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Netflix interview
The big Netflix interview: On the future

24 Jan 2013 | Rasmus Larsen |

Netflix has been expanding; to Latin America, UK and most recently the Nordics. The Nordic launch has been Netflix’s "Best launch ever". FlatpanelsHD met Netflix in Las Vegas where we talked about the future, new features, content, and the Nordic launch. Read more in the big Netflix interview!

Netflix on yesterday, today & the future

Netflix is starting to become a heavyweight without comparison in the TV industry. It is the first TV streaming company to truly go international and with more than 33 million customers, spread over the US, Canada, Latin America, the UK and the Nordics, few media companies can compete with Netflix’s reach.

”The Nordic launch was the best launch ever”

Netflix’s latest adventure is in the Nordic region (Denmark, Sweden, Norway and Finland) where the streaming service launched on October 16th. All eyes are on Netflix but what’s next? FlatpanelsHD met Netflix’s Director of Global Corporate Communications, Joris Evers, in Las Vegas during CES 2013. We talked for over an hour about everything from the latest launch to the future. Netflix even revealed some of its future plans and new features to FlatpanelsHD.

But why has the Nordic launch been the best launch yet? Why not the UK that Netflix entered in early 2012? Numerous reasons, Joris Evers said, but first of all because Nordic consumers are very tech-savvy and because the Internet infrastructure is very well-developed (the cold weather might have something to do with it too, I assume as a Dane myself). We pressured Evers for some numbers but Netflix has nothing to add. One analysis said that more than 350.000 signed up for the 1-month trial in Denmark (1 of the 4 countries) but it is just an estimate, nothing else. Netflix’s official word on the matter is still “33 million worldwide” (“30 million” during the interview but we updated the number based on yesterday’s quarterly report).

The big Netflix interview
Netflix lacks content in the new markets, says customers. It’s coming, says Netflix

Netflix was initially greeted with enthusiasm, but also disappointment. The Nordic consumers wanted more content, more American content preferably. New TV series and new movie releases.

The spiral:
More subscribers means more content, which leads to more subscribers that again leads to more content
You might not know this but Netflix’s business model differs from for example music streaming services such as Spotify. Spotify pays an artist a small sum every time someone stream a song. Netflix does not work like that. Netflix pays a fixed amount for a movie – or a content package – so they need to make estimates based on what they think will become popular.

Because Netflix buys content before customers have committed to the service it can be risky but it also means that the content catalogue expands with the user base (and when money flows into Netflix’s bank accounts). That is why it takes some time for Netflix to build up a content catalogue when launching into new markets. They cannot just go ahead with the same catalogue as in the US version.

However, Netflix will not add just any movie or TV series. One of Netflix’s strengths is the amount of data they have. It far exceeds the data that a typical TV provider can harvest. Netflix knows exactly what you are watching; when, where, and how. They know which genres you like and they know what you do not like. They know what you watch after having watched the first episode of a TV series and they even suggest new content that you might be interested in based on this knowledge. This is something traditional TV providers can only dream of. All this happens on an anonymous level but all the data basically tells Netflix what to add in the future, Joris Evers explains.

”Exclusive content: Does Netflix want to be more like HBO?” we asked

It is always fascinating to know to which degree different cultures and nationalities differ so we asked Joris if the Nordic consumers are different from the American consumers. Not really, says Joris. Both groups love movies, TV series and drama. “Prison Break and Breaking Bad are popular shows everywhere“.

House of Cards is based on Netflix’s deep data on viewing habits. It is a TV series, and it is drama. Kevin Spacey plays the lead role in the series that has been produced exclusively for Netflix. House of Cards will have its world premiere on the 1st of February. Lilyhammer is another exclusive Netflix series that is already available. Later in 2013, the fourth season of Arrested Development, Hemlock Grove, and Derek (by the same people that created The Office) will debut – all Netflix-exclusives.

