Open Letter to Netflix Haters

May 29, 2013

Dear Netflix haters,

I’d like you all to step away from your keyboards and close your blog window. If you work for an outlet hating on Netflix, take a break and get some coffee or have a smoke. Breathe, relax.

Let me say right up front, I am not a Netflix apologist, employee or shareholder. So, I have no vested interest in what follows.

It seems to me that so many of you Netflix haters are hell bent on seeing their demise. Over the past year, Wall Street ANALyst’s and a huge chunk of traditional media coverage of the company has done nothing but take the piss out of what they are doing. One must obviously acknowledge the monolithic misstep last year of splitting the company and then the piss poor handling of the ensuing aftermath. They paid the price for that, literally. I think everyone can agree on that. We can also acknowledge that it may be best to keep Reed Hastings on a shorter leash than he may like, but I suspect he is smart enough to know this already.

OK, so why is everyone so hell bent on slamming Netflix?

  • Because they are doing things differently (no one likes a rebel)? No, not really.
  • Because they are bucking the system (no one likes a smart rebel)? Nahhhh.
  • Because they are doing it well AND they are winning (believe it or not, we as a society don’t like winners. We reward them, but seldom like them)? Getting closer.

If only it were that easy, but this being the world of multinational corporations, it’s not.

You see the way broadcast media works is, in a word or two, fucked up. We just finished the annual circle jerk (upfront) here in NYC where all the networks preview their fall schedules. “This is the time of year when the most powerful ad execs in the nation stand in line — line! — to get into Carnegie Hall and Lincoln Center to hear the pitch…”(1) Even though traditional broadcast viewership continues to trend downward, this annual shit show continues to generate billions of dollars and all networks see year over year increases. (1) Seriously, it defies all logic.

In and of itself, that isn’t TOO horrible. That is presented like any convention, right? Sort of. It’s the lack of transparency that’s a slap in the face. You see, at a convention, you can bounce around and more or less see what everyone is charging, because it’s more or less universal. During the upfront, most advertisers are not aware of what their competitors, or ANYONE, is actually paying because it is all one big ass secret.

The core principle of a free market (which many of these CEO’s would claim to be advocates of) is to let the market decide what the rate would be…for everyone. Under the auspices of the free market, a 30 second unit for Ford in a popular show should, in essence, be in the ballpark of a 30 second unit for GM.

It’s not a free market if CBS says to Ford “I’ll charge you 10,000 for 30 seconds in ‘Two and a Half Men’ but you can’t tell anyone.”(these numbers are totally made up for simplistic reasons, I assure you they are INFINITELY more) and then goes to GM and says “I’ll charge you 100,000 for 30 seconds in ‘Two and a Half Men’ but don’t tell anyone.” The current foundation of media buying is anything but a free market, it is the very definition of dictatorial.

In all fairness, there have been more open systems tried (Google comes to mind) but they failed. They failed because they weren’t encouraged to succeed. There is much more money in the dictatorial model.

For a better understanding to the bullying or dictatorial market that is the upfront, read Jim Edwards article “A Secret Cartel Keeps The Dying Broadcast Industry Afloat“.

The price determined for these commercials is pure speculation and, from the pitch to purchase, the price is directly tied to the fictional rating system known as Nielsen. Simple facts, Nielsen has about 24,000 set top ratings boxes around the country. There are well over 115,000,000 television sets and well over 300,000,000 US citizens. Even for a non-math person or data analyst, I can tell works out to be a pretty small percentage. Furthermore, Nielsen does not factor into account colleges or universities, prisons, etc. where television viewing is tantamount to water.

BUT WAIT THERE’S MORE! Nielsen, the networks and advertisers are still trying to tell us that the 18-49 demographic is the most important demo, or “key demo” (they even have the data to back it up..HA). First of all, that is a HUGE spread, 31 years! A generation is typically defined by 25 years. That 18-39 demo is like the FBI’s worst profiler “Well, he or she is a white, hispanic or black male, anywhere from 18-49 with long/short sandy brown hair or possibly not, anywhere from 5’0” to 7’0″ tall.” Secondly, millenials and Gen X’ers (that is the 18-49 demo) are not brand specific and our viewing habits are changing daily. They’re certainly not the same as the baby boomers. And thirdly, any half wit can tell you boomers are the “key demo”.

My generation and the generation below me are constantly being told we don’t save enough and we don’t spend enough. You know what? WE DON’T MAKE ENOUGH TO DO EITHER! The baby boomer generation is roughly 78 million strong and controls a big chunk of the wealth in the U.S. (2) so to argue that x’ers or millenials are the “key demo” is to deny that fact, and it’s both ignorant and severely short sighted.

