Forrester: 32.1 Million U.S. Households Now Access Online Video On Their TVs
Forrester: 32.1 Million U.S. Households Now Access Online Video On Their TVs
Almost 115 million households in the U.S. currently own at least one TV set and 36 million own four or more. That’s a huge market and as Apple, Google and Microsoft try to wrestle more of this business away from the traditional content and hardware players, the old-school cable and satellite providers now suddenly have to content with this new group of challengers that, until now, barely registered on their radars. According to Forrester analyst James McQuivey, it’s Microsoft that’s winning this platform war so far.
Why? Microsoft, MCquivey argues, currently has a massive lead over its competitors thanks to its Xbox360. According to a new report by Forrester, the number of U.S. households that watch online video on a TV set is now up to 32.1 million, up from just 24.8 million a year ago. The majority of these households use their game consoles to do so. The adoption of connected TVs is also moving ahead quickly. Forrester estimates that 18.5 million households now use them to stream online video in the living room. Over-the-top set-top boxes like the Apple TV, Boxee and Roku, however, are still niche products, with just 4% of U.S. online households owning one at the end of 2011.
Looking ahead, Forrester estimates that by 2016, 66.8 million U.S. households will have connected their TV sets to the Internet and 89% of HDTVs sold will be connectable.
In this quickly growing market, McQuivey argues, it’s all about who owns the platform. Microsoft is in the lead right now, but still, only 49% of Xbox 360 owners currently connect their consoles to the net. McQuivey argues that in order keep its lead, Microsoft has to push this number to 75% and highlight the numerous video options beyond Netflix it already offers.
Google, says McQuivey in his blog post today, “has to push Android onto every TV device, including the Motorola set-top-boxes it is about to own.”
Apple, of course, is widely rumored to be working on a TV set as well. McQuivey and his colleagues, however, think that Apple shouldn’t just sell a replacement TV. Instead, the company should focus on something more akin to a smaller, 32-inch screen iHub that could be used in the dining room or kitchen to create a central hub for the family to gather around and use a shared calendar, Facetime, and view photos and videos.
Taking OTT to the Next Level: Exploring the Value of Smooth Streaming + HLS
Taking OTT to the Next Level: Exploring the Value of Smooth Streaming + HLS
In our previous post, we explored the evolution of multi-screen and the emergence of new network configurations, including DVB + OTT. In this post, we will share our thoughts on a few of the innovative technologies available to augment these networks from a Quality of Experience (QoE) and security perspective.
We have recently observed an increasing number of operators relying on adaptive rate streaming (ARS) to support the development of new OTT video service architectures. This is in no small part due to ARS’ ability to quickly and cost-effectively take operators over-the-top, and add interactive services to previously broadcast-only pay TV networks.
ARS is particularly attractive for DVB + OTT networks as multiple new streaming technologies have recently emerged to further simplify the deployment process, while also facilitating the development of new business models and increasing revenue security. Smooth Streaming from Microsoft and HTTP Live Streaming (HLS) from Apple are two such technologies that are exceptionally well-positioned to help take operators over-the-top. Additionally, since both leverage HTTP as their foundation, they can co-exist quite nicely.
As such, operators are increasingly choosing to use the two technologies in parallel, with the goal of reaching the most diverse range of device types possible. In fact, the combination covers an exceptionally wide range of devices as well, encompassing delivery to tablets, smartphones as well as iPad, iPhones, set top box (STB) devices, connected TVs, PCs and Macs.
It should be noted, however, that while it is possible to use a single stream type to service all of these types of devices, operators are tending to prefer Smooth Streaming for PCs and Macs because of the sophisticated (and free) Silverlight environment and preferentially choose HLS for other connected devices.
DRM management – always a key consideration when deploying multi-screen services – also remains relatively straightforward as long as an appropriately high level rights management solution is deployed.
Using a combination of Smooth Streaming and HLS provides operators with an ideal environment for developing and deploying applications on a wide range of device types. In addition, the resulting service is well-protected and operates in a reliable fashion on all supported devices.
