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You are here: Home / TV / Netflix is the new TV…

Netflix is the new TV…

1st August 2017 by Liam Cronin

At least that is what founder Reed Hastings would have us all believe! However, it is a black and white (or maybe orange?) fact that Netflix and its like are very much the darlings of Wall Street at the moment. Their share price took another upturn earlier this week, where they were trading at a phenomenal $181 per share at lunchtime today (1st August). The most recent increase was driven by the fact that they have reached 100 million subscribers globally, with much of that increase coming from international markets, as opposed to the already successful US market. It’s the ease by which they have driven their share price higher and higher (as detailed on the chart below), following relatively modest beginnings as a DVD rental company in California. A remarkable story.

This means that Hastings’ brainchild is valued at $78 billion, which is around 9 times bigger than ITV and 1.5 times bigger than Rupert Murdoch’s 21st Century Fox.

All Response Media Viewpoint

Reed Hastings is certainly an interesting character and by luck or design (or a combination of both) he has tapped into the ‘fast food’ zeitgeist that allows consumers to get what they want, when they want it; paying for it as they go. The growth in subscribers is as much driven by the quality of some of their headline dramas, such as House of Cards and Orange is the New Black, as it is the tech-cultural alignment. There is no point in denying that it is an incredibly strong proposition for the world we live in today.

“Creating a TV network is now as easy as creating an app, and investment is pouring into content production around the world,” Hastings said in a letter to shareholders recently. “We are all co-pioneers of internet TV, and together we are replacing linear TV.” A bold statement from Hastings, who (as is the fashion for any pioneering CEO) loves nothing more than to bait what he sees as an outdated modus operandi. However, in the same letter he also suggests that “It seems our growth just expands the market. The largely exclusive nature of each service’s content means that we are not direct substitutes for each other but rather complements.”

This seems almost conciliatory and perhaps a sign that there is a growing belief from inside the organisation that the goal should not be to take on linear TV, but to live more harmoniously side by side. There is no doubt that subscription services such as Netflix have had an impact on the viewing numbers of linear TV, and in particular those in the younger demographics. However, the long-term feasibility of the ‘eat what you want, when you want’ business model is starting to show some signs of strain.

As more subscribers consume more content more quickly, the appetite for new, fresh, exciting and (most importantly!) expensive content will grow. Netflix has already had some well-publicised programming ‘misses’ and that is an unpredictable pain point they will continue to experience in order to satiate the growing demand and expectation. That point, in conjunction with the fact that the competitive market is continuing to become more aggressive, will really test Netflix and in turn the market itself.

The linear TV model, we would argue, is far from broken. It’s not perfect of course, and it needs to react to the changing nature of TV consumption. TV and online video viewing, although comparable, are not the same thing. The activity we buy for our clients on TV recognises the fact that it very much still has the authority to direct our targeted consumers to shop windows both online and on the high street. Even those programmes that are not considered ‘appointment to view’ are extremely valuable in helping advertisers to reach and engage huge audiences nationally. The opportunity for advertisers right now is to identify ways of using tech solutions such as ARMalytics® to intersect with mass-market opportunity, to increase targeting efficacy and to drive performance.

So as I said…linear TV is not broken. It just needs to be understood and utilised correctly, which is simple when you have the right tools!

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