Content is Content, No Matter Who Makes It

Content Insider #912 – Spotlight

“Whether you like it or not, you have a gift; and that gift brings light and joy to an increasingly… dark and broken world! And to turn your back on that gift is to turn your back on the… entire human race!” – Javi Gutierrez, “The Unbearable Weight of Massive Talent,” Lionsgate, 2022

It isn’t often that we think Netflix missed something so obvious that it’s a giant DUHHH!

But then, hindsight is fantastic.

So what did they miss?

Well first, a little background.

Back in 2007, Reed (Hastings) and his cohort Ted (Sarandos) said from the get-go no advertising and for a lot of folks – O.K., we only know two but – that was like a breath of fresh air.

Finally, someone recognized that people didn’t need 20 min of ads every hour to go to the bathroom, kitchen, answer emails/texts on their smartphone, take a nap … whatever.

They also wanted to watch the stuff on their own terms – when/where/how they wanted their entertainment.

Folks signed up while theaters, studios, TV networks laughed at their folly.

Flatline – While smartphones continue to grow in usage, voice usage is almost non-existent.

By 2014, wireless and smartphones had really taken off and folks were using them for everything except making calls – Ericsson has reported for years that voice use has been almost non-existent. After all, who calls when you can text or email folks?

Four years earlier, Cisco forecast had warned that by 2020 video would consume almost 80 percent of internet traffic using wireless facilities and service was just slightly better than 5Mbps at the time.

Theaters, studios, and networks said piffle … folks want to/need to go see their great content in darkened movie houses and people want/need certain stable things in their lives like big black screens and TV schedules.

Reed/Ted could see a slightly different/changing world as the company began with expansion into 50 countries and has since spread their video service into 190 countries and that viewing habits were changing.

On-the-Go – While in most industrialized countries large screen TVs may be the screen of choice for watching video content, in many parts of the world the smartphone is people’s everything device … including video content.

They could see the trend on how folks signed up for their streaming video service that year.

Video traffic on mobile networks grew 30 percent annually thanks to the rapid rollout of 4G/5G wireless and evolution to higher screen resolution and growing usage of video-capable smart devices.

Soon after, Digital TV Research projected that smartphone SVOD subscription would double between 2019 and 2025 to 170M (that forecast has since been pushed to 2.15B).

Sarandos knew all of this even earlier because in 2013, he said, “This is really programmed to be addictive to get people “involved” with the content and … stay.”

That’s right, Netflix had in-depth, proprietary (and very secure/unshared) user data gathering tools that helped them and their content providers develop, add – and drop – projects folks honest to gawd wanted to see.

The only thing they hadn’t really figured out is how to eliminate/minimize churn (add/subtract service).

Very reluctantly – and admittedly a little late, they got over the no ads bit and started up a lower-cost ad-supported service with a commitment of no more than (4-5 min/hr in natural breaks).

We need to note here that one of our friends is positive that management (actually, Wall Street) will get greedy and start piling on the ads.

We believe he’s wrong and that the Sarandos/Peters duo will say no to their subscribers. They believed their content was too valuable and that they were doing a better job of delivering targeted/personalized ads so … you should pay more.

Ad Revenue – While Netflix may have been reluctant to add advertising to their streaming mix, it has quickly become a major source of revenue and growth.

BAM … it worked (so far).

Subscriptions topped 301.63M the last reporting period and profits are making Wall Street very happy.

Sarandos already knew a lot of those folks were watching their shows/movies on smartphones years before.

In fact, last year during an interview with The New York Times he said he believed any kind of movie would do really well on Netflix rather than in theaters.

“There’s no reason to believe that the movie itself is better in any size of screen for all people,” he said. “My son’s an editor. He is 28 years old, and he watched ‘Lawrence of Arabia’ on his phone.”

O.K., he probably did, but some things were probably missed because the epic was produced in ultra-wide 2:0:1 aspect ratio.

In addition, the film ran 3 hrs 47m which has got to be tough on the battery.

So maybe he exaggerated a little about people’s changing viewing habits.

After all, Sarandos (and now co-ceo Greg Peters) had been searching for the magic glue to keep people stuck to Netflix since 2014.

Adding/dropping content when viewing minutes dipped and adding video games didn’t solve the problem of churn.

The answer was all around them.

Yeah, a different kind of video service to add to Netflix offerings that was actually built on ads … the more the merrier.

You know, YouTube stuff.

Susan Wojcicki had the magic touch. Let ordinary folks and companies post video content – how-tos, box openings, fun/serious stuff — but keep them short, sweet and we’ll surround them with a crap load of ads.

She had 1B plus users in 2014 and took a nice cut of PewDiePie’s $7M earnings just for providing a “service” to reach his 17M followers

That was two years before 15-sec TikTok stuff started to appear (it has since grown to 30-min but the average videos are only 3-min).

Jeff Katzenberg tried to outdo them in 2018 with Quibi but the subscription price and short professional content just didn’t click with Gen Zs like the whatever goes stuff kids loved.

