Although Netflix is largely responsible for the popularity of the online video streaming industry today, over the past five years, they have needed to continually adapt and become more innovative with their marketing tactics to maintain their position as a disruptive force.
With the rising cost of licensing new content and heavy competition from the likes of HBO, Amazon, and Hulu, Netflix has adapted their business model to focus more on creating branded content of their own. In part due to their owned media successes of House of Cards and Orange Is the New Black, Netflix held the top spot with a 36% share of the online streaming industry.
Through their market leadership, they are breaking out ahead and setting the new standards for branded content and video advertising that are both compelling and well executed to fit customers’ needs.
Closed-Loop Feedback Systems Inform Programming Decisions
Traditional media outlets are chasing engagement by tailoring their content using closed-loop feedback systems. It’s what’s given rise to the listicle and the tl;dr. But it’s also what contributed to Netflix smashing success with its owned programming.
Netflix put consumer data to the test when it made one of the boldest decisions that we’ve seen of late—investing $100 million into the owned media bet that is House of Cards, without even testing a pilot. They were able to make the bet because of their keenly constructed closed-loop feedback system taking in and continuously monitoring insights from customer data.
Netflix accessed consumer data insights from current subscriber behavior and viewing habits to determine what content that they should invest in. They researched popular actors, actresses, television series, the data behind their recommended content algorithm, and the correlations among all of that data.
For example, Netflix discovered in their data sets that people who enjoyed the British version of House of Cards also tend to enjoy movies featuring Kevin Spacey. This helped inform casting decisions and could have been one of the reasons that the series has been an ongoing success.
More than a quarter (76%) of TV streamers say watching multiple episodes of a great TV show is a positive experience, and Netflix CEO Reed Hastings is changing the way that online content is consumed by releasing full season series at one time. The idea is to give the Netflix audience the chance to view content on their own schedule and increase the odds of creating loyal viewers.
While not every media company will be in a position to make bold decisions like Netflix did with House of Cards, they are influenced by the new standards set by Netflix. HBO’s move to unbundle its streaming service and Hulu’s unheard of $160 million deal for the rights to air Seinfeld are both signs of the new standard for online video streaming. The new standard has even reached beyond streaming—network television is feeling it too. To combat declining audience numbers, the “big five” networks are firing up their streaming initiatives. With the inherent feedback loop that online streaming creates, Network TV is shifting its programming strategy to meet the feature film quality, binge-worthy standard that Netflix has established.
Interacting with the Audience Natively
The standard doesn’t stop at owned programming—its reach extends to advertising. Recognizing the interconnectedness of the digital ecosystem, Netflix is also setting the new standard for branded content. The nature of their business enabled Netflix to formulate a native advertising strategy centered on creating content that specifically speaks to their target audience through a variety of publishers. For example, The company partnered with the New York Times’ Ideas Lab to extend their brand reach through a unique advertising campaign when promoting Orange is the New Black—a documentary titled, Beauty on the Inside.
The video, which runs just shy of five minutes, highlights the everyday struggles of real women incarcerated in the prison system.
Netflix opted to sponsor and distribute this content through the Times’ newly created branded content unit, T Brand Studio. This proved to be the ideal environment where readers would generally read about similarly positioned and informative content.
Beauty on the Inside, was a success because it focused on great storytelling and aligned with The New York Times’ audience. While not particularly glaring, the logo on the sponsored piece provided yet another medium to get the brand in front of both potential and current Netflix users. Brand salience is built through the memory structures marketers can create through repeated, emotionally resonant connections with customers—which is exactly what Beauty on the Inside did.
While sponsoring content to extend brand may not seem particularly game changing, it’s Netflix’s market dominance combined with a willingness to test new advertising methods that is setting the new standards for branded content.