The New Golden Age of TV
Netflix, which launched in 1997 as a DVD-by-mail service that competed with Blockbuster Video before successfully transitioning into becoming the leading online video service, reported at the end of July that its second quarter earnings had more than doubled, while it also surpassed 50 million worldwide subscribers for the first time.
It has earned critical praise for its original content as well. Netflix, along with pay-TV service HBO and basic cable channel AMC, managed to lock up the best drama Emmy nominations - beating out broadcast nets ABC, CBS, Fox and NBC.
It is thus no wonder that other OTT service providers, including Amazon Prime, Hulu and even Yahoo are now competing for original content. This has created new opportunities for producers, writers, actors and just about anyone in the content creation business.
The Evolution of TV
"I wouldn't use the word 'disrupter,'" Bill Niemeyer, new video strategist at The Diffusion Group (TDG), told the E-Commerce Times.
"Netflix has done an incredible job with its original content," he acknowledged, "but what we're seeing with it and with Amazon, Yahoo and Hulu is really evolutionary more than revolutionary. This is just the next step in the evolution of original content."
"HBO in its early days was really just a place to view old movies, or at least old 'new movies' that had been in theaters recently," said Niemeyer.
"HBO only slowly introduced original content, but it wasn't until the late 1990s that The Sopranos put them on the map as an original content producer. It was the show that got people to subscribe to HBO, and now Showtime and other cable channels are regarded critically so it is usual business for them."
Drawing in the Audience
All that critical acclaim has made HBO, Showtime and even AMC -- another cable channel that started out with just old movies in the vault -- serious destinations for viewers. Now Netflix is following suit in drawing eyeballs for more than just what is in the archives.
"Netflix has the benefit that HBO broke down the barrier of competing with traditional networks," Greg Ireland, research manager for multiscreen video at IDC, told the E-Commerce Times. "Netflix is also an example of company that has successfully reinvented itself to meet a changing market."
It already had successfully made the transition from DVD-by-mail service to streaming, but now its original programming is what is helping draw in new subscribers, including the reported 570,000 U.S. subscribers and 1.1 million international viewers it gained in the second quarter of 2014.
"Many factors come into play when determining success for streaming service providers, but the quality and desirability of the content is the most important," Myra Moore, founder and principal analyst at Digital Tech Consulting, told the E-Commerce Times.
"A library of old movies and TV shows doesn't provide a streaming service provider with the juice it needs to compete on a high level," she pointed out. "Offering original programming can definitely drive subscribers -- and Netflix has, so far, done a pretty good job of that."
Battle of the Binge
Netflix has also changed the way people are viewing content by making every episode of a new "season" of episodes available. For viewers, this means a weekend-long viewing marathon instead of a weekly rollout of program -- the method employed by broadcasters and even cable channels for decades.
"In a way, this puts a challenge on the traditional broadcast viewing experience," said IDC's Ireland. "This isn't a battle yet, but it is setting up a battleground of sorts."
The downside, of course, is whether Netflix -- or any streaming service -- can sustain enough content to keep subscribers locked in while they wait for the next big thing.
"There is a big splash when a new season launches," noted Ireland.
"However, in one way the show loses the potential buzz from online speculation and discussion. Viewers can't really discuss the shows on forums and social media, as that is lost. ... There is no waiting until next week, and there isn't the option for viewers to become part of a community over the course of a two- or three-month season," he explained.
"Really, it is a matter of taste," Ireland said. "Do you want to view it as a Dan Brown page-turner or wait each week and think about it? Netflix's model is working," Ireland said, "so it isn't really a battle yet."
Gambling on More Than Ratings
The streaming services are not really alone in betting on only a handful of series to carry the weight. Most broadcast networks have long had to gamble on a number of shows each new season and hope some stick. The difference is that Netflix isn't betting on a fall or mid-season debut, but instead rolls out new programming over the course of the year.
"Netflix isn't necessarily at any sort of disadvantage compared to any other cable channel or network that has to gamble on a hot show or two to carry it," said Ireland.
"If anything, Netflix still gets the buzz and then can move on to the next show if the viewers don't like it. There is nothing to cancel, as the episodes are all there. Those who don't enjoy it can just opt out while those who want to stick with it aren't left with a show that was canceled midseason."
Netflix has even shown that it is eager to bet on content that didn't fare so well on broadcast TV -- notably Arrested Development.
"Netflix picked up Arrested Development after no broadcaster wanted to touch the canceled series with a 10-foot pole," added Niemeyer. "This is because Netflix has an advantage that goes beyond just looking at ratings. It has taken data caps and they can see what shows in its library are popular. That helps them determine what shows should be made. TV has long had ratings to determine programming, but that's not the same things as what the server logs can show you."
Will Others Stream In?
Although Netflix has managed to gain critical acclaim and draw in viewers, it is not the only service that has been developing original content. The question becomes whether other OTT services will have as much luck -- and whether there is in fact room for more players, and if consumers will be willing to pay to access the content.
"We are in what I call the 'everybody jump in' era with streaming services," said Digital Tech Consulting's Moore.
"Lots of players are jumping in now and, of course, attrition is setting in. Not only is it not sustainable because of the cost of buying into multiple services, but because content fragmentation is confusing and inconvenient for viewers," she pointed out.
"The industry still lacks a well-designed and organized interface in streaming receivers that can elegantly aggregate the different streaming content that is available," Moore noted.
"The solution may be in one -- or more realistically, several -- well-executed interfaces, but also in receiving devices that incorporate multiple types of reception of content, whether the content is from traditional pay-TV operators, OTT service providers, free-to-air broadcasters," she suggested.
Getting this part right, "as well as there being continuing advances in obtaining the right kinds of streaming rights," Moore said, "is the next important step in the video-streaming industry."