But Netflix had all the components needed to start the creator “side gig”:

Global network of content servers and experience in delivering stuff the moment you clicked on it
Local user data that was kept local and secure to meet government requirements
48M subscribers back then and most were the younger crowd – millennials and Gen Zs
Experience in working with creative folks to use the subscriber data to help make good content great
Experience in building viewer excitement for content because they were already producing shorts (trailers) for YouTube to build show/movie excitement

Global Reach – While there are a few countries where Netflix is not officially available it doesn’t necessarily mean folks don’t stream/enjoy their content.

Imagine how different the creative/creator scene would be.

Okay, they’re officially not in Crimea, Syria, North Korea, Russia, China; but hey folks everywhere like good/great content.

Netflix ad-supported service(s) would have been insanely profitable instead of just profitable because they didn’t have to invest in the content just divide the spoils.

Countries wouldn’t be fighting over the location of and use of their citizens data because it’s at home.

Unfortunately, countries around the world now have to deal with the “TikTok issue”:

Outright ban: India, Iran, Afghanistan, Somalia, Nepal, Uzbekistan and Kyrgyzstan
Not on government employees’ devices – Australia, Belgium, Canada, Denmark, EU, France, Latvia, Netherlands, New Zealand, Norway, Taiwan, UK,
Iffy/sorta bans – Indonesia, Pakistan
No Way – China – no TikTok, zero – yeah, kinda sucks when your home country doesn’t trust you
True the world’s data rich market – the US – can’t figure it out but what else is new

Everywhere Viewing – People constantly pull out their smartphones to watch video, even when they find it difficult to see all of the content on the small screen.

Two years after China’s ByteDance started their social media video service, TikToks Mary Meeker said in her Internet Trends Report that the mobile audience would spend at least 30 minutes a day viewing online video.

Video – People of all ages enjoy their video entertainment while younger folks often find their smartphone the first screen choice for all types of news, information, entertainment.

We doubt if even she could have envisioned that video of all types – long and short – would grow so rapidly across all age groups and that the smartphone would become the screen of choice.

The Ericsson Mobility Report projected that 76 perent of all global wireless bandwidth will be used for video delivery this year.

With the continued expansion of 5G and FWA (fixed wireless access), smartphone viewers will grow from 190M last year to 2.8B by the end of this year.

And they still won’t be calling you.

They reported that video traffic will continue grow about 30 percent annually because of VOD and app screen services.

We’re not knocking YouTube because they’re very good at what they do.

But Netflix should have been at least the number two player in the total video arena because they understand and respect content … and creators.

Instead, YouTube is the big dog in the arena with 2B plus global users with more than 500 hours of new video uploaded every minute and 70B daily views of quick, bit-sized stuff.

TikTok saw an opportunity to slip into the viewer mix by giving kids free reign and mining all of the data of 1B active users who can’t seem to get enough of the short-form videos.

That includes letting them rip off movies one little segment at a time until viola, folks can see the whole flick … one tiny chapter at a time.

Even YouTube says that’s a no-no.

Netflix would have taken a more professional approach … put up a bunch of trailers and direct viewers to the ad-supported or subscription services, even if it wasn’t theirs because they have this warped idea that people who actually did the work should be paid for their work.

Don’t get us wrong.

Convenience Over Size – While people may like to show off their big/huge TV screen, there is still a lot of time spent watching content on their mobile devices.

We think DIY videos can be interesting, fun and a nice break between (or during) classes/meetings.

But movie/show distribution and viewing is still the first choice for real entertainment.

That’s why people spend an average of 3 hrs. 9 min. a day streaming while creator stuff is … filler.

About half of that time is done by folks on mobile devices, which is why both of our kids have earbuds.

They don’t always appreciate our drama and scifi stuff on the big screen but at least they honor us with their presence.

Young Eyes, Ears – Gen Zs may watch a ton of shows/movies, they also can’t seem to get enough of social video, even when they’re home and earbuds cut down on the household’s ambient noise.

Yep, earbuds could be one of the best family entertainment devices ever invented because kids bounce between real entertainment and other stuff constantly.

We’re all happy.

But we’d be even happier if Netflix would have read the signs early on that content is content no matter who makes it and then added a couple of places for the kids to practice making video content and making a few bucks along the way.

It’s true, China probably still wouldn’t have legally let them offer their total video service to their citizens but admit it … kids would find a way.

And everyone would have a better idea of where their data is and how it’s being protected/used.

It just would have been nice if Sarandos had recognized that entertainment opportunity and made his move then and agreed with Nick Cage in The Unbearable Weight of Massive Talent when he said, “Okay, I’m going to deal with all that. I’m going to get this next role. And when I do, all of that changes. Then, I’ll be back.”

It would have made everyone’s data a lot more secure.

But then, he might have missed the mark because as Nick Cage noted, “It’s impossible to be close to a 16 year-old.”

Every parent understands, even if we don’t want to admit it.

Andy Marken – andy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.