Social viewing involving Facebook and Twitter also isn’t on the table any time soon.
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In yesterday’s post, we sat down with Netflix chief product officer Neil Hunt and vice-president of content acquisition Elizabeth Bradley to discuss the company’s recently announced global expansion.
In the second part of that conversation, Hunt and Bradley talk about trying to push studios into licensing their content globally, experiments with social viewing and whether or not Netflix will ever get into live broadcasts. Here’s what they had to say.
How do measure success of your shows and movies?
Bradley: We look at the viewing, on a couple different levels. How quickly do you watch it, how long do you watch, if you have a series do you watch all 10 or do you leave after two?
We have the ability to take a piece of content and better direct it to an audience that’s going to like it. We don’t have to have huge box office hit type films or big shows that get the best ratings on a Sunday night because we have the ability to target to the right audience for everything. We can better monetize smaller shows.
Hunt: We measure hours, but that’s not it because that’s way too crude. We measure valued hours.
Somebody who doesn’t watch very much presumably puts more value on the hours that they do watch than someone who’s watching a hundred hours a month.
We’re able to measure the contribution of valued hours in a way that matches well to the business value of how it attracts your attention and the economic value of that customer.
There’s a lot of sophistication that we’ve developed over the last few years to develop that data and interpret it into metrics that inform the buying.
It seems like you’re pushing your own original content more than your licensed content?
Hunt: We have a problem to solve with originals. With licensed content we can leverage the awareness that’s been generated from someone else’s marketing campaign. With an original we have to build that awareness from scratch. It requires a bigger presentation, maybe more frequent repetition to get over that hurdle.
The primary metric driving all of our choices and presentation is customer attention. If we overweight our originals and you end up choosing something that’s less good for you than licensed content, you may or may not churn off. Somebody like you will churn off and it’ll be reflected in the metrics and we’ll realize we’ve overstepped.
Conversely, if we don’t push originals hard enough and you end up choosing licensed content instead when an original might have been a better choice, not only might we potentially damage retention, we won’t get the advantage of an original as something that only Netflix has.
There’s tradeoffs on both sides and we try to balance it. We’ve found we definitely can go too far, but we also have to push quite hard to overcome the lack of awareness, so that may be why you see things frequently.
How is it that Canada is the only country that’s getting Star Wars: The Force Awakens in 2016?
Bradley: In the feature film business, there’s currently a windowing structure that exists from the studios. We have what’s called the “Pay 1” window, which is seven to eight months after the theatrical run. We have that deal with Disney in Canada [for December], and we’re picking up that deal in the U.S. in January.
It’s a real challenge. Movie licensing is not global and we’re a global company. The way you get around that is you make your own movies, which is what we’re doing to help motivate that [change].
So to go back to the earlier question: will this pressure the studios to license movies globally?
Bradley: [Head of content acquisition Ted Sarandos] said it beautifully: we’re not anti-theatre, we’re pro-movies. We’re just trying to give that to consumers. Everyone is just listening to what customers want. There’s no reason customers in Thailand should wait longer than customers in Ireland.
Hunt: If you have a property and you space it out over time in countries, the consumer behaviour is that they want it anyway and they’re going to find it somehow.
If you release it all over all at once in a cheap, easy-to-access, quality manner, we demonstrate that you can reduce piracy in general.
The data from Australia is that we reduced BitTorrent traffic by 17 per cent over the first few months after launching. You reduce that opportunity.
So is the end goal to be able to access the same content from anywhere in the world?
Hunt: That certainly is a huge ambition. It may take 10 or 20 years or forever to happen, but we’d love to get there.
If you have the same content in each country, doesn’t that risk Netflix being homogenous?
Hunt: On the contrary. If you think of any one channel or network or broadcaster in any particular country, it’s very homogenous. It doesn’t address a broad audience. It addresses a subset of that audience.
Look at an HBO and you can tell what theme it has. It’s gritty and it’s a mid-age audience. It’s not kids and it’s not 50-year-olds. That’s great, but Netflix is a platform that can deliver that content, and kids content and Grace and Frankie and Bloodline to the slightly older audience.
By using the recommendations, we can present one set of content to you and another set to your parents and another set to your kids, so we can address all those markets.
Do you have any idea on what the price ceiling is for Netflix yet?
Hunt: Median consumers in the countries that we’re in right now consume 30-ish, sometimes 40 hours a month. That’s a big number.
If you take $8 and divide it by 30 hours, it’s a few cents an hour. Compare that with renting a DVD from the local rental store or almost any other form of entertainment and you would conclude that Netflix is significantly cheaper than most.
In terms of a price ceiling, I don’t think we’re near it. On the other hand, we get tremendous traction for being a very good value to consumers so I don’t think you should expect to see it race upwards.
Are you doing any experiments with live event streaming that you can tell us about?
Hunt: We are not doing experiments with live. We think one of the values of internet television is that it’s at the time you want to watch it, not at the time it was broadcast. Traditional broadcast does a rather good job with live so we’d be playing somebody else’s game and not the game we play well.
The move we’re about to make is the Chelsea Handler talk show and the Beastmaster game show*, both of those will be not live, but not 10-year properties either. That gets to a shorter lifetime and more frequently updated. We’ll see how that goes. [This show has not yet been officially announced by Netflix.]
But it’s unlikely we’d want to get into live in the short term.
Have you thought about adding social components that let viewers watch together at the same time?
Hunt: Yes, we’ve played with social components for a long time and we’ve had three major attempts at it. None of them have worked well so we’ve retired them all.
The social piece we have is the generic sharing panel that lets you post to Facebook and Tweet and so on. There’s too much effort for people to invest in building a new and differentiated social network to share their show recommendations and not just piggy back on the tools they’ve got.
There are also too many concerns about privacy. Some sort of automatic linkage is just toxic. We’ve experimented and explored and it doesn’t work. If you want to share, you hit the Facebook button and it shares to the people you want to share with.
Do you think Steven Avery is innocent?
Hunt: I don’t presume to know. I haven’t watched [Making a Murderer] yet.
You’re the only one in the world.
Hunt: Not everything appeals to everyone. I watched a few minutes and decided to go back to Jessica Jones.