Nineteen years after its release, Netflix became a global service. The company, founded in 1997, entered the market in the US as a VHS rental company. Technology evolved rapidly and Netflix moved to DVDs and, later, to video-on-demand services.
Today, the company spends 6 billion dollars on acquiring new programs and producing new series that are delivered around the world in the form of VOD content. In January 2016, Netflix made the decision to expand globally, adding 130 countries to its “availability map”. Among this countries was also Romania, a new market where, until now, the VOD giant hasn’t advertised its services.
We get a glimpse of Netflix’s evolution and the future plans for the business from Joris Evers, vice-president of Netflix EMEA:
A Romanian version of this interview is also available.
From renting DVDs to VOD
We started as a rental company in 1997. But ever since then, there was the idea to become online, a streaming video company. In 1997 the internet wasn’t good enough for that, though. At that time, the DVD was just coming around and the idea was to make a better experience of getting video into your home - better than the video-rental store that you had to physically go to and return to for returning the movie on the next day, so you didn't have to pay extra money.
But it was too expensive to send a VHS tape in the mail. However, when the DVD came out it was clear that was our route; we just needed to build systems to do that efficiently and affordably. So that’s what the company focused on.
Then we built a website for people to sign up and tell us which DVD they would like to receive. We needed a smart system, or else everybody would ask for the latest movie and we would stack a whole bunch of those; then, three weeks later nobody would want them anymore.
So we built a system of recommendations and a wish list of which DVD you would like to see next, so that we could be smart about what we would ship to you. We learned that people already enjoyed watching TV series and, also, that they immediately wanted to get the DVD with the next season shipped to them.
It was clear that, from a streaming experience, the TV series experience was actually really well suited.
Netflix – from local to global
The first streaming happened in the US in 2007, and then we became “international” in terms of having Canada as a country where we offered only streaming in 2010. And then, between 2010 and 2016 we expanded basically around the world.
We first added Latin America, then a few countries in Europe, then Australia, New Zeeland and Japan and in between some more countries in Europe. Then, at the beginning of this year, we decided that we’re going to be available everywhere all at once. There were 130 countries that didn’t have Netflix yet.
The key part is that there is a difference in being 'available' and really being local. In the past, when we came into new markets, we built a local version of Netflix for each of the countries that we launched into. What we did in January was the opposite - making Netflix available everywhere, but only in English and only with international credit card payments.
So there’s no “Netflix in Romania”, for example, or there are no Romanian language assets today. The same is true in Russia, or in Vietnam, or in Nigeria, or Kenya, for example. All you can get there is Netflix in English, that you have to pay with an international credit card.
What we started out in January is this path of learning and there’s still a lot of work for us to do in terms of making Netflix more locally relevant and more appealing to people in individual countries over time.
The major changes that had happened there is that in the past we had to acquire content country by country, region by region, and have teams of people that purchased the rights for programing.
What our team is focused on now is acquiring global rights. When we go out and negotiate the rights for programming we look to acquire global rights which is because we feel that in the today’s world people go online and expect to be globally connected.
When you go on the internet in Romania you aren’t expecting a Romanian internet only, you are able to talk to people outside Romania. When you turn on your TV, most of it is very much Romania focused. The internet is the opposite – it’s more international than it is specific to a country.
Yet, the world of TV haven’t been ready for that, it’s not built for that, it’s been the same for a long time. When we are trying to change that in terms of buying global rights, it actually has a lot of people scratching their heads and wondering: “What’s going on? We don’t really get it”. People haven’t been buying rights for movies and TV shows this way in the past.
So we’re trying to buy something that didn’t existed. It’s a slow process in terms of being able to do that. It’s easier when it comes to our original programing that we are able to get globally.
A key strength, from a consumer perspective, is that you are in charge of your TV experience. TV is one of the few media today that tells what you can watch or enjoy in a particular day, at a particular time.
You are not in control, and this is kinda strange, it’s like somebody told you: “You can only read THIS chapter of a book now”. And then you have to wait a week to read the next chapter. It’s not very consumer-friendly.
I think what people enjoy about Netflix is the control; being in charge of their television experience.
Then, at the end of 2011 we decided to commission our first original series, which was a major strategic bet at the time. We weren’t sure that was going to be the right choice for us, but obviously it has been. And it’s a big success, at least from our perspective, so we’re moving more and more on this path.
It’s really what differentiates us today and what people know us for – Netflix’s original programing.
More on Netflix’s original programing
It's still a minority of all the programing that we have and it’s also a minority of all the investment in programing. We we’ll spend globally this year about 6 billion dollars on programing – which is up from 3 billion last year. A minority of that will be on original programing, more of it will be on license programing.
The viewing of Netflix’s original programing is growing and it’s, often times, the top-viewed programing that we have on our service.
How much does Romania count in the regional development plans of Netflix?
Right now not very much, to be honest. It may, in the future. I think what’s important to understand it’s what we’re looking for in terms of our programmes.
We’re not looking for program to satisfy a particular country, per se. We’re looking for program for people’s tastes around the world, what do people enjoy watching around the world.
So, for example, we learned that Turkish TV drama is loved in many places around the world. The Turkish TV drama is loved in Romania, but it’s also loved in the United Arab Emirates, in Indonesia, in Malaysia, in Poland. So, Turkish TV drama makes a lot of sense for Netflix to invest in because we know we can find audiences for it.
