What is Netflix anyway?
review by Mansa Narain
Amanda D. Lotz, Netflix and Streaming Video: The Business of Subscriber-Funded Video on Demand. United Kingdom, Polity Press, 2022.
When was the last time you went to a theater to watch a movie? In fact, how often do you go out to watch a movie anymore? I bet you do it less often than you binge watch a show, perhaps on Netflix. Such a common choice, however, can only be made by those viewers who can afford a stable broadband wifi connection and a subscription to a streaming service like Netflix. In terms of demographics, streaming entertainment is much more common for young adults but now has steadily expanded to other age groups.
I have a personal example. Back in 2020, when the world was in chaos because of the Covid-19 pandemic, the situation was worsening in India every day. My grandparents traveled to come live with my mother and me just so we could be together during that quarantine. My contribution to this new intimacy was to introduce them to Netflix and set up their profiles on our living room TV. Soon my nani (maternal grandmother in Hindi) was watching more K-drama shows than me! When I asked her how she came to watch so many of them, she said—in Hindi loosely translated here in English—“Well, that’s what Netflix shows me on top of the guide list. I just click what is on top.” This conversation made me think about how different my Netflix profile is from my nani’s and indeed shaped my decision to go to grad school to pursue a doctoral degree in Film and Media Studies.
Fast forward to 2022 when I came across Amanda Lotz’s recent book in a class on media industries. It covers varied aspects of current entertainment media and is written in such a clear style which is why I recommend it forward, and that is the genesis of this review. Lotz is a renowned media scholar who has written extensively on media industries, digital distribution, and the future of television among other topics. Having taught for over 20 years, she has written 13 books and many other academic articles. In her latest book, Netflix and Streaming Video: The Business of Subscriber-Funded Video on Demand, she proposes a new framework/model to study these services because there are no existing frameworks that fully grasp how streaming platforms like Netflix function. In fact, there is a lot at stake here. That is, if we don’t actively formulate comprehensive ways of studying this new digital media industry, harmful results could occur, ones that might have been prevented otherwise. Here is a prominent example. Netflix uses machine learning algorithms on their artificial intelligence systems to profile its subscribers for each viewer’s “automated recommendations” feature. Streaming entertainment companies, like search engines, are not transparent about their systems; their algorithmic procedures occur in what —in research terms—they call a ‘black box.’ We don’t know how Netflix—or Google or Facebook—does what it does, and perhaps not even the coders do completely. Therefore, as users we don’t know how they are algorithmically profiling us, both to automate their content recommendations features and to sell those profiles.
One example of such harm is in guessing or knowing a viewer’s identity as other than heterosexual. For instance, in 2009, an in-the-closet lesbian mother filed a lawsuit, Doe V. Netflix, against Netflix in federal court in California for privacy invasion, alleging the company
“made it possible for her to be outed when it disclosed insufficiently anonymous information about nearly half-a-million customers as part of its $1 million contest to improve its recommendation system.” (c. Singel, 2009)
In other cases, the thumbnails are a clue to gender identification. It is almost public knowledge that Netflix changes thumbnails based on its algorithmic profiling of the user. Thus, in 2019, a 15-year-old Reddit user told their followers that they think Netflix outed him to his father by showing thumbnails that had homo-erotic suggestive artwork on them. (c. King, 2019) I myself noticed a change in my Netflix recommendation list and thumbnails soon after I came out as queer on social media but without me actively seeking queer content on Netflix. It is also because of algorithmic profiling that Netflix suggests to my nani K-drama shows; it keeps her and all of us in our own unique “filter bubble,” (c. Pariser, 2011). One can see the algorithms as essentially taking away our agency.
Probably algorithmic profiling is more beneficial for corporations and advertisers than for consumers, regardless of the argument made by the corporations that their goal is to provide better service to their customers. For example the “shelf life” of individual titles is of concern for both content creators and consumers here. Content on these platforms is more or less ephemeral. Unlike the consumer’s owning a DVD, which has a more permanent shelf life, these platforms keep the content they showcase available for a limited time, in addition to limiting access to content according to the user’s geographic Internet Protocol (IP) address (a unique numerical identifier for every device or network that connects to the internet). These are just a few of the reasons why we need to rethink and re-categorize streaming digital media separate from the ways we study traditional television.