We anticipate that technology advances through ARS technology, particularly those based around HLS and Smooth Streaming, are likely to alter the current framework of managed network vs. Internet delivery. Choosing the right protocol, and the right revenue security solution, will enable service providers to deploy well-protected multi-screen services on the widest range of devices possible, thereby reaching the largest number of subscribers possible.
Over a dozen Windows 8 tablets expected in November — including hybrids
Over a dozen Windows 8 tablets expected in November — including hybrids
The first round of slates powered by Windows 8 will reportedly hit stores in November,CNet reports. Sources tell the site that “more than a dozen” tablets will be available, and over half of them will be hybrid designs (meaning they can convert between being a tablet or a laptop).
“The schedule is tight,” CNet’s source said. “Looking at what Windows is trying to achieve not only with a new OS, but a new OS that needs to run four to five architectures — three ARM, Intel, and AMD.”
A November timeline makes sense for the tablets, since they’ll be available in time for the holiday season. Unfortunately, it also means that tablet makers will also miss out on the back to school rush — college students (and their parents) usually buy new equipment over the summer, in preparation for the school year. That’s a shame, since a decent hybrid tablet/laptop would be the ideal computing device for many students.
All of the initial Windows 8 tablets will run Intel’s “Clover Trail” Atom chip, CNet reports. Clover Trail is Intel’s first dual-core Atom processor based on the company’s new 32-nanometer production process. Faster hybrid laptops based on Intel’s Ivy Bridge chip are also coming, but it’s unclear exactly when.
Verizon wants deeper partnerships with TV makers
Verizon wants deeper partnerships with TV makers
The Verizon FiOS TV App on Xbox 360
Verizon, the U.S. telco and one of the most successful IPTV providers in the world, has made one of the clearest indications of any major Pay TV operator that it would like to work more closely with the CE industry to reduce the number of set-top boxes it deploys. Speaking after the Connected TV Summit last week, Brian Whitton, Executive Director at the company, made it clear that he believes it is a realistic goal to offer an IPTV service through an app for second and third rooms but continue to rely on set-top boxes where there are no connected TV devices present. However, this relies on major CE vendors becoming true partners and working with platform operators to share the ongoing support and customer care burden.
Asked if it is viable for Pay TV companies to become an ‘Operator in an app’, he confirmed: “I think it is viable but in practice getting there is going to be much more complicated than people have been led to believe.” Whitton says there is an opportunity to use connected TVs in place of set-tops in many instances in the home. “That would be attractive for us if you can get it all to work and deliver services without compromising the experience.”
Though still committed to the STB as a proven way to deliver a controlled service with 100% quality assurance, Verizon has clearly been thinking through the implications and requirements for using connected TV apps in their place. The big issue relates to Quality of Experience: ensuring customers get the same premium service they have come to expect via a set-top box, for which they pay good money. This means replicating the customer support model Pay TV operators use today for their own devices.
With FiOS TV, the company is dealing with six different models of set-top box, each of them requiring software development and Quality Assurance (QA). If a customer calls with a problem, the support centre must triage using its knowledge of those six models. But Whitton points out that if an operator wants to replace set-tops with an app then the support staff will have to be familiar with the various Smart TVs from Philips, Samsung, VIZIO and others. If technicians are called to a home, they must understand the different televisions, too.
Whitton suggests Pay TV operators will therefore work with a limited number of Smart TV brands. These will probably be the early adopters and market share leaders who also show an interest in, and understanding of, the deeper partnership opportunity. It is a prerequisite that they buy into the Pay TV customer care model. “The partners will be the ones who understand it is in their interest, and our collective interest, to make sure the experience works,” he explains.
Brian Whitton (left) speaking on a panel at the Connected TV Summit 2012
“They have to be our partner in triaging problems. If we have an issue that we cannot triage ourselves, we must be able to escalate it to them and they cannot say, ‘It is after 5pm so we cannot answer the call’. We have to understand the number of customers that could be affected [by the same problem]. They have to be actively involved in solving issues and creating a software environment that is as refined and as stable as what you find on set-top boxes.”
