Monday, March 25, 2013

IP TV is taking off -- which organizations will run the next global "networks?"

I recently wrote a post on Netflix's made-for the Internet series, House of Cards, saying that I did not like it as much as the HBO series The Sopranos. I've since finished watching House of Cards, and, even if I did not find it as compelling as The Sopranos, I was hooked and enjoyed watching it.

I ended that review by saying I hoped House of Cards would succeed and Netflix would give us more high production value entertainment online. It did succeed -- as you see here, it has an average rating of 4.6 stars.


In retrospect, that is not such a surprise. As David Carr points out, Netflix's use of big data pretty well guaranteed them a hit. Before starting production of the series, they knew that people liked the movies of director David Fletcher and star Kevin Spacey as well as the British version of House of Cards, upon which this series was based. Given that history, they were confident the series would be a success, so they produced 13 episodes without a pilot test.


As you see here, the episodes vary in length from 46 to 56 minutes -- the writers were freed from the constraint of broadcast television episodes, which must fit into time slots.


Having 13 episodes recorded ahead of time, meant that viewers, including me, could watch two or more together. We were freed from the weekly release schedule of broadcast television. The season constraint is also gone -- it could have been 12 episodes or 14 -- whatever the writers felt worked well.

We were also freed from commercials, which I really hate now after a year or two as a cord cutter.

They could have also dropped the episode constraint. One can think of House of Cards as a 661-minute movie. A viewer could pause whenever he or she felt like it and resume later or the writers could have inserted suggested pause points. I am not sure how well that would work out for viewers or how the writers would have handled the 11-hour format, but it would have had one positive advantage -- the viewer would not have to watch the series introduction and credits 13 times.

Netflix has committed to more Internet production, and they are not alone. YouTube is bankrolling productions and their audience exceeds 1 billion views per month.

The BBC has announced plans to produce Internet programs, and they are experienced content producers. Netflix jumped out to an early lead, but the BBC commitment reminds us that the Internet is global and we will see global productions as well as global audiences.

The times they are a'changing. The situation is well summarized in a quote by Netflix's chief content officer Ted Sarandos, who said "The goal is to become HBO faster than HBO can become us." Will Netflix, YouTube, the BBC and others become HBO-like content producers before HBO is freed of contractual obligations and moves their content to the Internet?

Historians look back at movies like Birth of a Nation, with its use of panorama shots, panning, night photography, a musical score and a large battle scene, or The Jazz Singer, with its sound track, as production technique breakthroughs. We may one day look back on House of Cards as a distribution breakthrough.

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Update, 3/28/2013

Amazon has committed to production of five children's programs in addition to six comedies they announced earlier.

Netflix is not standing pat -- they announced an 8-episode series to be called, Sense8, by the creators of the Matrix movies and Babylon 5. As with House of Cards, they are betting on a near-sure thing.

Update, 4/22

Even Twitter wants in on the video goldrush. Next week, Comedy Central will host a comedy festival on Twitter. That sounds like a long shot, but I love comedy, so will give it a shot. The hashtag is #ComedyFest.

Update, 4/29

Amazon has debuted pilots of their initial productions (http://indy.st/11doxAs). Netflix accurately predicted the success of House of Cards using past history and was confident in producing 13 episodes at one time. Amazon will use the public as a very large "focus group" in deciding which shows to produce and which to drop.

Netflix has released its second complete series, Hemlock Grove (http://nflx.it/14HdTIg). It has a four star rating -- Netflix mitigates their risk by mining their Big Data before producing the episodes.

Netflix and Amazon have an advantage over traditional producers in their ability to predict the likely success of new productions.

Update, 7/18

House of Cards was nominated for best drama for the 65th Primetime Emmy Awards.  The series earned nine nominations overall, including lead acting nods for Kevin Spacey and Robin Wright.

Update, 7/27/2013

Netflix profit grows but stock dropped because the number of subscribers was disappointing.  Subsequently, they got a big boost in trials when Google bundled a 3-month subscription in with their new Chromecast device.


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Update 10/7/2013

HBO is offering access to seven series in the Google Play store. They cost between $2 - $3 per episode and $19 - $29 for a full season. They say more will come.

Netflix said they wanted to become HBO before HBO became Netflix -- the race is on. (This looks good for Google too).


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Update 10/23/2013

As we see above, Netflix's chief content officer, Ted Sarandos, said "The goal is to become HBO faster than HBO can become us." It seems the race is getting close and hot. Consider these recent developments:
  • You no longer have to be an HBO subscriber to see HBO programs -- you can order individual episodes or full seasons ala carte from Google. (Individual episodes cost between $1.99 and $3.99 and full seasons are between $14.99 and $38.99, depending upon the show and the video quality.) The selection is limited today, but HBO says they will add more -- this must be a delicate marketing and contractual issue with their cable and satellite carriers.
  • Bloomberg projects that Netflix is poised to pass HBO in paid subscribers and is in talks about offering their content through cable providers like Cox Communications.
Consumer choice is growing and we are seeing more and more content on the Internet, but, will we settle into the usual ologopoly pricing situation?

Today, we notice some pricing differences and some similarities. HBO charges for episodes or seasons. Amazon offers current season releases for $1.99 (or $2.99 for HD). Amazon offers their Prime customers a lot of free content, but it is limited. A Prime subscription costs $79 per year, but it also includes fast shipping on things you purchase from Amazon. Netflix offers all you can stream for $7.99 a month, but its streaming service is limited -- for example they offer movies on DVD that are not available for streaming.

Amazon and HBO charge an additional dollar per episode for high definition video, and my guess is that is a lot more than the extra bandwidth cost and that difference will drop as bandwidth becomes cheaper. It will be interesting to see if they keep that differential. (That may seem like gouging, but it is nothing like the phone company pricing for text messages).

It would be cool if you could get any content from any "channel" and they were all competing on price, but with a relatively limited number of channels and production companies, I expect the market will eventually settle into a comfortable oligopoly/oligopsony.

Update 11/13/2013
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Netflix rolls on:

Update 11/13/2013
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HBO Go shows up as a supported Chromecast app in the Google Support page.

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Update 10/15/2014

HBO CEO Richard Plepler announced that the pay-TV channel would launch a stand-alone, online streaming version of its service next year.

This move was predicted by Netflix's chief content officer Ted Sarandos, who, nearly two years ago, said "The goal is to become HBO faster than HBO can become us."

This will make cord cutters happy, but, Plepler made the announcement at a Time Warner Cable meeting. As long as ISPs maintain their monopoly/oligopoly market positions, they will be able to raise their Internet service prices as consumers shift away from bundles of TV channels toward Internet streaming.

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Update 7/11/2015

Linear TV viewing is down 15% over last year and Netflix is the number three broadcaster in the US.