There’s been a major upset at Netflix. The tastemakers, along with a thousand other employees, are out. The stock is down. The press is not confident in the streamer’s ability to entertain the masses. While this wasn’t the outcome Ted Sarandos wanted when he built Netflix into an entertainment Goliath, it is a very natural one. What’s alarming is how many of the other big streamers and studios don’t seem to recognize they’re careening down the path Netflix broke itself forging.
Investors have been souring on Netflix for a while now, pointing to major challenges the streamer has faced as it competes with established filmmaking giants like Disney, Paramount, and Amazon (which owns MGM). This matters because the CEO of a major streamer doesn’t answer to audiences, but to those investors. That’s why every streamer seems to hunt down IP to own, sports deals to sign, and steadily crank up the cost of services. They need to keep those investors optimistic and stock prices high.
But Netflix doesn’t have the IP and has repeatedly struggled to build franchises as popular as its competitors. Stranger Things and Bridgerton are the TV highlights for Netflix, and its biggest cinematic success, K-Pop Demon Hunters, was such a surprise phenomenon the platform didn’t even have merchandise available for the first few months. Netflix doesn’t have a number of other business lines, like Disney with its theme parks and cruises or Amazon with its data centers and e-commerce empires. All Netflix has had is the ubiquity of its name because it was the first real film and TV streamer most people encountered. People recognize the “tudum” sound well enough that we know how to spell it, and “Netflix and chill” has been a synonym for date nights ending in sex for a decade. We know Netflix the same way we know Kleenex, Aspirin, and Google. That brand recognition is valuable, as is Netflix’s enormous subscriber base, but not valuable enough when the competitors have stuff like James Bond, Spider-Man, and Amazon Prime delivery.
What Netflix had, what it has always had, is data. For years, you could complain about issues like Netflix’s terrible IP lineup or tendency to cancel shows after they seemed to be big hits and the response was “they have the data to back all these moves up.” With one of the largest subscriber bases in streaming and an eye on what people watch, Netflix has had an iron grip on audience data. That grip has been so firm and enduring for the last nearly 20 years that press and consumers alike are genuinely surprised when Netflix does release data.
For years now Netflix has consciously and unconsciously pushed a philosophy of data being the supreme arbiter of taste. That belief system isn’t unique to Netflix: YouTube operates the same way (though its content is generated primarily by users, not commissioned). The vast majority of web publications have at some point worked that way too. Search Engine Optimization, or SEO, is an entire industry built on manipulating and exploiting data for views. It’s a very techbro way of viewing the content humans consume, and as a former newsroom leader I’ll admit it’s seductive. When you can open a chart and have an immediate, if rudimentary, window into your audience, it’s nice! It’s the professional equivalent of those quizzes that tell you what Power Ranger or X-Men you are.
But the internet is littered with websites that leaned too hard into letting data dictate decisions. Now Netflix too is suffering for worshipping at the altar of data. “We need better execution in the U.S.,” co-CEO Ted Sarandos said on the most recent earnings call with investors before pointing to the growth in other international markets. “The U.S. is also working,” he added. “It’s just not growing as fast as it could, or as fast as we’d like.” A lot of that Sarandos and his co-CEO Greg Peters feel is down to the people in leadership roles around content. It’s why they replaced Content Chief Officer Bela Bajaria with Peter Rice and booted Dan Lin, who ran films and reportedly was rude to the talent.
It’s all just rearranging the chairs on a sinking ship. The problem isn’t rude executives, and it isn’t a recent glut of mediocre shows and films. It’s an entertainment business convinced it is a technology company. The problem starts with Ted Sarandos and Greg Peters (and Reed Hastings too). A culture of data-dictating decisions has led to a company that couldn’t anticipate a hit like K-Pop Demon Hunters or bombs like the 11 films it spent $1.5 billion making. This is a company that dropped the ball so badly on the final season of Stranger Things, it had to announce there was no secret finale coming later. Netflix didn’t care about the quality of that final season or someone might have insisted the scripts and story be locked before they started shooting it.The streamer could have worked with the Russo Brothers to fix The Electric State and The Gray Man, but it didn’t. The data said “Russo Brothers plus big talent plus big dollars equals bigger dollars,” and Netflix said “green light.”
It’s absurd because leaning into data and algorithms has only really worked for TikTok and YouTube, which also primarily succeed because the content is uploaded by users and not commissioned by executives. It’s effectively cheap A/B testing for those platforms. Netflix doesn’t have that luxury. It will spend millions in the hopes that the data is right about the Russo Brothers and Millie Bobby Brown. That hasn’t worked for Netflix or anyone else. The philosophy was such a disaster at Disney that the board canned Bob Chapek, who was an acolyte, and replaced him with his old boss Bob Iger. At Paramount it’s been met with trepidation and no real results, and we can only guess what will happen as David Ellison folds Paramount and Warner Bros. into one another. Amazon can afford to lean on the philosophy because every single person who subscribes for fast delivery just gets Reacher on Prime as a bonus.
Netflix built this philosophy and has been its loudest acolyte. Given this is now year eight or nine of us all asking when Netflix will start producing consistent hits the same way WB has at the box office or CBS did throughout the entire ’90s, I think we can safely say the philosophy is bunk. Data, algorithms, and an exhaustive profile of audiences don’t matter as much as a filmmaker saying “let’s make the heroines K-Pop stars and add the derpiest giant cat we can animate.” Netflix has reached the nadir of what data can do. Now it needs hits, and for that it will need good people with good taste.
Alex Cranz writes about the intersection of technology and pop culture.
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