Whitton would like to see the connected TV makers embrace the MoCA (Multimedia over Coax Alliance) standard to support in-home IP home networking over coax. This provides high capacity and reliability for video distribution and is widely supported by North American operators, where coax is widespread in homes. Whitton estimates that MoCA chipsets have a similar cost to Wi-Fi and he points out that you do not need the mobility benefits of Wi-Fi in a 50 inch television.
MoCA is already being used by operators to support multi-room TV and multi-room DVR services for classic, managed TV. “The reason we were early adopters of MoCA technology is that 90% of homes [in the U.S.] have coax cable and overall throughput is more than what we need for HDTV,” Whitton notes.
Connected TVs can be used as client devices on an IP server/client home distribution architecture and this is one of the instances where they can replace second or third set-top boxes, fed from a central DVR. “We would be able to deliver a video stream from the cloud or from a server in the home [the DVR hard drive] to a MoCA device like a television with MoCA,” Whitton points out. “The reality is that Wi-Fi, off-the-shelf, is non-deterministic and you cannot ensure that there is no packet loss when someone is watching the ball game. The big point, which I cannot stress enough, is that when people buy video – at least in the U.S. – they want 100% assurance that when they turn on the football game it is not going to be disrupted.”
LG, Samsung (Associate Members) and TiVO (Contributor Member) are the biggest CE brands within MoCA today. The standard has widespread support among STB vendors, SoC vendors and North American Pay TV operators, among others.
Is it reasonable for a Pay TV operator to expect partnerships where the TV maker integrates MoCA at their request, and then takes a share of the customer care burden where Pay TV subscribers are using an app on their TV? “Those discussions would make sense,” Whitton says. “You need business terms that are in everyone’s interest and it has to be a genuine partnership activity; the CE manufacturer has to embrace the operating model that the operator has and then invest in the right solutions to ensure that the TV is sufficiently hardened that operating costs do not rise.
“I think there is a steep learning curve for the CE industry when it comes to embracing the concerns of Pay TV operators and what is required on their part. But my sense is that there is definitely an interest from them in this.”
Verizon is already harnessing connected devices. If you subscribe to FiOS TV, FiOS Internet and have an Xbox LIVE Gold membership, you can watch live streaming channels on the Xbox 360 using the Verizon FiOS TV app. And the company is working with Samsung to make the FiOS TV App available to a potentially wider audience via Smart TVs and Smart Blu-ray players. In consumer marketing for the Xbox option, the company makes a point of telling consumers: ‘No Verizon set top box needed!’
Coding the future: HTML5 takes the internet by storm
Coding the future: HTML5 takes the internet by storm
The BBC’s Ian Hardy looks at why companies have been rushing to embrace HTML5 – and the innovative ways it is being used
It’s hard to imagine now, but original sites on the world wide web, written in HTML code or hypertext mark-up language, were made up of little more than text.
Corporate web designers were well aware that most of their customers had slow connections and would not tolerate much of a wait.
Even a simple black and white image could irritate a user, as it gradually appeared on the screen revealing itself one painful line at a time.
That began to change as modem speeds gradually crept up and content makers used more sophisticated methods to encode their multimedia content.
Macromedia’s Flash, now an Adobe product, made all the difference when it arrived in the mid-nineties. Animations, video sequences and graphics became more sophisticated.
But since its invention in the early 1990s HTML has not supported video natively.
That is why HTML5 is being received so enthusiastically by businesses in particular. The latest version can perform all kinds of dynamic tasks and visual tricks. The web is progressing faster now than it has in a long time.
Going native
Application developers, like Kevin Sweeney who works at Vimeo, a video-sharing website based in New York, have already embraced the new tools that are built in to HTML5.
“We’ve needed to rely on third parties like Adobe Flash or QuickTime and had to embed this inside web pages. What HTML5 will do is remove them from the equation so this stuff is supported natively,” he says.
Put simply it means that there’s now much less chance that customers visiting a website will come across a black hole in the middle of the page, or get endless prompts to “download a plug-in” which may take several minutes to install.
People will know what ingredients they have in their refrigerator and keep track of it using an HTML5 app on the screen”
By then it is often too late. The consumer has already clicked on a competitor’s website.
