Netflix Wants To Change The Way You Chill
Log on to Netflix today, and you’ll see a lot of stuff you’ve never heard of. Here's how the streaming service is convincing you to click on it anyway.
It’s Thursday night, and you’re in front of the TV. To save money, you’ve replaced your cable TV package with a $10.99 monthly Netflix subscription you share with your roommate. Trailers begin to play as you scroll through each title on the homepage. Food show. Comedy special. Indie drama. Click, click, click. Sigh.
This common dilemma — difficulty finding something to watch — is Netflix’s nightmare. According to its own research, the company has a 90-second window to help subscribers find a TV show or movie before they give up and go somewhere else. That’s why Netflix is obsessed with tweaking and personalizing its product. It knows that’s how to draw you in and get you hooked. And it needs to get you hooked.
Netflix faces major competition in the streaming space it pioneered. Disney, NBCUniversal, and FX are pulling their shows and films and launching their own streaming platforms. Even Apple and Walmart are joining the fray. For viewers, it’s a content fragmentation nightmare. Right now, there are over 100 different services vying for your eyeballs.
Netflix’s strategy for outlasting the competition? Changing the way you chill — by being the primary way you chill.
“When you want entertainment — when you want to decide whether to read a magazine or play that video game or watch traditional linear TV or watch Netflix — we want you to say, ‘Yeah, gotta watch Netflix, gotta watch the next episode,’” the company’s vice president of product, Todd Yellin, told BuzzFeed News.
The company’s spent billions, and taken on billions more in debt, to develop hundreds of original titles. That cash is one of the incentives Netflix uses to lure Hollywood bigwigs like Lost creator J.J. Abrams and Gravity director Alfonso Cuarón away from established studios. The streaming giant also offers producers something traditional media companies don’t have: Silicon Valley data nerds and a global infrastructure for distributing their entertainment at scale.
But making good original programming is just one part of the battle. Placing the right kind of shows and movies in front of the right people is equally consequential, and the pressure to do that can create tough working conditions and experiments that backfire. The onus is on the company’s product team to get people to watch content they’ve never heard of (and like it!) — to make sure Netflix’s multibillion-dollar bet pays off.
Netflix is used to remaking itself. The company began in 1997 as a DVD-by-mail rental service with no late fees. A decade later, it introduced streaming, and in 2013, Netflix began producing a few titles of its own, starting with House of Cards. Then, in 2016, the company set its sights on global domination. Today, with the exceptions of China, Crimea, Syria, and North Korea, the streaming service is available in every country in the world.
Now Netflix must survive the next major shift: maintaining its head start in a race where former partners are competitors, playing dual roles as both studio and distributor, and navigating the tension between its data-focused technology and relationship-driven entertainment arms. On top of it all, to keep its balance sheet balanced, Netflix needs new subscribers — and it may even need current ones to eventually pay more.
Netflix must survive a major shift: maintaining its head start in a race where former partners are competitors.
“We were expecting at Netflix for the dam to break, and all the competitors to come, and everyone to realize that over-the-top streaming, on-demand internet TV, is the wave of the future. It actually took a little longer than we expected, but it’s here now,” said Yellin.
“There are so many competitors,” CEO Reed Hastings acknowledged in an October earnings call. Hastings noted the success of YouTube (“just on fire,” he said) and video games like Fortnite, and emphasized that the key for Netflix is not just content — it’s presentation. “What affects us is, can we produce the best content the world’s ever seen? Can we serve it up in ways that make it really fun and easy?”
With over 137 million paying members, Netflix is ahead. The company’s biggest streaming competitors are Hulu, which is only available in the US and has 20 million paying members, and Amazon, which hasn’t released numbers for Prime Video but has “over 100 million global” Prime subscribers.
But Netflix isn’t resting on its laurels. The streaming giant is borrowing money (to the tune of $1.9 billion in April) to fund new films and TV shows. Its total debt and contractual obligations amount to over $28 billion. In 2018, the company planned to release 80 original films and 700 (yes, 700!) original TV shows worldwide. (BuzzFeed News announced its own deal with Netflix earlier this year for the series Follow This.)
Netflix is less and less able to rely on licensing competitors’ content. After subscribers revolted in December, the company paid $100 million (or about 750,000 annual subscriptions) to keep the show Friends for just another year, according to the New York Times. But there’s no guarantee after that: AT&T, which now owns the rights to Friends, is launching its own streaming service by the end of 2019.
