On a cold evening in November 2019, Cadillac Escalades began to circle New York City’s iconic Paris Theatre. Soon enough, the passengers stepped out on to the midtown Manhattan street, flashbulbs popped and the cast of Noah Baumbach’s Oscar-tipped divorce saga, Marriage Story, lined-up under the awning of the famed arthouse cinema.
It was a curious gathering because the venue, a 581-seat movie theatre with a single screen, had closed in August—or so it appeared. An unusual saviour had quietly come to the rescue. The latest owner in the cinema’s 71-year history was Netflix, the same company that had financed Marriage Story but was seen by many in Hollywood as a threat to the movie business. So what did a streaming company want with a bricks-and-mortar cinema?
How the streaming service was born
Leasing the Paris Theatre was a quixotic move by Netflix, the company thought to have broken the traditional film-release model (exclusively showing in cinemas before being available to watch at home). But then the US company, launched in April 1998 by entrepreneurs Reed Hastings and Marc Randolph as the world’s first online DVD rental store, has always operated in a different way to the rest of the industry. Hastings especially was something of a cultural seer, quickly changing tack from DVDs to an online streaming service (although the bandwidth costs and data speeds didn’t catch up until the mid-2000s).
“It’s hard to remember that the entertainment industry believed that digital delivery would remain a ‘niche’ offering as Reed Hastings was trying to convert consumers to those ideas in the late 1990s and early 2000s,” says Gina Keating, author of Netflixed: The Epic Battle for America’s Eyeballs. “He was a visionary because he set the standards for what global home entertainment has become.”
It wasn’t just Netflix’s mode of delivery that set it apart from other services. Hastings and Randolph were among the first e-commerce entrepreneurs to quantify human behaviour with maths, says Keating. “The Netflix database now tracks more than two decades’ worth of consumer behaviour against the backdrop of economic and societal changes—the warp and weft of which is very powerful and revealing.”
The many milestones of Netflix
The revolutionary notion of creating an endless stream of content proved a runaway success. Netflix now has 158 million subscribers, according to a report by Statista. For the ‘Basic’ package of £5.99 (approx S$10) a month, users are able to choose from more than 1,500 TV shows and 4,000 movies. In 2019, Netflix has an estimated net worth of US$125 billion. Not to mention, the company’s name is part of the lexicon: “Netflix and chill” is as ubiquitous a phrase as “to google”.
When Netflix started to produce original content in 2013 and launched its first series, House of Cards, the move upended the market in a monumental way. In 2018, the company spent US$12 billion on Netflix Originals, which includes shows such as Russian Doll, The Crown and Stranger Things. “It’s inevitable that budgets have gone up,” says Sally Woodward Gentle, founder of Sid Gentle Films, which produces Phoebe Waller-Bridge’s thriller series, Killing Eve. “Ambition and scale are exciting—and often that comes at a price—but competition drives the price up, too. There is a battle for writers, actors, directors [and] crew. On the whole, it’s good, but there is no direct correlation between big budgets and good shows.”
Yes, Netflix has had its flops—think of its third Originals venture, Marco Polo, which was cancelled after two seasons in 2016, resulting in a $200 million loss—but the new model allowed for that. “While it might be inconceivable for an old-style network to green-light a series that appeals to 0.5 percent of its viewers, for Netflix, if that series is the reason that 0.5 percent choose to subscribe, that is enough to justify it,” explains economist Joshua Gans in the Harvard Business Review in 2017, as it seemed like the success of Netflix would only continue to rise.
Is Netflix finally chilling?
In July 2019, a shock reverberated around Netflix headquarters. The company announced that for the first time in nearly a decade, subscribers in the US had declined, as it reported 130,000 fewer domestic users. Globally, Netflix added 2.7 million subscribers, far fewer than the 5 million it had forecast. The news couldn’t have come at a worse time.
In November, Disney unveiled its new streaming service, Disney+, in the US, Canada, the Netherlands, Australia and New Zealand (with the UK joining in March 2020). Peacock by NBCUniversal will launch in April 2020, and HBO Max will launch in May. They join Amazon Prime Video, Apple TV, Hulu, Now TV, Showtime and YouTube Premium — no wonder that 87 percent of people are worried it will become too expensive to keep up, according to an October 2019 study by TV Time.
Terrestrial TV channels, such as BBC and ITV in the UK, are also adopting the Netflix playbook, too. “Other providers are attempting to build a similar slow build-up of interest around their shows, [based] on the Netflix model,” says Alice Jones, arts editor of i newspaper. “The BBC frequently puts up dramas in full on iPlayer, and broadcasts them traditionally week to week.”
The question being asked among professionals and investors is can Netflix weather the storm without an excess of turbulence? “Netflix has two things going for it in the streaming battle,” says Keating. “First, it invented this category and second, its top focus is renting movies. [Netflix] doesn’t have the problem of cannibalising one part of its business, such as Disney’s broadcast networks or studio, or having to commit talent to another, unrelated parts of the business, such as Apple and Amazon.”
The battle for the world’s attention will be long and costly. Netflix will require the attraction of well-known names to work alongside its current big hitters, Ryan Murphy and Martin Scorsese. But the real frontline will be in terms of user data, smart algorithms and an absolute iron commitment to the original vision articulated by its founders: “Find movies that people love.” If the night at the Paris Theater is anything to go by, then Netflix may actually win the war.
