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Yoshi Heffernan
By running through some select executive comments and breaking down the pros, cons and data implications of various release strategies, we can identify how and why a one-size-fits-all approach may not be the best strategy overall.
When we look at the decay rate post-season, the weekly release and the periodic release generated 44 of the 50 best decay rates for a season of TV combined dating back to 2016. In other words, demand was less likely to fall off as quickly for shows released weekly and periodically. For decay rate post-offseason, or the demand change between the post-finale period and the time until a new season begins, weekly and periodic combined for 48 of the top 50 decay rates.
These trends imply more sustained demand and above-average demand for shows released over longer periods of time vs all at once. Sustained demand typically translates to more consistent engagement and lower churn, which means better retention and a lower cost of customer acquisition.
None of this is to say that the binge released series is a failure. Far from it. Grace and Frankie is one of Netlix's longest-running shows. And to be fair, a platform like Netflix, which releases scores of new titles every month, would not be able to effectively schedule such a volume of TV series weekly without cannibalizing viewership.
Yet the questions streaming executives must naturally ask is how much does it cost to provide the required volume of binge release series to A) unearth a rarer long-running success such as Grace and Frankie and B) maintain consumer interest and churn rates while viewers rapidly burn through shows in one weekend? Supplying entire seasons all at once is a costly way of doing business that requires a constant stream of fresh content.
Netflix reality series such as Love is Blind and The Circle are released in periodic batches over several weeks while Too Hot to Handle is split into two binge portions. This has put the most recent seasons more in the demand realm of weekly linear hits 90 Day Fianc and The Real Housewives of Beverly Hills.
In terms of the top 50 most in-demand streaming originals in the US from 2020 to present, the supply share of binge release series has dropped 14% while the demand share has dropped 15%. In that same span, the dips for episodic releases were more muted: a 2% decline in supply share and a 3% decline in demand share. Yet periodic releases, which still often release the majority of its episodes one at a time, rose 16% in supply share and 18% in demand share.
Given the upfront costs required for a binge-heavy library, how significantly weekly and periodic release strategies already dominate the global TV demand leaderboard, and how these tend to maintain more consistent demand over longer periods of time while appealing most to older demographics, you can see the value in its strategic deployment.
A binge release hit compared to a weekly hit exists on a sliding scale, but something as big as Stranger Things seems to boast a higher overall ceiling than recent weekly hits such as The Mandalorian and House of the Dragon. (On the day Stranger Things premiered in 2016, it ranked as the 72nd most in-demand series worldwide; two days later it had broken into the top three). Six of the 15 most in-demand seasons of TV during their active season (i.e. releasing new episodes) since 2016 were binge or partial binges. While weekly and periodic seasons still claimed 41 of the top 50 spots, this underscores how high the binge and partial binge ceiling can be. The same holds true for the 50 highest post-season demand levels (the window immediately following the finale), which are dominated by weekly and periodic releases yet still see binge and partial binge combine for five of the top 10 spots. The top heavy release strategy can offer immense upside.
A binge release season, particularly for a new concept, can help quickly turn a low-profile series into a broader success. The Boys originally debuted as the 57th most in-demand series as a binge release in 2019 before breaking into the top five just two days later. Wednesday may have been a spinoff of the long-running Addams Family franchise, but its rise to the most in-demand series worldwide in just 10 days remains impressive.
As every streaming service attempts to claw out greater profits, flexible release strategies allows for companies to better address a variety of different goals simultaneously. In doing so, platforms can maximize engagement by serving audiences the latest addictive drama via binge before recommending a weekly swashbuckling action and adventure series, or any number of other combinations. This will help improve the perceived value of a service in the eyes of consumers as it offers an eclectic roster of genres and release strategies to choose from. And the stickier subscriptions are, the more pricing power it affords a parent company. Ultimately, the goal with such a versatile lineup is to contribute to a more manageable cost of customer acquisition and steadily increase the lifetime value of a subscriber over the long term.
