The Netflix Effect

Netflix performance chart from Google Finance

"Each Netflix show doesn't have to be a massive success in its own right....just good enough"

Part 1:

I once saw a post about a crowdfunding Hollywood studio startup and it got me thinking. While I'm mistrustful of Kickstarter startups like these, I like the idea in theory. The idea of involving the masses in choosing what gets made next.

I think of Netflix because they have perfected this model. Not in the sense of asking people what they want to watch next (like Amazon now does) though.

Netflix doesn't necessarily ask people what they want to watch (let's face it, people never really know what they want). Netflix uses algorithms and analytics to figure out what a target demographic will want to see next based on automated feedback from their viewing habits.

This is the real advantage of the streaming paradigm...the analytics...not the convenience (which is a nice perk...don't get me wrong).

Thanks to said targeting, Netflix is in a unique position to be able to revive old shows ("Voltron", "Danger Mouse", "Full House", "Gilmore Girls,' and counting) and release 'independent' films.

They don't need to spend too much trying to achieve a wide reception for their shows. Netflix' targeting is so accurate that they seem to know how many the die-hard fans of a show are...and they spend accordingly...just enough to keep up quality standards but no more.

For example, Netflix' "Voltron" has hardly any big-name stars...and they couldn't even spring for the iconic theme music. Also, I won’t be surprised to hear it was a tad difficult to get Melissa McCarthy to take a break from her blockbusters to show up on a “Gilmore Girls" set. The little money they allocate goes to the story and execution....and none of the hype factors that the old paradigm relies on. Like the reason why Scar Jo is cast to lead Ghost in the Shell...because of the fear that a no-name face wouldn't cut it. Now, let's talk about fear.

Bottom line, the fear factor is reduced with the Netflix model. The economic pressure of reaching certain audience quantities (not qualities) is just not as much. Each Netflix show doesn't have to be a massive success in its own right....just good enough. Each show shines by being part of a diverse whole that screams to the prospect subscriber, "we have enough variety to satisfy your tastes...we have everything!". The shows all come together to form a big unstoppable Voltron...more badass than the sum of its parts.

These tastes being met are not arbitrary. They are gleaned from the data, which speaks louder and more accurately than any crowdsourcing/voting can (after all, this is the same human race that didn't know it wanted smartphones...and later phablets).

The ability to make shows without undue economic pressure frees Netflix to just tell the stories without too many contrivances and audience manipulations (having no pressure from advertisers also doesn’t hurt). This makes their shows stand out as originals. Being emboldened this way means they will take more risks and since sales is a numbers game (and their risks are comparatively low-stakes) it means they will have more successes, and thus, more profits.

More profit means more emboldening and the cycle continues until one day, the bubble bursts. Bubbles always burst...but all bursts are not equally catastrophic or unrecoverable from.

"Disney can take more risks. Risks like hiring the directors of "You, Me and Dupree" to helm a major blockbuster"

Part 2:

A similar argument for the application of the new paradigm can be made for the big film studios. With the old paradigm, a movie has to make at least twice its budget (that's production and marketing combined) in order to break even.

That's why a film like "Batman V Superman" (BvS) produced and marketed for over $400 million can hardly be considered a success in spite of making over $800 million dollars; because nearly half of that money goes to the theater chains; theater chains who have to markup their concessions by hundreds of percentage points to stay solvent.

The viewers pay a premium to see the movie, the studio loses half of the money to the theaters, and the theaters can't stay afloat on that so they charge a premium to the same viewers for concessions.

This puts immense pressure on the movie to be very good (or very 'big-spectacle') or the viewer won't be able to justify the popcorn. This puts immense pressure on the studios who panic and make decisions that could end up adversely affecting a movie...such as cutting out useful minutes out of a film like BvS.

One way studios can partially relieve this immense pressure is via a merchandising mindset. This Merchandising Mindset or Theme-Park Mindset, allows a company like Disney to purchase franchise properties with high merchandising potential. They can purchase Pixar, Marvel, and the Star Wars universe in the same decade (at tens of billions of dollars no less) because of the merchandising potential of these properties.

Since Disney makes a huge sum from merchandising and theme parks, this takes some pressure off a movie to be successful in its own right. It is treated simply as part of the whole theme park attraction. Part of the 'Voltron', if you will.

This ease in pressure means Disney can take more risks. Risks like hiring the directors of "You, Me and Dupree" to helm a major blockbuster (Dude, they even hired a director from "Movie 43"!). Compare that with a studio relying on Zack Snyder for everything (don't get me wrong, I loved BvS...sue me).

More risk means more successes (remember, numbers game). This doesn't mean there won't be duds.

Disney couldn't hear the sound of "Alice Through the Looking Glass" crashing at the box office because Captain America's shield was vibrating too loud. They couldn't hear "The BFG" flopping because Dory was flapping too loud.

More profit means more emboldening...until...again...the bubble bursts.

Hopefully, till then, we can dream of seeing something like a "Friends" renewal on Netflix (nah...won't happen until Jennifer Aniston stops making movie hits and requiring a big salary) or Disney buying the Super Mario franchise (okay that was a joke but, hopefully, you get the idea). Further reading:
https://www.facebook.com/groups/384042768442961/permalink/584921608355075/ http://www.cinemablend.com/television/Insane-Amount-Money-Netflix-Spend-Content-2016-112117.html https://www.yahoo.com/news/netflix-subscriptions-boom-around-world-shares-jump-20-053523519--finance.html
https://truththeory.com/2017/04/19/netflix-just-paid-105-million-unite-worlds-greatest-actors-will-anticipated-film-century/ http://deadline.com/2017/04/roseanne-revival-roseanne-barr-john-goodman-sara-gilbert-1202078883/ http://news.nationalpost.com/arts/movies/cinema-is-gone-according-to-martin-scorsese-younger-people-just-dont-understand