Netflix: House of Cards and Castles in the Air

“If you have built castles in the air, your work need not be lost; that is where they should be. Now put foundations under them.”

– Henry David Thoreau

Though the brouhaha over the series House of Cards has been building steadily since its announcement almost two years ago, through rumours of budget battles between director and studio, it was upon the release of the series this week that the media meta-echo chamber really went into overdrive. The first season, with a budget far north of $100m, debuted to ebullient praise from critics. But what does it signify for the trail-blazing company’s future?

Aside from the mostly positive reviews, the series piqued the media industry’s interest for other reasons too. It is the first to be created and screened exclusively by Netflix, a company previously known for striking deals with studios to distribute and stream their content. Not satisfied solely with such (sometimes pricey) deals, the company also saw an opportunity for greater brand visibility and a separate revenue stream – assuming it eventually licenses the show regular TV networks – in fully-fledged independent production. What is also interesting is that the entire first season was made available for instant viewing, all 12 hours. By doing this the company recognised and capitalised on a trend that has been accelerating for almost a decade; people like to watch multiple episodes at once. This has never not been the case, but the weekly episodic installments of shows on network television have allowed the audience little say in the matter, and thus no room for such a habit to develop. This changed dramatically with the arrival of the DVD, specifically with affordable boxsets, as those that had missed the zeitgeists of West Wing, The Sopranos and 24 were able to quickly catch up with their obsessed brethren. Critics have often noted how the viewing of multiple episodes at once – which is how such reviews are often conducted as they usually receive a disc with several shows to consider – particularly for shows like Lost, improves the structure and narrative flow. With the arrival of boxsets, such opportunities were available to all. Indeed, marketers leveraged this enthusiasm for consecutive viewing, creating events around it. Netflix saw this with absolute clarity and allowed viewers to watch as much or little as they desired. Many, it seemed, chose to devour the whole first season in one weekend, which entertainment trade Variety covered with humourous repercussions to the viewer’s psyche, across now fewer than six stages of grief. Zeitgeist has written before about the increasing popularity of streaming, and the complementary preference that audiences have for the type of films (action, romcom, broad comedy) they like to watch when choosing such a distribution method. It is interesting to consider then just how much the viewing experience differs between a 12-hour marathon over two days, and a one-hour slice over a period of three months. As the article in Variety half-jokingly posits, “Is tantric TV viewing a thing? If it’s not, should it be?”.

Of course, Netflix aren’t alone in seeing an opportunity to delve into developing complementary products and assets. Microsoft are using the functionality of Kinect to pair with their own content development, letting children “join in” with Sesame Street, for example, and are in the process of setting up a dedicated studio for production, in Los Angeles. Amazon, which owns the streaming service LoveFilm, is also getting into the game, recently setting up Amazon Studios for original content production. At the end of last year, The Hollywood Reporter announced Amazon would be greenlighting twenty pilots, all of which were “either submitted through the studio’s website or optioned for development”. YouTube recently launched twenty professional channels on its UK website, Hulu is following suit… It really is quite startling to see such fundamental disruption and turmoil in environments where incumbent stalwarts (such as 20th Century Fox in film and Walmart in retail,) have long been accustomed to calling the shots. Could the model become completely inverted, such that the Fox network and HBO become the “dumb pipes” of the TV world, showcasing the best in internet-produced television? Maybe so, and this is not necessarily a bad thing. The Economist this week argue that one of the most important factors in Liberty Global’s recent purchase of Virgin Media was the avoidance of paying corporate tax for “years” to come. If content is still king though, a problem remains for those incumbents. The New Yorker astutely points out,

“An Internet firm like Netflix producing first-rate content takes us across a psychological line. If Netflix succeeds as a producer, other companies will follow and start taking market share… When that happens, the baton passes, and empire falls—and we will see the first fundamental change in the home-entertainment paradigm in decades.”