"But does Netflix want to be more like HBO?", we asked Joris. HBO recently entered the Nordics with a streaming-only service. Prior to this HBO GO has allowed Americans to watch HBO shows but HBO GO still requires a cable subscription. HBO Nordic has no such requirement. It costs the same as Netflix in the Nordic countries and could be considered a direct competitor.

But Netflix does not see it this way, according to Joris. They have started to produce exclusive content – like HBO - but they will still license content from other studios. The advantage for Netflix when it comes to its own productions is that Netflix can release it in all of its markets at the same time. What’s more, you can even watch all episodes from day 1. You do not have to wait one week for each episode to air. It is the ultimate manifestation of "on-demand". When Netflix produces its own shows they also get to decide; an important factor when Netflix operates in so many different markets. The exclusive shows will help differentiate Netflix and they are very excited about that.

When it comes to licensing content from other studios Netflix has already demonstrated that they can compete with the big, well-established TV broadcasters in the US. Netflix recently announced its biggest content deal ever. They will have the exclusive rights to Disney, Pixar, Marvel, and Lucasfilm content right after the DVD/Blu-ray sales window (and the movie theatre runs, naturally). Only on Netflix - nowhere else. In other words; expect to see major Disney releases on Netflix, the best animation movies of our age from Pixer, superhero movies from Marvel and Star Wars from Lucasfilm. The catalogue will not be available until 2016 and only in the US but it proves that Netflix can break up the established power establishments of the industry. Content deals are not yet negotiated on a worldwide scale but the same thing could happen in Netflix’s other markets, we assume. It just takes time. Remember: more customers = more content.

”No live TV? Where are the live sports events?”

Netflix is an on-demand service. They have movies, TV series, and documentaries, but no live events or live sport events. “Are these things coming?” we asked Joris Evers.

No. This is not something that Netflix will do in the coming years, Joris answered. There are no plans to include sports events, live news or live music shows. TV channels provide that and we still need TV channels. There is room for TV channels and on-demand services in the market, Joris argues.

Super HD, 3D and technology

At CES 2013, Netflix announced its Super HD picture tier that increases picture quality to Full HD in bitrate around 6 Mb/s, based on a new compression technology that is twice as effective as the old one. Super HD also replaces Netflix’s former X-High tier, and Netflix is confident that future compression technologies will improve picture quality even further.

The big Netflix interview
Netflix demonstrated 3D at CES. Here you see 3D running on around 6 Mb/s but 3D can reach 12 Mb/s in Full HD resolution

Netflix also added the first 3D content (only in the US) during CES. Bitrate on 3D streaming can go up to 12 Mb/s – twice the bitrate of Super HD. 3D is not a major push from Netflix but it is there and Netflix will probably add more in the coming months. The 3D option also demonstrated that Netflix can move to new formats quite easily – as long as the internet connections are fast enough.

Netflix demonstrates 4K streaming
Netflix and Samsung demonstrates 4K streaming on one of Samsung’s Ultra HD TVs

Another interesting demonstration was found at Samsung’s CES booth where Netflix demonstrated 4K streaming on one of Samsung’s Ultra HD TVs. We were told that it was streamed from a local server right next to the TV but it was still quite impressive.

”Will Netflix offer 4K streaming before TV channels take the step?” FlatpanelsHD asked

Joris Evers said that Netflix has no plans for 4K streaming in the near future. They are obviously exploring and experimenting, as evidenced, but right now almost no Ultra HD TVs are sold and none of the existing Smart TV platforms, streaming boxes are game consolers are able to stream in 4K resolution. It is still too early for Netflix to think about 4K in the mass market but in time 4K can obviously be added on as a new picture quality tier just like Super HD and 3D. Netflix has demonstrated that it is possible but it will not happen in 2013, Joris predicts.

Where is my instant queue? Why do receive recommendations on shows that I have no interest in?
The Nordic users have complained that there is no way to save movies or TV series for later watching in the Nordic version of Netflix. However, in most other markets Netflix offers the Instant Queue function. “What is going on here?” we asked.

“Netflix is performing user tests”, Joris responded. But it is not happening inside Netflix’s headquarter. It is an open test that tries to determine how to best serve the viewers.