This is true for anyone studying, working in, making, or using contemporary modes of media and communication. Upon first reading her book, I could sense Lotz’s aim to engage readers from all over the world, many of whom have English as a second language. She writes in simple language and refers to works by some important scholars in the field like Joseph D. Straubhaar, Raymond Williams, and Henry Jenkins. Straubaar in his book, ‘World Television: From Global to Local,’ mainly argues that television is undergoing a multifaceted process characterized by the simultaneous globalization, regionalization, nationalization, and even localization, as audiences interact with it on various levels of identity and interest. Raymond Williams’ book fundamentally challenges Marshall McLuhan’s theory of technological determinism, which posits that technology emerges independently and exerts detached effects on culture. Conversely, Williams contends that a comprehensive understanding of television and its impacts necessitates the reintegration of intention, historical context, and cultural factors into the discourse. Henry Jenkin’s book on ‘convergence culture’ explores the flow of content distributed across various intersections of media, industries and audiences, presenting a back and forth power struggle over the distribution and control of content.
Split into two parts, this book explains specialized streaming services like Netflix and, with an international focus, the different national contexts streaming exists in. The first part differentiates these subscription-based streaming services from older video services like DVD rental stores that did not use the Internet. The second part focuses on Netflix as an example to show how it is different from other subscription-based streaming services which are its competitors—such as Amazon Prime Video. In particular, Lotz gives credit to a group of scholars from around the world who helped with the research for this book—the Global Internet Television Consortium—which explores the global strategies and roles of subscription-based streaming platforms distributed over the Internet.
This book will appeal to a broad range of readers. It has an easy-to-read style. The chapter and subsection titles are clear and straightforward. Lotz goes out of her way to define important terms and explain them in context. The book also benefits from Lotz’s sharing her personal experiences and emotions, which make the statistics and data more engaging. Her writing is focused and well-organized, making it easy to understand the main ideas in each chapter. Furthermore, she recognizes the constraints of the book, and maintains a modest attitude towards taking on a topic with such a broad international scope.
In the introductory chapter, Lotz explains that she focuses solely on examining subscription video-on-demand (SVOD) services—the industry jargon for streaming platforms—and emphasizes that these differ significantly from traditional television and film industries. These services rely solely on subscriber funding and limit access to subscribers. Streaming relies on the Internet’s unique technological capabilities and algorithmic content strategies. The book also categorizes other emerging forms of services: ad-funded video on demand (AVOD), free ad-supported streaming television (FAST), and other complex categories for platforms like Hulu, Peacock, and HBO Max. By narrowing down her analysis to just one corporation, Netflix, she covers varied aspects of it—such as library size, commissioned content amount, geographical reach, specificity, and corporate position. Lotz also compares Netflix’s content strategies with that of other competitors in the market and emphasizes the impact of these transnational SVODs—the streaming platforms— on the evolution, and interconnectedness, of the entire media industry across the world.
As one aspect of her research, Lotz examines available interviews with industry professionals from these streaming platforms to support her arguments. Looking at examples of popular Netflix-sponsored shows like Madam Secretary, Stranger Things, Tiger King, Borgen, and One Day At A Time, Lotz shows how Netflix carefully strategizes its content selection and allows for new viewing practices, and she argues that platforms like Netflix are able to develop such diverse programming without relying on demographic thinking. Lotz also suggests that because these services operate outside of the traditional norms of linear ad-supported television and can offer content to many different audiences simultaneously, such a business has developed new ways to entice people to pay for its services.
In one of the chapters in the book, Lotz elaborates on licensing, labor, regulations, and recommendations as she details the business model developed by these streaming services. Her research suggests that these platforms have been licensing programs, especially the ones they commissioned, to show for a longer period of time than did earlier linear, ad-funded TV services. Currently, according to available data, Netflix has commissioned the most programs as of 2022, and other platforms are adopting this practice of initiating productions, often throughout the world.
Lotz also examines the impact of the Covid-19 pandemic on the business model of these platforms, which relies on a flat monthly fee. She points out that because these services do not profit from people watching more hours, unlike linear television, they keep their produced and commissioned projects exclusive to their service for perpetuity. That is, these streaming platforms aim to entice more people to subscribe to the service rather than to attract more people to watch a title at a specific time. Hence, these services have different expectations for each of their titles as they produce and commission projects exclusive to their service for perpetuity.
In this chapter on business models, Lotz advocates for renewal of policies, stating that the current communication technologies “pose direct and indirect challenges to the previous regulatory equilibrium.” (Lotz, 2022) She asserts that since these services are more like video rental stores than cable television, they construct libraries rather than timed programing schedules. As a result, enforcing content quotas is not a suitable policy mechanism for them. Their compatibility with existing services requires a different approach that recognizes their distinct advantages and goals.
