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>The networks are gambling big in a risky industry where only the most prominent shows survive. While top-rated hits can garner millions of viewers, FX research

>The networks are gambling big in a risky industry where only the most prominent shows survive. While top-rated hits can garner millions of viewers, FX research found that the bottom 20 percent of shows averaged around 380,000 viewers, a daunting prospect for networks that depend on big audiences for ad revenue. Only the prominent shows survive in the ads business model that currently governs these networks. If an Amazon or Netflix show gets 380,000 viewers and this show convinces the majority of those viewers to keep their subscription, then the respective streaming giant has already accomplished their goal. That's another $3.8M (or whatever the average subscription amount is) in monthly subscription revenue. They're not beholden to advertisers. A typical "Black Mirror" viewer might not overlap with a typical "Marco Polo" viewer or a typical "Unbreakable Kimmy Schmidt" viewer, but, as long as each viewer has a reason to stay subscribed, Netflix doesn't care if said shows were to have a low average number of viewers.

zephod 10y ago
$3.8B? The average subscription amount is slightly less than $10,000/month...
- Throwaway23412 10y ago
  Apologies for my crappy math. Already edited it.
deleted 10y ago
[deleted]
chx 10y ago
Yeah but that means you only a very small budget for that show. Perhaps $100k per episode perhaps even less.
- Throwaway23412 10y ago
  Individual budgets for individual shows sounds like a big TV network convention. Netflix isn't selling ads against each show; their subscription revenue is shared between all their content. I just read elsewhere that experts estimated that "Fuller House" attracted over 10M viewers. Even if every single one of those viewers cancelled their subscription after binge-watching the show, Netflix might have made nearly $100M in one month from that show. "Fuller House" probably funded several shows that you or I love.
  - mattmanser 10y ago
    But does it really work that way? Do you think that Netflix thinks it works that way? I subscribe because it has X number of good shows, not because it has 1 good show. If Netflix only had "Super duper invaders from Mars" and that was the only show I was interested in, I wouldn't subscribe to them, I'd just pirate it.
    - matwood 10y ago
      It's two things, good content and ease of use. Netflix is also banking that with their investment in their own content that there are more shows you would enjoy. It does not happen overnight, but they are getting there.
- Cthulhu_ 10y ago
  Good TV shows don't need big budgets. A show like House of Cards does without special effects or CGI, whilst still being a highly popular show. Another factor is that Netflix is a multinational; if a (cheap?) show doesn't work in one country, it might work very well in another one. (see the Warcraft movie as a movie example; did okayish in the west, was a huge hit in China).
  - dredmorbius 10y ago
    Whilst I can't speak to HoC, my understanding is that CGI is frequently used because it is cheaper than constructing large sets or shooting outdoor scenes, or is used to add small elements to a scene. The BBC drama Poldark makes use of CGI to nail some of its historical elements, for example: https://www.latitude50.co.uk/journal/on-the-set-of-bbcs-poldark https://www.latitude50.co.uk/journal/on-the-set-of-bbcs-pold... Both Battlestart Galactica (the remake) and Firefly were fairly low-budget productions which made extensive use of CGI.
    - sprafa 10y ago
      Working in the film industry and this is both true and untrue, depending on the situation. It's very hard to estimate. But yes CGI can make certain productions a lot cheaper, while a lot of films also have a ton of CGI work for superfluous reasons. Retouching the actor's faces for instace is more common than you would imagine, in the industry it's called "beauty work" and it's widespread.
      - dredmorbius 10y ago
        Reemphasising: CGI can be used to reduce costs. Hence, relying on "uses CGI" as a sign of either a high-budget or low-budget production isn't valid. If you want to assess the budget, look at the budget.
    - ascagnel_ 10y ago