Different versions of a feature are rolled out to groups of maybe 10,000 or 100,000 members, Joris explained. The groups will see different features or maybe just a tiny difference in naming. The goal is to determine if a specific feature increases viewer attention on Netflix. If more content is consumed, Netflix believes it improves the user experience and it might be implemented. If nothing happens, Netflix believe that users see no benefit in the feature and it will fade out after the test.

A test can take up to 6 months and the Instant Queue is one of the features missing in Netflix’s most recent markets. Something is coming, Joris told FlatpanelsHD, and Netflix is also working on some new cool features. Let us take a look at some of them.

Family Profiles, second-screen & DIAL

One of the new features is “Family Profiles”. Netflix is already recommending content based on your viewing habits but viewing habits for members of a family with children are quite different. Netflix acknowledges that fact and that the current recommendations engine might suffer as a result.

The big Netflix interview
You are greeted with this screen when you open the Netflix app on devices that support the new Family profiles

That is why Netflix is currently testing the Family Profiles feature. It works as in the photo above. When you open the Netflix app on device that support Family Profiles you just select our profile and recommendations will be based on your preferences. If it is well-received it will roll out to all Netflix subscribers.

The big Netflix interview
Now Dad is watching Netflix and he doesn’t want to see recommendations based on the children’s TV habits

Additionally, Netflix is rolling out its “second screen” experience to more platforms. “Second screen” is the trend where viewers use their smartphone or tablet while watching TV. So why not let the devices interact?

The big Netflix interview
Browse the content catalogue on a tablet, and start watching on the TV screen with Netflix’s new remote function

DIAL enables you to start a movie or TV show on a Smart TV or a streaming box even though it is turned off – with you one press of a button
It already works in Netflix’s iOS and Android apps. On your smartphone or tablet you can navigate the Netflix catalogue from the Netflix app and when you find something you like you can click “play”. When you do Netflix automatically registers that other Netflix-enabled devices exist in the home. These devices can now be “told” to create a direct stream from Netflix’s servers (the smartphone/tablet merely acts as a remote).

Right now it works on select Smart TVs and the PlayStation 3 but it will be available on other devices, too. The main limitation right now is that the device has to be turned on and have the Netflix app open.

To counter that, Netflix is working on "DIAL" (Discovery and Launch), an initiative backed by several electronics manufacturers and YouTube, too. DIAL will allow you to start a movie on a Smart TV or media box that is turned off. DIAL-enabled devices are connected to the home networks in an always-on, low-power state. So when you click play on your smartphone or tablet, you can choose to automatically power on your living room TV - or even another TV in your house - that automatically powers up, opens up the Netflix app, and starts stream – with one click.

It does not stop here. With DIAL you can manage more than just Netflix. YouTube is working together with Netflix on the initiative and in theory it can work with many other services, too. It makes a smartphone or tablet serve as a universal remote that can control any screen in the house.

The big Netflix interview
Wii U takes the second-screen concept one step further. The Wii controller acts as a remote and a “second screen”

Netflix also demonstrated its second screen experience on the new Nintendo Wii U that uses a game controller as a Netflix remote. You can push Netflix to the TV screen via the controller or you can pull Netflix onto the controller screen.

The big Netflix interview
On Wii U you can also “pull” movies and TV series from Netflix onto the small controller screen

When Netflix plays on the TV you receive information about the movie on the controller screen. This is the “second screen” experience that not only connects devices but also improves user friendliness and the user experience.

Lastly, Netflix is moving forward with Facebook integration. Facebook is already integrated in some of Netflix’s market but is also coming to the US. It is not about “Liking” movies and sharing them on Facebook but instead about a deeper Facebook integrating that lets you recommend movies or TV series to select friends or family members. Depending on your settings you can also see what your friends are watching right now from inside the Netflix app. Netflix is going social.

Netflix has some exciting things prepared for the future. We cannot wait!

A big thanks to Joris Evers, Director of Global Corporate Communications at Netflix, for this opportunity to have a sneak peek into the future of Netflix.

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