Netflix has been making great strides setting itself up as a content distributor. The famous quote is that it wants to “be HBO before HBO becomes Netflix”. They seem to be following this model pretty well, offering movies and tv shows to their subscribers online.
However, while they are making some original content (see: House of Cards), most of their TV content is acquired from other sources. The potential problem that stems from this is what happens if the content providers get jealous of how much you are profiting off their works?
In an ideal situation, Netflix is paying enough for the content that the content owner (let’s say AMC) is happy to let Netflix deal with the bandwidth, customer service, etc. But, what happens if so many customers start cutting cable that they stop paying for AMC because they know they can just watch the episodes of “The Walking Dead” later on AMC?
This might be creeping up on Nickelodeon. There are reports that more people are watching Nickelodeon’s kid-centric shows on Netflix – where you can stream them without commercials and back-to-back-to-back – than on the cable channel.
Nickelodeon might get worried that it will become simply a producer/studio instead of a network. And that brings big changes to their business strategy.
I am going to predict that eventually Nick gets weary of Netflix’s power here. I’d bet to compliment (and potentially replace in the future) their cable channel, Nickelodeon launches their own web service/application that streams their content to consumers for a fee or with ad support.
Once in a while someone comes along and makes a passionate argument justifying that they have to illegally download content because it is the only way they can get it. Except that very often, it isn’t. They provide a false argument where they don’t want to pay for the way they could get it, because it is slightly more expensive than they want it. Or, it comes to them in a method that is not the medium they would prefer it be delivered to them.
So, they push the “bad behavior” off of themselves and on to the very entity that is providing the content that they claim to love and desire so desperately they have to steal to obtain it. This is bullshit, plain and simple.
Giving the consumer what they want is great, and obviously the key to any great business. But it only works for rational demands.
After that point a company simply can’t grant everyone’s greatest wishes. Its a business, it costs money. Shows cost money to make, and they have to make money back. Many businesses have determined that certain methods of delivery, like over cable distribution systems where the overhead, distribution, and customer service is handled instead of an expense.
There are lots of things I want that I can’t have because I lack the resources like a Viking range, a BMW X5 and washboard abs. Doesn’t mean I’m allowed to go out and steal them. Same goes for music, movies and video games. Just because I want the content and it’s convenient to steal doesn’t mean I should.
There’s right, and there’s wrong. Stealing stuff is just plain wrong. We learn this as children, yet somehow we make elaborate excuses for it as we get older, like “Well, I’m just copying bits. I’m not really stealing.” Or “If it weren’t so hard for me to get legitimately, I wouldn’t have to steal it instead.”
When the studios make it hard for you to have content you want, you should just live without it, or reward other content providers who make it easier for you to do business with them.
Consumers have to stop expecting to have everyone kiss their ass just because they want something. This is the warped, misguided reason why “Six Strikes” policies are created to begin with.
Certainly, there can be arguments for better methods. At some point if someone provides a product closer to what customers want, then they deserve to win, but I would argue that if no one is coming in to serve the demand, it is not sustainable. If it is sustainable, someone will come along and take away their customers. That is how the free market works. Players adapt or die.
But the sense of entitlement to product is just staggering. As Andy Ihnatko put it:
The world does not OWE you Season 1 of “Game Of Thrones” in the form you want it at the moment you want it at the price you want to pay for it. If it’s not available under 100% your terms, you have the free-and-clear option of not having it.
It has even gotten to the point where when a company does ship something that is available anywhere you want it, for the lowest possible cost, at any time, as much as you want – people still complain that there are credits. That’s right. God forbid we acknowledge the people took time to make the product you are marathon watching because its-just-that-good to devote 13 straight hours to over a weekend.
I love this argument – “Give us what we want, when we want it, how we want it, and for the price we’re willing to pay for it and we’ll happily hand over our money for it.”