      Indeed, this is a poor example specifically because House of Cards makes heavy use of digital backlot. > Steve: We have a visual effects supervisor on the show who’s been working with Fincher for around 20 years. Let’s say we’re shooting on stage, and out the window we want to see the Washington monument, we’ll shoot green screen out of the set window. Then we’ll coordinate with the VFX department, telling them that we need to add a certain image out the window, and then we will go back-and-forth on how much expense it will require and how best to accomplish it. > We actually do a fair amount of digital work in post on the show. All the driving in the show, anything inside the vehicle is done on stage, in a room that is a big three-sided green screen space. The car does not move, the actors are in the car, and the cameras are set up around them. We have very long strips of LED monitors hung above the car. We had a camera crew go to Washington, D.C. to drive around and shoot plates for what you see outside when you’re driving. And that is fed into the LED screens above the car. So as the scene is progressing, the LED screens are synched up to emit interactive light to match the light conditions you see in the scenery you’re driving past (that will be added in post). All the reflections on the car windows, the window frames and door jambs is being shot while we’re shooting the actors in the car. Then in post the green screens are replaced with the synced up driving plates, and it works really well. It gives you the sense of light passing over the actors’ faces, matching the lighting that is in the image of the plate. > And as you mentioned, one of the bigger computer-generated things that we did in the first season was the VFX extension of the exterior of The Francis J. Underwood Library. That was a one-story building on location, which was not very modern. We added some elements to it when we shot it, then in post the top of the building was extended per the design that we did in the Art Department to create the modernist look of that building. There were a few other spots where we did visual effects work to enhance things on the show. From http://www.pushing-pixels.org/2013/12/29/production-design-of-house-of-cards-interview-with-steve-arnold.html http://www.pushing-pixels.org/2013/12/29/production-design-o...
rubber_duck 10y ago
I wonder how much money you get for the embedded brands. Like I went to see dr. strange this weekend and I immediately noticed Microsoft Surface and Adidas prominently focused in two scenes. Not classical advertising but it surely pays, and considering it's a Marvel it must have cost quite a bit, but I'm sure you could find some brands interested in 300k viewers depending on the content.
- brak1 10y ago
  Product placement is a big money source for film & tv. e.g. http://www.cbc.ca/radio/undertheinfluence/show-me-the-money-the-world-of-product-placement-1.3046933 http://www.cbc.ca/radio/undertheinfluence/show-me-the-money-...
- FussyZeus 10y ago
  I giggled a bit when he chucked the Surface on the floor. As a proud owner of a Pro 3, that's highly relatable... :D I've never minded the on-screen product placement in movies. It just makes things more immersive, IMHO. Certainly better than the hamfisted style of advertising seen elsewhere. I'm not sure how effective it is at moving product, though.
  - rubber_duck 10y ago
    >I've never minded the on-screen product placement in movies. Actually the Adidas logo was quite out of place in that movie for me - the color was really out of place in the scene (probably to draw attention), they usually try to balance the colors in the scene and this really broke my immersion. The Surface part on the other had was nice, it didn't sacrifice anything and it added an interesting detail.
    - FussyZeus 10y ago
      To be honest I didn't even notice the Adidas logo. shrug Apparently that product isn't "for" me. Ha.
    - thebspatrol 10y ago
narag 10y ago
It's not only the ads that have a rigid model. The contents of the shows are also mostly formulaic and repetitive. I've seen only a few series that broke that mold, like Lost (although it spoiled after three seasons), The Wire and Breaking Bad. The rest, even if good, seems like made by the same book. Maybe products could differentiate if producers tried to do something... different. If you do the same thing (with small variations) as everybody else is doing, it's very difficult to captivate the audience, that only see "yet another police show with a twist".
izacus 10y ago
And not being forced to appeal to everyone means that they can create better and more immersive content for the smaller target audience the shows are meant for - making them so much better for the subset of people.
bduerst 10y ago
I've always wondered how Netflix does attribution for their netflix originals. For example, do they take the percentage of a person's viewing habits that the show takes up, multiply it by their monthly subscription revenue, and attribute it to the show for all viewers?
- jerf 10y ago
