• by Steve Sternberg , Featured Columnist, November 2, 2016

Five years ago, I had just subscribed to NetfIix and wrote an article for MediaPost explaining why I thought it was the best thing ever.

I ended my article with the following: “So far Netflix hasn't had any impact on our regular television viewing, but it has cut sharply into our pay-per-view movie and DVD viewing.  I think it's the first thing that's actually cut into my son's video game playing.  We like the basic platform so much, however, that if and when Netflix does strike more content deals for top TV shows and movies, and has more original series, it will probably have a much bigger impact on our TV viewing -- especially in the summer.  The company has the right model, and seems to have hit that rare chord with kids, teens, and their parents.” 

Spending an extraordinary amount of money on programming, reportedly $5 billion in 2015 and $6 billion in 2016, has helped Netflix become in five short years everything I expected and more.  While it raised its price from $8 to $10 per month, the difference in my monthly credit card bill was not noticeable, and did not make me even think about canceling the service.

My son and I watch “Daredevil” together and are about to start watching “Luke Cage.” I watch “Jessica Jones” by myself and just started watching “Stranger Things.” My wife and I watch “House of Cards” together, usually three or four episodes at a time.  We also like “Longmire,” which we watched on A&E before it was canceled for appealing too much to older viewers, and Netflix picked it up.  We’re about to start watching “Master of None.”  My wife keeps saying she wants to start watching “Grace and Frankie,” but hasn’t yet.

My 17-year-old son likes searching Netflix for shows he hasn't yet seen but might like (recently discovering “Archer” — not sure how pleased I am about that).  We also started rewatching “30 Rock” together from the beginning, although we stopped after the second season (we will probably revisit in the summer).  He also likes a few shows I’ve never heard of.

One reason Netflix continues to grow and thrive, aside from spending a significant amount on programming, is that it does not have the same constraints as ad-supported networks, most importantly needing to worry about average minute ratings and audience flow. We’ve seen time and again, a broadcast or cable network unsuccessfully try to air a program that does not fit in with the bulk of its lineup.  While reach is considered for media planning, the only things that really matter for programming decisions are average ratings and network rankings (among artificially constructed age groups such as adults 18-49 and 25-54).

Netflix does not need to worry about any of this.  It doesn’t care about adults 18-49 or 18-34.  A 60-year-old has just as much value to Netflix as a 25-year-old, or maybe more, since older viewers tend to be more loyal (and have more disposable income).  

Netflix wants “Longmire” and “Grace and Frankie” to appeal to different viewers than “Orange is the New Black” and “Daredevil.”  Reach matters much more to Netflix than average audience.  That’s how you get and sustain subscribers at this price point.  Ten bucks or less per month is not going to make me drop Netflix even if I watch only three or four original series, and only watch it for a couple of hours a week.

And when the broadcast networks are in repeats, and there’s nothing I want to watch on cable, there’s always something I can find on Netflix.  My wife and I watch Netflix together on our TV. When I watch Netflix by myself it tends to be on my laptop, and my son watches on either his TV, laptop, or Playstation.

It’s still the best thing ever.