The Netflix Curse – and the Cure

Posted March 24, 2023

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In the beginning, there was broadcast.

There were only three networks — NBC, CBS and ABC. If you wanted to watch TV, that was the extent of your choices.

There was, of course, PBS, but no one went there.

The three networks divided a viewership of about 100 million households, so no matter what piece of junk you put on the air, whether it was My Mother the Car or Mitch Miller, you could deliver 30 million households to advertisers.

For this they paid a lot. This was called The Golden Age of Television.

Then, in the 1980’s, cable came along and the world of watching went from 3 networks to 2,000 channels. This was a very big change. Consumers suddenly had lots of choices and whole new, and very profitable channels and companies suddenly arose where nothing had existed before — companies like Discovery or Turner Movie Channel or even Jewish Living Channel.

The number of channels may have exploded, but the population of the United States did not, so now 2,000 channels were competing for the same 100 million households. While there were fewer viewers per channel, there was a demand for a lot more content.

The 3-network world had needed about 12,000 hours of content a year. McHale’s Navy, I Love Lucy, The Honeymooners. A very limited world.

The advent of cable meant that now cable needed lots TV shows— like closer to 9 million hours of content a year. Shows like My 600 Pound Life or House Hunters or Pawn Wars. Lots of new shows.

Then, in 2007, Reed Hastings took his DVD rental service, Netflix, and took it online.

This was a revolution. In the linear world of The Food Network or NBC, you could only see the shows that a network was running at a given time. 8PM and it was House Hunters. 9PM and it was Property Brothers. The network decided and you watched what they offered.

But with Netflix, you got to pick what you wanted to watch whenever you wanted to watch it.

This was a revolution.

Clearly, people much preferred the Netflix model to the HBO model. Once they were given the option of watching whatever they wanted, whenever they wanted to watch it, that’s where they went.

Traditional broadcast and cable suddenly seemed, well, old and archaic.

The Netflix model was much more appealing, at least to viewers, but not to broadcasters.

Like any revolution, the Netflix Revolution was a two-edged sword. Technology gives, but it also takes away.

AMC, American Movie Channel took a risk and commissioned the series Mad Men, which turned out to be enormously popular. (HBO, ironically passed, a rather big mistake).

But Mad Men aired once a week, for an hour at a time. AMC sold commercials to advertisers on each Mad Men show. The first season ran 13 episodes, (as did the following 6 seasons). The show aired once a week, and if you wanted to see it, you had to tune into AMC on Thursday night at 10 PM. And millions did — millions whose eyeballs were then sold to advertisers. It was a very profitable venture. It had to be, because each episode of Mad Men cost about $2.5m to make.

That’s how cable worked.

But in the Netflix model, viewers might binge watch all 13 episodes of the first season in one night. And, there are no ads in the Netflix model. Instead, you pay a one-time subscription fee to watch as much as you like whenever you like.

The Netflix model chows through an enormous amount of material very very quickly,

Mad Men lasted AMC 13 weeks. For Netflix, Mad Men would last 13 hours.

AMC or Discovery or The Travel Channel had to fill a fixed number of hours of programs every day. It was a limited world. But Netflix has to keep feeding the beast. It has to provide LOTS more programs, in fact, an almost unlimited amount of programs, and to continue to attract subscribers, it has to keep commissioning new shows all the time — shows that get eaten up in a few hours.

This costs real money.

For example, an each episode of Bridgerton, a very popular series on Netflix, costs an estimated $7 million per episode. So far, there have been 16 episodes of Bridgerton made, with another season in the works. 24 shows at $7 million a show, that’s $168 million.

You have to sell a lot of subscriptions for Netflix at $15.49 to pay for Bridgerton — and that’s just Bridgerton. But if you’re Netflix, you need a LOT of series, all the time, endlessly, to keep people signed up.

Is it any wonder that Netflix is $14.5 billion in debt?

But of course, Netflix is not alone. The model is so popular that everyone is now getting into the online, non-linear world. Disney+, Amazon, Discovery-Warner. It’s where everyone is going to go. And as a result, everyone is going to have to start producing a whole lot more content to attract subscribers.

But of course, there are only so many channels that people will subscribe to.

It’s a real problem. Let’s call it The Netflix Curse.

There is, however, a cure for the curse. The answer is already in front of us, but it requires a very different model.

For networks like HBO or Discovery or HGTV, the content has always been made buy professional production companies. They make it in a very expensive way — producers, camera crews, editors, and so on. Watch the credit rolls.

But the online world is different.

Quibi tried this model — hiring expensive Hollywood producers to make content for online. This was a disaster. Quibi lost an astonishing $1.75b in a matter of months.

But look at successful online content companies — like TikTok or Facebook or Instagram.

Who makes the content for TikTok?

You do.

Who makes the content for Instagram?

You do. We all do. We do it with our phones.

Our phones are amazing tools for video content creation.

Now, you probably could not make Bridgerton with your iPhone. But I am willing to bet you could make House Hunters with your iPhone. I bet there are a lot of reality shows that you could make with your iPhone. I bet you have a lot of ideas for new shows for the endlessly expanding and exploding world that Netflix has unleashed that you could make with your phone.

And I am willing to bet that a lot of the content that is going to feed the Netflix model is not going to come from Hollywood.

It is going to come from you.