  They have enough data to do statistics that are probably pretty accurate. I wouldn't be able to just whip off a description of exactly how you'd do that in an HN comment, I'd have to think about it for a while since I don't do this every day, but I'm fairly confident the people who do can get a very precise answer to that question with the data they have. Certainly an answer precise enough to give to the executives deciding which series to keep and what to invest in.
  - bduerst 10y ago
    And yet, their recommended movie list is still not that strong :(
    - webmaven 10y ago
      It used to be a lot better, but the increasing cost of licensing Hollywood films has been cutting into the size and quality of their catalog.
- verbify 10y ago
  I recall reading that's how Spotify's model works.
  - michael_h 10y ago
    Spotify's model is slightly different - for premium subscriptions, they pool the total subscription revenue, take their cut, and then pay out to the artists, based on their total share of listens. Not awful, not ideal.
deleted 10y ago
[deleted]
thenomad 10y ago
It's probably not quite as rosy as you state here, I'm afraid. Let's look at a 380,000 viewer show. It's very unlikely that ever single one of those viewers paid for Netflix for a solid year just to get access to that show (which will have all its episodes released at once). So let's assume it has significant cult appeal, meaning a full 25% of its viewers are primarily subscribed for that show and things like it. (I'd say that's likely to be very high, based on my experience in the narrative video world, but let's be optimistic.) And let's say, based on subscribing for that show and forgetting to cancel for a couple of months (or subsequently being retained by another 380k viewer show), that Netflix gets 3 months' worth of revenue from them. So that's 380k/4 = 95,000 * $7.99 * 3 = $2.28m revenue attributable to that show. Of the shows you mention: Marco Polo cost $90m to produce for the entire season. Black Mirror doesn't have figures online, but it'll be around $3m per episode if it's similar to other BBC shows. So that's $18m. Unbreakable Kimmy Schmidt doesn't have figures available, but based on Tina Fey's fees for other shows and general knowledge of how much TV costs, I'll guess at about $3m an episode. (Might be cheaper if they're being clever about it, so could be as low as $2m) So that's $39m. So, assuming that Netflix are just getting revenue from retained subscribers, and they get the figures above, we're looking at losses of: $88m for Marco Polo. $16m for Black Mirror. $37m for Unbreakable Kimmy Schmidt. Obviously the situation is far more complex than that - they'll be financing with coproduction deals, they're looking for growth rather than revenue, they also acquire a lot of content cheaply (very, very cheaply in some cases) through licensing - but it's certainly not rosy enough that they'll be happy with 380k viewers for shows they're making.
- matwood 10y ago
  It would be interesting to know how many people subscribe and unsubscribe to Netflix for a single show. I tend to think it is a small minority, but without numbers it is hard to know. Also, the up front production costs do not need to be recaptured on first watching. The 90M to produce Marco Polo creates and asset that can be sold, traded, etc... Eventually Netflix will have so much good, custom content that a new person joining will take years to go through it all if possible. What we are watching now is them bootstrap that process, but it will not always be that way.
aeharding 10y ago
On the other hand, I go to a grocery store not because it has potatoes and onions but because it has a couple niche items that are much less popular (but that are essential to me). This allows me to make one visit to one store. I go to a grocery store that has my niche items, but I also buy popular items that are expected at every grocer. (My grocery store has to have good tasting cheap milk, full fat large container fage yogurt, fresh & authentic croissants, lemongrass, red lentils, etc.) If one store has a monopoly on full fat fage yogurt but doesn't have lemongrass, I'll make a compromise of going to the store with lemongrass and buying some other brand of yogurt from them. Making one store visit is important to me.
- jp555 10y ago
  Not sure about that analogy. Ingredients tend to get mixed together in many ways to make many different kinds of meals. You can only watch one show at a time, and the marginal effort of "travelling between stores" - flipping from Netflix to Youtube/Amazon/HBOGo/Etc, is essentially zero.
  - wlesieutre 10y ago
    Only if you assume a subscription to each of those services, instead of just one. It'd be like $100/month if you wanted access to every single streaming service.
  - aeharding 10y ago
    It might be a low barrier for some, but for me I don't want to manage multiple services which could contain duplicated content (less value per $). In this case, I'll choose the most valuable service to me as a compromise.