And when original shows like Stranger Things, Narcos, Orange Is the New Black, the docuseries Making a Murderer, and the platform’s Marvel titles become hits, significant numbers of sign-ups follow.
Netflix needs more of its own must-watch media to woo subscribers and keep them streaming. Otherwise, they can easily cancel their memberships, and Netflix’s on-demand entertainment empire crumbles.
Unlike traditional Hollywood studios, Netflix doesn’t rely solely on marketing campaigns to attract viewers. Instead, its army of designers, data scientists, and product specialists control algorithms that recommend content to its users around the world. But you won’t see the word “recommendation” anywhere in the app. The team analyzes how subscribers click, watch, search, play, and pause, and it uses the data to fine-tune the company’s mostly invisible, top-secret personalization technology that decides which titles appear on your Netflix homepage.
The man leading that effort is Product Vice President Todd Yellin, who has spent 13 years at Netflix. In the company’s DVD rental heyday, it was Yellin who suggested movie titles be ordered in sliding horizontal rows, by genre, like the shelves in a rental store.
As a former filmmaker, his deep movie junkie knowledge also helped shape the company’s early personalization logic. To better identify users’ preferences, content is categorized into tens of thousands of micro-genres as specific as “Critically Acclaimed Emotional Underdog Movies” or “Gritty Chinese Action & Adventure from the 1970s.” Netflix then pairs the genre tags with a user’s viewing history. Together, the data points are combined to create what Yellin calls “taste doppelganger” profiles, or clusters of people who have the same content preferences.
Everything you see on Netflix is a recommendation.
Netflix has identified over 2,000 taste communities. In one group are subscribers who streamed House of Cards and also It’s Always Sunny in Philadelphia. In another, fans of Making a Murderer bizarrely also like the John Mulaney: The Comeback Kid comedy special. Those who watch Black Mirror tend to gravitate toward the equally cynical and edgy documentaries Dirty Money and Food, Inc.
These profiles drive what you see on Netflix. In fact, the homepage’s “Popular on Netflix” row isn’t a definitive, universal ranking of the most watched shows on the platform. The section is really what’s “Popular among people who have similar viewing histories as you” — and it’s only a small part of the massive personalization layer underpinning Netflix’s apps. Everything you see on Netflix is a recommendation: the rows, the titles in those rows, and the order of those titles within the rows are all deeply considered.
Viewing behavior associated with the genre tags also helps Netflix decide what kind of content, like more science fiction or more reality shows about cooking, it should license or make next, Yellin said.
With all its data in hand, Netflix’s product team serves another important role: helping the company pitch creators.
Bringing on big-name producers to create shows that’ll attract subscribers is essential for Netflix, but persuading them to sign with a streaming company can be a challenge. Netflix movies aren’t contenders for one of the industry’s top prizes, the Cannes Film Festival’s Palme d’Or. Netflix also doesn’t publicize streaming numbers (nor do Hulu or Amazon), so showrunners can’t measure their success as easily as they can with traditional TV’s Nielsen ratings.
So Netflix invites product specialists, like Yellin, to the negotiation table. “These people don’t understand what the technology and design side can do for their content,” said Yellin of Hollywood creators like Grey’s Anatomy’s Shonda Rhimes and Glee’s Ryan Murphy, who both signed deals worth hundreds of millions of dollars with Netflix earlier this year.
One of the most compelling sells to producers is Netflix’s global distribution infrastructure, which allows it to release originals around the world simultaneously. For traditional, linear TV, US shows are delayed for weeks — and in some regions, months — before they reach international markets.
“My team talks to all these content creators, and they’re explaining to them, ‘This is how Netflix works ... This is why we’re going to give you the best possible treatment for your content, why it’s going to bubble to the top and unearth audiences you wouldn’t imagine,’” said Yellin.
Another competitive edge the company offers creators: its expansive trove of data on subscribers’ preferences and behavior, which Netflix uses to personalize every aspect of the app, down to the thumbnails, “to put the right title in front of the right person at the right time,” according to Yellin.
Getting the artwork right is critical. Thumbnails constitute over 82% of a subscriber’s focus while browsing, and Netflix has just 1.8 seconds to get subscribers to click in and watch. That’s how long viewers spend reviewing each title, on average, before moving on.
