Thirty eight percent in the US watch Netflix online -- each one knows how to "cut the cord"

Yesterday I posted a note on Netflix' vision for their company and the TV industry in general. They now see themselves as a "movie and TV series network" and predict rapid growth for Internet TV. Today, I came across a Nielsen survey that supports both of those contentions.

The survey showed that 38% of the people in the U. S. subscribe to or watch Netflix streaming video service. That is up from 31% last year.

I don't know about you, but that is a lot more than I would have guessed. It is about 119 million people if they consider the entire population -- babies and all. Note also that Hulu and Amazon also have significant, growing numbers of subscribers.

Netflix' view of themselves as a series network is also confirmed by the study. Forty five percent of Netflix streaming subscribers say the types of shows they watch when they stream are original programming -- series like "House of Cards."

And, when they watch those series, they tend to “binge.” Eighty eight percent of Netflix users and 70 percent of Hulu Plus users report streaming three or more episodes of the same TV show in one day. As we pointed out in our previous post, both consumers and creators like the full-season format of Netflix productions.

The survey also showed, that Netflix and Hulu are watched on a variety of devices:

The above figure also suggests a trend away from computers and game machines toward phones and tablets. People want to watch TV on any device at any time and at any place.

"Over the top" Internet television is not just for geeks any more -- 38 million people understand how easy it is to defect from cable and satellite TV, to "cut the cord." As the quality and variety of Internet TV material improves, it will be easy for them to drop their cable and satellite subscriptions. When we reach the tipping point, the transition will be rapid.

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:

• Netflix introduces a new user interface -- it shows how their recommendation algorithm came up with suggestions for you.
• Netflix and YouTube combine for over 50% of North American traffic.
• Netflix added 1.3 million new US subscribers in Q3 and is now larger than HBO

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.

Yet another way to cover live events

Louis CK made a lot of money and made a lot of fans happy by producing his own video of a recent comedy show and distributing it on the Internet.

This evening, Bill O'Reilly vs Jon Stewart will be on stage at George Washington University for a political/comedy show.  If you can't or don't want to be there, you can still watch it on the Internet.

Nox Solutions will stream the event on the Internet, and for $4.95 this is what you get:

• You can stream the event up to three times, including the live stream
• After that, you can watch it on demand (for a limited time)
• You get a downloadable audio (mp3) file or downloadable high-definition video file (H.264 encoded in an MP4 container), which will be available at a later date. 
• You can watch it on any phone, tablet or computer and on your TV if you have a Roku, Google TV, Apple TV, etc.

They ask that you not redistribute and half the profit goes to charity.

You see the event where and when ever you want for $4.95.  Does that sound good to you? What other events would you like to see given similar terms?

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More versions are now available for download or streaming -- 240p, 360p, 540p, 720p and 1080p. The file sizes are 238 MB, 548 MB, 882 MB, 1.8 GB and 3.4 GB respectively. It seems like they could have produced the hi-def version faster, but in the case of an entertainment event like this, waiting a few days is not a problem. (They will improve their work flow and get hi-def versions out faster in the future).

I cut the cord -- no more cable TV

In this video, Verizon tells us the future of home video will be a wireless LAN connecting our TV sets and other devices to a Verizon FiOS server:



I agree that we will be distributing video around our homes on LANs, but don't expect mine to be connected to a FiOS server. For a start, Verizon does not offer FiOS in my neighborhood and from what I hear and read, they have no plans to do so.

Moreover, if they eventually do offer me FiOS, I suspect that it will be expensive and I will have to purchase a bundle of video "service" -- forcing me to pay for a lot of channels that I will never watch.

But, I don't want video service from Verizon, I just want bits.

I want my home LAN to be connected to the Internet (by Verizon or any other ISP), allowing me to watch ala carte IP video.

I've taken my first step in that direction. I “cut the cord" -- dropping our cable TV service and connecting our TV sets to our home LAN using Roku boxes. We (just barely) get local channels over the air using rabbit-ear antennas.

This set up and the available content is far from perfect, but it is my first step toward unbundled IP video.

Have you cut the cord? How do you like it?

Consumer electronic devices on your home LAN

We talk about home LANs and their eventual convergence with consumer electronics like TV sets and audio equipment.

This New York Times article surveys some of the Internet-ready consumer electronic devices that were shown at a recent German trade show.

Do you have a home LAN? If so, is your TV, sound system or any other consumer electronic device connected to your LAN?

Who needs the broadcast television networks?

The Los Angeles Times and the New York Times both ran recent stories on entertainment programs being produced for the Internet by successful, mainline TV producers and writers. They are attracted to the new medium by creative control and cost savings on distribution. You can check episodes of two of them at The Fantastic Two and Qarterlife.

For more insight into the background of TV production and what is motivating these successful men to move their talents from television to the Internet, see the companion LA Times article Are Corporate Suits Ruining TV?". (You can guess the answer to that question).

Watch a couple episodes from one or both of these programs. How do they compare to TV? How do you think they could be improved?

Crescent Heights -- the future of television?

Proctor and Gamble, which makes Tide laundry soap and pioneered radio and television soap operas, has an Internet soap opera called Crescent Heights. The three minute episodes are designed to be seen on a mobile device or a computer, and there are no commercials. The Tide logo appears at the end of an episode and, as you see in this screen shot, the characters use it for their wash. The key advertising value is in a set of forums where members can discuss the characters, the story, and household topics like stain removal and washing. The discussion site mentions Tide products and has a Tide logo.

You can read more on Crescent Heights and the business proposition here.

In this case, the Internet lets the advertiser produce and distribute their own content rather than sponsoring a show produced by someone else and distributed by a cable or broadcast network. Would this cut cost? Is this a rough, early glimpse at the future of television?

As mobile and home connectivity improve, how will a program like Crescent Heights improve? Would you be willing to watch a football game sponsored by Budweiser on the Internet? Do you think people would be more likely to purchase Tide soap after watching Crescent Heights and looking at the online forums?