Netflix CEO: Viewing Time, Not Subscriber Counts, Will Determine Streaming Wars' Winners

While coverage of the video streaming wars tends to focus on comparing services’ existing and targeted subscriber counts,  viewing time will be the real make-or-break metric, argues Reed Hastings, CEO of Netflix — the well-established leader, with a current global subscriber count of 164 million.

“Time will be the real competition,” Hastings said during yesterday’s New York Times DealBook Conference, per CNBC, which videoed his comments.  “You’ll hear some subscriber numbers, but you can just bundle things, so that’s not going to be that relevant. So the real measurement will be time — how do consumers vote with their evenings? What mix of all the services do they end up watching?”

“There will be some more competition for us, but we’ve already got a lot of competition,” Hastings added, noting that Netflix, YouTube, Hulu and Amazon Prime Video all launched in 2007 or 2008, and have been competing for more than a decade now. “And people will watch less linear TV, and now watch, say, Disney content on the Disney+ service.”

Most consumers will subscribe to “a couple” of services, he believes. (A scenario that reflects the current status, according to U.S. adults’ own reporting in one new survey.)

“I don’t think that subscribers or cumulative media spending is going to go down,” Hastings concluded. “Linear TV is a huge revenue and time source that’s declining, and that’s fueling the growth of all of the internet sources."

Hastings also reemphasized his maxim that streaming services compete not just with one another, but with all of the activities that now command consumers’ time, including video games and sleep.

Nielsen and other measurement services are likely to begin releasing viewer data early in first-quarter 2020, he said.

Speaking of going up against Disney, he noted that Netflix’s new offerings include “The Irishman,” “The Two Popes” and the new season of “The Crown”—quality content that speaks to its focus on pleasing its customers.

“That’s what Disney does, too,” he said. “Disney’s been doing creative content for 100 years, and they’re incredibly good at it. They’re $80 billion in revenue, we’re $20 billion. And we’re both focused on how do we win viewing time from you by doing incredible work, telling stories that you all care about.”

He noted that all companies can learn from Disney when it comes to entertainment content, adding that he’ll be a Disney+ subscriber himself.

Asked by moderator Andrew Ross Sorkin whether Netflix can continue to let subscribers cancel any time, particularly given longer-term subscription efforts by Disney and others, Hastings said that Netflix focuses on how it can offer a service that “people want more of the time — not on how to lock people in… When you’re in front of the TV and you think, ‘Do I turn on cable, do I turn on YouTube, do I turn on Netflix?,’ we want you to choose Netflix.”

Asked if Netflix and competitors will have to scale back at some point on the huge investments now being made in content, Hastings replied that, to the contrary, “We plan on taking spend up quite a bit.”

Netflix has been growing and investing around the world. “The U.S. has 5% of the world’s people, and all people around the world love entertainment,” he said.

Netflix has been “strong in series, now we’re getting strong in movies,” and pumping up investment in areas including animation and unscripted shows, he added.  

5 comments about "Netflix CEO: Viewing Time, Not Subscriber Counts, Will Determine Streaming Wars' Winners".
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  1. John Grono from GAP Research, November 7, 2019 at 5:33 p.m.

    Which is what the cognoscenti have been saying for a decade or so.

    And if you report that viewing time relative to the period of time that the viewing time is reported, and realtive to the population (say, just US or global) and for a specific piece of content its duration, then that would be very helpful as well.

    We could even give it a name.   A 'rating' springs to mind.

  2. Ed Papazian from Media Dynamics Inc, November 7, 2019 at 6:14 p.m.

    As I pointed out on another forum, the two---share of viewing and total subscriber counts are linked. If a subscriber is paying $10 per month for a service whose program library becomes less interesting relative to what's offered by other platforms, the inevitable result is a loss of frequency  and, eventually, a cancellation of the service. Why? Because people can only devote so much time to the same kind of content.

    As a rule it takes some time for the final stage---cancellation---to take place, but once people buy another service---or two of them ---and start to watch their content, their bonding with the original incumbent fades---until it becomes a not worth the money deal. Thus, reduced share of viewing usually comes first, folowed by loss of subscribers, second.

  3. John Grono from GAP Research, November 7, 2019 at 7:04 p.m.

    Totally agree Ed.

    If the market has a lot of providers with 'skinny' packages, then you tend to get 'over-subscription' levels (a form of FOMO), and when ennui sets in, there is a 'rationalisation and reduction' phase.

    The ideal offering would be a 'consolidation' option that was cross-provider via a single interface.

    I've basically ended up at that phase through Australia's biggest aggregator - Foxtel (yes a Murdoch company) which has around 28% household penetration (i.e. way lower than the US for cable).

    Foxtel has strong movie channels (though reducing as the movie-based houses now have their own streaming offers and are quarantining content), extremely strong in sport, very strong in general entertainment, news and current affairs ... which you package via tiers.  They also have free re-transmission of all the broadcast channels.    I have just negotiated an 'all you can eat' deal for $99 per month (~$69 USD).

    Foxtel now has a deal which embeds NetFlix (optional) and I suspect that will be their extended business model.   So, single interface multiple content, single bill.

  4. Craig Jaffe from Baruch College, Zicklin School of Business, November 8, 2019 at 12:51 p.m.

    A few years ago, Netflix's library (quietly) shrank by 32%. Something to consider for those of us who model viewing/usage behavior.

    With that said, I think there was some poetic license in this article (and the related CNBC online post as well) which indicated that Reed Hastings said "total viewing time" was a better way of understanding which services customers preferred. I listened to the whole Hastings interview with the New York Times, and he didn't say anything about "total viewing time."

    I'm glad to discover that, because "total" (while sometimes analyzed) is not generally how our industry evaluates time spent with media, especially when comparing discrete viewing sources, such as media distributors (i.e. Netflix vs CBS vs YouTube, etc).

    There is merit to analyzing "total," but during those exercises, how we define viewing time becomes critical to assure we are making a fair apples-to-apples comparison. Hope you agree.

  5. John Grono from GAP Research replied, November 8, 2019 at 5:10 p.m.

    Very insightful post Craig.

    Total Usage Time is used at a strategic planning level when determining how an advertiser's (limited) budget is to be most effectively and efficiently deployed.   So for the case of Netflix, TV, mobile video etc. Total Viewing Time is still important.   At this stage, within each medium a top-level allocation would also be outlined.

    For example, based on Total Usage Time (and I note that Usage Time varies across media so it is roughly scaled - e.g. 3 hours a day of TV is common, while 3 hours a day of newspaper reading is extreme - using broad consumer research on the target audience), you might allocate 55% of the budget to video, and within that 50% maybe be allocated to broadcast, 20% to cable and 30% to OTT/streaming digital.

    Then as you correctly point out when the allocation is approved by the advertiser, Total Viewing Time is used to select the entities within those allocations that will deliver, and will also be used to decide what content to include in the implementation schedule, and again in the delivery post-analysis.

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