The iPod Touch, iPhone and lately the iPad have been especially good at leaving black holes on the screen, because the former boss of Apple, Steve Jobs, would not allow Flash to run on any of his iOS devices from the start.
The success of these products globally means many companies cannot ignore the need to re-code their entire websites in HTML5, especially the multimedia content.
A lot of companies are not waiting for the HTML5 specs to be finalised and approved in a multi-year process. They have jumped right in, using early “unofficial” versions of the code to deliver a complete web page to every customer.
New horizons
Aaron Gustafson, author of the book Adaptive Web Design, says the versatility and dynamic nature of HTML5 means it can be used in new ways in different environments including the office and kitchen.
“We are starting to see devices that are not traditionally web devices becoming more web-enabled,” he says.
“If you are a recipe curator with a website, all of a sudden you can build pages that work on a touchpad that’s built into a refrigerator. People will know what ingredients they have in their refrigerator and keep track of it using an HTML5 app on the screen.”
Google is pushing HTML5 hard, not surprising since the greater impact that web pages and apps have, the more advertising it can sell.
Its search homepage is traditionally sparse but many of the doodles, including the Jules Verne-inspired interactive submarine, are now being designed to take advantage of the newest code.
Jeff Harris, product manager for Google Docs, says HTML5 will change the way its services operate from the ground up.
“A simple example would be taking an attachment from your desktop and dragging it into the compose window in Gmail. That’s a basic capability that you couldn’t do five years ago because web browsers didn’t support it.”
HTML5 also represents another step to the “semantic web”, a web structure championed by Tim Berners-Lee that cross-references, reacts to and displays multiple information sources from the internet in real time.
HTML5 is partly responsible for the browser wars in the past few years.
A decade ago Chrome, Firefox and Safari didn’t exist, and browser updates for Internet Explorer were only occasional.
Today desktop and mobile browsers update frequently as new HTML5 functions get incorporated.
Companies favour HTML5 because it can also replicate experiences previously only available inside an app, on the web. This is especially true for the mobile environment.
And a lot of brand names don’t like being part of someone else’s ecosystem because they lose control of pricing and subscribers. The Financial Times recently announced it will shut off its iPad app completely following the success of its HTML5 web page.
This is a trend that is likely to snowball within months.
Flash forward
But where does this leave Adobe Flash?
The company has already stopped supporting it on mobile devices.
Danny Winokur, the general manager of the Interactive Development Business at Adobe, says the future of Flash is not in doubt, especially since protecting high quality assets with DRM (Digital Rights Management) is not yet possible in HTML5.
“Flash is allowing things like 3D immersive gaming that you would normally see on an Xbox or Playstation to come into a web browser,” he says.
“That’s something that HTML may eventually be able to do but it has a long way to go. Flash will pioneer those most advanced cases like HD feature-rich cinema graphic content that needs to be copy-protected.”
Ideally of course the end user will not notice, or even care, that the web is being powered by a new updated set of code.
If HTML5 does its job properly, no-one outside the web development community will ever know about it!
Apple television is like a big Thunderbolt display, says source
Apple television is like a big Thunderbolt display, says source
According to this source, the television is equipped with two pivotal elements that will put Apple’s mark on the device: iSight and Apple’s voice-controlled assistant Siri. The iSight camera will be used for making Facetime calls, while Siri could represent an evolution of remote controls from handheld devices to built-in voice-enabled software. The television is also “much larger” than the Thunderbolt display, according to the source, though specific sizing details are not available.
It has been long-expected that Apple would release a television using Siri, though the company has not yet graduated the software off of its latest smartphone. As for Facetime, the source says the camera has the ability to follow you around the room, as well as zoom in on your face so you won’t have to sit right next to the screen for the person to see you clearly. Whether or not it will be able to detect and follow more than one person is unknown.
Rumors about an Apple television have been swirling for months. Analyst Peter Misek said he spotted television parts slowly being shipped to Apple’s manufacturers on a recent visit to Asia. He believes the television could debut as soon as this summer, though that target seems unrealistic now. Others say Apple has been in talks with Epix, a movie channel backed by three major studios, for a streaming deal that Netflix currently monopolizes.
