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Netflix and the Development of the Internet Television Network Syracuse University SURFACE Dissertations - ALL SURFACE May 2016 Netflix and the Development of the Internet Television Network Laura Osur Syracuse University Follow this and additional works at: https://surface.syr.edu/etd Part of the Social and Behavioral Sciences Commons Recommended Citation Osur, Laura, "Netflix and the Development of the Internet Television Network" (2016). Dissertations - ALL. 448. https://surface.syr.edu/etd/448 This Dissertation is brought to you for free and open access by the SURFACE at SURFACE. It has been accepted for inclusion in Dissertations - ALL by an authorized administrator of SURFACE. For more information, please contact [email protected]. Abstract When Netflix launched in April 1998, Internet video was in its infancy. Eighteen years later, Netflix has developed into the first truly global Internet TV network. Many books have been written about the five broadcast networks – NBC, CBS, ABC, Fox, and the CW – and many about the major cable networks – HBO, CNN, MTV, Nickelodeon, just to name a few – and this is the fitting time to undertake a detailed analysis of how Netflix, as the preeminent Internet TV networks, has come to be. This book, then, combines historical, industrial, and textual analysis to investigate, contextualize, and historicize Netflix's development as an Internet TV network. The book is split into four chapters. The first explores the ways in which Netflix's development during its early years a DVD-by-mail company – 1998-2007, a period I am calling "Netflix as Rental Company" – lay the foundations for the company's future iterations and successes. During this period, Netflix adapted DVD distribution to the Internet, revolutionizing the way viewers receive, watch, and choose content, and built a brand reputation on consumer-centric innovation. This reputation served it well during its second phase, "Netflix as Syndicator" (2007-12), when the company turned from DVD rentals to online distribution. In chapter two, I explain who Netflix adapted syndication – a business model that has been a staple of US broadcasting for half a century – to Internet distribution. By doing so, Netflix up-ended both the TV industry's traditional content release structures and viewers' habits. By shifting TV distribution to the Internet, Netflix drastically increased the control viewers have over where, when, and on what devices viewers watch TV. In its third phase, Netflix entered the original programming business by subtly adapting traditional program genres, content, and release schedules to Internet video. I split this phase – "Netflix as Internet Network" (2012-present) – into two chapters. While many of Netflix's concerns parallel those of traditional networks – in terms of production and financing, for example – Internet networks also have a number of unique concerns in areas such as Net Neutrality and distribution windows. Netflix has led the charge on these issues, and chapter three explores Netflix's role as the first Internet network, including the development of its binge- viewing strategy and its push into international distribution. Finally, chapter four takes a deep dive in Netflix's foray into original program production. In its third phase, Netflix has adapted traditional TV structures to Internet distribution. Despite the innovations in short-form and user-generated content that sites like YouTube, Crackle, and Twitch have named, Netflix's traditional approach to programming has set the template for successful Internet networks that has been adopted by the likes of Hulu, Amazon, and Yahoo Screen. Chapter four analyses Netflix's biggest programs - including House of Cards, Orange is the New Black, Daredevil and others - to explain how Netflix has adapted traditional TV genres and structures to the freedoms in production, marketing, and content possibilities that the Internet affords. In the same was that NBC set the example for broadcast networks in the 1950s and HBO developed the framework for cable TV in the 1990s, Netflix has set the template for Internet TV in the 2000s. Netflix's mix of technological advancements, consumer-centric practices, personalized content, and global mindset have become the gold standard for the how-and-why of developing a successful Internet TV network. Although other aspiring Internet networks Hulu and Amazon started out with a different ethos than Netflix, Netflix's financial, creative, and cultural success has forced a series of reactionary decisions from both Hulu and Amazon that have brought them closer and closer to the foundations Netflix began laying out in 1998. So while the Netflix model isn't the only possible model for an Internet network, it has become the blueprint for the