Netflix was founded in 1997 by Reed Hastings and Marc Randolph as a DVD-by-mail service. The idea came after Hastings was charged a late fee for a movie rental. Customers could subscribe to receive DVDs by mail. The company later expanded to streaming and now has millions of subscribers.
The company at the time struggled with two fundamental problems in their business model. One was that because the DVD was sent via mail, it would take anything between one day to 4 days for the shipment to reach the subscriber. Even though people were likely to try Netflix, conversion to repeat rentals was low. Secondly, people would far more inclined to rent out the latest releases. For the company to break even on the cost of purchasing a DVD to rent-out, they would have to generate 15-20 rentals for each DVD.
Secondly, to enable maximum utilisation of their DVD content catalogue, the company created their movie recommendation system. Through Cinematch, Netflix would recommend shows for their subscribers to watch. The point for this was to alleviate pressure for DVD rentals away from new releases, to a more uniform renting out of their content library. This solution has over the years become considerably sophisticated, and drives how customers experience Netflix and how the company makes decisions when acquiring new content.
Netflix put further pressure on competition when they announced the launch of their streaming service in January 2007, as Watch Now. At the time the streaming service was expected to be of use only for power users with broadband internet connections, which were not all that common at the time. Users were required to have a 1 mbps internet connection to be able to stream movies, with a 3mbps connection required for streaming DVD-quality films. Subscribers under the $17.99 plan had access to 18 hours of streaming content. Video delivery was through a special browser applet that subscribers would have to install. By 2008 however Netflix had given access to unlimited video streaming for subscribers to its biggest plan .
Prioritising building a robust technical infrastructure has helped Netflix keep their first-mover advantage. Oftentimes the first-mover advantage is squandered by technology companies who have to make way for businesses that solve the problem more efficiently. Netflix, however, by relying on a solid content and technical team, has managed to keep its competitive advantage since the launch of its streaming video service.
As the company started working towards building a streaming video solution, they also started to develop solutions for streaming video through hardware platforms. In 2004/05 the company was considering working with contract manufacturers on DVD disc drives with a video processor, which could download video content over the internet, and then stream it on TV. This model was similar to TiVo, which enabled TV owners to record TV shows on a disc. This was however shelved as competition with Blockbuster intensified and Netflix had to put resources into engaging in a pricing war with the market leader.
In 2008 Netflix began work on a device for streaming videos. Netflix started to work on developing a video player to connect to television, through which streaming video can be played over the internet. However Reed Hastings was concerned that potential partnerships with consumer electronic platforms would be negatively impacted by having their own platform. Roku was subsequently spun out as a separate company.
For much history of Netflix has had to face questions from cable TV providers whose content it would license, movie studios for movie licensing, as it presented a competition to their respective business models. Being perceived as a threat by the device manufacturers with which it was seeking to partner in the early stages of its streaming video business would hardly have severely limited its growth options. For this reason Netflix decided to spin out the Netflix Player team as a separate company.
In August 2008 Netflix experienced a major database corruption, and could not ship out their DVDs for three days. This was the stimulus that led to Netflix opting to host their business logic on the cloud. This cloud migration would take place for the main part in the period of 2010-2011, and would only be completed in 2015, when the company finally setup its billing infrastructure, the most sensitive part of its business operation, on the cloud. The complete shift to the cloud was a pathbreaker in the tech industry. Throughout the history Netflix, it has built a highly robust cloud infrastructure, which has enabled the company to scale up seamlessly as it has seen exponential growth and as it has expanded to 190+ countries.
As more people began tuning into Netflix, content providers found that Netflix helped build audiences for their shows. Cable networks making past seasons and episodes of their television series available on Netflix enabled content discovery. Customers discovering quality cable content on Netflix helped would later tune into the currently airing episodes of the series. This helped boost ratings for television shows such as Breaking Bad and Mad Men, both produced by AMC. Ratings for Season 5 of Breaking Bad were more than double those of Season 1, and many times the ratings of Season 1, largely helped by the audience that Netflix generated for AMC. Netflix helped users catch up to currently broadcasting series, and enabled networks to focus on creating quality content with the knowledge that even a small initial following would convert soon enough to larger audiences.
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