Cult of Mac warns that the source is “well placed,” but the tips don’t always pan out. The source often gets early access to prototypes, which Apple may not use in the final product.
TV broadcast viewing is losing eyeballs to DVR, mobile, & the web
TV broadcast viewing is losing eyeballs to DVR, mobile, & the web
The main culprit? “Time-shifted” DVR devices, according to the report. Basically, that means people still prefer to watch somewhat current programming, but on their own time. The growing number of streaming video services like Netflix and Hulu are having a great impact on viewing habits — in the sense that TV shows are becoming much less of a performance and far more like a good book on a shelf that you’ll eventually get around to reading.
The report shows that 98 percent of all viewing is still done on a television set. This is partially due to the presence of more set-top boxes and homes that contain a game console capable of using streaming video services.
And while TVs are still the center of the universe for video watching, mobile is showing some impressive strides. One interesting thing to note is that the report found 33.5 million mobile phone owners now watch video on their phones—an increase of 35.7 percent since last year.
Photo via Shutterstock; Graphic via Nielsen
Do not overlook CE and Pay TV cooperation, says Samsung
Do not overlook CE and Pay TV cooperation, says Samsung
Smart TV is not a zero-sum game for the Pay TV industry and the CE industry, according to Dan Saunders, Director of Content Services at Samsung. A zero-sum game is one where the gains of one participant must be matched by the losses of another. So the implication is that both Pay TV operators and device manufacturers like Samsung (who are also developing their own content portals) will gain from the development of the Connected TV market.
Samsung has been keen to emphasise the potential for cooperation with the Pay TV industry and Saunders says the company is seeing a lot of interest from network operators, including telcos, who want to use Samsung Smart TVs as a way to increase their incremental market reach using apps and OTT video. But he believes the mood for cooperation has been largely ignored in favour of more dramatic headlines pointing to a battle for control between Pay TV and the CE industry.
Apps development should become easier for Pay TV operators, and for all content providers including broadcasters, looking ahead, Saunders reckons. “From an apps development point of view we have reached stable ground,” he explains. “We are adding new features and tools to the software development process [for the Samsung platform] but the underlying architecture is fundamentally stable.” He adds that, given the combined experience of Samsung and the developer community, and the fact that there are now apps development agencies specialising in Connected TV, the technology barriers are coming down for content owners or platform operators who want to build apps for Smart TV.
“We are definitely at that point where apps are opening up to more people,” he adds. “The learning curve is no longer as steep. We are always improving our process and the tools and resources we make available to developers. The time and cost needed to build apps for Smart TV is coming down and will fall significantly.”
Saunders acknowledges that the value Samsung can offer a Pay TV operator or any other content provider depends on the market reach they can offer. When it comes to Smart TV sales and market share the company has a big advantage over many of its rivals. Samsung is also addressing the next challenge: making it easier for consumers to find the content from its apps partners. As a result, the concept of ‘smart interaction’ is a big focus in 2012, as witnessed at CES in January when facial recognition, voice recognition and gesture control were important highlights. The company is keen to make it as easy to find content and navigate around it as possible and views this as a way to differentiate the platform from rival CE offers.
Meanwhile, Saunders is convinced that Smart TV is on the verge of changing the TV market, helped by increased adoption. He thinks the behaviour of early Smart TV adopters, when it comes to how they find and watch content, is an indication of what the mass-market will look like in future. The desire to time-shift content is an example. “Everyone says it is only a small percentage of people that have these devices and only a small percentage that watch time-shifted content compared to linear TV but there was a time when only 2% of people bought books online. We are now seeing the roots of how people will consume TV in future.”
In Search of Apps for Television
In Search of Apps for Television
A Philadelphia Phillies-San Francisco Giants game on Comcast Sportsnet.
The same consumers who delight in navigating the iPad still click frustratingly through cable channels to find a basketball game. Their complaint: Why can’t television be more like a tablet?
Neil Everett and Stan Verrett, the anchors of SportsCenter, on the WatchESPN app for the iPad.
