Will Netflix bring the long-awaited digital revolution to TV viewing?

Some industries have been transformed by the internet within a matter of years, but television is one that’s proven harder to crack.

Most people still watch TV as they did years ago, with channel numbers listed on the remote control, commercial breaks, fixed programme times and week-long breaks between episodes of a series.

Even after a decade of internet-fuelled "disruption," traditional TV consumption has scarcely declined, Robert Kyncl, a top manager with Google’s video platform YouTube, admitted at the recent DLD internet conference in Munich.

But in the shadow of the still thriving TV giants - the traditional television channels - a new business model has been growing stronger and stronger: Subscription-based TV offering programming on demand via streaming. The pioneer of this model, Netflix, is now almost global and may have the critical mass to transform the industry.

The founder and CEO of Netflix, Reed Hastings, believes the conventional stations aren’t going to disappear. "The local television stations will continue to offer regional content. We can’t be as French as Canal+," he said at DLD.

At the same time he believes that linear television with its fixed broadcasting times will decline in importance "like landline phones."

Industry experts have pointed out that the average viewer of traditional stations is ageing, while younger people watch more TV via the internet. Netflix is strengthening its focus on children's programmes and could thereby secure an audience for a long time into the future.

Netflix has 69 million customers in around 60 countries. With the launch of 130 further markets, the Californian company - which started out delivering DVDs by post - theoretically now has access to around 5.5 billion people.

The massive market of China isn’t yet among them and Hastings admits he doesn’t know when this will change.

For Netflix the global expansion means first of all a lot of money being spent on marketing so that the brand is known in places like Pakistan or Cambodia, Hastings says. "We want to be as popular there as in the United States," he says, but he’s under no illusions about how long this will take: "That will mean 10 to 15 years of hard work."

Netflix also needs to add a lot more languages to its service - today there are 21.

Of course Netflix has to compete in the market to purchase content like other broadcasters. Traditionally, studios were accustomed to selling the rights to their programmes in different markets individually, making more money that way, but Netflix seeks global rights. To achieve this, "we have to offer more money," says Hastings. "If we only offer the same, they won’t make deals with us."

Netflix has a shopping budget of 5 billion dollars this year and that figure will continue to rise, Hastings says. To compete with the company, other channels are clubbing together when it comes to buying content.

For content selection Netflix relies on a mixture of data analysis and the gut feeling of programme director Ted Sarandos. Netflix has shown itself to be good at spotting what will be popular with viewers. For example, it contracted the critically mauled comedy star Adam Sandler for several movies, knowing that its customers would watch them regardless of what the critics say.

In the final analysis, each viewer only has 24 hours in the day and many providers competing to provide him or her with content to fill those hours. And the mountain of content is growing all the time.

Google’s Robert Kyncl says that 400 hours of video are added to YouTube every minute. The company has to rely on self-learning machines to organize this flood of images.

Last update: Wed, 27/01/2016 - 04:25

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