Never mind the tech: Netflix pitches to creatives

Tony Gunnarsson/Ovum

OvumOnce upon a time, Netflix, the great disruptor, was considered the archenemy of established film and TV businesses everywhere. Those days are long gone and to prove it, Netflix CEO Reed Hastings opened MWC late on Day One with a quick Q&A keynote session. Netflix has come in from the cold; not that Hastings needed to prove it, but what better way to start the keynote than by mentioning Netflix documentary White Helmets, which won an award at the Oscars overnight.

However, today, most TV operators see Netflix as just another broadcast partner. In a question about Netflix's relationship with operators, Hastings said that, today, Netflix is in more than half of all US households and yet TV penetration remains stable. "Netflix is one source of great content, like HBO." This is why Comcast has integrated Netflix into its set-top boxes (STBs) with some success and so has Liberty Global in Europe. In a moment of modesty, Hastings acknowledged that while entertainment and content is continuing to rapidly move online, everything will be distributed online in five to 10 years. Come that day, Netflix will be just a small fraction of online entertainment.

As predicted by Ovum, Hastings called for collaboration with the mobile industry. He encouraged operators to offer tariffs that allow consumers to watch unlimited amounts of video without additional data charges, adding that Netflix was open to operators optimizing traffic generated by its video streams to conserve bandwidth and reduce congestion and costs. Hastings also stressed that Netflix was doing its bit, deploying video transcoding technology that reduces the bandwidth required to deliver a high-quality stream to a 4–5" screen to 0.5Mbps and working toward reducing that load to as little as 200Kbps.

Hastings stopped short of discussing more expansive forms of partnership related to collaborative forms of video delivery and monetization, such as emerging content delivery network (CDN) architectures, mobile app bundling, and carrier billing. However, this does not mean that Netflix is not interested in these. Indeed, Ovum's research and discussion at MWC indicate that the company is actively pursuing or investigating a number of options that will improve and extend its mobile reach. Ovum's research into the wider area of telco and OTT provider partnerships has also shown that negotiations revolve around which party has the most power and leverage. Hastings very clearly emphasized just how powerful Netflix is.

Indeed, the key term at the presentation was "global." Netflix is global. Distribution is global. Content is global. Storytelling is global. The audience is global. You would think it was somewhat disappointing for tech heads at MWC that had hoped the Netflix CEO would talk about exciting new technologies. Instead, Hastings opted to talk about storytelling. At one point, it was as if you could hear the audience sigh as Hastings explained how content is not designed for a specific type of devices or screen. Instead of talking to a tech audience, Hastings seemed to be talking more to one made up of creative content producers, saying: "What does it mean when content is global?"

Unlike traditional TV, which tends to be focused on domestic home markets, or US content that has historically dominated global home entertainment, global distribution through services such as Netflix allows access to a global audience. And what the global audience needs is all kinds of genres, all interests, and all languages. This is why Netflix collects stories from around the world and why it shares stories globally. Hastings mentioned a forthcoming Spanish drama series; other Netflix Originals that are being produced in Brazil, Germany, and the UK; the work Netflix is doing with Turkish TV producers, and forthcoming Korean and Japanese productions.

Also, it's not simply about TV or movies – Netflix is about all genres, from stand-up comedy to TV shows and feature films. "And, actually, we've only just got started!" boasted Hastings. If you really haven't got the message yet: Netflix even promises funding for content that may not have a chance to be produced through legacy entertainment channels. Clearly, Hasting was pitching to producers of content everywhere: Netflix offers a global audience for all kinds of entertainment.

Ovum did not expect Reed Hastings to announce big news. Instead, we expected Hastings to continue to paint a modest picture of a connected world, where the presence of Netflix continues to benefit everyone. As long as Netflix continues to dominate global online video, this is the new orthodoxy. It is a story that we will no doubt hear again as Netflix continues its global "Mr Nice" promotional campaign.

Tony Gunnarsson is a senior analyst for TV at Ovum. For more information, visit www.ovum.com/

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