The technology industry is trying to address that question for the millions of customers ready to embrace the next generation of viewing options. In the process it could transform the clunky cable interface, with its thousands of channels and a bricklike remote control, into a series of apps that pop up on the television screen.
While still in its early stages, the idea has taken off among tech-loving consumers, and companies are trying to satisfy them. Already, apps for Hulu Plus, Netflix and Wal-Mart’s Vudu streaming service, among others, are built into Internet-enabled televisions. Devices like Microsoft’s Xbox 360 and the streaming video player Roku let viewers watch apps that mimic channels. New sets by Samsung and others come with built-in apps loaded with television shows, movies and sports.
Apple has a video player called Apple TV with apps to Netflix, Major League Baseball and other content. Many media executives predict Apple will ultimately enter the television market in a more aggressive way, with either a new set-top box or an Apple-made TV set. Both would rely on apps scattered across the screen as they are on the iPad. Apple declined to comment.
“I’ve told my bosses, ‘This is beachfront real estate. Buy in now,’ ” Lisa Hsia, executive vice president of digital media at NBCUniversal’s Bravo channel, said of developing TV apps.
A model built around TV apps, however, could let viewers use favorite apps on the screen on an á la carte basis, thus bypassing cable subscriptions and all the extraneous channels they don’t watch. And therein lies the tension that has the television industry delicately assessing how to balance the current system with an Internet-based future that some feel is inevitable.
“The question that hasn’t yet been answered is whether television viewing will consist of a single app that mimics the pay TV bundle or a series of different apps that together form a content experience,” said Jon Miller, the chief digital officer at News Corporation, which owns Fox Broadcasting and cable channels like Fox News and FX.
À la carte apps would upend the entrenched and lucrative economics of television, which have long relied on a system in which cable customers pay for channels even if they don’t watch them.
The so-called bundle setup helps little-watched channels bring in revenue from monthly cable fees and allows the most popular channels to get high fees from every subscriber, even the ones who don’t watch them.
The idea of undermining this model is so sensitive that media executives who think that apps are the future of television would not discuss the subject publicly, for fear of disturbing their cable and satellite partners.
But many analysts caution against predicting the near-term demise of cable and satellite delivery, pointing out that the spending and viewing habits of consumers are also firmly entrenched.
“The model we have is the model we have, and while it’s tempting to imagine an app for TNT and an app for ESPN, that’s not the likely outcome,” said Craig Moffett, an analyst at Sanford C. Bernstein & Company. À la carte apps might seem like a bright idea, Mr. Moffett said, but it is unlikely consumers would pay $20 a month for individual channels when the traditional cable bundle provides a bargain price.
Currently, most TV apps created by networks work on an authentication model that requires cable subscribers to log in before gaining access to a channel’s app. The handful of apps already available on television screens also largely require a cable subscription.
For the most part, the apps being offered today are intended as complements to traditional TV viewing and are available only on tablets and mobile devices. For instance, NBC Sports will soon introduce its NBC Olympics Live Extra app, which will allow subscribers to stream every Olympic event from London this summer. It is available only on iPads, tablets and other mobile devices, not on TV screens through Xbox or Roku.
“No one on the digital side wants to take away audience from the TV,” said Rick Cordella, vice president and general manager for NBC Sports Digital.
Netflix bullish on original content
Netflix bullish on original content
Streaming service sets slate, shakes stock tumble
Even if only a small percentage of the $3.9 billion that Netflix spent on content licensing in 2011 will go to its own original series, the attention this growing slate is commanding is becoming increasingly disproportionate to its size. That’s a testament to how aggressive the Los Gatos, Calif.-based company has gotten over the past year in a business in which they didn’t have so much as a toehold the year prior.”I doubt there’s a serious pitch out there that doesn’t come through here,” says Ted Sarandos, chief content officer at Netflix, where original programming is just one piece of a broader content strategy he oversees. Under his watch, Netflix has already greenlighted four original series.
The first, “Lilyhammer,” is a mob dramedy from Norwegian TV that stars Steven Van Zandt (“The Sopranos”), and has been on Netflix since early February. The second will be an adaptation of the BBC drama “The House of Cards” that is in production in Baltimore and should be on air by year-end, with Kevin Spacey in the lead role.