This doesn’t sound ”comically selfish” – it is selfish. First, the problem was not being able to get the content we wanted when we wanted it. Then, came the laments about pricing. How dare seasons of television cost anything more than [INSERT ARBITRARY NUMBER I REMOVED FROM MY RECTUM]!
Now, people are getting their panties in a twist over having to sit through opening credits? Where does it end? At what point does this blatant selfishness turn into, “I hate this actor/these mushy love scenes/this director. If you remove all of that, I’ll be beating down your door to give you money, then complaining some more.”
I wrote a post recently about how Netflix is launching a couple of original new series, and while they are keeping the short serialized format of TV, they are going against the grain in that they are utilizing their medium to allow people to watch the entire seasons of their new shows immediately.
My point there was that Netflix is trying a different option, and I wonder what challenges that will bring compared to the old system. I wasn’t alone in my concerns.
GQ has an interview with Netflix CEO Reed Hastings, where it is quite apparently where he hopes the company will go. He wants to be the new HBO. And that means in addition to movies, they want to produce quality original content that they have an exclusive on. In the article he discusses the move to immediately available content as giving the consumer what they want:
The strategy may gut some media conglomerates along the way and could prove too costly for even a cash-rich company like Netflix to sustain, but one thing is certain: It will make a lot of viewers—bingeing on brand-new shows made by the hottest writers, directors, and producers—deliriously happy. “This is the direction that storytelling is evolving, where you’re going to have the most interesting story lines, the most interesting characters,” says Spacey, who is also an executive producer of House of Cards. “What a company like Netflix is doing is the ultimate expression of individual control, proof of what people’s attention span really is.” The heady rhetoric, of course, masks a few nagging questions: Once waiting is history, will “quality” television still pack the same cultural punch? Would Tony Soprano be Tony Soprano if we had been able to gorge on his life in a single weekend? How important are episode recaps and live-tweeting and the shared experience of everyone watching together?
But the writer examines my same concerns-
Netflix hasn’t been able to add subscribers at the swift pace it promised shareholders lately, a trend that could make it much harder to establish the “virtuous cycle” it’s chasing—that is, subscription fees enabling Netflix to acquire content that in turn attracts new subscribers, which will pay for more content. Profit margins, which are nearly 50 percent on the declining DVD side of the business, are only about 17 percent on the streaming side of the ledger.
But Hastings continues to tow the line in an interview with tech site The Verge. I think his vision is that if enough people buy into the idea of premium quality content, they will pay. And that will make up for the costs of creating this content. This is very similar to the idea of paying for HBO back in the early days of cable.
“We believe that February 1st will be a defining moment in the development of Internet TV,” Hastings writes. Full stop. Paragraph break. In less than two weeks, Netflix will release every episode of its big-budget drama House of Cards simultaneously. No dragging of the calendar like HBO to make sure you’re rung up for at least four months of The Sopranos. Netflix is betting its future on this. Netflix is reluctant to definitively predict a subscriber boost for either House of Cards in the first quarter of 2013 or Arrested Development in the second. “Some of us are optimistic that it may be substantial, but we really don’t know,” said Hastings. But when he’s less guarded, Hastings seems to be predicting big things. “Is Arrested Development a content expense or a marketing expense?” he mused, explaining how Netflix doesn’t need to make a big traditional advertising buy. “The huge benefit is we don’t have to advertise ’8PM on a Thursday night, tune in’,” for a series unfixed from any date and time, Hastings said. “This lets us be much more efficient in our marketing.”
However, the difference (again) is that unlike HBO, there is no schedule. Everything is available at once. So, I could in theory sign up for a free 30 day trial, watch the entirety of House of Cards, and Arrested Development, and a couple movies, quit and never pay Netflix a dime.
with Netflix‘s new original series, House Of Cards, making its debut on February 1, some investors wonder whether the company needs the remainder to help it handle its steep content payment commitments.
And Variety points out almost my exactly argument from the article I wrote that I mentioned at the top. If I can zip through content super quickly, what is compelling me to stick around? They also go on to point out a few other upcoming hurdles like data caps.
