Netflix/Hemlock Grove Digital Strategy

Netflix/Hemlock Grove Digital Strategy - student project

This will act as a sounding board for insights at this stage:

"Netflix's goal is "is to become HBO faster than HBO can become us", Ted Sarandos, Netflix's Chief Content Officer

Netflix Audience:

Predominately Female 56%

Adult: (25-34 - 23%) (35-44 - 25%)

No Kids - 56%

Affluent - 29% with an income of $100k - 28% = $150k, 27%= $50k-$100k

Educated - Graduates and Post Graduates

Caucasian = 78%, African American = 9%

Note: Look at sites such as, Fox Searchlight, Fandango and Rotten Tomatoes for banner advertising opportunities.

Very strong brand with competitive rank dominating the opposition (imbd, Amazon, hulu, blockbuster, redbox)

Google trends shows a spike of interest in December. Traffic peaks on weekends with lows occuring on a Wednesday. Peaks in June/July and Nov/Dec. Most popular in the Western States though Vermont, Maine and New York show volume.

Popular search terms: Netflix Movies, Movies, Movies on Netflix, Hulu, Netflix Streaming

Triple the global monthly searches of Hulu, 10x more that Redbox and Blockbuster.

Slightly dated....but:

  • Moviegoers searched 1.75X more per film in 2010 than in 2008
  • Queries on Google per each Netflix subscriber grew a strong 40% in 2010 as consumers continue to have a strong desire to consume film content in the home after its theatrical run
  • Search activity persists much longer than box office revenue is generated. In the first 30 days of release, 85% of box office has been earned, whereas search activity has only reached 77%
    • There remains significant opportunity to further engage movie audiences online. Emerging trends in search indicate moviegoers are more deliberate about the movies they consume and use online channels to gather information.

    • We see missed opportunity to capture potential moviegoers. Our analysis indicates that consumers searching for a movie are not necessarily indicating definitive intent to see the movie but rather a desire to gather more information. 

    • The changes in movie consumption over the past few years have led to an evolution in the way film producers create and distribute content. The shift was driven largely by the transition from physical to digital in home entertainment. It began four years ago with increased availability of digital content and has been propelled since by the proliferation of Internet-enabled devices. As a result, we’re now seeing an exciting level of experimentation on the part of the studios to streamline theatrical film slates and alter traditional release windows.

      The latest buzz is around the creation of a new “premium VOD” window that would make film content available for rent 30-60 days after its theatrical release. This builds on the notion of compressing the theatrical to DVD window and releasing VOD titles day and date with DVD that was highly publicized last year.

      The theory behind these initiatives, as we understand it, is to develop an incremental revenue stream that would build on the marketing investment and buzz developed in the theatrical window without cannibalizing box office receipts. Inherent in this debate are many variables including appropriate pricing of a new premium product, the likelihood to cannibalize the theatrical window, and piracy considerations, among others. We won’t attempt to address the economics behind many of these questions, but rather offer perspective into this debate by offering insights we glean from search activity throughout the lifecycle of a film. 

      The film industry is at an inflection point driven largely by changes in consumption patterns (physical to digital) in home entertainment. Given the strong profitability of the home entertainment

      window, disruption at this phase reverberates through the lifecycle of a film.

      Search patterns in home entertainment confirm the widely recognized shift toward digital movie consumption. A more interesting insight we garner from this search data is that consumers continue to have a strong desire to consume film content in the home post its theatrical run.

      While the physical DVD sell-through market began its decline in 2007, search activity for DVD terms increased significantly through 2008. The shift in online behavior driven by the increased ability to buy and research DVDs via the Internet compensated for the decreased desire to own physical DVDs. The result was strong growth in search activity for terms including “DVDs,” “new movies on DVD,” “new DVD releases,” among related other generic DVD terms. Query volume for this bucket of terms peaked in the 2008 holiday season. Similarly, piracy became evident in search behavior beginning in 2008; terms including “free movies,” “movie torrent,” and “free movies online” grew significantly.

      In 2010, search activity for DVD terms remained high, but was off 45% from its peak while searches for pirated content terms have fallen to low levels.