Slated for 2013 are a revival of the Fox comedy “Arrested Development” that’s still being written and a horror series from “Saw” helmer Eli Roth, “Hemlock Grove,” already in casting. A fifth series, the prison comedy “Orange Is the New Black,” from “Weeds” creator Jenji Kohan has been reported as a done deal, but Netflix is not officially acknowledging it being in the development pipeline.
As badly as Netflix stumbled in the fourth quarter of last year, when ill-advised pricing decisions cut into the company’s market capitalization and subscriber base, Sarandos says the company can still afford its growing content bill.
“Things took a pretty unpredicable turn last year, but relative to the entire business, it was not much of a change,” Sarandos said, firm in his belief Netflix has weathered the storm and come out the other side.
To some degree, Netflix was essentially forced into doing original programming. The kind of series Sarandos coveted most — critically acclaimed serialized dramas from HBO and Showtime — were never going to make their way to the streaming side of Netflix given the incumbents weren’t about to arm a would-be competitor with its own weapons. “Cards” represented a turning point for Netflix when Sarandos outbid his TV counterparts for a property he would never get on Netflix if it went to one of those pay nets.
“We concluded that if this is an area of programming that our customers really enjoy, and the economics work well for us, then we’ll just create a new market if we’re not going to be licensing in that aftermarket,” Sarandos says. “Based on the quality of the slate so far, we have proven that we can bring these shows to market. We’ll see if ‘House of Cards,’ when it starts on Netflix, is just as great an experience or better if it played somewhere.”
With so many buyers of original content to compete with from the traditional TV world, Netflix would seem to have some competitive disadvantages, since it is new to the marketplace and doesn’t develop programming inhouse. But Sarandos says he has an edge in more ways than one. If a series idea comes in the door further along the development process than might be required in the network world, he’s willing to make a larger commitment upfront. Witness the eye-popping 26-episode deal, sans pilot, Netflix made with MRC for “Cards,” with David Fincher onboard as executive producer.
But Sarandos also believes Netflix is a better home for programming because the company isn’t under pressure to launch big out of the gate, allowing a series to establish its value over the course of a long run instead of all at once.
“Our success isn’t dependent on traditional media spending to try to motivate every American to do the same thing at the same time, which has a pretty hit-or-miss record,” Sarandos says. “If you’re going to spend tens of millions of dollars to get America to tune in to a show Wednesday night at 8 p.m., its success is likely more dependent on the marketing working than the show itself. We give creative talent more comfort that we’re more of meritocracy than a test of a network’s marketing group.”
Another Netflix advantage: while a network-TV launch is subject to the incredible scrutiny that comes with publicized ratings, there’s no transparency regarding the performance of a series on a streaming service. Sarandos declines to offer any internal measurement figures for “Lilyhammer,” but says he’s pleased with the audience reception for Netflix’s first original.
“On average, the folks who watch ‘Lilyhammer’ rated it four stars, which is very good for a show that is more than half subtitled in Norwegian,” he says.
Sarandos also believes “Lilyhammer” vindicates the Netflix strategy of evaluating its programming needs through the filter of data derived from the website, which gives a very refined sense of the types of programming that will appeal to the subscriber base. Those algorithms came in handy when the time came to make a decision on “Arrested Development,” which Sarandos believes would have led him to a different verdict had he had only TV ratings to go on, considering the sitcom never performed very well on Fox.
“The data we get from our algorithms can sometimes be wildly disconnected from the ratings data point,” Sarandos says. “Sometimes shows that didn’t fare well on TV do quite well afterward.”
Thanks to “Arrested,” seemingly every TV show that gets canceled these days ends up subject to reports that Netflix is in negotiations to scoop it up, most recently Fox’s “Terra Nova” and ABC’s “The River.” Sarandos wouldn’t address any specific negotiation but he says that while his preference is for original series ideas, he’s glad Netflix has become a must-call for series looking for life after cancellation.
“It’s a phone call that will probably be made on every one of these shows, and it’s a phone call we’ll take,” he says. “There’s room for shows that have a unique, passionate following when you can make the economics work.”.