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With Apple and Disney looming, Netflix is changing its strategy and letting creators peek into its walled garden

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With Apple and Disney looming, Netflix is changing its strategy and letting creators peek into its walled garden

Netflix is cozying up to TV and film creators now that it’s facing stiffer competition for their content.

The streaming-video leader is soon to be one giant among many deep-pocketed tech and media conglomerates —including Apple, Amazon, Disney, and WarnerMedia — that are peddling high-quality series and movies from the biggest stars. As rival video subscriptions such as Apple TV Plus and Disney Plus ready for launch, Netflix said it plans to open up to showrunners and other creators about how titles are performing on its platform.

“Over the next several months, we’re going to be rolling out more specific granular reporting first to our producers, and then to our members and of course to the press over time and be more fully transparent about what people are watching on Netflix around the world,” Ted Sarandos, Netflix’s chief content officer, said during the company’s earnings interview last week.

More detailed reporting is part of a broader effort within Netflix to make its performance more visible. The company also plans to test a weekly list of the top 10 titles on Netflix in the UK to help subscribers discover the most popular content in their area amid the thousands of titles available to them on Netflix.

“We’re just beginning to start to share that data, and we’ll be leaning into that more quarter by quarter,” CEO Reed Hastings said in the earnings interview.

The decision to offer producers — and ultimately the public — a peek inside its walled garden is a pivot for Netflix, which has long kept its data mostly private.

When Netflix was just getting into original programming in 2013, Sarandos said traditional viewership metrics such as ratings placed undue pressure on productions, and that he didn’t see a need to publish them, Variety reported. Top producers such as Tina Fey, one of the creators of Netflix’s “Unbreakable Kimmy Schmidt,” reportedly received no hard numbers from Netflix on how their shows performed. Netflix generally shared with certain producers select data that offered an overall sense of how a particular title was doing, such as heat maps that showed where a program was most popular with Netflix users, a source familiar with deals Netflix has negotiated with TV creators told Business Insider.

Competition is pushing Netflix to be more transparent

Viewership data gives talent leverage when renegotiating contracts for later seasons of TV shows. It’s also a useful tool for producers when evaluating what platforms to sell their next titles to. As Netflix works with more A-list creators — including Martin Scorsese, who will be releasing his mobster opus, “The Irishman,” on Netflix later this year; Alfonso Cuarón, who recently won an Oscar for his Netflix film, “Roma”; and the TV hit maker Shonda Rhimes, who is creating a variety of series for the platform — they will want to know that their content is being watched and that Netflix is putting in the resources to get the movies and shows in front of viewers.

“Roma” earned Netflix its first Oscar nomination for best picture.
Netflix

“This is Netflix joining the 21st century of TV programming,” said Michael Pachter, an analyst who covers Netflix for Wedbush and has historically been bearish on the company. “They’re having to concede to content creators something that they didn’t have to concede before, because now there are so many channels of many distribution channels that Netflix has to play ball.”

Netflix has focused more on making original series and movies in the past few years than licensing them from outside studios as competitors such as Disney launch services of their own and end some of their licensing deals with Netflix. Video from studios including Comcast, Fox, Disney, and WarnerMedia make up an estimated 20% of Netflix’s library, according to research from Ampere Analysis reported by Recode. That share of content could be in jeopardy as existing licensing deals expire.

That makes Netflix’s ability to attract and retain talent for its original programming even more crucial.

Netflix has wooed content creators such as Rhimes, Scorsese, and Ryan Murphy by offering big paychecks up front and creative freedom. But it’s no longer unique in that regard, with rich rivals such as Apple and Disney entering the streaming game and existing rivals like Amazon and Hulu ramping up production.

“It’s of great concern to [talent] who is going to take their content and elevate it to another level,” Mary Ann Halford, a senior advisor at the strategy consulting firm OC&C, said. “It’s great to be paid a lot of money but you also want to know that people are watching your stuff.”

There’s a business case for letting investors know what’s doing well

Netflix’s decision to share more data is also somewhat self-serving. A narrative emerged in the media and investor community over the past year that Netflix might be creating so much content that no one was watching it all. Netflix spent more than the annual gross domestic product of small nations such as Haiti or Chad on content in recent years. It spent about $12 billion on programming in 2018.

Without viewership data such as TV ratings or box-office figures, it’s difficult to tell whether a movie with a reported $120 million production budget, such as “Outlaw King,” actually paid off. Netflix has been touting viewership statistics for select movies like “Bird Box” and “Triple Frontier” and series like “The Umbrella Academy” during quarterly earnings reports. The top 10 lists Netflix will test in the UK and the boost in reporting to producers are extensions of that effort.

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“This is about proving that content gets found, not lost” on Netflix, Rich Greenfield, an analyst who covers Netflix at BTIG Research, said.

But Netflix did not say specifically what data it would share with producers (or the general public). A spokesperson for the company did not elaborate on the “granular” metrics Sarandos referred to. But it will include viewing metrics for a given title’s first month on the service.

Not all data is equal

Netflix has been criticized in the past for sharing numbers without context. The sporadic viewership numbers Netflix shares on quarterly earnings reports are measured by the number of member households that watched at least 70% of a movie, or at least 70% of one episode of a season of a TV show, during its first four weeks on the service. This is the same metric Netflix will use to calculate its weekly top 10 list in the UK.

The total number of people watching various episodes of a nine-season show like “The Office,” using that methodology, probably wouldn’t rank as high as a concentrated number of people watching the first episode of a new show, like “The Umbrella Academy,” which, Netflix said in its in earnings, was watched by 45 million member households in its first four weeks on the service.

“The Umbrella Academy” was watched by more than 45 million member households on Netflix in the first month of its release.
Netflix

Still, these numbers give the clearest picture Netflix has offered so far of its viewership. Third-party measurement firms like Nielsen and 7Park Data have attempted to fill the gap. SAG-AFTRA, a US labor union representing TV and film actors and other talent, recently announced a deal with 7Park Data to access the share of audiences on Netflix, Amazon Prime Video, and Hulu that are watching titles over given periods of time.

“Netflix is likely being hit with a lot of demand for this information,” David Viviano, the chief economist at SAG-AFTRA, said. “We’re at a tipping point where [streaming platforms] dominate so much of the business that a lot of content creators and producers are realizing they’re missing a critical piece of the puzzle when it comes to understanding the value of their content.”

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