zephod 10y ago

$3.8B? The average subscription amount is slightly less than $10,000/month...

Throwaway23412 10y ago
Apologies for my crappy math. Already edited it.

deleted 10y ago

[deleted]

chx 10y ago

Yeah but that means you only a very small budget for that show. Perhaps $100k per episode perhaps even less.

Throwaway23412 10y ago
Individual budgets for individual shows sounds like a big TV network convention. Netflix isn't selling ads against each show; their subscription revenue is shared between all their content. I just read elsewhere that experts estimated that "Fuller House" attracted over 10M viewers. Even if every single one of those viewers cancelled their subscription after binge-watching the show, Netflix might have made nearly $100M in one month from that show. "Fuller House" probably funded several shows that you or I love.
- mattmanser 10y ago
  But does it really work that way? Do you think that Netflix thinks it works that way? I subscribe because it has X number of good shows, not because it has 1 good show. If Netflix only had "Super duper invaders from Mars" and that was the only show I was interested in, I wouldn't subscribe to them, I'd just pirate it.
  - matwood 10y ago
    It's two things, good content and ease of use. Netflix is also banking that with their investment in their own content that there are more shows you would enjoy. It does not happen overnight, but they are getting there.
Cthulhu_ 10y ago
Good TV shows don't need big budgets. A show like House of Cards does without special effects or CGI, whilst still being a highly popular show. Another factor is that Netflix is a multinational; if a (cheap?) show doesn't work in one country, it might work very well in another one. (see the Warcraft movie as a movie example; did okayish in the west, was a huge hit in China).
- dredmorbius 10y ago
  Whilst I can't speak to HoC, my understanding is that CGI is frequently used because it is cheaper than constructing large sets or shooting outdoor scenes, or is used to add small elements to a scene. The BBC drama Poldark makes use of CGI to nail some of its historical elements, for example: https://www.latitude50.co.uk/journal/on-the-set-of-bbcs-poldark https://www.latitude50.co.uk/journal/on-the-set-of-bbcs-pold... Both Battlestart Galactica (the remake) and Firefly were fairly low-budget productions which made extensive use of CGI.
  - sprafa 10y ago
    Working in the film industry and this is both true and untrue, depending on the situation. It's very hard to estimate. But yes CGI can make certain productions a lot cheaper, while a lot of films also have a ton of CGI work for superfluous reasons. Retouching the actor's faces for instace is more common than you would imagine, in the industry it's called "beauty work" and it's widespread.
    - dredmorbius 10y ago
      Reemphasising: CGI can be used to reduce costs. Hence, relying on "uses CGI" as a sign of either a high-budget or low-budget production isn't valid. If you want to assess the budget, look at the budget.
  - ascagnel_ 10y ago
    Indeed, this is a poor example specifically because House of Cards makes heavy use of digital backlot. > Steve: We have a visual effects supervisor on the show who’s been working with Fincher for around 20 years. Let’s say we’re shooting on stage, and out the window we want to see the Washington monument, we’ll shoot green screen out of the set window. Then we’ll coordinate with the VFX department, telling them that we need to add a certain image out the window, and then we will go back-and-forth on how much expense it will require and how best to accomplish it. > We actually do a fair amount of digital work in post on the show. All the driving in the show, anything inside the vehicle is done on stage, in a room that is a big three-sided green screen space. The car does not move, the actors are in the car, and the cameras are set up around them. We have very long strips of LED monitors hung above the car. We had a camera crew go to Washington, D.C. to drive around and shoot plates for what you see outside when you’re driving. And that is fed into the LED screens above the car. So as the scene is progressing, the LED screens are synched up to emit interactive light to match the light conditions you see in the scenery you’re driving past (that will be added in post). All the reflections on the car windows, the window frames and door jambs is being shot while we’re shooting the actors in the car. Then in post the green screens are replaced with the synced up driving plates, and it works really well. It gives you the sense of light passing over the actors’ faces, matching the lighting that is in the image of the plate. > And as you mentioned, one of the bigger computer-generated things that we did in the first season was the VFX extension of the exterior of The Francis J. Underwood Library. That was a one-story building on location, which was not very modern. We added some elements to it when we shot it, then in post the top of the building was extended per the design that we did in the Art Department to create the modernist look of that building. There were a few other spots where we did visual effects work to enhance things on the show. From http://www.pushing-pixels.org/2013/12/29/production-design-of-house-of-cards-interview-with-steve-arnold.html http://www.pushing-pixels.org/2013/12/29/production-design-o...

rubber_duck 10y ago

I wonder how much money you get for the embedded brands. Like I went to see dr. strange this weekend and I immediately noticed Microsoft Surface and Adidas prominently focused in two scenes. Not classical advertising but it surely pays, and considering it's a Marvel it must have cost quite a bit, but I'm sure you could find some brands interested in 300k viewers depending on the content.

brak1 10y ago
Product placement is a big money source for film & tv. e.g. http://www.cbc.ca/radio/undertheinfluence/show-me-the-money-the-world-of-product-placement-1.3046933 http://www.cbc.ca/radio/undertheinfluence/show-me-the-money-...
FussyZeus 10y ago
I giggled a bit when he chucked the Surface on the floor. As a proud owner of a Pro 3, that's highly relatable... :D I've never minded the on-screen product placement in movies. It just makes things more immersive, IMHO. Certainly better than the hamfisted style of advertising seen elsewhere. I'm not sure how effective it is at moving product, though.
- rubber_duck 10y ago
  >I've never minded the on-screen product placement in movies. Actually the Adidas logo was quite out of place in that movie for me - the color was really out of place in the scene (probably to draw attention), they usually try to balance the colors in the scene and this really broke my immersion. The Surface part on the other had was nice, it didn't sacrifice anything and it added an interesting detail.
  - FussyZeus 10y ago
    To be honest I didn't even notice the Adidas logo. shrug Apparently that product isn't "for" me. Ha.
  - thebspatrol 10y ago

narag 10y ago

It's not only the ads that have a rigid model. The contents of the shows are also mostly formulaic and repetitive. I've seen only a few series that broke that mold, like Lost (although it spoiled after three seasons), The Wire and Breaking Bad. The rest, even if good, seems like made by the same book. Maybe products could differentiate if producers tried to do something... different. If you do the same thing (with small variations) as everybody else is doing, it's very difficult to captivate the audience, that only see "yet another police show with a twist".

