David Simon, Netflix and the Power of Constraint

The issues currently facing streaming platform Netflix are well publicised. And whilst the service is still incredibly successful and indeed, incredibly popular, stalling user growth combined with a crowded and competitive landcape have contributed to a 70% reduction in their shareprice in the last 6 months. The expectation treadmill can be cruel.

David Simon, creator of The Wire, had this to say about Netflix’s approach to commissioning in a recent interview with The Sunday Times Culture Magazine:

“The TV market has got more crowded. But what I find problematic is what you see with Netflix is when they launch a show - and they launch a lot of shows - some are well conceived and some are trifling. But, they’re all promoted equally, and if they do not hit huge they may not complete their run. If writers were able to complete their run, they might actually build something. But if they cut off after two seasons, they’ll never know”

This quote is interesting not only against the backdrop of Netflix’s recent woes, but also in the context of comments made by the UK government. Comments which make explicit comparison between the Streaming giant and Public Service Broadcasters in this country. If we were to just free Channel 4 from the shackles of public ownership, perhaps it would be more competitive against the likes of Netflix and Amazon, they claim.

Whilst Channel 4 have cancelled shows ‘prematurely’ (such as Black Mirror and Top Boy, both of which found a new home on Netflix, ironically) - Netflix’s preferred approach to launching shows, as descibed by Simon, couldn’t be more different to the way that legacy, 'linear’ broadcasters such as ITV, BBC or Channel 4 have traditionally operated.

Channel 4’s business is laden with constraint.

Some constraints are as a result of their public service remit. Broadly, this informs the types of programming Channel 4 needs to make but also how it should make them. It also goes some way to informing how much money they have available at their disposal to make content and the extent to which they can earn secondary revenue from the shows they commission with their production partners.

Some constraints are a function of their history as a linear broadcaster - a function of their core method of distribution. Channel 4 has to manage airtime - a finite amount of minutes that they have to fill every day, with strict rules in place about the type of content they can show at what time, the amount of content they can show and the amount of advertising minutes they can place within that content, subject to time of day. Whilst commercially funded, Channel 4 don’t always make ‘the commercial’ choice. Reputation is as important as ratings and revenue.

In stark contrast you have Netflix.

A business which streams its content to it’s viewers via the internet. A business which is managed for the enrichment of it’s shareholders, rather than the benefit of the public. They have no such constraints around the amount of shows they can commission or broadcast, because they don’t work to a ‘schedule’ in the same way C4 do. Nor do they have to make specific types of programmes. Their ownership model means that their leadership have been able to make a specific choice about funding, taking advantage of historically low interest rates and cheap capital. Like many other tech companies, Netflix have fueled their growth by accruing mountains of debt.

The purpose of this post is not to argue for whether Channel 4 is better than Netflix. At the heart of the governments comparison of the two is an erroneous assumption that they are comparing apples with apples, which is frankly ludicrous.

Instead, this is perhaps an argument that the constraints facing Channel 4 have resulted in a much more distinctive brand. To come back to David Simon’s point - Channel 4 have to make choices about the shows they bring to market and moreover, they have to make specific choices about how they launch these shows in terms of marketing and communication. Across commissioning and marketing communications the constraints enforced upon them lead to a more distinctive level of creative ouput. I feel - and perhaps my professional experience influences this significantly - that there is a ‘Channel 4 style’ - a type of show I’d expect on the channel. A result of the choices they have to make on a daily basis.

Netflix, as Simon points out, by virtue of their business model seem to make few editorial choices. They commission and license freely. The promote equally, waiting for consumer reaction, rather than editorial input, to guide which shows they champion. The algorithm on the platform decides how shows are merchandised to users. Quite often, the volume of options available on the platform is actually not a benefit, but a distraction. I don’t want to scroll endlessly, I want someone to tell me what to watch.

As a result, as a viewer I don’t feel that I have a sense of what the ‘netflix’ style of programming is, they don’t have a style, theme or worldview….

The brand name confers no promise of performance, no badge of authenticity.

It simply tells me how it is available to watch. And here comes the nub of the problem for Netflix.

Whilst they were an early pioneer of the ‘stream and binge’ model - the competition has caught up. The business model and the distribution model is not sufficiently defendable. Consumers now have more choice than ever before in terms of streaming options, most notably from established entertainment brands such as Disney. These new entrants are now revoking distribution deals with Netflix to help them bolster their fledgling libraries. Removing heavy-weight content in the process, content which drives a significant volume of views for Netflix. By contrast, you have Amazon. They have chosen to bolt on streaming to their home delivery service, affording them some form of in-built defence versus new entrants - defences which Netflix lack.

As Adam Morgan tells us in his book - constraints don’t have to be bad. They can be a force for good, a force that enables rather than stifles creativity. As Netflix seeks to revive it’s share price, perhaps they should begin by thinking about how they can add constraints to their decision making process, by making more choices - about the shows they license, about the shows they commission, about the shows they choose to ‘go big’ on - driving the consumer to content they think is important, rather than just reacting to it.

Trying to be all things to a all people may be a route to scale, but it’s not defendable when market dynamics shift against you.

The likes of Netflix have been responsible for the proliferation of high quality content available to audiences - driving innovation in the market and forcing all players, new and old, to think carefully about how they create a meaningful value proposition for their viewers. But, as competition heats up, perhaps they would benefit from looking back, to linear broadcasters, and learning from how they built their brands. Brands which mean something , which set expectation and act as a beacon in a sea of infinite choice.