If you’ve watched more rom-coms recently, Netflix will show you an image of Matt Damon and Minnie Driver pre-kiss to promote Good Will Hunting. If you’ve tended to watch comedies, then you’ll see a still of Robin Williams from the movie instead.
These kinds of data-driven decisions often give Netflix an advantage — but they can also make things complicated internally.
According to a Wall Street Journal report, a thumbnail test for the comedy Grace and Frankie found that more users clicked on photos without Jane Fonda, one of the show’s stars. Typically, this finding would have meant artwork that performed better would replace images of Fonda. Netflix’s content team, under pressure to maintain a good relationship with the actress, urged the company’s leadership to reconsider. Thumbnails with Fonda eventually went back into circulation.
The Fonda conflict is just one of hundreds of debates within Netflix’s walls. In the company’s earlier years, raised voices and flared emotions were common during a long-standing weekly meeting called “Product Strat.” The company maintains its “honesty and candor” and “farm for dissent” culture, but Vice President of Product Innovation Michael Spiegelman, an eight-year Netflix veteran, said, “We’re calmer now. We’re a little bit more polite.”
Netflix’s experiments have backfired, like when some subscribers noted Netflix was showing thumbnails featuring black cast members for movies in which they had minor roles.
Still, Netflix has a reputation for being a “ruthless” place to work, according to a recent Wall Street Journal story that detailed how emails explaining why a specific person was “exited” are sent to hundreds of employees, and that colleagues routinely deliver criticism and feedback to peers during team dinners, in front of the entire group. “Cutthroat,” “fast-paced,” and “culture of fear” are common themes in Glassdoor reviews written by former employees.
In a statement, a Netflix spokesperson told BuzzFeed News, “Fewer controls and greater accountability enable our employees to thrive, making smarter, more creative decisions, which means even better entertainment for our members. While we believe parts of this [Wall Street Journal] piece do not reflect how most employees experience Netflix, we’re constantly working to learn and improve.”
Netflix has no chill, so you can.
The company’s culture, Yellin says, is out of necessity: “With all that competition, it keeps you on your toes and it makes you want to keep on innovating. You have to keep on pushing forward. And so you have to be risk-embracing to do that.”
At times, Netflix’s “risk-embracing,” research-based approach has backfired with subscribers. In October, Twitter user Stacia Brown noted that Netflix was generating thumbnails featuring black cast members, but for movies in which those actors had minor roles: “It’s weird to try to pass a film off as having a Black principal cast (by creating a movie poster-like as featuring just the Black people) when it’s a white movie.”
Netflix denied using race-based data in its personalization tech: “We don’t ask members for their race, gender, or ethnicity, so we cannot use this information to personalize their individual Netflix experience. The only information we use is a member’s viewing history,” a spokesperson said.
Rochelle King, Netflix’s vice president of product creative, added, “In general, a person’s race, gender or ethnicity is not a great indicator of what that person will actually enjoy watching. Time after time, we have seen that great stories transcend borders and that an individual’s tastes are complex and multifaceted, going well beyond basic demographic attributes.”
Netflix may not be aware of your race or gender, but the company knows something far more personal — what your actual taste in movies and TV is. “To the 53 people who’ve watched A Christmas Prince every day for the past 18 days: Who hurt you?” asked Netflix’s official Twitter account last year. The company also called out one member who watched Pirates of the Caribbean: The Curse of the Black Pearl for 365 days in a row. Netflix is always collecting and analyzing — mostly to identify content its users will like and binge-watch, and sometimes to anonymously roast them on social media.
The company has long used its collected data to serve you content that matches your preferences. Now, it must also convince you to watch movies and series you’ve never heard of. “We’ve been great at the matchmaking problem for years. Now with original content, there’s a second job, which is tastemaking,” said Chris Jaffe, vice president of product innovation.
The “tastemaking” initiative is partially why video trailers are everywhere on Netflix, much to some users’ chagrin. Netflix isn’t minding naysayers’ feedback. “Video is just a much more efficient way to communicate these things per unit of time than reading text,” Jaffe said.
Netflix’s increasingly simple, visual interface is all meant to make choosing what to stream so fast and frictionless that you don’t have to think about it.
Netflix’s increasingly simple, visual interface is all meant to make choosing what to stream so fast and frictionless that you don’t have to think about it.
