I always thought it's the other way around and Netflix was in a "if life gives you lemons" situation. The content producers in 2010 (or 2005 .. don't know) didn't want to bother with digital, so they just gave it all to Netflix and that's that. Then when time came to renegotiate the existing contracts (let's say in 2015) the situation had changed: Everyone and their dog now knew that digital was great, so half of them didn't want to give Netflix anything anymore. They wanted to be a competitor and Netflix had zero leverage (e.g. Disney), the other half now had a far better understanding of the value of their digital catalogue plus was able to shop around "so, you don't want to pay us our prices? Let us talk with Amazon over here ..".

At some point Netflix had to find a way out of that situation and while "we produce our own content" may have a higher initial cost and is not what the existing audience wanted in the long term it frees Netflix from their dependency on competitors.

If Netflix produces its own content, it is going to pay $Y to produce the content, and that quantity does not depend on the number of subs.

If the number of subs increases, eventually (subs) * $X is going to be more than $Y and in that case it makes more sense for Netflix to own rather than to rent.

Now content owners might have wanted to increase $X when they saw that Netflix was a good business, but I think the real driver behind the change was the increasing number of subs.

Their release schedules often obey no ryhme or reason like "all by language, all by highest cost per unit first", etc. This is the industry that referred to VCRs, a clear new market for their freely broadcasted releases as the Boston Strangler.

For instance, there is not a lot of ownership between movie theaters and movie studios. For movie theaters, an end to theatrical windowing is seen to be an existential threat. Movie studios probably wouldn't care a lot but they sell a lot through theaters so they don't want to harm the interests of theaters.

Piracy during that window (seemingly people who want to watch a movie at home when it is not yet available at home) does seem to be popular. It staggers me how many people are connected to torrents with horrible audio and video quality (often in a language you don't know until you watch it) when they could wait a while and download a pirate Blu-Ray rip.

Windowing across countries was a big deal when it was expensive to produce film reels so it made sense to put the audio track on CDs that could be distributed separately from the film, then organize showings to minimize the number of reels.

The transition to digital in theaters helped with that but also revealed the kind of conflict their is between theaters and movie studios. The distributor pays to make the reel (and save money in digital) and the theater has to get an expensive digital projector. The costs and benefits don't match and the sides have to compromise to make it work.

It is like how movie theaters for a long time have wanted to lower ticket prices because they figure they'll make it back at the concession stand, but the studios won't hear it.

If they make lots of money, up go the licence fees.

The decision to create their own content seems like an inevitable consequence of that, and acts as a deflationary force on prices as licenced content has to compete for airtime with content commissioned by the streaming service.

Producers thought they'd improve their position by going into distribution. Distributors (Netflix) thought they'd better themselves by going into production.

Perhaps they would have been better off focusing on either producing or distributing. A distributor improves their bargaining position by growing the audience they can reach. Producer, by making better films that more people want to see.

Seems unlikely to me. They're doing it on a very limited basis right now, but that's not for revenue; it's to get the movies in the running for awards.

> offer one-time access for people to watch a film but not sign up for a subscription

Seems unlikely. The number of people who think Netflix is expensive enough to avoid, and don't have friends they can mooch off of or get a group buy with is pretty small.

> they're probably going to have to turn their series into events by showing new episodes on schedule, once a week.

I'm really curious about this one. I have no idea why they would possibly want to do this.

In network TV land, broadcasters have time slots for shows so they can more efficiently sell advertising slots. Even if Netflix decided to start advertising, they can just tie ads directly to videos being watched.

Traditional tv shows can also get buzz by people chatting and theorizing about them week to week as the episodes trickle out. This isn’t really possible with the Netflix binge model.

They can also release faster since episodes trickle out as they are done. Not sure how often this happens vs editing and releasing later.

Whether this type of “buzz” actually is that important from an economic perspective or if it just generates a bunch of noise online and at the water cooler, I don’t know. So far Netflix seems content to drop content using the binge model.

This is the opposite of what happened: they had a large library because they were able to cut some deals in the early 2000s when streaming was a niche due to bandwidth and hardware limitations and most of their business was DVDs in the mail. That became popular and the large content owners decided that they wanted a greater cut and especially to avoid what had recently happened in music where iTunes had such a large share of the market that Apple was able to negotiate less consumer-hostile terms with the music industry.

Developing their own content is how Netflix is trying to even that up - they profit directly and it makes it harder for one of the large rights-holders to setup a competitor and lure most of their customers over.

I dont own netflix, but I do think it's a great idea and a smart investment by them. One thing netflix does with this disruption-wise is the way they think about content.

companies like comcast (NBC) still got their heads in broadcast television style producing content, where-as netflix takes a lot of risks, and is ok if a show has a niche following, so long as they have something in their library for everyone.

edit: its sad, if content producers thought like this in the past, we'd have more episodes of firefly.

But then they lost the advantage they had. The subscribers they have today subscribed to the variety it had in its catalog, not Netflix Originals that have replaced it.

Netflix is an organization built around distribution, where dependability and efficiency wins. I am highly doubtful that Netflix can produce great stories, whether in movie or series format. They do take a lot of risks (and arguable they would have to because do they have leaders that understand story?) but that in itself is not an advantage. It is only an advantage if it produces better stories and we haven't seen that.

