When Netflix came out with its “House of Cards” show in 2013 and that series spread to more than 40 countries, people wondered how executives in the company knew it would be a hit before anyone shouted “Action “.
According to Jonathan Friedland, chief communications officer of Netflix, user insight encouraged the company to buy the rights to the show. “Because we have a direct relationship with consumers,” he told the New York Times, “we know what people like to watch and that helps us understand how big the interest is going to be for a given show. ”
The Future of SVOD
Small wonder that a recent report from Futuresource Consulting estimates that the global revenue of subscription streaming video increased 25% to $36 billion this year – with Netflix and Amazon Prime Video grabbing 66% total consumer spending on SVOD. The data consulting agency found that mainstream adoption of SVOD continues to grow worldwide, reaching 60% of households in North America, 26% in Western Europe, 21% in Asia-Pacific and 19% in Latin America.
According to Statista’s Digital Market Outlook, that number will total 499.7 million SVOD consumers by 2023.
Our own Streamlytics report cites data that estimates that 55% of U.S. households spend $2.1 billion a month on streaming services. Millennials alone (73 million) spend $7.3 billion dollars on paid streaming services. By 2045, minorities (191 million) will dominate the U.S. media streaming population.
Subscription Streaming Video Beats Television
The reason why media streaming companies like Netflix succeed is simple. Unlike traditional television networks that don’t have (or use)streaming technologies, programming by companies like Netflix are viewer-led. New shows presented by TV face a 35% chance of succeeding. For new TV shows launched by data-driven SVOD services like Netflix, that number rises to a 70%.
Take that TV show the “House of Cards”, for instance. At the time, Netflix data accumulated from 100 million users showed that films featuring the work of David Fincher, the director of “The Social Network” always did well, and that the UK “House of Cards” delighted British viewers, as did films featuring actor Kevin Spacey. With these three circles of interest, the Venn diagram intersection showed that a US House of Cards would likely succeed.
The Netflix Model: Data analysis
According to GigaOm, Netflix looks at 30 million “plays” a day, including when you pause, rewind and fast forward. It goes through three million searches a day, checking data that include which device you use to access Netflix, and the days and times of the week you do so. Netflix even attaches hundreds of tags – called meta descriptions – to its movies and TV shows to accumulate data on things like volume, colors, and scenery for signals on what viewers like.
Its analysts look at questions like: How many users followed a particular series to the end? Where was the common cut off point for users? What did those users who left watch? And how big a ‘time gap’ was there between when consumers watched one episode and when they watched the next?
The 4 Questions Future-Driven SVOD Companies Ask
To succeed, subscription video streaming companies need to answer four key questions:
- What kind of content are people willing to pay for? Companies need evangelical users, not just one-time viewers.
- What is the most effective revenue model? The pricing and distribution strategy determines the viewers they attract, so SVOD companies want accurate insight on revenue and monetization issues.
- How will you keep subscribers and win new ones? Acquiring new subscribers is five to 25 times more expensive than retaining existing ones. What’s the best way for companies to drive subscriber loyalty?
- How will you close the feedback loop? According to Ernst & Young, media companies exploring the direct-to-consumer model need to remember that their “number one mission is getting to know their customers.” An organized and modern approach for gathering audience-insight is indispensable.
It’s not just Netflix that attributes its success to its viewer-led habits. BritBox, another SVOD that offers classic British television content, recently reached half a million subscribers and cited its data-oriented approach for identifying its key viewing groups.
In short, while traditional TV sampling methods use trial-and-error estimates, successful SVOD services, like BritBox and Netflix, hew to viewer data and so are able to run their businesses more efficiently.
Their models dictate that they are in the drivers’ seat – but it’s user data that guides their drive.
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