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Mitch Lowe: Netflix Binge-Viewing Bad for Business

11 Feb, 2014 By: Erik Gruenwedel

"House of Cards"

When Netflix on Valentine’s Day bows the second season of high-profile original political drama “House of Cards,” it will again make all 13 episodes available — thereby enabling the cultural phenomenon known as “binge-viewing.” This is the practice of watching television for longer time spans than usual, usually of a single episodic show.

To Mitch Lowe, co-founder of Netflix and former president of Redbox, binge-viewing is a concept the subscription streaming pioneer should have left in the bottle. Lowe said the ability of viewers to consume an entire season of a TV show in two or three nights (if not sooner) eliminates the spectacle of cliffhangers, office water cooler talk and enticing new viewers.

“It really fails on several points — on the social, artistic and the financial aspects of it,” Lowe told . “One of the great ways to build viewership and excitement [around a TV show] is for people to talk about the episodes during the course of work, breaks, or when they’re having dinner with friends.”

Lowe said binge-viewing is akin to a huge spoiler alert in that it precludes people from drumming up excitement about a show since not everybody is on the same page of the storyline as is common during a conventional serialized weekly program.

“Everybody stays mum, you’re afraid to give away what happens in the next episode,” he said. “It really creates this cone of silence.”

Indeed, serialized dramas such as Showtime’s “Dexter,” AMC Networks’ “Mad Men,” Starz’s “The White Queen,” and HBO’s “Game of Thrones” and “True Blood” have all stuck to the traditional weekly episode format.

Netflix argues that since it is not beholden to weekly ratings and advertisers, it can stream all episodes of an original series from the start — thereby differentiating itself from other pay TV services. The SVOD service believes binge-viewing ups video consumption, keeping viewers away from linear TV.

To Dick Parsons, former CEO of Time Warner, binge-viewing is just bad business. He said the idea shouldn’t be about creating a movie model where viewers come and sit either for two hours or 13 hours and come back in six months.

“What you want to do in TV is habituate viewers,” Parsons said. “From the point of view of the business model, binge watching is not good for the company.”

Parsons admitted that the traditional TV viewing model has changed, with people not consuming their news and entertainment at the same time each day. The rise of on-demand viewing, connected devices and over-the-top video has upended conventional home entertainment norms.

“The monolithic market perspective is fragmented, but from a business perspective and revenue-generating perspective it’s dangerous," Parsons said. "It’s moving television into the realm of movies, which is a less good business than television.”

Michael Pachter, analyst with Wedbush Securities in Los Angeles, said that with the vast majority of Netflix content repurposed, enabling binge-viewing doesn’t impact the bottom line because “the water cooler talk” happened years ago. That’s not the case of with originals, the analyst said, where water cooler talk is essential to building the brand.

“I completely agree that maintaining the [current] business model for originals is a bad idea,” Pachter said. “Unfortunately, Reed Hastings thinks it’s a good idea, so we’re going to be allowed to binge.”

About the Author: Erik Gruenwedel

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