That’s, maybe, more obvious, than, for example, French television. We premiered a Netflix original series called Marseilles, shot in the same city of Marseilles. It’s a French series, written and directed by French people, starring French actors, the lead is Gerard Depardieu. That series also does well around the world. A newspaper in Brazil was calling it the best Netflix original since House of Cards. A newspaper in the UK wrote great review about it. The same in Sweden, in Germany.
But many French critics were very negative about it. And that’s fine – we didn’t create that show for people in France. We created that show for people who like this kind of series – it’s French series, but it’s French political, crime, family drama. And that kind of programing travels around the world.
Coming back to the question about Romanian programmes. If there are examples of Romanian television or Romanian film that transcends Romanian borders, that could be something we’d be interested in. But I wouldn’t make any commitments on that now.
Introducing local subtitles
It’s clear that if you have local subtitles people would engage more and you can attract a larger group of people to watch the series. By the end of the year, gradually you will see more and more titles that will offer subtitles in Romanian.
Does Netflix plan to make local content acquisitions?
Yes, if it makes sense in the business model. I would say, though, that in Romania, like in many other countries around the world Netflix is in, you don’t have a lack of access to Romanian programing. I can turn on the TV here and I can see many Romanian channels. You’re not necessarily looking for more places for Romanian programing. What we offer is different programmes, different types of entertainment and that’s why people subscribe to Netflix.
In terms of existing TV shows, existing documentaries, there will probably be some acquisitions. It’s, basically, dependent on what’s available, what the quality is, whether we’ll be also able to offer it in other countries. I would say it’s likely to acquire some Romanian TV or film documentaries.
Countries with high levels of piracy will be interested in Netflix. Because, typically, a large use of piracy means high level of frustration with the lack of access to the type of programmespeople want to watch.
People choose to go to piracy to be able to watch the things they can’t watch somewhere else easily. That means that offering a service like Netflix would be great. That’s how we see it.
The average VOD consumption
I will not be specific to Romania. Earlier this week we published some information around how Netflix members watch TV series. Specifically, we released some data around what we call “the binge index” and how fast people consume seasons of TV series.
To me, the most interesting part isn't how much people watch, but how services like Netflix change TV behavior and how much people really enjoy being in control of their own viewing.
With a service like Netflix you can have, for example, a week of watching Breaking Bad. With classic TV, you are watching a season of a TV show starting in September and you would finish it in May. On Netflix people start their TV season on Monday and they finish it, on average, the next Monday. So, in one week.
Some people finish a TV show in 4 days, especially if it is super-intense. If that’s something that requires more thinking, more of your brain, like House of Cards or Bloodline, it takes a little bit longer.
We offer a free month everywhere where we are available., but you don’t see what’s on Netflix until you’re actually signed up. So, if you want to see what we offer in terms of programmes, you have to sign up tell us how you’ll pay for our service after your free month.
Typically, what we see around the world is that the majority of people that take a free month end up being paid subscribers. So, more than 50 percent of the people that try Netflix, stay with Netflix. Also in Romania.
There’s still work to do in terms of making the service more appealing and more atractive, but that’s pretty good. And, as I said, we haven’t marketed our service in Romania at all so we’ve been pleased so far.
The Netflix communication philosophy
I’m not sure we have one. (laughs) The way we talk about Netflix is really around consumer freedom, consumer control, providing a better television experience.
Sometimes, people talk about Netflix as like “revolutionizing television”. And that’s not the way we would talk about it.
We think that the internet is a revolution. It has changed, many different things in peoples' lives.
You can’t imagine not having the internet anymore. It’s changed the way you shop, it’s changed the way you bank, it’s changed the way you buy travel, the way many people learn and how they go to school. It’s changed healthcare and definitely the music industry, it’s changed the news industry and the publishing industry significantly.
But internet hasn’t changed the TV industry. Yet. And we think that’s what’s happening now - the internet is providing an opportunity to deliver a better television experience. And we are one of the people that are figuring out how to provide a better television experience using the power of the internet.
The primary way we present our service to consumers now, for the last couple of years, has focused on the programmes.
The primary advertising you will see for Netflix in countries where we currently focus on advertising (which hasn’t been Romania; there has been some advertising in Romania, but not a lot) is, for example: if you go to Berlin, you’ll notice a major billboard outside Potsdamer Platz that talks about Orange is The New Black (author’s note: original Netflix programing). So, we don’t advertise Netflix per se, we advertise the programmes.
When a new movie comes out in the theaters you see advertising for a movie, when there’s a new TV show on one of your major channels you’d see advertising for that show. Netflix marketing is very similar, although we focus heavily on the online component.
Elements that made Netflix a success
Taking a risk in terms of expanding internationally. Taking a risk in terms of really investing in original programming, taking a risk in investing in exclusive rights.
There are three major components that drive Netflix’s success. Obviously, we need to have great programming – you can talk about the service as much as you want, but when’s nothing great to watch on it, who’s going to subscribe?
Then, it just needs to work really, really well, so that it’s intuitive, easy to use. You can use Netflix on different devices, you can use it even if the internet is crappy – you don’t have that problem in Romania, but if you go to places like Poland the internet is not that great.
Finally, you need to have great marketing, so that the message of Netflix - what it is and what it gives you - reaches consumers.
Those three things are key to the success of Netflix: great programing, great technology, and great marketing.