Television and disruption

One of the benefits of being married for many years to a TV blogger is that it has kept me up to date with developments about content I would otherwise miss because of lack of time, but that I do enjoy to some extent, if only as background noise when I work in my living room.

Television series are a form of content that I find very interesting: long considered the poor relatives of the seventh art and usually featuring also-ran actors, they now attract top talent, enjoy multimillion dollar budgets and their series premieres are global phenomena. This transformation can perhaps best be evaluated over the years based on the results of that indicator of relative popularity, the Emmy Awards.

Aware of the progressive market dominance of television by newcomers such as Netflix or Amazon, I asked my wife Susana, a faithful follower of the Emmy awards and even jury of an Emmy category when we lived in Los Angeles and she was working for Fox, to furnish me with data about this progression over the last four years. These are the results:

• 2013: this was the first time two Netflix series were listed as nominees in the main categories: House of Cards as best drama and comedy seriesArrested Development for Best Actor (Jason Bateman). This year Netflix was among the Top 10 channels with more nominations occupying ninth place: five in all.
• 2014: Netflix’s comedy/drama series Orange Is the New Black won nominations and one award, and House of Cards won seven nominations. In all categories, Netflix received 31 nominations and moved up to third channel in terms of nominations.
• 2015: The list of streaming productions by companies grew, with six series nominated in major categories;

- Transparent (Amazon)

- House of Cards (Netflix)

- Orange Is the New Black (Netflix)

- Bloodline (Netflix)

- Unbreakable Kimmy Schmidt (Netflix)

- Grace and Frankie (Netflix).

Netflix was the third-most nominated channel (34 nominations) and Amazon ninth (12 nominations), but Amazon beat Netflix five to four in the key categories.

• 2016: This year there have been even more series nominated in different categories, with productions by Netflix, Amazon and even a Vimeo clip:

- House of Cards (Netflix)

- Master of None (Netflix)

- Unbreakable Kimmy Schmidt (Netflix)

- A Very Murray Christmas (Netflix)

- Bloodline (Netflix)

- Patton Oswalt: Talking for Clapping (Netflix)

- Garfunkel and Oates: Trying to be Special (Vimeo)

- Transparent (Amazon)

- The Man in the High Castle (Amazon)

- John Mulaney: The Comeback Kid (Netflix)

In addition to numerous nominations in the creative categories, which in the case of Netflix include Chef’s Table, Narcos, Daredevil, Jessica Jones, Making a Murderer, Sense8, What Happened, Miss Simone? or Winter on Fire: Ukraine’s Fight for Freedom; and in the case of Amazon, Catastrophe and Mozart in the Jungle. This year Netflix was the third network with more nominations (22 nominations in major categories, 50 in total) with Amazon coming seventh (16 total nominations). After HBO, Netflix and Amazon are the channels with the most awards in major categories (three and two respectively).

The success of HBO, the most successful channel in recent years thanks largely to Game of Thrones, which is leader in terms of internet downloads (something the director celebrates and the CEO of the company considers “better than an Emmy”) also deserves special mention for its strong shift from traditional television to the world streaming through HBO Now.

What does this transition from productions intended to be broadcast on traditional television a model not based on a license free TV or cable, but through streaming through the internet? On the one hand, that it is essential to understand the structure of demand by users increasingly moving away from traditional patterns, and who want to view content when they want, on many occasions through binge watching a single series over an afternoon, a day or a weekend. And of course, without advertising breaks: up to 74% of Netflix users say they would cancel their subscription if the company decided to have advertising, and would rather pay more not to see ads.

Furthermore, cord-cutting becomes an increasingly real threat to the traditional business model: a study suggests US cable companies calculate they will lose around a billion dollars due to users dropping their subscriptions: some 800,000 people in the next twelve months with an estimated about $1,248 average annual payment. The study estimates that somebody who unsubscribes will save themselves around $104 after subscribing to streaming services that, in many cases, they were already paying for in addition to their subscription to access exclusive content. For Netflix and Amazon,the strategy of producing their own content is proving a resounding success.

Finally, thanks to the availability of complete and accurate statistics about consumption and trends at both the aggregate and individual levels, streaming companies are able not only to generate patterns of satisfactory consumption for their users through the right recommendation algorithms, but even to plan production to ensure adequate demand. When you have a huge pool of subscribers and know perfectly well what they like, producing content is much less riskier. If you can also sidestep the issue of geographical licensing rights and all that crap from the last century, your existence as a company is characterized by peace of mind and subject to a more reasonable planning, with more control.

The companies that ignore this trend will have problems. These are the ingredients required for the disruption that is defining a new era.

(En espa?ol, aquí)