izacus 10y ago

And not being forced to appeal to everyone means that they can create better and more immersive content for the smaller target audience the shows are meant for - making them so much better for the subset of people.

bduerst 10y ago

I've always wondered how Netflix does attribution for their netflix originals. For example, do they take the percentage of a person's viewing habits that the show takes up, multiply it by their monthly subscription revenue, and attribute it to the show for all viewers?

jerf 10y ago
They have enough data to do statistics that are probably pretty accurate. I wouldn't be able to just whip off a description of exactly how you'd do that in an HN comment, I'd have to think about it for a while since I don't do this every day, but I'm fairly confident the people who do can get a very precise answer to that question with the data they have. Certainly an answer precise enough to give to the executives deciding which series to keep and what to invest in.
- bduerst 10y ago
  And yet, their recommended movie list is still not that strong :(
  - webmaven 10y ago
    It used to be a lot better, but the increasing cost of licensing Hollywood films has been cutting into the size and quality of their catalog.
verbify 10y ago
I recall reading that's how Spotify's model works.
- michael_h 10y ago
  Spotify's model is slightly different - for premium subscriptions, they pool the total subscription revenue, take their cut, and then pay out to the artists, based on their total share of listens. Not awful, not ideal.

deleted 10y ago

[deleted]

thenomad 10y ago

It's probably not quite as rosy as you state here, I'm afraid. Let's look at a 380,000 viewer show. It's very unlikely that ever single one of those viewers paid for Netflix for a solid year just to get access to that show (which will have all its episodes released at once). So let's assume it has significant cult appeal, meaning a full 25% of its viewers are primarily subscribed for that show and things like it. (I'd say that's likely to be very high, based on my experience in the narrative video world, but let's be optimistic.) And let's say, based on subscribing for that show and forgetting to cancel for a couple of months (or subsequently being retained by another 380k viewer show), that Netflix gets 3 months' worth of revenue from them. So that's 380k/4 = 95,000 * $7.99 * 3 = $2.28m revenue attributable to that show. Of the shows you mention: Marco Polo cost $90m to produce for the entire season. Black Mirror doesn't have figures online, but it'll be around $3m per episode if it's similar to other BBC shows. So that's $18m. Unbreakable Kimmy Schmidt doesn't have figures available, but based on Tina Fey's fees for other shows and general knowledge of how much TV costs, I'll guess at about $3m an episode. (Might be cheaper if they're being clever about it, so could be as low as $2m) So that's $39m. So, assuming that Netflix are just getting revenue from retained subscribers, and they get the figures above, we're looking at losses of: $88m for Marco Polo. $16m for Black Mirror. $37m for Unbreakable Kimmy Schmidt. Obviously the situation is far more complex than that - they'll be financing with coproduction deals, they're looking for growth rather than revenue, they also acquire a lot of content cheaply (very, very cheaply in some cases) through licensing - but it's certainly not rosy enough that they'll be happy with 380k viewers for shows they're making.

matwood 10y ago
It would be interesting to know how many people subscribe and unsubscribe to Netflix for a single show. I tend to think it is a small minority, but without numbers it is hard to know. Also, the up front production costs do not need to be recaptured on first watching. The 90M to produce Marco Polo creates and asset that can be sold, traded, etc... Eventually Netflix will have so much good, custom content that a new person joining will take years to go through it all if possible. What we are watching now is them bootstrap that process, but it will not always be that way.

aeharding 10y ago

On the other hand, I go to a grocery store not because it has potatoes and onions but because it has a couple niche items that are much less popular (but that are essential to me). This allows me to make one visit to one store. I go to a grocery store that has my niche items, but I also buy popular items that are expected at every grocer. (My grocery store has to have good tasting cheap milk, full fat large container fage yogurt, fresh & authentic croissants, lemongrass, red lentils, etc.) If one store has a monopoly on full fat fage yogurt but doesn't have lemongrass, I'll make a compromise of going to the store with lemongrass and buying some other brand of yogurt from them. Making one store visit is important to me.

jp555 10y ago
Not sure about that analogy. Ingredients tend to get mixed together in many ways to make many different kinds of meals. You can only watch one show at a time, and the marginal effort of "travelling between stores" - flipping from Netflix to Youtube/Amazon/HBOGo/Etc, is essentially zero.
- wlesieutre 10y ago
  Only if you assume a subscription to each of those services, instead of just one. It'd be like $100/month if you wanted access to every single streaming service.
- aeharding 10y ago
  It might be a low barrier for some, but for me I don't want to manage multiple services which could contain duplicated content (less value per $). In this case, I'll choose the most valuable service to me as a compromise.