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?”.

Social Struggles & Facebook Fiefdoms

Movers and shakers and substantial tremors as social networks jostle for dominance…

Google+, which launched recently, is the latest volley from the behemoth in its efforts to battle with its similar-sized foe, Facebook. Time will tell whether it will encounter the same fate of the much-ballyhooed Buzz and Wave. Google is entering murky waters as it comes under scrutiny from Federal Trade Commission in the US, as well as the European Commission, for any anti-competitive activity. It is, increasingly, spreading its wings to areas previously considered far outside its remit. In some cases, such news is welcome, as when The Economist recently reported on the Summit Against Violent Extremism, “arranged by Google Ideas”. Importantly, the network effects of Googling are nothing compared to the network effects of Facebook, at least for now.

Meanwhile, Facebook announced “something awesome” this past week, which turned out to be the somewhat underwhelming news of group chat and video chat functionality, the latter a product of a collaboration with soon-to-be Microsoft’s Skype. It’s interesting to consider whether the audience for both platforms overlaps enough for it to be too much of a good thing; by allowing video chat on Facebook you might necessarily make Skype a much less crowded place, very quickly. The 750m users of Facebook are both a boon and a potential source of trouble for Skype. One of the things that was interesting in the conference was when the camera cut to further back in the press conference to reveal the journalists recording the event. Not as you might think, if you had watched too many West Wing episodes, were they all diligently leaning forward, facing the person speaking. Rather, as the picture above demonstrates, were they entirely arranged facing perpendicular to Mr. Zuckerberg, furiously typing away on their laptops. They weren’t reporting for tomorrow’s newspapers – or yesterday’s – they were reporting live, a constant stream of data for the data-hungry populous to instantly discuss and further disseminate.

Mr. Zuckerberg spoke confidently on Moore’s Law, applying it to the continuing growth in use of applications and tools by users on Facebook. Zeitgeist is in no position to question Zuckerberg’s thinking, yet it would seem that Moore’s Law applies to development and acceleration of technological development. Here, Zuckerberg is trying to apply it to sociological developments, rooted as they are in a technological sphere. However since Zeitgeist’s blog has not yet quite reached 750m users, we’ll defer to Zuckerberg’s opinions on the subject.

Who will win this showdown for social hegemony depends rather upon who you ask, but also upon what metric you’re looking at. Zuckerberg, rather dismissively, said it wasn’t about the number of users, but about how much they engaged with content. He may change his mind if news of a Facebook exodus in mature markets continues, and if Google has anything to say about it.