But let’s not forget that the whole point of Netflix embarking on an original programming strategy is to bring in new subs by offering a different value proposition. These are consumers who didn’t feel compelled to sign on to binge on library programming, but they’re interested in seeing a buzzed-about new show like “Cards,” and other originals still to come.
So when new subs polish off “Cards” in less time than the month they paid for, they’ll quickly have to confront the issue of whether they are getting their money’s worth. Netflix is betting to work its algorithmic magic on these subs by getting them hooked on other programs from its library. But that’s a risk because that’s not primarily why these customers signed onto Netflix.
I (along with most of Hollywood I’d imagine) will be watching what happens to Netflix over the next few months very very closely. In the best case scenario, Netflix produces a string of great hits that compel customers to stay signed on from one show to the next.
Netflix has been exciting TV fans recently by bringing back “Arrested Development” and the launch of a new series starring Kevin Spacey “House of Cards”. The interesting aspect of these launches to me is that Netflix has announced they will release all the episodes at one time. So, on the premiere date, you could watch any and all of the episodes immediately.
Traditionally, shows are serialized. This means they happen at the same time every week over a span of 13-26 weeks. This method got started by Networks and it made sense for TV. You couldn’t expect the average viewer to sit down and sit through hours of entertainment. However, with on demand internet streamed content, these restrictions don’t matter. If you want to sit through 8 hours of a show you can.
Here it why that might be a problem. The side benefit of those serialized patterns was that it helped a show build an audience. Each week gave time for people to talk to their friends about the show and convince them to tune in next week. The lifespan of a show was also much longer. That sitcom was talked about and sold ads for half a year.
With digital on demand streaming, the chatter about a show lasts much shorter. If I zip through the show in a month, that leaves 11 months of silence. Netflix’s shows don’t get talked about. They either have to produce more shows (which means more money) or shoot more episodes more often (more money, and probably weaker stories).
So, even though Netflix isn’t selling ads for monetization like the old networks, it still needs subscribers to convince to sign up. If I get through all your good content in a month, why should I keep subscribing? Or if Netflix has to spend a lot more to produce more content, what kind of price increase will consumers bear before they think its not worth it?
And that leaves out the second issue – viewer fatigue. It is honestly hard to sit through hours of a show. Especially if it isn’t compelling enough. The dirty little secret of TV shows (even great ones) is that there are big giant story arcs (handsome character lead slowly falls in love with beautiful actress) that take place over a season with a lot of meaningless fillers and side plots in the middle.
This was discussed just this week on KCRW’s martini shot. Viewers will often just choose to skip through the end of a season and either skip to the last episode or simply read synopsis online. We have too many other forms of entertainment to keep us occupied that we don’t want to waste days on the couch watching a show. Just tell us the ending already. Serialized bite sized episodes help with this. It is far easier to swallow 30 minutes a week than 16 hours in one. More likely, I will just fall off views, even if I was dedicated for the first 4 or so episodes. Alternatively, viewers might split attentions, playing on facebook while your show plays in the background. And this type of weak engagement doesn’t lead to the type of dedicated viewers who you hope tell their friends about the show and get them to watch (and thus pay for netflix) too.
A few announcements today in the world of streaming movie delivery. I think these developments are indicative of some trends we will see coming down the road in the new media space.
First, RedBox – that kiosk you see in your grocery store that lets you rent discs for $1 a day – recently announced a partnership with Verizon to offer a streaming video companion service. Its been quiet for a few months following that news. But recently, leaks have come about a beta test. The sources indicate an unlimited streaming option for $6 a month. If you want to add physical discs, for $8 per month you can get 4 Redbox movie rental credits. Compare this to Netflix which charges $8 for streaming and at least another $8 for unlimited discs.
