Disruption is one of those words that get thrown around a lot in marketing circles, along with "The Three Cs"—change, complexity, and chaos (four Cs in you want to throw in content). But there are very few companies that are truly disruptive. Technology certainly is disruptive; from the printing press to the assembly line to the Internet, technology has been upending the status quo for hundreds of years, but disruptive companies are harder to find.
Right now we are witnessing firsthand the efforts of such a company as Netflix looks to explode the way we watch quality scripted programming. On February 1st Netflix made available all 13 episodes of its new program, House of Cards and the resulting discussion amongst the media, and the consumption habits of Netflix subscribers, has been fascinating.
As The Huffington Post notes: Netflix CEO Reed Hastings has a vision for TV that ought to scare studio heads as much as Netflix’s first business—direct-by-mail DVDs—scared Blockbuster. So, what is Netflix’s plan for disruption? The streaming TV network wants to turn into the HBO of Internet TV and as media critic Michael Wolff notes: It has formally "broken channel power."
Disruptive companies often tend to think differently than their competitors. I was somewhat pleasantly surprised to hear that Netflix has a cultural anthropologist on staff, something that will no doubt also please Grant McCracken (who has his concerns about this new direction, something along the lines of while knowledge may by power, absolute power corrupts absolutely).
There are in fact two entrenched systems that Netflix is looking to disrupt—first, the current prison of waiting. A week for a new episode, months (or years) for a new season. Reed Hastings, the CEO of Netflix, has a name for this prison and what it does to the people trapped inside it: managed dissatisfaction. Hastings is smashing this prison by allowing you to watch what you want, on whichever device you want, when you want, and crucially in whatever volume you want. Watch one episode a week or two or three or all 13. He’s also looking to give fans of HBO-type shows the thing they have been crying out for, a cord-cutting option. One of the big questions in the media industry is when and if we’ll be able to get HBO without having to pay for all the other dreck on cable. Netflix is trying to provide that option.
The early returns? The show rose to be the most watched thing on Netflix, and Fast Company named Netflix as one of the Top 3 most innovative entertainment companies in the world.
Of course a disruptive brand will not be welcomed with open arms from all corners. Venerable trade magazine Variety (whose print edition will be discontinued in March) was quick (as in before House of Cards was even streamed) to say that Netflix had made a mistake. Yes, they ask some fair questions, but I don’t believe they understand the true cultural shift that a new generation of content consumers has brought. The publication asks what of the water-cooler talk that Netflix binge programming will miss out on? The answer is, consumers will adapt. Perhaps viewers will utilize, or Netflix will partner with, a 2nd screen app to have binge viewing parties or allow you to chat with people who have only watched the same episodes you have. Maybe there will be Social TV parties starting at midnight when all episodes become available. Or perhaps groups of people will agree to watch shows simultaneously at a designated time. (Or perhaps this behavior, like others, will evolve).
The demand for something like that is clear already. In a New York Times article, Internet pioneer Dave Winer lamented, "We need to invent new communication systems, where only people who have made it through Episode X can discuss with others who have made it exactly that far." No doubt that will come.
The Daily Beast (whose print component has folded) also unleashed its inner concern troll with this word of caution: "Is House of Cards doing itself a disservice by urging viewers to watch so quickly?"
Netflix isn’t worried about the Variety/defunct newsmagazine cohort, they’re much more interested in a new breed of media consumer, and these people get it.
Wired.com ran a poll of 1,900 readers who were watching the show and found that an overwhelming amount of them had watched all 13 episodes within days of the show’s release (see chart below).
These accolades and results can at least partially be attributed to the fact that Netflix is a thoroughly modern company, and that no doubt perplexes some people, especially in the media industry. They are indeed data driven, but that’s a far cry from being driven by bean counters, the type of scenario which has seen Hollywood turned into a production line of lowest-common denominator drivel, pumped out for an international audience (Transformers anyone?). Bean counters are about driving down costs and maximizing profits. Netflix is tapping into something different with data, a deeper understanding of how to make quality programming.
Jesse Hirsh brings up an excellent point regarding how Netflix may be leveraging its massive amount of data to their benefit: "It also allows them to bid on and acquire scripts and content with insights that others may not have." They have the data to know exactly what type of shows their subscribers are most likely to want to watch ("Aha!" says McCracken. "Here comes the inevitable ‘notes from the suits.’").
House of Cards showrunner Beau Willimon lays out the thinking, and the implications, behind the strategy when he says:
"I think we’re at the cusp of a paradigmatic shift. People have been talking about there being a confluence of the internet and TV ever since the internet was invented, but the technology wasn’t there. And now it is. So places like Netflix can actually get into the game. Pretty soon, there’ll be no reason why there has to be a half-hour, hour-long mandate length for anything. That comes from a bygone era of having to fill up 24 hours in a day, seven days a week, and that’s not how people experience content anymore. People’s attention spans are less and less being carved up into this half-hour, one-hour, and two-hour format, for instance. Why can’t you have a 13-hour movie?"
With the massive amount of data they have access to, Netflix understands their users and crucially, listened to them, regarding how they want to watch, not how to make the shows. Netflix was hands off with House of Cards, as you imagine they will be with the upcoming fourth season of cult hit Arrested Development, which will also air first-run on Netflix.
Alyssa Rosenberg of thinkprogress.org shares Variety’s concerns, then notes, "One of the things Netflix facilitates is binge viewing, which in my case means watching an entire season of 30 Rock in a single day…" And that is certainly part of the Netflix master plan. Come for House of Cards, stay for some older, great shows we are going to recommend to you until our next original programming comes along in a few weeks. They’ll know when to launch a drama or a comedy or a show aimed at teens (or tweens, or women or…) based on data, not the hunches of some network programming head (how’s that working out for you, NBC?).
The New Yorker lays out what is at stake with the Netflix experiment: "Maybe Amazon will go beyond its tentative investments and throw a hundred million at a different A-list series, or maybe Hulu will expand its ambitions for original content, or maybe the next great show will come from someone with a YouTube channel. When that happens, the baton passes, and empire falls—and we will see the first fundamental change in the home-entertainment paradigm in decades."
And that perfectly sums up what is really happening. The disruption that Netflix is inflicting on the scripted entertainment industry will have vast and far-reaching effects, not just for Netflix, but for a whole host of companies. When the inevitable disruption comes to your industry, do you want to be the Netflix, or the status quo?
Rick Liebling is Creative Culturalist at Y&R New York. He advises clients on how to engage in culture in order to better understand consumer behavior.