Friday, October 3, 2014, 6:06 PM ET|Posted by Will Richmond
"Content is King." No, wait, "Distribution is King." No, wait, "Content and distribution are equals and need to work together." And on the debate has raged for years about what's at the core of the media and entertainment industry's success. Meanwhile, Netflix keeps proving that data is fast becoming the real king, with profound implications for all players in the industry.
The latest evidence of data's ascendance and Netflix's ability to harness it is the company's new 4 movie deal with Adam Sandler. Opinions about Sandler are all over the board, but in a must-read interview with The Hollywood Reporter, Netflix's content head Ted Sarandos neatly summed up why Netflix made such a big commitment to him:
"The more global we become, the more access we have to global behavior data so we can see what people are watching all around the world. Very uniquely, he (Sandler) stands out for his global appeal to Netflix subscribers. Even movies that were soft in the U.S. outperformed dramatically on Netflix in the U.S. and around the world."
Underscoring just how robust Netflix's user data is, Sarandos went on to say the following about how actionable user data from the company's recent France and Germany launches already is:
"Almost immediately, because we've been at this long enough that we can build these regression models that tell you a lot about the first day, the first week, the first hour, the first month."
Of course, none of this guarantees the 4 new Sandler movies will also perform well on Netflix. But it does mean the multi-hundred million dollar commitment Netflix made was a highly-considered investment that has limited downside risk. That makes it a far smarter way to use precious capital than relying on the golden gut of studio executives, no matter how much audience research is available.
As I wrote 4+ years ago, Netflix effectively infuses data in many of its business decisions. A great example of this is how successful both of Netflix's high-profile originals, "House of Cards" and "Orange is the New Black" have been. Isn't it somewhat remarkable that a brand new player in serialized dramas could break through given the astronomically high failure rate for new TV shows? Not when they've been self-selected with insights gleaned from hard data.
(Btw, I should note that Netflix's extraordinary reliance on data is what made the whole Qwikster debacle so incredible unexpected and out of character for the company. But that was now 3 years ago and we haven't seen any major executive slip-ups since.)
Netflix's use of data has already had a profound impact on the industry, helping the company grow to 50 million global streaming subscribers in 7+ years. Many media companies have benefitted from Netflix's licensing largesse, but some will be licking their wounds as Netflix's strategy evolves and its data drives ongoing programming decisions.
Meanwhile, for TV networks that have long relied on Nielsen and other audience data, the lack of first-hand user insights is becoming an increasingly obvious competitive disadvantage. Producing high-quality TV shows and movies is a very expensive proposition. Any edge for how to create the next hit is a huge benefit. This is what data provides.
To be sure, data isn't the sole determinant of success. There is still plenty of art in developing creative projects like TV and movies, not to mention the role of marketing and distribution (raising the topic of windowing, which Netflix's "Crouching Tiger" deal addresses). But there's big role for data to play in nudging things in the optimal direction. That's what Netflix appears to be doing successfully and why data's place on the throne will become increasingly secure.