Think More MaaS (Media as a Service) Less DTC (Direct to Consumer)

Media is changing and the moves streaming services are making to leverage this paradigm shift are broad, inventive and subversive. The marketing and release of Cloverfield Paradox is Netflix acting like ‘the Raptors testing the fences’ and the hubris of established entertainment execs might lead to their loss of focus, unless they figure out how to get ahead of the shifting paradigm and save their business.

I mentioned this when we recorded our podcast a couple of weeks ago but this hearkens back to an even older podcast where I touched on the future of media. The paradigm has already silently shifted to MaaS (Media as a Service) and as long as establishment execs are distracted by calling it DTC (Direct to Consumer) their emphasis is on the wrong part of the equation. Nicole Sperling wrote about this Cloverfield Paradox difference in Vanity Fair.

Netflix continues to show their focus on quantity of content. Owning the biggest sandbox with the most sand is their game. Fending off competitors with shiny, lucrative co-production deals and raising investor money on one key factor alone, subscriber base. This obfuscates their actual core business, time consumption. Operating with the "burn rate" mentality of a fast-growing tech company over the stricter ROI model of a mature media company.

“We’re competing with sleep, on the margin. And so, it’s a very large pool of time.” Reed Hastings stated in Aatif Sulleyman's Independent article. But it is the rest of the media companies that should be losing sleep over this rapidly growing adolescent.

After the release of Bright Netflix Jeremy Bowman wrote an article in The Motley Fool comparing Netflix to McDonald's, but the analogy might work better with Starbucks due to the subscriber aspect to the equation. Since so many Starbucks customers carry balances on their Starbucks Card it acts as a de facto subscription fee allowing Starbucks to use the money on those cards while promising to give the holder that benefit in the store at a later time. All that to say subscription is not the goal. Both Starbucks and Netflix goal is ubiquity.

When McDonald's say, “99 billion served.” Some people think that it refers to customers or number of customers served a number of times but in actuality it has been a benchmark of the number of burgers sold since their first million in 1955.  If you can keep the shareholder focused on subscriptions your competitors will focus there too, but that’s a red-herring. If we continue to draw out the analogy McDonald's business is hunger and as Netflix is competing with sleep McDonald's is competing with satiation.

But it’s not only the lowest common denominator that needs help, there is a sliver on the other side of the mass appeal space that needs a patron too and Netflix can help them as well. Films like Mudbound might not have gotten made in the bigger global market due to lack broad market appeal.  

As big media companies start to pay attention to Netflix and their subscriber base, Netflix has already moved on to MaaS, the next beachhead. This game has always been about scaling fast at any cost. In the time of TV programming giants like Paley, Tartikoff & Littlefield their programming was always limited to 7 days a week. Similarly, film execs racked and repacked their 52-week grid. This rhythm has historical data to lean on track against and program for and counter-program against. But this is the game everyone is playing. Netflix is becoming a big player in this space but in addition it releases seasons of "television" all at once so they are not tied to Sunday Night appointment viewing to compete with HBO's high-quality programming. And now they have shown they will release movies without a traditional marketing window attacking theatrical media and the marketing apparatus supporting it at a scale traditional film distributors are not used to. Quality is important but now with freedom from the shackles of this 7-nights-a-week or 52-weeks-a-year schedule they offer Happy Meals to everyone at an affordable price.

Focusing on DTC and ignoring MaaS would lead to the proverbial comparison of apples to oranges. Except this would be more dangerous since the traditional media company has produced and continues to produce generations of apple varietals. Netflix, on the other hand, makes apples, oranges and engineers hybrid apple/orange that taste like grapes. Since Netflix has no limits to their personal programming and detailed viewer data they can program to each subscriber.

Sadly, traditional media relies on its own data but the Observer Effect causes a margin of error. When subjects are asked about their viewing habits the answers could be altered for countless reasons. Whether it's the frail human psyche not wanting a stranger to think less of them, seeing a certain value in being popular, or any other random reason. These caveats have been accepted up to this point since the industry has shared this margin of error uniformly. Netflix does not rely on questionnaires. Their data is picked from the Netflix tree of knowledge. This pure data has no tint, no evaluation, no judgement, it is the consumers’ raw viewing activity. The longer they can keep this to themselves; the longer they will keep their competitors in the dark. This will leave media giants measuring themselves against Netflix's shadow and asuming they are functioning as a media company.