The difference here is that with Netflix, you get “unlimited” discs, but you have to mail them back and wait for the new ones to arrive. With Redbox, you get only 4, but you can immediately go to a kiosk and get a disc. The other key difference (other than price) is that with Netflix you get a huge back catalog of old films you can choose from online to get sent to you. This catalog is much deeper than the streaming only catalog. With Redbox, you will only get new releases that are available at the kiosks for a few weeks following release.
I think the wise choice will be to look at your viewing habits – do you want to see new releases, or do you like exploring older films?
Movies have “windows” of releases. First in the theater, then on DVD, then on VOD, then on pay TV options like HBO, then eventually on regular cable and broadcast TV. This way studios recoup their money back. They get more from a movie ticket than a DVD purchase, and they get more when you buy a DVD than when you see it on HBO, etc. So, if you want to stream or watch Disney movies at home, you will only be able to do so over Netflix. This is a big win for the company, and establishes it as even more of a competitor to typical premium cable options like Showtime and HBO.
The trend I see coming from this is that movie rights are going to become more exclusive. You are going to see more stratification between what is available on Netflix, Amazon, Hulu, Vudu, Redbox etc. It is going to look more and more like HBO v Showtime v Encore, where you don’t get to subscribe to just one and get everything you want to watch.
This was not the case in the past, because these online distributors were buying catalog films – older titles with smaller demand – and so they paid less and got fewer exclusives. Now that people are looking for new releases on streaming options, they will be paying more, and expecting more exclusive rights. Don’t think Amazon isn’t lining up similar deals to try to get exclusive distribution for a studio.
But for the consumer, this means you can’t just get Netflix and be OK. You might have to subscribe to more than one service. Suddenly cable cutting doesn’t seem as much of a good deal.
Dish Network recently launched a new DVR called “The Hopper”. This new DVR has a few neat features. You can set up “Joey” boxes on your other TVs and stream anything recorded on your Hopper to any of up to 4 other TVs. You can also set it to record all Primetime Network shows for 2 weeks. So everything on ABC, CBS, FOX and NBC from 8-11 pm every night is available to watch on demand.
However, one last feature is raising the eyebrows of the networks and content production companies. They have started a feature called “auto hop”. What this does is that Dish will automatically take out the commercial for you if you turn this feature on. Available after 1AM the morning after the recordings are made (presumably so Dish can go through, find the commercials, and send out the jump points to their DVRs), no longer do viewers have to hit the 30 seconds skip button, or fast-forward through ads during their favorite shows.
The networks are mad because if this technology is widely adopted, advertisers would realize their ads aren’t being seen (to an even larger extent than they aren’t being seen now). They have filed suits (FOX, CBS, NBC) to stop the use of this product, and Dish filed its own motion seeking a declaration from the court that the product is legal.
There are a ton of meaty copyright issues here. How does this differ from normal DVRs? Does copyright to a program include the ads during a broadcast? How come viewers can skip commercials but not Dish? Is this just protection of a lost business model or a legitimate claim of copyright infringement?
A quick boring lesson in copyright law. There are essentially two types of copyright infringement, Direct and Secondary. Direct, as it sounds is when you are violating copyrights (like making a copy of something and selling it). Secondary is when you enable another to violate copyright, most often through a product or service of yours. To further muddy things, there are two types of secondary infringement – Vicarious and Contributory. Vicarious is when you have the right and ability to stop infringement (like a mall that has a store selling counterfeit goods), while Contributory is when your product is used to violate (think Grokster or various P2P programs).
DVRs and Copies of Television Programming
The legality of a viewer recording a copy of a TV show to their home DVR is based on case law going back to VCRs (and Betamax!) in the Sony v Universal case of the 80s. In this case, Sony made Betamax machines which allowed people to record TV programs to videocassettes. Universal sued claiming copyright infringement. The court found that a consumer making a copy of something they could have watched for free, and simply watching it at a different time (what came to be known as time-shifting, which still describes what DVRs do) is a fair use for the consumer. Thus, while technically there is a copy being made, which would normally be an infringement, this an exception of Fair Use, and is allowed.
