From the Ivey Business Review: “Arrested Economics — Assessing Netflix’s Original Content Business”


Story-makers, the shift in the independent film industry includes new opportunities in what is commonly called “television.” The new creative opportunities are exciting. Here’s the second of two discussions about these new opportunities.

Arrested Development and House of Cards aren’t designed to deliver the metrics Wall Street expects, and this means a lot about how Netflix views its future.

Reposted by permission from Ivey Business Review

(Originally posted June 9, 2013)

A Netflix New Season: ARRESTED DEVELOPMENT

May 26th was a uniquely exciting (and perhaps exhausting) day for TV lovers. At midnight, Netflix released a brand new season of Arrested Development – more than seven years after the show was cancelled by Fox. The show’s return represents a key component of Netflix’s emerging original content strategy and is the fourth show released by the over-the-top streaming service this year (at a total cost of more than $150M). As such, I thought it would be a good opportunity to pause and evaluate the economics of this strategy and hypothesize what success might look like. In doing so, we can also better understand the role of original content (is it intended to drive net adds, reduce churn, stabilize content costs etc.) and the impact of their controversial decision to release entire seasons at once. This will also tell us about Netflix’s future and management’s POV on this future.

The Value of Netflix to the Consumer

Though inexpensive on the whole, Netflix’s service does not offer materially cheaper entertainment than that of traditional cable TV, costing approximately $0.0024/minute versus cable’s $0.0035/minute. alt="NFLX3"

This is interesting for two reasons

1. Despite being commercial-free and infinitely more flexible than live linear TV (in terms of time, content and screen), Netflix is unable to command a price premium for its entertainment service

2. Average time spent watching Netflix per user is up more than 10% year-over-year. However, with prices still $7.99 a month, Netflix has not benefited from this increase in customer value (directly, at least, as it would improve word-of-mouth and perceived value). Increases in both the quality and size of its content library content quality is no doubt a major driver for increased usage, but this has contributed to a 16% increase in quarterly licensing costs ($1.355B in Q1 2013).

This matters because it means Netflix may have limited means to raise prices – and when it does, they will still lag customer value growth. As the instant decapitation of Qwickster demonstrated (among many other lessons), Netflix’s customers really do control the relationship.

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From the Ivey Business Review: “Original TV Series — The Illusory ‘Silver Bullet'”


Story-makers, the shift in the independent film industry includes new opportunities in what is commonly called “television.” The new creative opportunities are exciting. Here’s the first of two discussions about these new opportunities.

Streaming services such as Netflix and Amazon see original TV series as the path to success. It’s not. But consumers win.

Reposted by permission from Ivey Business Review

(Originally posted April 30, 2013)

A Netflix Original Series: HOUSE of CARDS

It is a great time to be a lover of television. Content, for one, has never been better. Not only have many declared today the “New Golden Age of Television”, some such as Vanity Fair’s James Wolcott, have gone as far to ask questions such as if “anyone thinks The Artist (which had recently won the Academy Award for Best Picture) is better than Mad Men?”. The rise of digital distribution and portable, media-focused devices has also fundamentally increased potential “demand” for this content. The ability to watch content whenever (and wherever) we want means that we can watch more shows than was realistically possible when we were tethered to 2-3 hours of “appointment TV” per night (and we could watch only one show per primetime slot). Not only does this save older shows, such as The Sopranos, from irrelevancy after airing, it opens up the creative medium. Hyper-serialized shows such as LOST and Game of Thrones would not be possible without the ability for viewers to easily catch-up on a missed episode (or “marathon” past seasons). Digital-only distribution (such as Netflix’s House of Cards) has further freed creatives to pick scene lengths or runtimes based on the needs of the story, rather than the need to cut to a commercial break every 4-7 minutes or fill out an hour-long timeslot.

Market behavior clearly illustrates the New Golden Age hypothesis. Movie stars are increasingly moving to the TV screen (from Ewan McGregor or Zooey Deschanel) and many TV stars are bigger celebrities than most movie actors (such as Kim Kardashian, regrettably). TV budgets have also exploded. Game of Thrones costs upwards of $60 million for a 10-episode season and many hour-long dramas at the Big Four broadcasters can cost $40-75 million per season ($2-4M/episode). Content has also become an increasingly important differentiator for cable networks such as HBO and AMC, which traditionally focused on films and one-off specials, but are now defined by and dependent on hits such as Girls and The Walking Dead.

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THIS IS THE SECOND ‘GOLDEN AGE OF TELEVISION.’


When looking at what I’ve termed “The Blended Screens” — the destruction of all the different ways that used to define what we were watching (it was a “movie” because it was shot on film and shown in a movie theater; it was a “TV Show” because it was shot on tape and broadcast by a TV station; it was “Home Video” because it was burned to VHS tape or DVD or Blu-Ray and shown on a machine in the living room; it was a “Web Series” because it was carried over the Internet and watched on a computer; etc., etc., etc.) — it becomes clear to me that THIS IS THE SECOND ‘GOLDEN AGE OF TELEVISION.’ Continue reading

The JOBS Act of April 2012 is a Failure for America.


THIS IS A MAJOR JOBS PROBLEM AND NEEDS OUR ATTENTION:

America needs good jobs. Joblessness and low-wage jobs have crippled the survival and prosperity of millions of Americans, and are a drag on our entire economy.

The promise of the JOBS Act, signed into law a year ago and supported by the most bi-partisanship effort in recent history, is DEAD because the Federal Securities and Exchange Commission (SEC) has failed to enact it.

The JOBS Act established a deadline of Wednesday, July 4, 2012, for the SEC to promulgate rules and regulations for the implementation of TITLE II—ACCESS TO CAPITAL FOR JOB CREATORS (commonly referred to as the “general solicitation rule“). The SEC missed that deadline. The agency did publish proposed rules for TITLE II on August 29, 2012, but has not implemented them. There is no anticipated date for finalizing the rules for Title II of the JOBS Act.

The JOBS Act established a deadline of Monday, December 31, 2012 for the SEC to promulgate rules and regulations for the implementation of TITLE III—CROWDFUND (commonly referred to as “Equity Crowdfunding“). The SEC missed the deadline, and has no anticipated date for the rulemaking to implement TITLE III.

AMERICA NEEDS JOBS! Hope from the JOBS Act of 2012 has been *crushed* by the SEC’s inaction and dismissal of the JOBS Act!

 

THE UNIVERSAL FILM ACCESS POINT


How will independent filmmakers fully embrace digital distribution for maximum value? It’s a new world, and the old methods cannot be squeezed and twisted to work in it. There will be a new approach to bringing indie films to the audience.

Old Movie Theater

Old Movie Theater

I call it the UNIVERSAL FILM ACCESS POINT.
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My Bumpy Road Through “Hollywood” — MOVIES IN A BAD ECONOMY


Front cover illustration for the official souv...

Image via Wikipedia

You know that your favorite movies, and even ones you don’t like, exist in an uneasy alliance of art and commerce. Movies have the potential to be both emotionally and financially powerful; sometimes one, sometimes the other, sometimes both. They brew in a caldron of artistic expression, profit potential, and career possibilities. Some movies find life solely because of demand for profit, and some find life solely because of someone’s passion for storytelling. Some come together for any number of reasons between those two ends of the spectrum.

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Indie filmmakers and BRANDING


BRANDING.

Most people don’t think much about branding, and when they do, they take a look at a logo, think of it as “a brand,” and move on.

But a brand is so much more than a logo. It is the entire perception, the emotional feeling evoked, of a company, person or product. The brand is a product of diligent, consistent and focused marketing efforts.
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