Bad star ratings, for example, can no longer dissuade users from watching. Last year, Netflix removed its global five-star rating system and a decades’ worth of user reviews. Now, users rate content for themselves with thumbs up/down icons, and a very specific, personalized “match rating” — 98%, 81%, 62% — has taken the star ratings’ place.
Netflix ultimately needs to convince members that a subscription is worth paying for — and the best way to do that, after helping them find something to watch, is converting casual browsers into hardcore binge-watchers, Spiegelman told BuzzFeed News. “If you make people find more things that they want to watch, then they will get more via the service and they’ll be inclined to stay,” he said.
The in-app features the company’s developed for this purpose take care of the rest. Netflix first tested the “post-play” feature, which automatically starts a new episode within seconds, in 2012, despite Hastings and then-product chief Neil Hunt’s skepticism. Now the feature is “a significant portion of our streaming activity,” said Spiegelman.
Last spring, Netflix rolled out a “Skip Intro” button, which takes viewers past the opening credits and straight into the episode. Some creators didn’t appreciate having their work ignored, but fans heralded the feature as “the greatest invention of 2017.”
Watching multiple episodes in a row has become so ubiquitous on the platform that, last year, Netflix coined a new term: “binge-racing,” which refers to users who finish an entire season within 24 hours of its release. About 8.4 million people have binge-raced a show on Netflix. In 2017, Gilmore Girls: A Year in the Life was the top binge-raced series globally.
The product team is always testing different ways to get members interacting with Netflix content. The mobile app features Instagram Stories–style videos and notifies you when trailers are released for content it thinks you’ll like. Instead of a “30- or a 45-minute viewing session,” Chief Product Officer Greg Peters explained in a recent earnings call, “you can get five minutes, you’re waiting in line, and you can catch a preview of a show ... and maybe you watch that when you get home.” Netflix wants you to be able to get your fix everywhere.
“You want to watch all six episodes of Wild Wild Country and come to work with bloodshot eyes the next day? You go ahead and do that.”
Making sure content is available in as many places as possible, even where there’s no internet connection, was crucial to getting a more global, non-US audience to binge too. Netflix finally let users download certain content for offline watching in 2016. “[Downloads] is a must-have for people in the Philippines or India,” Spiegelman said.
But the team can’t be too heavy-handed. Netflix tested a feature in March that encouraged its younger viewers to “collect patches” by watching episodes of certain kids shows. After a backlash from parents, who didn’t appreciate Netflix rewarding their kids for binge-watching, the company pulled it.
Ultimately, Yellin says that it’s a good thing to give consumers more control: “We’re giving you the freedom. We’re not doling it out. So here it is, watch it whenever the heck you want. You want to watch all six episodes of Wild Wild Country and come to work with bloodshot eyes the next day? You go ahead and do that.”
Opening sequences, credits, and, for many binge-watchers, sleep, are all casualties in Netflix’s quest to be your end-all, be-all source for entertainment.
Even the most tested optimizations may not be able to overcome the meh content members report seeing more of on Netflix, some of which may be created by producers pushed to make shows at breakneck speed. In a reflection of 2017’s TV landscape, Polygon senior culture writer Julia Alexander wrote that she often chooses Hulu when she wants to stream something: “It’s not that I hate Netflix’s content, but I feel inundated with mediocre original series, making it that much harder to find the gems.” That sentiment isn’t unique.
Although, given the circumstances when Netflix feels appropriate (a chill night in, wearing pajamas and eating takeout), we may turn to meh more than we’d like to. After all, more than half a billion hours have been spent on Netflix watching Adam Sandler movies.
Above all, as Netflix gains subscribers, as it has done consistently every year, the company drops further into debt. The company reported $859 million in negative free cash flow for the third quarter of the year. That’s –$1.7 billion so far for 2018, though the company anticipated it. Spending aggressively now, Netflix hopes, will eventually lead to big profits in the future. It’s the same gamble Uber, Tesla, and Twitter have taken, but with many competitors close behind, success isn’t guaranteed.
And while the company remains laser-focused on new members, it must also retain existing ones. Netflix will not only need to produce more hits — like this summer’s To All the Boys I’ve Loved Before, which the company said was one of its “most viewed original films ever with strong repeat viewing” — but also continue to make hundreds of data-driven product refinements to ensure that every user will be shown content they want to see.
“Our metrics are measured purely on the consumer,” Yellin said during a press event in March. He added, “As a subscription service, we have one master.” ●