When one considers the nature of a televised copyrighted audiovisual work … and that time-shifting merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact … that the entire work is reproduced … does not have its ordinary effect of militating against a finding of fair use.
Consumers of the product therefore were protected. What about Sony as a secondary contributor? The court noted that it is important to not stall technology that has uses for legal purposes, even if it can be used illegally. Since videotapes could be used to create home videos, or competition to the major movie studios, this technology was cleared.
[There must be] a balance between a copyright holder’s legitimate demand for effective – not merely symbolic – protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses….
On a side note, this is often what P2P software companies try to argue about their products. Yes, you can download music illegally, but you can share totally legal stuff like free software! This can be a protection, but what often happens is that they adversities the illegal benefits of their product, and thus are guilty of inducement, or suggesting that you violate copyright.
Thus, this case created a precedent that home viewers can create copies of shows for home use (not for profit), and the companies creating those copying technologies are generally safe, as long as there is a legal purpose for those technologies.
Streaming DVRs
As technology progressed, new features were added and litigated. Recently, Cablevision a cable company introduced a product that acted as a DVR, but stored the shows on the company’s servers and then streamed the programming to the consumer when they decided to watch it. This meant no home DVR was recording the show.
The content producers sued claiming Cablevision was violating their rights by making a copy of a copyrighted work, and then putting out a public performance of a copyrighted work. The Court again sided the technology producer. They claimed that since a user was directing the copy to be made, this again was a legal copy, and that since the one copy was going to one customer, the transmission to the home user from the company’s hard drive was not a public performance.
The Hopper
Now we come to Dish’s new product. It seems to me that this case will turn on the factors the Courts have focused on in the past, but one new aspect will be addressed (which is exciting as a copyright nerd).
Who is making the recording?
The courts have protected the DVR companies in the past when the user is the one requesting the recording be made. Even when Cablevision stored the recording, the fact that the customer requested it protected them from liability. Here, is the customer requesting the recording? According to the ad, The Hopper records all the primetime networks every night. Is the user really “requesting” this, even if they choose the “Primetime” option? How does the fact that Dish sends the jump points back to the DVR (which stores the video) factor in?
What is included in the copyrighted work?
The networks obviously have copyright protection in their programming. However, does this extend to the commercials that appear between the shows? I can see an argument that the entirety of what is coming off their broadcast is their programming. Will the court accept that? Before, using traditional DVRs, customers saved the “entire” program, ads and all. Even if they chose to skip them, they still were saving them. Here, the ads are cut out. Is that a derivative work? Or an unlawful reproduction of the original programming?
Conclusion
In the end, this will be a big decision for the networks. If allowed, new models for advertisers will have to be created. You will probably see much more product placement, in-show type advertising. Further, one expert hinted that you could see permanent bottom-third style ads (like those pop ups on Youtube, or the ticker on CNN) instead of commercial breaks. However, should we be protecting an old business model just for the sake of propping up an industry? Perhaps this will force new revenue models that some have said are long overdue.
Television networks are finding ways to stay relevant in a time when they have to compete for eyeballs with other forms of media. Namely, the internet. Saw this story about how the traditional networks are incorporating their online offerings and portals when trying to sell advertising space to companies.
The CW pitched itself on Thursday as “the first fully converged network” — but it has competition on that front. TBS and TNT, two cable channels owned by Turner Broadcasting, rather dramatically said that two years from now, they won’t be linear channels, they’ll be “branded video destinations” that just happen to have a linear component.
This is exactly how I believe the “networks” and television channels will exist in the future. No longer do you have a list of channels with scheduled programming. People want to watch programs when they want to watch them, on-demand. However, it is difficult to find “new” things to watch. One of the undervalued aspects of networks is that they curate shows. When you turn on a channel that you liked before, you are buying into the idea that the network will put out more product you like. Think HBO building a rapport with Sopranos so you trust that Game of Thrones will be good.