Netflix is a subscription based model, so they are not beholden to Madison Avenue. And the subscription based model not only turns its back on the the ad supported model but also proves to advertisers and networks just how archaic their business model is. People are fine paying for content that excludes commercials. Hell, HBO taught us that eons ago…before it was snatched up by a multinational.

Netflix has been able to attract some a-list talent, which television has great difficulty doing, and they’ve created some pretty good original programming, which television is also having great difficulty doing. And nothing pisses networks off more than competitors success.

“Lilyhammer” was a nice introduction to the Netflix original programming sked, David Fincher’s “House of Cards” was just shy of brilliant, “Hemlock Grove” was a misfire for me, but apparently it did well. And now “Arrested Development”. I am halfway in and it’s a welcome reminder of just how smart the show was and is.

To expect “Arrested Development” to be GREAT would have been foolish. It’s very good and it’s still INFINITELY better than any of the dreck commercial networks try to jam down our gullet.

Netflix is not beholden to Nielsen. At all. They don’t even need to release the number of views for their shows with their quarterly statement, or at all. One could easily argue Netflix is not being transparent with that information. How dare someone not be transparent to the all might multinationals that own cable and broadcast networks! They would never do such a thing…oh wait, they already do.

Netlix releases their subscription information and right now it hovers just under 30 million, all paying on average 9 dollars a month. Now, even for a non-math guy, I can tell that is a pretty substantial revenue flow.

So why is everyone hating on Netflix?!

One, traditional broadcasting got caught with their pants down and they are not handling the transition to streaming very well. In fact, they’re acting like Lars Ulrich did with Napster. In other words, like rich little jack asses throwing tantrums because they thought they were impenetrable.

Two, Netflix’s success is a reminder that traditional broadcast media is being shown up by a young non-traditional upstart, or rebel. And they’re succeeding without their help. Soon, the networks will take their toys (aka programming) and go home. Instead of acting like petulant children, and they had half a brain, they would strike an alliance with Netflix.I mean a REAL alliance, not just an agreement for Netflix to broadcast the first three seasons of “Murder She Wrote”.

Thirdly, there are no less than three industries that Netflix is fucking with, Advertising, Media Buyers and broadcast networks. And those are some powerful players. Almost every major player in those industries is either owned by a publicly traded company or IS a publicly traded company.

This may come as a shock to you, despite the use of the word “public”, publicly traded companies don’t really have the public’s best interest in mind. And yes, that probably includes Netflix.  So, there is simply too much money, spread out over too many places, going into too many pockets for a simple streaming model like Netflix to be wildly successful. It won’t be allowed.

Lastly, Netflix won’t play by traditional rules and release viewership information. And boy does that make media companies and media watchers angry! You can almost see the steam coming out of their heads. I don’t personally believe Netflix to be deliberately withholding information to be jerks. I suspect they will provide that information in time, but in our instant gratification, narcissistic society where we must measure success IMMEDIATELY, any delay infuriates people.

The truth is, nothing Netflix is doing is traditional, so the archaic, or traditional, rules of broadcast television don’t apply. And instead of highlighting all Netflix is doing correctly like the programming, development, handling the bandwidth,  etc. pundits and spoil sports alike are focused on the crap that only matters to a few. And when the few get angry, they PUNISH people. The Netflix stock price has certainly seen its share of punishment over the past 18 months.

So to you Netflix haters, I say “Go ahead, hate away. I’m not gonna stop you.” All I ask is that you take a good look as to why you are hating them. Instead of acting like pouting prissies, explain your reasons logically. Because logically, Netflix is doing a much better job than most other media companies whose shit scraps you lap up as “genius” and “progress”, when more often than not, they are neither.

Sure, Netflix does some dumb shit and makes some wonky decisions, but as far as moving towards a definable future for broadcasting, they’re looking ahead versus trying to cram the old broadcast business model, and content, down our throat.

As a fan of quality, uninterrupted shows available when I want to watch them, there is no better provider than Netflix. I’ve tried a fair number of them and for my money and my time, Netflix does it best. I doubt it will last forever, media is a serious state of flux, but for now:

Rock on Netflix!

Links:

1 – Edwards Article – http://tinyurl.com/pjlxvww
2 – Boomer article – http://tinyurl.com/oujbbxy
3 – NYTimes article – http://tinyurl.com/oqg7hv7

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