Hello and welcome to the third edition of In Media Res. Today we’re looking at a unique advantage that Netflix has over it’s streaming competitors: An incredibly deep library of content that allows it to respond to, and cultivate, zeitgeist interests.
Let’s dive in...
Streaming platforms have structural advantages over traditional TV
Traditional TV operates to fill a 24h programming period. This means they can only host about 20 shows at once, and all those shows have to bring in audience numbers from launch, otherwise they cannot generate ad-revenue from high ratings. This leads to a lot of wastage, if a show isn’t successful quickly it has to be dropped from the rotation at a loss.
Streaming doesn’t have this problem, hosting one show does not come at an opportunity cost of another. Which leads to some significant advantages:
-The value of the shows they host grow over time as new audiences come in and are incentivised to watch additional shows to get value from their subscription.
-They can host a wide variety of shows, some quite niche, to appeal to wider audience interests.
-Successful shows create a network effect, raising the whole content ecosystem as they bring in new audiences that go on to watch lesser known programs. A rising tide lifts all boats.
Traditional TV makes money from ratings, streaming platforms make money from audiences.
Traditional TV’s time advantage
A key advantage that traditional TV has over streaming platforms is the ability to report and respond to what’s happening in the world as it unfolds through live newsrooms. Despite the trend of audiences migrating away from cable, harnessing public interest has helped drive record ratings for news-based programs such as Tucker Carlson and Morning Joe .
News bleeds into culture
Despite record ratings, a rising mistrust in news media has led to audiences no longer being satisfied with simply receiving and accepting news as it stands:
(Source: Edelman 2020 trust report)
People want the complete story, and a distrust in news is moving audiences to seek other sources to complete the picture.
A look at Amazon and NYTimes best seller lists shows the effect of the BLM movement in pushing audiences to deeper understanding of current events. A similar trend happened earlier this year with the Covid outbreak and a rise in popularity of pandemic movies such as Contagion.
Streaming platforms are incentivised to host deep libraries of content
Audiences subscribe to streaming platforms, rather than tune in as they do with traditional TV. To justify the continued cost of subscription, streaming platforms are incentivised to offer as much content as possible.
This means that a deep library is essential to the success of a platform, and no-one has a deeper library than Netflix.
Below is a distribution chart of shows rated by viewers from average to exceptional. Despite having quite a few ‘average’ rated shows, it’s the sheer volume of choice that helps drive Netflix’s success in justifying their subscription cost to customers.
Netflix’s third lane
It’s easy to imagine streaming platforms acquiring audiences via two lanes.
The first lane is taken up by the big hits. These are the shows that drive conversation on social media, office water coolers and awkward first dates. Tiger King, Birdbox, Peaky Blinders and Stranger Things are examples of this. Blockbuster, wide appeal programs created and marketed to bring new audiences in.
The second lane is made up of shows that aren’t going to have cultural impact, but retain audiences and drive total view time. Take The Office, it won’t make headlines but is one of the most popular shows on Netflix, despite being over 15 years old.
Due to it’s deep library Netflix has created a third lane: Shows that capitalise on audiences seeking a fuller context to current interests in the news. The BLM movement and protests are a great example. Netflix was able to curate 45 titles from it’s library to highlight ‘powerful and complex narratives about the Black experience’.
This is a very powerful lane:
-Capitalises on popular interests to bring in new audiences seeking deeper narratives.
-Reinforces subscription value for current audiences through deeper knowledge.
-Transforms the platform from a home of content to a responsive library.
It’s worth noting that Netflix’s curation of BLM related content isn’t a vanity play, nor is it a commercial exploitation. Their programming of Black Content is famously substantial and they have made c-suite level appointments to continue to drive this growth.
Netflix’s third lane is crucial because it maintains the relevancy of the platform. Their deep library means they can leverage popular culture, milestone events and keep up with the zeitgeist. It transforms the platform from an escapist source of entertainment and into a reactive cultural powerhouse.