It could be difficult to do this with random websites. Do you google “cop drama” and hope you find something good, and not some 5th grader’s home movie project? Networks could serve as these curators. TNT already is moving to this with their “We Know Drama” slogan. TBS is “Very Funny”. So, if I am in the mood for a sitcom, I could go to TBS’s iOS app, or website, or TV channel – whatever my preferred medium, but know I was getting a certain quality and type of program.
Over the week I’ve seen the headline over and over describing how HBO’s Game of Thrones show is set to be the most pirated TV show ever.
Most of these people blame HBO, because the only way to get the show rightfuckingnowthissecond is to subscribe to HBO. Which means you have to subscribe to Cable, since you can’t just pay HBO to stream their programming over the internet. Otherwise, you have to wait 6 whole months for the series to come on DVD (or iTunes). So, the only solution is to illegally pirate/download it. Of course.
This idea has been discuss ad naseum over and over lately.
“HBO hasn’t helped the problem by making the show tough to watch online for the young and cable-less,” notes Greenberg. “The show isn’t available through Hulu or Netflix, iTunes offers only Season 1, and using HBO’s own streaming site HBO Go requires a cable subscription.”
For the millions of Americans who don’t subscribe to HBO, or who may not even watch shows on a television, this means there is no legal way to watchGame of Thrones. If you only watch TV on your laptop, there’s no way you’re going to pay $50/month for cable and another $15/month for HBO. -Forbes
The single least-attractive attribute of many of the people who download content illegally is their smug sense of entitlement.
Here’s the terms of use for commercial content: you have to pay for this stuff. This means either you need to wait for it to become commercially available, or if you torrent it today you need to buy it when it gets released. So long as you buy it as soon as it’s possible to do so, I can confidently reach for my “No Harm Done” rubber stamp. Some content is commercially unavailable because the publisher or distributor has no desire to ever release it. I’ll even go so far as to say that downloading it illegally is a positive thing; you’re helping to keep this creative work alive.
If you avoid purchasing the media in some form, however…you’re just one of those people who prefer to steal things if they think they can get away with it. Simple as that. Get off your high horse.
The world does not OWE you Season 1 of “Game Of Thrones” in the form you want it at the moment you want it at the price you want to pay for it. If it’s not available under 100% your terms, you have the free-and-clear option of not having it.
But, I’ll ignore the “I demand HBO’s awesome well crafted expensive to produce content on my terms immediately instead of in a method that makes money for them” argument.
If HBO were to break off and do a stand-alone service they would be giving up those subsidies and would incur huge additional costs in terms of support, billing, and infrastructure that they currently aren’t burdened with. This would make producing the content they produce now – including extremely expensive shows such as Game of Thrones - impossible. At the very least, it would be a huge risk.
Not going to happen. But let’s skip that part too. What I like to focus on is the hypocrisy. Pirates and piracy supporters (sigh) argue that if HBO would just offer this up, then all these people would just start paying HBO for the content. Except, that when its convenient, they make the exact opposite argument. These same proponents argue that Hollywood’s losses are overstated because “not every pirated copy equals a sale.” Not everyone who downloads a song on BitTorrent would have bought that song on iTunes they argue. They are sampling/getting something they wouldn’t actually buy. So, why would this change when it comes to Game of Thrones? No one seems to be able to address this shortcoming. You simply cannot argue both ways.
There is a show on Fox called “New Girl” that has fantastic writing and is actually quite funny. But I am convinced it could be easily titled “The Doppelgangers”. Every actor on this show seems to be a twin of another celebrity. Check it out:
Zooey Deschanel and her twin, Katy Perry
Jake Johnson and his twin, David Krumholtz
Lamorne Morris and his twin Dave Chappell
The only one I haven’t figured out is Max Greenfield. Any ideas? Maybe a young Tom Cruise?