      The strongest home entertainment query growth is currently in more navigational terms like “Netflix” and to a lesser degree, “Redbox.” Query volume for Netflix hit a new peak in February 2011 after 90% growth in both 2009 and 2010, as illustrated in Figure 1 below. Even though Netflix receives home video content with a delayed window from a film’s DVD release, search activity suggests that consumers interested in knowing what’s available in home video are shifting from searching for terms like “new releases” to the brand term “Netflix.” Has Netflix become synonymous with home video the way Band-Aid has for bandages? 

      We can’t answer that with any level of certainty but we can uncover search trends that indicate increased levels of Netflix usage. Subscriber growth at Netflix has been well publicized – 2010 marked a year of continued acceleration in net subscriber additions reaching over 20 million subs at year end. Combining search activity on Netflix with subscriber trends illustrates that Netflix growth is not only a function of adding new subscribers, but existing customers accessing the service more. Queries on Google per each Netflix subscriber grew a strong 40% in 2010. 

      The recent surge in Netflix success is largely driven by its rollout of online streaming. With the robust growth of online video viewing, a viable business model, premium VOD, has emerged for the studios to offset the loss of physical DVD sales to players like Netflix.

      The potential introduction of premium VOD would require careful consideration along many factors – pricing, windowing, and cannibalization / implications to distribution partners would be among the most important.

      Search activity can shed light into the time period appropriate for the premium VOD window to begin. The alternatives being considered include a 30-day and 60-day window. Our analysis which uses queries as a proxy for interest suggests the 60-day window would be optimal.

      Figure 2 below illustrates the percentage of box office earned after each week of release as compared to the percentage of searches made on movie title terms.

      Note: Since movie titles oftentimes generate search volume unrelated to a movie’s release (i.e., Alice in Wonderland that has evergreen search interest), we show incremental queries to best isolate the search activity related to the movie.

      Search activity persists much longer than box office revenue is generated. In the first 30 days of release, 85% of box office has been earned, whereas search activity has only reached 77%. If a premium VOD product is released at this period, there is a strong level of awareness as 23% of searches are yet to occur, but there is also the likelihood of missing 15% of box office revenue or potentially 25% if people at the 3-week mark decide to wait one more week to view the movie in home.

      At 60 days, the theatrical potential has largely been captured with 97% of receipts earned while search activity is still active. There are millions of searches

      (6-12% of total) that persist in the 45-60 days post theatrical release indicating a high enough level of awareness to introduce the movie on a new format without having to fully invest in a new marketing initiative.

      Or Changes in Windowing?

      Similarly, studios have been experimenting with compressing the windows from a film’s theatrical to home video release. In 2004, studios waited 5 months on average to release a title on DVD which has since been condensed to 130 days (average as of 2009). While studios continue to time the home video release of certain titles to coincide with peak purchasing periods such as the December holidays, several have recently been considering tightening windows to allow for reduced advertising spend and more effective sequential marketing in the home video window. The theory posits that buzz and awareness can be better maintained from theatrical to home video with shorter windows.

      We analyzed search activity between the theatrical and home video release for all film grossing over $50 million in 2009 and 2010. We segmented the films into four buckets based on release window: 1) ~ 3 months, 2) 3-4 months, 3) 4-5 months, and 4) 5 months. Since search activity is one indicator of awareness, we tested whether there was any meaningful difference between the search curves of releases with short versus long windows.

      Typically, search activity for a film builds prior to premiere, peaks at premiere, and moderates thereafter until a smaller spike builds concurrent with the home video release.

      Films with a long release window follow that pattern and illustrate search activity falling to pre-theatrical levels 8-10 weeks following the theatrical release. At the DVD release, queries build to 36% of peak volume on average. Searches are active only in the1-2 weeks prior to the home video release. 

      The home entertainment section of this paper illustrates how early stage we are in the home video transition. As such, new initiatives haven’t yet fully materialized in search activity. In contrast, strategies to streamline the theatrical business have been at play longer and have had a much more pronounced impact on search activity and revenue performance.

