Netflix’s Data-Driven Strategy Strengthens Lead For ‘Best Original Content’ In 2018
In contrast to the traditionally fragmented market prevalent in creative industries, Netflix has created its own ecosystem. It licenses content, distributes that content, owns the platform on which that content gets consumed, and as a result, it can access and use consumer data to drive success across its entire business. Its pipeline, in short, is vertically integrated. Through data and data analysis, Netflix licenses content based on organic viewing behavior vs. the standard pilot testing and reactionary paradigm. Once the content is available on Netflix’s platform, the company makes sure that the right content gets to the right consumer through its recommendation engine. With over125 million subscribers, Netflix has weaved data into its blueprint, and as a result, is outperforming its competition.
According to a survey released by investment banking company Morgan Stanley last week, 39% of U.S. consumers said that Netflix offers the “best original programming” compared with other subscription-video services. HBO charted a distant second at 14%, while Amazon Prime Video charted third with 5%, Hulu at 4%, Showtime Networks with 3%, Starz at 2% and Cinemax at 1%. According to the report, Netflix’s success is, in part, a result of its substantial investment in original content. The company is currently on track torelease 86 original films in 2018, up from 61 the previous year.
Morgan Stanley speculates that the release of Stranger Things season two was likely the largest driver towards Netflix’s overall increase in popular content programming from 33% to 39% of all U.S. consumers surveyed. According toNielsenratings, other popular content included Black Mirror season four and House of Cards season five, evenwithout lead actor Kevin Spacey. When it comes to content programming, what is it about Netflix’s data-driven strategy that sets it apart from the competition?
Sebastian Wernickeis a statistician and Chief Data Scientist of One Logic, a data science boutique that supports organizations across industries to better understand their data. In 2016, TEDX released a video presentation that Wernicke gave illustrating Netflix vs. Amazon’s approach to data and data analysis. In his presentation, he illustrates how Netflix and Amazon used their data to guide their investment decision in a new series. Their goal was to make a hit. At the time, Amazon’s now Head of Global Video Content, Roy Price, hosted a competition. His team selected eight winning ideas for television shows, through extensive evaluation and made produced a pilot each. Price then released these pilots for free online and tracked the consumers’ reactions. Amazon looked atmillions ofdata points including when viewers pressed play when they pressed pause, which parts they skipped and which parts they rewound and watched again. Amazon concluded that it should invest in a series calledAlpha House, a show about four U.S. Senators.
Netflix Chief Content OfficerTed Sarandosand his team used its data to guide content investment decisions in a different way. Instead of utilizing reactionary data based on supplied content, Netflix looked under the hood at all the data it already had and analyzed how and what consumers were organically paying attention too. The company considered information like ratings, data and consumers’ viewing history to establish a deep understanding across various viewer profile types to illustrate, in aggregate, which shows viewers liked, and subsequently, which producers and actors that they were attracted to. Combined with industry expertise, Netflix invested in a drama series about a single senator rather than four afteridentifying that viewers who loved the original 1990s BBC version of the series also like films starring Kevin Spacey and films directed by David Fincher. As a result, the new version ofHouse of Cardsstarred Spacey and the pilot was directed by Fincher.
