Since the 1950s, television has
been a staple in American households. For more than half a century, it has
pervaded itself into basically every single living room, often with multiple
TVs in a single household. But new technology allows for media to constantly be
upgraded and replaced - originally storytelling was exclusively an oral
tradition. Books eventually replaced oral storytelling, and then succeeded by
radio, which was replaced by TV. But in 2016, for nearly two decades, purely
digital media threatens Cable television: instant on-demand streaming from
Netflix has revolutionized watching shows and movies. With its innovative
streaming business model, Netflix has set the stage for the (eventual) demise
of Cable TV.
For
more than half a century, and likely for a long time ahead, TV has been integral
to American culture. The average
American spends four-and-a-half hours each day watching TV (Hu, 2013). That’s
20% of our 24-hour day, so it’s even more of a substantial chunk of our waking
hours. But with Netflix, a subscription-based instant streaming service for
television shows and movies, more and more viewers are turning away from
expensive, monopolizing, traditional Cable TV services. CNET - a media journal
- has found that more and more people have been ‘cutting the cord’ with Cable.
These ‘cord cutters,’ viewers who abandon Cable for purely Internet content,
have more than doubled the amount of ‘Zero TV’ households since 2007 (as cited
in Hu, 2013). In fact, a survey conducted by FBR Capital Markets, a Wall St.
investment management company, found that consumers preferred Netflix to Cable
57% to 43% (as cited in Haq, 2015). This is the “first major disruption of
television” (Investopedia, n.d.). But why are people choosing Netflix over
traditional Cable services? Well, Netflix has been doing more than converting
viewers: Sandvine, a Canadian networking equipment company, found that nearly
37% of North American primetime bandwidth is used for Netflix (as cited in Fung,
2015). Netflix currently holds 60-plus million subscribers (Haq, 2015) and for
good reason. With high-profile originals, instant streaming access, and at a
fraction of the cost of Cable, Netflix certainly is causing concern among
traditional Cable TV networks, and digital streaming (whether it be Netflix,
Hulu, Amazon, or any of the newly emerging services) will replace traditional
television.
After
spending about fifteen years solely providing streaming of previously aired
content, Netflix won the bidding war to produce House of Cards (Dupont, 2014). This was the service’s first
original show, which Netflix picked up for two complete seasons without ever
seeing a pilot episode (Stenovec, 2015). This is very different from how shows
are usually picked up. Traditionally, producers make a pilot show to send to a
network, which, depending on ratings, may or may not be picked up fully. Netflix,
in addition to allowing the showrunners to complete at least one season without
fear of cancellation (Plaugic & Miller, 2015), has also afforded creators
full creativity without micromanaging (Stenovec, 2015). With this innovative business model,
creators now can see streaming services such as Netflix as a viable top option,
rather than a last resort (Plaugic & Miller, 2015) (think Community and Yahoo Screen, which Yahoo
shut down after two years for losing $42 million; Wallenstein, 2016). In doing
so, they garner top quality television that rivals HBO and Showtime. And Netflix
knows, “people only need to watch one or two shows to be hooked as subscribers”
(Dupont, 2014). With as many originals as Netflix has, as well as a vast previously
aired collection, subscribers have endless options, and new membership is
enticed.
With
a large millennial viewership - 37% of new users are between the ages of 16 and
25 (Civic Science, 2015) - digital streaming is perfect for the company. According
to John Baick, a popular culture history professor at Western New England
University, “Millennials value Internet access above Cable access” (as cited in
Haq, 2015). The instant accessibility and convenience makes Netflix popular,
especially with people who are always online. As well, Netflix adopted a unique
release system for its content, which works especially well for its originals:
a season is released entirely at once (Hoyle, 2014; Dupont, 2014), which
allowed for a binge-watching culture to emerge among viewers (Plaugic &
Miller, 2015). And when viewers are hooked after binge watching top-notch
television, they are likely to stay for the year-or-so until the release of the
next season. But by that time, they’re likely hooked to a slew of other shows.
By encouraging bingeing, Netflix doesn’t have to use each episode as a hook -
the season can be the hook (Plaugic & Miller, 2015). This allows for
episodic season story arcs instead of the traditional similarly structured
episodes with an underlying seasonal arc, thus ensuring a second season viewer.
Netflix
also treats its employees spectacularly who in turn produce great work. With
superb treatment and high expectations, Netflix HQ is highly efficient and
highly retentive, with employees staying for a decade plus (Stenovec, 2015). As
well, Netflix tracks subscribers’ preferences to personalize the viewing
experience, likely increasing satisfaction and loyalty (Haq, 2015). Netflix
certainly has its viewers’ trust, with subscriptions topping 75 million (La
Monica, 2016). But it’s not just the excellent engineering keeping viewers
happy, it’s also a fraction the cost of Cable.
Netflix
is a surprisingly inexpensive service. With no Cable box, lawn-digging for
fiber optics, or dish satellite from Cable Providers necessary, the service has no need to charge so
much. According to the FBR survey, Cable TV can cost on average $80 per month
or more, with on-demand content prices being “quite substantial” (Younker, 2015),
costing about four dollars per movie. Netflix, on the other hand, ranges from $8 to
$14 per month. That’s vital for “cash-strapped younger generations who have
come of age in an on-demand world,” and not to mention that it is all ad free (Haq,
2015). The mass departure of millennials of traditional television to convert
to less expensive digital streaming has been a product of the company’s outstanding
service and inexpensive prices. Though, even with top quality service and
inexpensive prices, Netflix can’t do everything. Traditional television still
has one advantage: appointment viewing.
Appointment
viewing affords Cable networks the upper hand, especially networks such as CBS,
Fox, and NBC, who host everything from the Olympics to American Idol to the NFL (Haq, 2015). With this advantage, until
Netflix can compete to bid for live events (Yahoo hosted the first ever
live-streamed NFL game in 2015; Barsanti, 2015), Cable networks will survive. As
well, even with 75 million subscribers, Netflix only just surpassed HBO’s revenue
for the first time, with $1.146 billion (Post Wire Report, 2014). Netflix still
has a long way to go until it completely takes over traditional television,
although with other companies such as Amazon, Google, Hulu, and Apple creating their own instant streaming platforms, Cable could be eradicated within years. It’s already common for Cable
networks to provide instant streaming content (Plaugic & Miller, 2015), but
Netflix is still beating CBS and Viacom combined
on Wall St. with $44.5 billion (La Monica, 2016), and whose shares hit an all-time
high at $546.80 in 2015 (Picchi, 2015). So, although likely a long time out,
Netflix can certainly surpass and then replace traditional Cable TV.
In
order to replace traditional television, Netflix must obtain the rights to live
broadcast, or, really, have to just want
to live broadcast, which could be easily won. Otherwise, Netflix and other
streaming services have the potential to completely oust traditional Cable
broadcasting (though not premium content such as HBO), and have paved the way
for full conversion to digital streaming content. With top quality content,
superior service, and inexpensive prices, Netflix seriously is ‘chillin’ it.
Edited April 18 at 12:48am
References
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