      As a result of the challenges in home entertainment, box office has become an increasingly large proportion of consumers’ movie spend. Box office increased to $10.6 billion in 2010 versus $9.6 billion in 2009 and has generally been on an upward trajectory over the past ten years.

      One strategy studios have employed to maximize box office potential has been to be more selective in choosing film slates. Reducing clutter and investing more in each release has positively impacted the profit profile of release slates. Box office per film grew at a 15% CAGR over the past two years and 9 films grossed over $200 million in 2010 versus 6 in 2008.

      The success of streamlining films slates has not only translated into higher revenue per film, but also stronger online engagement prior to release. In analyzing search activity on movie title terms for all movies grossing over $50 million, we see that queries per moviegoer increased at a 17% CAGR from 2008 to 2010.

      Digging deeper into search behavior across the varied tiers of films brings to the forefront several noteworthy trends as to how moviegoers search for films and subsequently convert / buy a movie ticket. Figure 6 below illustrates per film performance in sales and searches across two buckets of films – box office > $100 million and box office between $50-100 million. 

      Changes in media consumption have led to an evolution in the way studios produce and distribute content. The transition in theatrical is well underway as studios have successfully streamlined films slates and focused investment on high quality, proven concepts. As a result, not only has box office performance improved, but also online engagement as measured by searches per moviegoer has grown significantly in 2010.

      That said, there remains significant opportunity to further engage movie audiences online. Since moviegoers are becoming more deliberate about the movies they consume and are increasingly using online channels to gather information, we see significant opportunity to capture additional moviegoers. Consumers searching for a movie are not necessarily indicating definitive intent to see the movie but rather a desire to gather more information.

      Studios therefore need to be present with compelling trailers and other desired information at the moment moviegoers indicate purchase intent – the moment they search.

      The evolution in home entertainment is much more nascent. Studios are contemplating the creation of a new “premium VOD” window that would make film content available for rent 30-60 days after its theatrical release. Our analysis of search activity supports the viability of a new 60-day window.

      Given the importance of search as a continuously tracked metric representing consumer awareness and intent as well as sea changes in the industry, Google offers a free tool called Insights for Search through which studios can monitor search activity.

      Go to:

      Insights for Search shows relative query volume over various periods of time for search terms you select. The screenshot in Figure 14 compares search activity for the terms “Movies,” “Harry Potter,” and “Netflix” illustrating relative volume and differences in query patterns. Similarly, the tool provides insights into top related searches and rising searches (searches that are growing the fastest).

      Moviegoers tell us what they want when they search. Insights for Search is one more way to listen. 

      Hulu appeals to a younger demographic. Playstation is the chosen weapon of choice for streming Netflix movies -

      Certainly space here to strongly target both the younger demographic and the platform they prefer - gaming platforms.

      Facebook CRM needs work -  (4.41% response rate and 24hr response time to posts ain't exactly engaged!)

      That’s what I liked about it, “ Roth said. “That we could do something that was adult subject matter, and if we want to go dark and violent, we can. If we want to have the language, we can. We have the freedom to do something like it’s on cable... to go as R-rated or as NC-17 as we want. Where the teenagers could really behave like modern adolescents.”

      The above is important for the tone of the campaign.

      Netflix Statistics
      Total number of Netflix streaming subscribers 23 million (this is now 33 million)
      Number of hours spent by Netflix members watching streamed video on hi-speed internet 2 billion hours
      Total number of Netflix viewers who watch live stream via video game console 50%
      Percentage of all U.S. internet traffic during peak hours that use Netflix 30%
      Percentage that Netflix Snail-Mail will make up of all disc-rental spending 35%
      Total percent of Netflix members who watch both Television shows and Movies 36%
      Total percentage of Netflix subscribers who use service via cell phone 6%
      Total number of Netflix distribution centers 58
      Total percentage of Netflix subscribers who use their computers to stream and watch 42%
      Total percentage of Netflix subscribers who watch by connecting their computer to their T. V. 14%

      Would be interested to know if, and by how much, these stats have changed for users streaming via video game consoles, those streaming via computers, and those connecting their computers to a TV.