Netflix Showing What Television 2.0 Will Look Like

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The video streaming service Netflix is advancing the line in the battle for the future of television. CEO Reed Hastings recently indicated in a letter to stockholders to mark February 1, 2013 as a “defining moment in the development of Internet TV.” Why? Because that is the day that its much hyped original program House of Cards was not only released, but the entire 13 episodes were made available all at once.

On the surface, this may not seem like that big of a deal. After all, many of the TV shows currently on the service’s Instant Watch have entire seasons available now for viewing. But the difference is these are not new shows — they’ve already been run previously one episode per week on a basic or cable channel. For Netflix to launch a brand new show with all the episodes at once is a big shift in the way that programming is released and assumes a lot about the way people consume their shows.

Just take a gander at what Hastings suggests in his letter:

Imagine if books were always released one chapter per week, and were only briefly available to read at 8pm on Thursday. And then someone flipped a switch, suddenly allowing people to enjoy an entire book, all at their own pace. That is the change we are bringing about. That is the future of television. That is Internet TV.

You see, Netflix knows too well about a much tweeted trend of consuming an entire season or multiple seasons of a show in a marathon, hypnotic session (Breaking Bad, anyone?). Now, the company is not only acting on what it knows about viewing habits, it’s staking a claim that its the game changer for the future of TV.

The company is putting its money and reputation where its mouth is by going big, in the Hollywood sense of the term.

In particular, House of Cards is the real deal. At a cost of $50 million, the show has some major celebrity muscle behind it with Kevin Spacey and Robin Wright starring and David Fincher as director. While it isn’t the first original series that Netflix has been behind (that would be the fairly well received  Lilyhammer), it marks a stronger move into the big-names-in-an-original-series space that HBO has dominated.

The show also kicks off a trifecta of original programming to roll out this spring. In April, the gothic Hemlock Grove, based on the novel of the same name, will aim to capitalize on the growing viewing segment interested in horror thrillers. Finally, the much anticipated fourth season of the award winning cult classic Arrested Development, sure to be one of the biggest draws in television this year. After being cancelled by Fox in 2006, the show continued to grow an audience through online streaming. In May, 14 new episodes featuring the entire ensemble cast will be released all at once.

Ready for 14 new episodes of Arrested Development this May? Netflix is banking on it.

Though Netflix experienced a few bumps in 2011, most notably a failed effort to split its DVD service from online streaming and losing studio contracts, 2012 was a year of significant recovery. After expanding into 40 countries, 10 million customers were added globally, bringing the total number of streaming members to 33 million. In addition to a growing membership, Netflix signed an exclusive streaming deal with Walt Disney to bring films from the Disney Animation Studios, Pixar, and Marvel into its fold.

But another reason that the company’s strategy is important to monitor is the way that it is changing how the Internet is used and the inevitable strain it is putting on the web’s infrastructure.

Consider this: a 2012 release from Sandvine titled “Global Internet Phenomena Report” revealed that at peak times, one-third of Internet bandwidth in the US is currently used to stream videos from Netflix alone, while YouTube eats up close to 15%. Other streaming services such as Amazon’s Video on Demand (1.75%), Hulu (1.38%), and HBO Go (0.52%) trail much further behind, but each of these services is also growing and marketing aggressively. Although iTunes consumption was close to 4%, it is primarily used for downloading music and videos, yet Apple seems to be ever toying with the possibility of expanding its service into streaming.

In light of these numbers, traditional Internet providers may have to seriously reconsider throttling and tiered data plans. Otherwise, they may very well see a new player move into the market to satisfy the veracity of Netflix customers viewing habits. Perhaps that is why there is so much excitement surrounding Google’s move into building network infrastructures with Google Fiber, reported to be delivering speeds up to 1 gigabit.

As online video consumption grows worldwide, we can expect all eyes to continue to remain on Netflix, and if its original programming delivers on the hype, expect to see even more new shows delivered in one giant heap of viewing goodness.

[image: Bloomberg]

Discussion — 8 Responses

  • Amine Boulaajaj February 2, 2013 on 1:33 pm

    Sorry, but I find this article quite useless.