In addition, Lotz explains how the ‘recommendations’ feature on streaming services differs from social media and Google recommendations: the streaming service does not make money directly from the viewer watching a recommended title. However, she acknowledges that Artificial Intelligence (AI) is used to create these recommendation lists across platforms on the Internet. She also talks about business size, and how that affects its programming strategy, using data from platforms like Netflix, Mubi, and Stan to support her arguments. Further details trace differences between platforms such as Netflix, Apple TV+, Amazon Prime Video, Disney+, HBO Max, and Peacock based on how they make money. Using this information, she warns about ‘streaming wars’ and even predicts which global platform might come out on top.
Lotz starts the conclusion of the first section of the book by admitting a mistake she made in her previous book, Portals (2017). In that book, she considered services like Netflix to be a type of internet-distributed “television,” but she now takes a different view in her recent work. In the first section of this current book, she explores the general characteristics of streaming platforms and tries to cover their diversity. At the end of this section, she argues that there are significant differences between streaming platforms and the traditional ad-supported TV that has been the norm for home viewing. She urges readers to appreciate these differences, as they are crucial for rethinking the video landscape of the 21st century. In the second section of the book, Lotz focuses specifically on Netflix. She points out that Netflix has characteristics that come from both traditional ad-supported TV and streaming platforms, which makes it unique. Lotz also uses information from interviews with Netflix executives, investor documents, and media coverage to support her claims. She explains industry jargon such as verticals, taste clusters, taste communities, sensibility, and tone to help readers understand Netflix’s content strategy.
To explain the company’s history, Lotz considers Netflix’s library strategy and divides the growth of the service into three phases. Netflix 1.0 was when it started as a DVD-by-mail service, Netflix 2.0 was the expansion into web streaming, but only in the US market, and Netflix 3.0 marked the shift towards commissioning original content and expanding globally. She analyzes the data for Netflix libraries and notes that the ratio of foreign to domestic content varies by country. For instance, countries like Japan, South Korea, and India have a higher ratio of domestic content than foreign content. Among streaming services, Netflix is the forerunner of commissioning projects for its platform’s libraries far surpasses its competitors in terms of commissioning scripted fiction as of 2022.
Furthermore, Lotz explores how Netflix’s unique characteristics drive it to prioritize distinctive content. She calls it ‘shifted 45 degrees,’ that is, different from those programs that could be commissioned by US linear channels. To support her arguments, she cites examples of popular series like Sex Education, Fleabag, The Sopranos, Breaking Bad, and Mad Men. Cable TV shows like these, along with other lesser-known series, brought new and exciting programming to American television. They expanded the types of shows available and changed what people considered valuable content for selling TV programs. These shows, which had smaller audiences, were supported either by subscriber fees (like The Sopranos and other HBO shows) or by enough subscriber revenue that the channels didn’t have to focus solely on getting the biggest audience. Netflix and other SVODs (Subscription Video-On-Demand services) now commission shows that are similar to what some cable channels (especially HBO, Showtime, FX, and AMC) commission, but different from what regular TV channels with ads would offer. This all depends on the specific context.
Lotz takes as an example Australia, where Netflix became more popular than the main cable service provider Foxtel; the shows commissioned by SVODs seemed more unique and special because cable channels hadn't been as innovative in their commissioning, and most households hadn't watched them before. In another delightful segment in the book, she cites co-CEO Ted Sarandos’s interview with Joe Adalian, where they discuss at length the successful series One Day At A Time and the reason behind why it became a limited series even though it appealed to the Latinos, females, members of the LGBTQAI+ community, and many other groups. It is delightful to read this segment in the book and can surely be considered as one of its key highlights.
Taking up the important topic of how entertainment is changing internationally, Lotz explains how Netflix is trying to become a global service and how it challenges the way people traditionally think about video services as either domestic or foreign. She looks at various data such as global media libraries, most-watched and top 10 lists, commissions, and investor meetings to determine if Netflix is, in fact, the same everywhere. She concludes that it is not. Netflix creates content that is locally specific, and also content that appeals to a global audience. In that regard, she quotes Netflix VP of Development, Kelly Luegenbiehl, who believes that the more local the stories are, the more universal they become. Lotz is skeptical of this claim but acknowledges Netflix’s commissioning of content toward that end.
Finally Lotz emphasizes the importance of understanding the economic dynamics underlying the different types of streaming services. These business practices can provide insight into the actions taken by these companies and hints about their future strategies, which can be relevant for industry regulators and citizens. Lotz also calls for policymakers to reconsider appropriate policies for the audio-visual sector in the 21st century, recognizing the limitations of current policies. She hopes media scholars can build a stronger conceptual basis to understand these commercial services beyond the industrial distinctions she has brought to our attention.