Netflix’s only hope is to advertise

A recent Wall Street Journal article, “Netflix Fights to Keep Its Most Watched Shows: ‘Friends’ and ‘The Office,” shared that only two of the top 10 shows on Netflix were original to the streaming service. Those shows were Ozark and Orange is the New Black, and they weren’t the most popular of the top 10. The three most-viewed shows on Netflix were The Office, Friends, and Gray’s Anatomy.

On an earnings call the previous week, Netflix’s Chief Content Officer Ted Sarandos claimed that the service’s original series are, “the shows that our members most value us for, and the things that we really pay a lot of attention to.” Sarandos was either fooling himself or making a distinction between the shows that people care about having access to and the shows that they actually watch. Either way, I think he’s wrong.

The Journal article is worth reading in its entirety. It adeptly makes the obvious point–a point that many other articles have been making lately–that Netflix is facing headwinds as the studios launch their own streaming services and pull the content that they own out of Netflix and other services.

I’d like to make a less-obvious point. Whether or not you think that Netflix’s original shows are any good (and a lot of people think that they aren’t), quality often doesn’t matter when people are making decisions about what to watch.

Saying that may sound ridiculous, particularly because many people agree that we’re in the golden age of television (or “peak TV”) with more high quality programming available to us from more channels and services than ever before. How can quality not matter?

The Syndrome distinction

In the first Incredibles movie (2004), the envious villain, Syndrome, plans to give everybody superpowers because “when everyone’s super, no one will be.” People like Mr. Incredible won’t be, well, incredible, if his super strength is quotidian.

Likewise, there is so much fantastic television available right now that quality is table stakes for scripted television (things written in advance, rather than talk shows, game shows or so-called “reality TV”).

If viewers can safely presume that whatever they wind up watching will be pretty good (a recent development in the history of television), then what are the criteria that people use to decide what to watch?

Overlapping criteria

First, there’s the consideration set. Up until 2016, Nielsen tracked how many channels the average American household got (206) versus how many the household actually watched (20). Nielsen hasn’t updated that number, probably because the apples-to-apples comparisons among broadcast, cable, and streaming make it hard to define a channel these days. But what’s important about that old number is that in our age of entertainment overload some viewers gravitate towards channels or services rather than programs.

Availability is the second criterion. Once a viewer has gravitated towards one channel or service, promotions for other shows from the channel or service will reinforce the viewer’s bond to that source of programming. If you watch “God Friended Me” on CBS, then during that show you’ll see ads for “NCIS” or “Seal Team.” Even if you have no interest the exploits of Naval Criminal investigators or Navy Seals, repeated exposure to those ads make the shows more easily available to your memory.

I’ve written about cognitive availability around consumer-packaged goods in earlier columns, but the same phenomenon holds true for television shows, and indeed for many other things as well.

As behavioral economics teaches us, the more often you hear something–regardless of whether or not it’s true–the easier it is to call to mind. The easier something is to call to mind, the truer you think it is. This has sinister implications when it comes to serious endeavors like politics or journalism. It’s why politicians of all stripes (and particularly despots and those than tend that way) repeat themselves over and over, sometimes in rhyme, to build availability for their claims in the minds of their audiences.

The stakes are lower when it comes to television, but the psychology is similar: “I’ve heard of that show; it must be pretty good.” It’s easier to decide to watch a show that you’ve either seen before or least heard about–even if you don’t remember where.

This is why the different entertainment conglomerates benefit from cross-channel promotion. Comcast owns NBC as well as Bravo, E!, USA Network, CNBC, MSNBC, mun2, Chiller, SyFy, Sleuth, and Universal HD. Disney owns ABC and Fox, as well as ESPN, the Disney Channel, FX, Freeform, and (with Hearst) A&E, National Geographic, and History. The conglomerates can take advantage of their own ad inventory to make people aware of their different programs across all their channels, even if the viewers don’t consciously notice.

Netflix and ads

Most of the time, when we talk about Netflix and advertising we’re talking about how much better the viewing experience is without all those pesky interruptions.

But there’s another Netflix and ads discussion, which is that without a wide network of channels (like Comcast and Disney) it’s harder for Netflix to build background awareness for its content.

To compete, Netflix will need to start running pre-roll ads for its other shows after a viewer clicks to watch something. (Amazon already does this.)

It will also need to start advertising heavily for specific shows on other channels (where it will pay more).

Generally, when Netflix buys ads it talks about the overall service rather than an individual episode of an individual show or movie. The theme of the ads is, “look at all this stuff you get.” As more and more streaming services launch (each with its own cornucopia of original content) Netflix should consider investing in promotion for can’t-miss individual series the way HBO has leaned so heavily on Game of Thrones for the last several years. (Don’t miss Center director Jeffrey Cole’s recent GoT column.)

Netflix will spend $12 billion this year on original content. They’d be better off spending $8 billion on content and the remaining $4 billion on a different kind of ad.

[Cross-posted on my site, the Center site, and elsewhere.]

Futurist, strategist, researcher, startup advisor, writer, speaker, events veteran & family man.

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