These days a huge experiment is taking place with the participation of hundreds of millions of people. At stake are billions of dollars and the future of the entertainment industry. We’re talking about the last season of “Strange Things.”
The experiment began last month, when Netflix released seven new episodes of its most popular series, making this season fundamentally different from its predecessors: it could not be finished the day you started watching it. For most players in the streaming market, this approach is perfectly normal, but for Netflix, it is blasphemous.
Being different is special until it becomes a disadvantage
The decision to delay the last two episodes of “Strange Things” until next weekend, five weeks after the previous part of the season, was a change from the innovation the company invented: watching Bing. It has been more than a decade since Netflix pioneered the model of advertising entire seasons of TV series in one go, instead of in a drip once a week, and the idea of watching (binge) quickly became synonymous with the company. “Netflix’s brand for TV series is built on binge watching,” Reid Hastings, co-CEO of the company, once said. “It’s addictive, it’s exciting, it’s different.”
But being different is special until it becomes a disadvantage. Netflix is still different, but that’s only because its competitors have collectively decided that the time for the binge model is over.
HBO, Apple, Disney, Amazon and Hollow services typically drip episodes of the series they broadcast on a weekly basis. Netflix still publishes most of them in one go. Bing views helped Netflix win early battles of streaming wars – and now most of its rivalry in a tough competition landscape is fighting back by using this strategy against it.
This company, which was extraordinary because it abandoned the conventions of television, became extraordinary in the streaming world by sticking to the Netflix way. Bing views alone do not explain the company’s success over the past decade, but it was the only phenomenon that differentiated Netflix and revolutionized Hollywood, with television streaming replacing the film business and music industry as the defining cultural force of our time.
So what happens when the jammers experience a jamming? How do successful companies react when the circumstances in which their early success occurred change – and can they respond at all? Upload Bing Series, or not?
These are fundamental questions facing Netflix as one of the big winners of the epidemic economy, which has become one of the biggest losers in the S&P 500 this year. The answers may force the proud and shattering society to swallow its pride.
“All options are currently on the table”
“I think Netflix needs to change and is starting to change its perception of what the business model looks like – and I would assume that all the options are currently on the table,” said Tim Nolan, an analyst at Macquarie.
The company’s share price has fallen 73% since peaking in November, which means there has never been a better time to watch Netflix. This is the kind of identity crisis of a corporate entity that every successful company inevitably reaches when industries are evolving and veteran players in the field are adapting. It’s almost hard to imagine that Netflix might see its leading position in its field erode similarly to companies like Netscape and Nokia, but there are precedents for strong companies being pushed to the margins because they have failed to maintain flexibility. In fact, the reason Netflix is in this situation right now is because it has already survived just one such cycle of innovation.
Netflix has a history of throwing its strategic rulebook into the shredder when the time comes. The company was once a DVD delivery service that sent movies in paper envelopes before reinventing itself into the streaming TV era. She had ambitious plans to set up a separate subsidiary before abandoning them when she realized that something called Qwikster was a silly idea. The company promised with a bang that it would not broadcast commercials, before discovering that it had actually crossed fingers behind its back: the idea of broadcasting commercials on Netflix was still floating.
So is binge watching the next thing that will be eliminated? Julia Alexander, director of strategy at Parrot Analytics, which keeps a finger on the pulse of the streaming industry, says that the future of streaming TV looks more like a hybrid model than it was before the plague. Flexibility is essential.
“There is no one hard rule,” she said. “And there are always exceptions.”
The philosophical delay on watching Bing occurs at an unusual moment in Netflix history. Advertisements are one of several arterial blockers that companies can stretch on themselves when they suddenly start bleeding subscribers, as company executives revealed in a notorious profit call in April, when performance was so terrible that Netflix really did not fulfill the company’s mission and entertained the world.
It is worth remembering that Netflix lost 200,000 subscribers last quarter, meaning it still has more than 220 million. A drop in Netflix would seem like a dizzying success to any other streaming company that no longer believes in Bing. Company executives insist it is not planning major changes to the binge model. While the company is not a world champion at disclosing inside information, it is possible to guess based on Netflix’s behavior that according to its metrics, uploading the series in one go is still considered the preferred strategy.
“I still think our subscribers, by and large, want to watch what they want, how much they want and when they want it,” Netflix Global TV Director Bella Bahria said in an interview with Wall Street Journal colleague Joe Flint.
Ted Sarandos, co-CEO with Hastings, also recently said that production delays during the epidemic allowed the company to investigate the effects of unplanned changes in the bing model. Some watched Bing watching their favorite series. Others watched them slowly. “What we found is That people like both types of viewing, “Sarandos said.
A Netflix spokeswoman said the company had not changed its position on the series’ advertising strategy since.
Apple and Disney have redefined the competition
Netflix’s streaming competitors clearly see three issues with binge watching. The first is the rate of customer loss: people can unsubscribe if they can sequentially watch their favorite series and then cancel the subscription and return next season. The second is a basic economy: there is a need for supply that will meet the endless and insatiable demand. The third is buzz: Uploading a series on Bing spends all of its cultural capital on the beginning.
This was just before the Corona plague, when Netflix’s rivals began to take different paths from its approach.
And that says a lot about Netflix’s market position that not even Apple and Disney tried to beat Netflix in its game. When their platforms went live in November 2019, they redefined the competition lines. The executives may have asked themselves what Netflix is not doing. Apple launched with three episodes of “The Morning Show” and Disney with two episodes of “The Mandalorian” in the first week, and the series moved to the regular one-week broadcast format from the same point.
Pretty soon it became the standard episode-raising strategy across the industry. By 2020, 35 of the 50 new streaming series were Bing series, according to Parrot data. Last year, the number was 14. This year, meanwhile there were 15.
“The audience may complain, but still pay”
The competing approach to Netflix worked so well that we decided to steal it here at the paper. This new column on success and failure will be published every week – except this week. This week, three will be released.
Netflix’s decision to adopt advertisements was a shock that puts a question mark over the safest assumptions about the company’s plans. Then came the hybrid strategy of publishing “Strange Things”: first a seven-episode dose, a six-week break, and two more episodes this coming weekend. Now some analysts say Netflix will continue to have fun with various distribution models before deciding whether to get rid of the binge altogether and move to a weekly schedule for drama series that are a hit with a loyal audience.
“My gut feeling is that Netflix is not going to do it right right now with the big titles, because it’s an element that is so at the core of their identity,” Alexander said. “But I do think it makes a lot of sense for the next season of ‘The Crown’ or ‘Bridgerton’ to be released on a weekly basis. The audience is already there. He might complain, but still pay, because people want to see the series.”
What I want to see right now is how the big experiment of “weird stuff” ends. This season alone is responsible for 880 million hours of viewing, and that number will cross the billion mark in the final episode. Will that be enough to change Netflix’s position on the innovation that made it what it is, will only become clear after a while.
We’ll just have to wait to find out what happens in the next episode.