newly-developing Internet TV ecosystem. NETFLIX AND THE DEVELOPMENT OF THE INTERNET TELEVISION NETWORK by Laura Osur B.A., University of Chicago, 2007 M.A., Syracuse University, 2012 Dissertation Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Mass Communications. Syracuse University May 2016 Copyright © Laura Osur 2016 All Rights Reserved Table of Contents Introduction … 1 Part I: History Chapter 1: Netflix as Rental Company (1998-2007) … 21 1998-2007: Netflix's Early Years … 23 Developing a Brand Synonymous with Innovation … 31 Innovation Reaches its Peak: The Netflix Algorithm … 36 Conclusion: Towards Internet Streaming … 43 Chapter 2: Netflix as Syndicator (2007-2012) … 45 Managed Dissatisfaction … 47 New Distribution Strategies … 49 New Content Strategies … 66 Conclusion: Growing Pains … 77 Part II: Netflix as Internet Network (2012-present) … 82 Chapter 3: Netflix Transitions to an Internet Network … 83 Net Neutrality … 84 Disrupting Distribution Practices … 90 Netflix Enters Film Production and Distribution … 96 Netflix as a Global TV Network … 102 Conclusion … 122 Chapter 4: Original Programming for an Internet Network … 124 The First Foray: Lilyhammer … 126 Quality Dramas … 129 Quirky Comedies … 144 Cult Shows … 165 Conclusion … 173 Conclusion: The OTT Ecosystem … 175 References … 184 CV … 215 v Introduction "[N]o one is happier to see streaming services take nominations away from Cable than Network television. Not very nice when someone younger comes along is it, Cable? Cable is looking at Netflix the way Justin Bieber looks at One Direction." – Seth Meyers, 66th Primetime Emmy Awards It is fitting that I started this project on the eve of Netflix’s first Emmy ceremony. Only a year after premiering its first original program – Lillyhammer in 2012 – all three of its qualifying shows – House of Cards, Arrested Development, and Hemlock Grove – received nominations. Just a year later, Netflix was the center of Seth Meyers’ opening monologue, signaling the mainstreaming of Netflix as a legitimate original programming alternative to broadcast and cable, for critics, audiences, and the Academy. Many books have been written about the five broadcast networks – NBC, CBS, ABC, Fox, and the CW – and many about the major cable networks – HBO, CNN, MTV, Nickelodeon, just to name a few – so this also seems a fitting time to undertake a detailed analysis of how Netflix, as the preeminent Internet TV network, has come to be. When Netflix began its plans to deliver DVDs in 1997, both the Internet and the TV landscape were radically different. At the end of the 1996-97 season, ER won the ratings race with 21.2 million households weekly, and a 35 share (HH), followed by Seinfeld (20.5/32 share), Suddenly Susan (17/27 share), and Friends (16.8/28 share). Seven of the top ten shows aired on NBC. Nielsen regularly provided ratings in households, rather than the adults 18-49 demographic. On cable, 1997 saw the premieres of Oz (HBO, 1997-2003), Daria (MTV, 1997- 2002), Stargate SG-1 (Showtime/Syfy, 1997-2008), South Park (Comedy Central, 1997-), and The Daily Show (Comedy Central, 1997-). It was still two years from when HBO would become a legitimate original TV producer with the premiere of The Sopranos. 1 In 1997, Internet video was also in its naissance. Eight years before the debut of YouTube, pixelated, somewhat primitive videos such as "Bad Day," "Dancing Baby," and "Hampster Dance" circulated via e-mail over slow and unreliable dial-up Internet connections. The foundations for Internet video had been laid, however, when, in January 1998, Ally McBeal (Fox, 1997-2002) introduced the Dancing Baby Internet meme as a metaphor for Ally’s impending biological clock, effectively integrating Internet video into popular broadcast television programming. The Netflix revolution began with the radical idea of using the US post office to send DVDs to customers, a set-up not too far from the use of horses and elephants to transport the circus from town to town a century ago. At one and the same time, Netflix's DVD-by-mail business was both old-fashioned and innovative. While the postal service is one of the government's oldest departments, applying the postal service to video rental distribution was an innovative approach to a rental industry based entirely on brick-and-mortar stores. This balance between old-fashioned and innovation is difficult to master; Blockbuster failed and other rental stores like Hollywood Video and Movie Gallery never even tried. Netflix's success lies in elevating 'old-fashioned’ to ‘cutting-edge,’ by mixing pre-existing elements of content distribution with new and radical advancements. Before it began producing original programs, Netflix took pre-existing DVDs of film and television shows and gave customers a new
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