Debunking Netflix: the essential guide for marketers

The essential guide to Netflix for marketers

No one wants to look like a plank when talking about the video landscape. It’s a hot topic full of hype, stats, launches, boasts and innovations. The noise can sometimes drown out the nuance. You need to keep your video marketing game tight.

The latest news in the world of video is Netflix’s recent Q2 results. They were better than forecast with the subscription video on demand (SVOD) service adding 5 million subscribers to take its total number of subs worldwide to more than 100 million (a billion households have internet access).

Wall Street is relieved, but should marketers care? What does this mean? What should you know? Does it matter?

Allow us to help. We’ve spent years being asked what Netflix means for TV and we have answers to all the major questions – backed up with proper research rather than the hope or guesswork that fuels some of the video debate.

How much of my ad budget should I give to Netflix?

You can’t advertise on Netflix (or Amazon Prime for that matter). Netflix accounts for 0% of the video advertising we see in the UK. YouTube, for example, accounts for 0.7%. TV is 94% - and that is before you take into account the quality of the advertising environment.

Is Netflix an apocalyptic, end-of-the world style threat to TV as we know it?

No. Much of Netflix is TV. Netflix and other SVOD services are a part of the TV industry. They commission high quality, premium TV series – which expands the TV production industry – and buy archive shows from broadcasters around the world providing them with extra revenue. (The time may come when broadcasters air Netflix shows, and then brands could advertise around them.)

We need to see Netflix in perspective: it generates a lot of interest but it accounts for less than 4% of the average person’s video consumption in the UK. TV accounts for 75%.

But Netflix says it is ‘replacing’ scheduled TV?

It has been claiming that for a long time. But it is speaking to shareholders and journalists, not to the facts. The fact is that scheduled TV and Netflix co-exist very happily. In fact people who subscribe to Netflix tend to also subscribe to the biggest TV packages – they are telly addicts.

Yes, Netflix has probably pinched a bit of the time people used to spend watching scheduled TV – as have the broadcasters’ own VOD services. But a replacement it is not. On demand services like Netflix have mainly replaced Blockbusters and to a certain extent physical DVD box sets.

Why won’t it replace scheduled TV?

If live, scheduled TV didn’t exist, we’d have to invent it. People like it and miss it when it is gone (we’ve got video footage of people going cold turkey when we took live TV away). TV fulfils basic human needs to share, belong and not miss out – especially scheduled TV, where FOMO comes into play, fuelled by social media.

On-demand TV doesn’t satisfy all our different emotional viewing need-states. It is great at more personal, indulgent viewing, but less good at the social side of things which is such a fundamental human need. Only live TV does that, which explains why, despite the myriad on-demand options available, the vast majority of TV watched is live.

But they’ve got some good shows?

Yes they have – as does Sky, ITV, Channel 4, the BBC, UKTV, Viacom, Turner, Fox, NBC, CBS and other TV broadcasters around the world. We are spoilt for choice and the broadcasters invest eye-watering amounts into their TV shows. For example, UK broadcasters spend £6bn a year on programmes. That’s just in the UK. Netflix invests less than that globally.

And Netflix’s content – like SVOD generally – is quite limited. It is predominantly eye-catching drama and film, which is great but not universally appealing. We cannot live by film and drama alone. For instance, people really enjoy local TV shows (as in particular to their country, rather than village). They also love topicality and live TV events. They like watching Pointless and Countdown too.

When Netflix invests in marquee shows like The Crown or House of Cards it is very much a marketing investment to attract subscriptions. In terms of their business model, they’re less concerned with viewing time and more concerned with payment of the monthly subscription. That’s perhaps a reason why they and Amazon Prime don’t release viewing figures; it isn’t how they are judged.

So how much time do people spend watching Netflix?

Well, they don’t release viewing figures. However, our analysis of the best available industry data (such as BARB, Ofcom, IPA, and comScore), estimates that Netflix is a proportion of the 4% of total video time that is accounted for by SVOD. In total, the average viewer in the UK watches four hours, 37 minutes of video a day, so that would put total SVOD at under 11 minutes a day. Given that Amazon Prime is in that same SVOD 4%, let’s say Netflix is about two thirds at around eight minutes a day.

However, not everyone in the UK watches Netflix; it is currently in 7 million households in the UK, which is roughly one in four. These households obviously watch more than eight minutes a day. Given the population average is eight minutes a day and one in four homes have Netflix, then average viewing in Netflix homes would be four times the population average, so 32 minutes a day.

This is below other attempts to calculate Netflix viewing, which can get up to an hour and a half a day. But these aren’t UK figures, they are global averages, and the UK TV market is very strong. It makes sense that UK Netflix viewing would be lower than a global average that is heavily skewed by the service’s popularity in the US.

There is also reason to believe that average Netflix viewing is decreasing as the enthusiastic early adopters have been joined by subscribers who dip in more occasionally or perhaps joined to watch a specific series and carried on subscribing.

So there you have it. Netflix is a valued new part of the TV world, some additional choice for viewers, but ultimately not that much use for marketers.

Matt Hill is the research and planning director at Thinkbox, the marketing body for commercial TV in the UK.

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Matt Hill

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