    • Amine Boulaajaj Amine Boulaajaj February 4, 2013 on 9:15 am

      How can I delete my comment? I changed my mind, this article is not as useless as I thought before. My initial thought came up because I don’t seem to enjoy Hollywood movies anymore…

      I started to realize that scientific documentaries and new scientific lectures are more fun to watch, which Netflix provides very little of that these days. I like to learn new things, but Hollywood’s been slow on that front… Or misleading in some cases (sorry, I take movies seriously, even though I know I shouldn’t)

      Though, thank you very much for the effort you put in this well written article.

  • Richard Cook February 2, 2013 on 3:54 pm

    The format of the content will have to change. The “week by week” format means you have a teaser for each episode leading into the next. Your analogy of a book is apt — in this case, each “episode” will have a much more subtle transition into the next, since there is no reason to try to tease your audience into the next chapter lest they forget about you.

  • Tamas Simon February 3, 2013 on 12:37 pm

    some random thoughts:

    TV is the next big thing that is going to be totally disrupted.
    Today’s TV is pretty much the same it was 40 years ago – when I was a kid.
    The only difference is it’s not black-and-white and there are more channels.
    Netflix is a great company but they are only focusing on one piece of the puzzle.
    Interestingly even giants like Apple were unable to pull of a true change.

    My cable provider has gone full digital. My “TV” is unable to receive anything without a “digitial box”. it’s just a dummy screen with built in speakers. Watching Netflix or AppleTV is no different than watching “TV”. It’s streamed digitally and I need a box between the cable and the big screen.

    Once we accepts that it is full digital we can personalize it.
    The other thing is the remote. there is tons of possibility in second screen apps.
    Let the “buttons” on the remote change with the show.

  • chikoppi February 3, 2013 on 6:02 pm

    Another aspect of disruption the article neglected is the erosion of barriers between creators and consumers. There is a looming convergence between content channels such as YouTube (with “studios” such as Machinima and Geek & Sundary), podcast networks (such as Leo LaPort’s Twit.tv), and networked digital television.

    Once television becomes a fully networked service the consumer can buy content direct from any creator. Then, anyone can earn spot on the “dial,” from the $20M studio that produces one series each year to a plucky team of science journalists who churn out a daily news show for $250k a year. The consumer gets highly customized content and the creators get direct distribution—no middle-man necessary.

    Networked television will do for rich media what the Internet did for news, publishing, and shopping. It’s a massive disruption, and none of the old gatekeepers are quite sure how to take advantage of it without simultaneously making themselves obsolete.

  • Improbus Liber February 4, 2013 on 2:34 pm

    Duh, I cut the cord years ago. I bittorrent, download or stream everything I watch. It is nice to see that Netflix pulled its head out of its behind and started to make good decisions. Give them a few more years and they could eclipse some of the “real” networks.

  • Herbys February 4, 2013 on 10:24 pm

    > In light of these numbers, traditional Internet providers may have to seriously reconsider throttling and tiered data plans.
    No. Because the cost of video streaming is only a tiny fraction of the cost of other Internet traffic. Why? Because of CDNs and caching. You don’t need to stream House of Cards from the headquarters of Netflix to your home. Most likely it is being streamed from somewhere less than ten miles from your home. For some people it might be a few hundred miles, but for precisely that same people the pipes are mostly unclogged.
    Streaming video over wireless carriers are a different situation, but for wired users (which is what will be used for TV for a good while, I doubt people will spend much time watching LOTR on their phones in the street, and if they do it won’t be in real HD in the vast majority of cases) the last mile is the only cost of streaming.
    While 30% of the internet data at peak times may be video streaming, I doubt more than 10% of the Internet backbone is used for the same purpose. And if some providers are not doing it very efficiently today, they will as soon as it becomes economically sensible. A local datacenter per each million users is a steal compared to transmitting petabytes of data across the world.

  • Nathan Coppedge February 17, 2013 on 2:24 pm

    Then there is future potential for the complexification of the human or post-human landscape, as buildings, people, and objects become anchored to media. Perhaps this is more public media than virtual reality, is one thought.