In fact, there is a company that is much, much more exciting and successful when it comes to production: Blumhouse Productions. I recommend reading up on their model.

I have UK Netflix, I see no difference in the quality of the stories on Netflix and those on terrestrial TV (which costs more due to BBC license fee). The stories in the Netflix movies are as compelling as other movies IMO, though they don't have the budgets and sometimes that shows more clearly than others.

AFAICT we're looking at content producers all having their own walled-garden distribution channels; so they can keep more of the money and squeeze more cash out of consumers as an industry.

To fix this it seems we could require content producers to release to any channel if they release to one, giving a global per stream price. So, you release it to your own platform they pay X to the production arm and Y users view it; end of the year everyone else can pay you at a rate of X/Y per stream (plus an admin cost). Maybe that would homogenise streaming channels too much?

Remember copyright is an entirely UNnatural right, in theory we get to set its terms to be whatever is best for the demos.

Just imagine if, in the physical rental DVD/VHS era, stores could have obtained monopoly distribution rights. Star Wars only at Blockbuster Video. Your suggestion appears worthy of serious consideration.

I think Netflix is banking on the fact that great is on the whole unnecessary and pretty good is good enough. Every mediocre TV show is someones favorite and if they just throw out enough different things something will stick for enough people. In the short to medium term at least they don't have to make you super engaged with their content, all they have to do is have enough OK stuff that you don't bother unsubscribing.

If we are talking about tv series then there is a really low bar for what is considered "great stories".

Agreed. Especially when tech becomes commoditized enough that anyone can pick and run with it. And that is what has happened with Netflix. Most companies have realized that getting a streaming service is easy and are trying to get a slice of the OTT pie.

But Netflix might actually be valued less and less as time goes by. This is simply because producing content was not their forte and now that they are into content production it will take a concentrated effort to maintain both, good quality of content and a great streaming service. They will be able to pay for content production using the money from streaming but couple of mistakes and both businesses will be affected.

This similarly applies to content producers as well. Their forte was to produce great content and not the OTT service. So, they might be able to pay for their OTT division using the profits from the media division. But on a longer time frame many, if not all, streaming services will be unable to replicate the success of Netflix.

On a longer timeframe I expect Disney or someone to acquire Netflix or some companies selling their streaming services back to Netflix.

They have the advantage of being able to use consumer viewing patterns to optimize their new shows, but then the seams are too often visible. Often the shows with better plots suffer from bad acting too. The best of their shows are the ones they seem to have bought as an entire proposition, like "1983" and "Suburra".

From a cultural or art critical point of view, this is a negative though. Movies end up being made to appeal to lowest common denominator tastes or themes for a broad audience.

The recent movie Bird Box is a great example. Total garbage, derivative movie, clumsy, contrived villains, manufactured tension with no actual plot driving any of it. Yet became somewhat of a viral hit.

If this is what Netflix’s data lets them optimize towards, count me out.

I must have expressed myself really badly, since people are reading the opposite of what I intended.

Netflix bet the farm on computer-generated plots, which is partly how they have such an immense quantity of content - yet the badness shines through. OTOH the handful of decent shows they have are all fully fledged concepts that they bought.

Like most people I really have to rethink the value-per-$ of this proposition, but if Netflix just erased all the crap maybe 10 up-to-snuff and 2 to 3 really good shows a year would remain. Worth paying what it is? If every new show was like "1983" or "Fauda"...

When my kids were younger, my wife and I used to joke about some of the kids shows that way, too... "kids like dinosaurs... kids like trains... Dinosaur Train!" If you don't have kids or aren't in the US or something... I'm not just making up a joke: https://en.wikipedia.org/wiki/Dinosaur_Train

Netflix is literally doing the exact same thing: https://en.wikipedia.org/wiki/Dinotrux:

> Dinotrux is an American computer-animated web series. It features a fictional prehistoric world inhabited by hybrid characters that are part dinosaur and part mechanical construction vehicle. The larger Dinotrux are accompanied by Rotilian Reptools who are smaller reptiles combined with mechanic's tools.[3] The series debuted on August 14, 2015 on Netflix...

They can do a lot more than that. They know precisely at what points people pause episodes or give up viewing a series entirely, for example. I'm sure someone must have thought of using that to determine what plot structures and pacing captivates viewers.

Which is the Achilles Heel of all recommendation engines. Just because I watched one historical drama doesn't mean that I want all historical dramas all the time. Take a show like Stranger Things. The campy nostalgic thing worked for it, but that doesn't mean I want my next 5 shows to be campy and nostalgic. I want my next show to be something original like Stranger Things was.

And keep in mind, this isn’t actually an advantage they have - scroll through any channel list and you’ll find a TON of crapware tv entirely designed to hook the lowest common denominator for as cheap as possible. That is reality TV. Yes they have fewer barriers to entry for promotion vs having to get it onto a tv schedule, but data points overall just select for optimization along one or two axes (cost, viewership numbers being the most frequent).

Shark week is an example of a viral hit - it’s not that Netflix makes more because they have more genre data.

You can't just go to a producer and tell them, make something about Japan, because it's trending, and use these two actors because they're the most popular at the moment. Creatives don't work based on directives.