: it was more
convenient than pirating.

Now, it's all about pushing Netflix produced content down my throat using
whatever trick possible, and pirating is again more convenient (large catalog,
no ads) even if less user-friendly.

So yeah, "outsmarted" is really pushing it. I'm not the only one getting bored
by the current Netflix direction.

~~~
dragonwriter
> I'm not the only one getting bored by the current Netflix direction

The current Netflix direction is the only one possible; one big catalog only
worked before they had proven the viability of mass streaming—once that
happened competitors bidding for exclusives (and content owners reserving
material for their own services) was inevitable.

------
frandroid
>> You were at MTV early. Early-ish.

> I sold my company to MTV in March 2000

2000 is not "early" or even "earlish" at MTV, youngun.

------
PaulKeeble
I am always going to disappointed that in the end the only model Netflix could
follow was that of the cable companies by having its own locked in content.
The cable companies didn't want to share their media via the internet and
hoarded it and Netflix's attempts to be a modern delivery service failed, so
they became a cable TV company over the internet with their own locked in
content.

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remir
There's a lot of hype about Netflix, but beside Stranger Things, and some
"old" movies here and there, I'm not that much impressed. After I watched what
interested me, I cancelled my subscription.

~~~
WilliamEdward
You're not the market. I keep finding new things I want to watch, to the point
where there's almost too much choice.

~~~
jkmcf
I agree. My watch list is like 40 films or series' long. A lot of that is
Chinese kung fu movies, but I really love the cinematography and locations.
Additionally, Netflix provides me my BBC mystery fixes (Shetland, Midsommer
Murders, etc...)

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chaoticmass
One thing I lament about Netflix is how people's watching habits have changed
around it, and how the programming has also changed in response.

A lot of people like to have something playing on the TV that they passively
watch while also doing something else. Maybe they put on a show while they
browse Instagram, or do house work/cook dinner, or while hanging with friends.

Seemingly as a result of this, there are a lot of shows/movies where you don't
really need to pay close attention to get the plot because it has been dumbed
down, reduced to the most basic strokes. There's more filler in between plot
developments. It's like a lot of B-movie schlock with high production value.

These shows/movies don't interest me. When I put something on to watch, I sit
there and watch it. I want deep plots and fleshed out characters and a lot of
Netflix originals seem to lack this.

~~~
iamforreal
I don't think that in itself is a change in viewing habits. There's been
plenty of filler tv trash for the last half century, and I've used it in the
way you describe even before netflix existed

~~~
chaoticmass
True. I guess I wish their original programming didn't skew so heavily that
direction. It wasn't as much of a problem for me when they still licensed a
lot of non-original programming.

~~~
valarauca1
> I guess I wish their original programming didn't skew so heavily that
> direction.

no it really did.

"Shipping" is a classic trope where 2 characters have a will they won't they
relationship for several seasons. It is always a good B story to fill
otherwise empty space with when writers run out of material.

The name literally implies what it is, you are "shipping" a script. quality is
slightly irreverent

~~~
Apocryphon
I was once told soap opera is literally named for disposable shows that people
at the laundromat would have on while waiting for their clothes to finish
drying. That turns out to be a folk etymology, but it's believable.

As for original programming seemed dumbed down, I'd argue that for whatever
reason (general technical advancements, maybe), it's far easier to make dumb
shows, with higher production values. That's how you get wannabe prestige
dramas that ape the style of The Sopranos, Mad Men, even costume epics like
Game of Shows, but end up being far more vapid and worse in writing or plot.
It's sort of how even box office stinkers these days look much better than bad
movies used to do.

~~~
chaoticmass
I don't mind over-the-top drama. Drama does not need to be dumb. One of my
favorite series is Downton Abbey. The rule of that show seems to be that given
a situation, always take the most dramatic route. This isn't bad though, the
characters react realistically, they have depth, the show is wonderfully well
acted. If you're not actively paying attention you will miss subtle facial
expressions and looks that the characters show, giving more insight into what
they are really thinking.

------
sambe
I feel more and more done with paid streaming services. Even Netflix seems to
make their interface progressively more intrusive and less useful. Their
content seems to vanish and get replaced with "original content" \-
conspiratorial documentaries, mostly.

For sure there is still some value there, but it's more and more distributed
across platforms, with worse and worse usability. Often I find I'm paying for
multiple expensive services and can't find a way to stream what I'm looking
for. Or (Amazon Prime!) I can rent it from a service I already pay monthly
for.

TV had lower expectations. On-demand but sort-of-not-really-and-you-have-to-
pay-again-and-watch-more-ads is frustrating.

------
glitchc
Netflix hasn't outsmarted anyone really. They are still dependent on the
studios for AAA content. It remains to be seen how successful Netflix remains
once studios ramp up their own streaming services and start pulling their
content from Netflix. I predict it will become another HBO with similar
subscription rates.

------
telltruth
Stock market aside, it is yet to be seen if Netflix model is viable on long
term. Current content budget growth is larger than revenue growth and lot of
the new memberships are coming from International market which will saturate
at some point. The basic hypothesis here is that $10/mo per subscriber would
be enough to sustain roughly $700 million/mo content budget. This is quite
possible if you had 70 million subscribers. HBO on the other hand 130 million
subscribers but they do this by sneaking in package deals with cable plans.
However there is no magic here with idea or business plan. You can think of
whole deal as Netflix turning itself in to Internet version of HBO. It will
just work as good or as bad.

------
rpoconn1
9 minutes of commercials per 1/2 hour? Ice road truckers level content? The
bar was really low here. I wouldn't give Netflix too much credit, although
IMHO they are doing the best out of their competitors (AMZ, Hulu, etc..).

------
rajacombinator
Tough times ahead for Netflix. Their model is broken and smart money is
leaving the service. Why pay monthly for a bunch of crap shows I don’t like.
They have no edge vs competition. Prime, Hulu, etc all offer the same thing
it’s just a matter of whose lineup is better and Netflix can’t produce enough
content to compete on that.

------
partycoder
Because they track what people like and give people more of that.

------
m3mpp
man, only in this world, second rate movies, shitty shows, stupid
functionalities like autoplay, they don't even have a decent search...

~~~
baq
They need to become TV in order to survive, so they are trying. Ads will come,
too, it's just a question of when.

~~~
yborg
Exactly what I was thinking the last time I was on Netflix, which was a couple
of weeks ago at this point and spent a good 40 minutes realizing that Netflix
had now become the "vast wasteland".

With delivery platforms all now funding their own content, the streaming
entertainment landscape starts to look ... exactly like the old TV networks.
Just the names have changed - replace 'ABC', 'NBC', 'CBS' with 'Netflix',
'HBO', 'Amazon'. It convergent evolution, and all of the things that drove the
dreck that was on broadcast TV in the old days are there to drive it now, only
with even better and realtime ratings data and targeted ads.