Netflix must tread carefully. Crucially, what seems like competitive differentiation and all-quadrant coverage now can quickly shift. Amazon’s ventures into content production will be backed up with a sizeable and perpetual stream of revenue that it derives from its e-commerce platform, which isn’t going away anytime soon. The BBC are publicly welcoming new entrants, and is devising its own tactics, such as making episodes available on iPlayer before they screen, if at all, on television. Interesting but hardly earth-shattering, and likely to make little difference to viewer preference. Netflix will have to do better than that if it wants long-term dominance of this market. It will have to be increasingly careful with its partners, too. Recent, though long-running, rumblings of discord with partners like Time Warner Cable, though seemingly innocuous, tend to be indicative of a larger battle ensuing between corporate titans. Moreover, though the act of providing a deluge of content seems new and sexy now, what about when everyone starts doing it? Chief content officer for Netflix Ted Sarantos told The Economist last week, “Right now our major differentiation is that consumers can watch what they want, when they want it, but that will be the norm with television over time. We’re getting a head start”. Fine, but about when that is the norm, what is the strategy for differentiation then? Netflix have made some lofty, daring, innovative moves here, exploiting consumer trends and noticing a gap in the competitive environment. But they will need firm foundations to support this move into an adjacent business area, of which they know relatively little, in the years to come. As President Bartlet of West Wing was often heard to say, “What’s next?”.

Rewarding Advocacy and Retaining Customers

How “24”, Louis Vuitton and a London restaurant attempt to make their brands worth engaging with.

Eye-catching advertising – like the one mentioned by Zeitgeist in the previous article posting – that succeeds in converting a person to being a new customer of a brand is one thing, but keeping them dedicated is quite another. As The New Yorker cartoon above demonstrates so humorously and effectively, engagement is what’s important. It’s about incentivising and rewarding your customer for their association (and, hopefully, evangelism) of the brand.

Zeitgeist has touched on location-based services several times in the past, and as the service continues its maturation process, we are able to judge better as to what kind of benefits it brings to marketers of brands. One is still left with the impression that network effects have yet to fully take hold for the myriad platforms – Foursquare, Gowalla, and more recently Facebook’s equivalent – that provide these services. Logically, greater and more plentiful benefits for those that sign up to these services would encourage those users to advocate others to sign up to them.

So what is the current state of affairs for rewarding users of such services? Well, first you can count out anyone who lives outside a major metropolitan city; the service has nothing to offer them other than who gets to be arbitrary mayor of which location. Sometimes, locations can be inaccurate enough that it looks like people are having a drink in a subaqua bar, as is the case above.

In the past week, living in London, Zeitgeist has experienced two offers through Foursquare that have had real-world consequences. Tuesday before last, as one of the first people to unlock the “Louis Vuitton Insider” badge, Zeitgeist’s presence was requested at the Bond Street Maison for a drinks reception, attended by several Vuitton employees from the marketing and digital disciplines, from both London and Paris. The chance to get to talk to such people, while browsing the store’s significant art book collection while munching on macaroons and sipping various beverages, leaving with a small gift, all were clearly tangible benefits for those guests who attended the evening. What of the business though? What benefits does it reap from organising such an event at reasonable expense? Ideally it gets to know its customer base better, though in this case, some of those who unlocked the badge were not habitual customers of Vuitton. Still, for those that are, the event would no doubt have encouraged a greater affinity toward the brand.

Yesterday at lunch near Covent Garden, Zeitgeist was early meeting his friend and decided to check-in on Foursquare. The reward for having done so was a free glass of wine. The benefits of free alcohol need not be extolled or delved into greatly in this article. However, the execution was sorely lacking. The waitress, when presented with the notification of this offer, was totally caught by surprise, and was not aware of any such offer. When the glass was ultimately brought – Zeitgeist was presented with a choice of “red or white?” – it was of course some substandard plonk that wouldn’t have been fit for a university ball. On the face of it, of course, this was not surprising; but it led to the question of what is the point of rewarding the consumer / shopper / person with something that is pretty poor and leads to a less enjoyable experience?

Zeitgeist can think of few experiences less enjoyable than competing against others to stay awake. Yet this is exactly the idea that 20th Century Fox have had, on the eve of the release of an enormous, diss-it-and-you’ll-be-waterboarded, boxset of the entire series of the hit show 24. Starting last night in Los Angeles, several “lucky” winners of a competition run entirely on Facebook will be subjected to every single episode of the series, while they compete with other viewers in a glass cube to stay awake. The campaign is also supported by a Twitter feed and, as Fox would have hoped, has been picked up by “24” fan blogs as well as the mainstream media, appearing in the LA Times. The campaign will have relatively little long-term impact, as the series has now come to end – though rumours persist of a film being made – but the idea for the competition, one of endurance, is very on-brand for the series, and has clearly sparked much chatter online. It should be noted that endurance contests are not always on-brand, or safe. UPDATE: The winners.