Mar 7, 2013
Many claim that Netflix is a disruption agent – Hollywood’s version of a startup. In a way, it is: Netflix has one of the most successful business models for capitalizing on existing trends. The company not only recommends films to users based on their past behavior, but also uses data to determine which shows to produce. The company launched its first original show, House of Cards, a few months ago, proving they do not need material from the traditional networks, which have been jacking up prices. However, Netflix’s approach is recursive. Their decisions are based on past patterns, thus reducing the risk associated with guessing what the masses want (or think they want). But this does not allow them to break forward, ahead of trends. Sure, they can try partially new concepts, but they will always be rooted in the past with no true fundamental content disruption. Netflix may be the first to notice a new trend, but they will always need someone else to set it. They are in the business of discovering (and monetizing) existing trends, not creating new ones.
Could smartphones have taken off if Steve Jobs had asked people what they wanted? All the user preference data in the world in 1998 would have shown him he should have made flip phones, because that was what the next trend would be. Similarly, if Henry Ford asked people what they wanted in 1900, they would have said faster horses. Cars would not have been invented, because people were not truly aware of all the possibilities. No doubt, Netflix will be amazing at predicting trends, but not more than that. Trends are just ripples of an existing wave. They should not be mistaken for a new creation. Did the average person know that 3D film technology existed well before it was “forced” on us? Did the average person know that touch-screens existed for years before Jobs “forced” them on us? Did the average person know that digital cameras were patented ages before they were “forced” on us? No. People didn’t know they wanted all this. All they know is that they want Kevin Spacey and David Fincher together in a political drama; so Netflix made them House of Cards.
Bottom line: Netflix is in the business of maximizing the monetization of existing trends, not the business of true creative innovation (technological innovation – yes, content innovation – no). Therefore, there will always be a place for risk taking content-innovative production companies and studios. It may sound arrogant – but true innovators either know better than the masses what the masses want, or are very lucky at guessing. Fake innovators play it safe with datasets. Real trendsetters don’t ask people what they want; they force it on them with the confidence of a parent that knows what’s best for the kids. It’s not nice to say, but it’s true of every genuine innovator, from Da Vinci to Anna Wintour.
Netflix will be the first to notice a new trend, but they will always need someone else to set it: someone has to invent vampires before someone else can realize that vampires are popular. Netflix will win this game of losers. They may make a ton of money beating the other losers, but at the end of the day they will always be the ones asking David Fincher and Kevin Spacey to keep doing the same thing over and over in different mix-and-match combinations, rather than finding the next Charlie Kaufman or Lena Dunham, who may be less palatable at first. Their algorithms will keep the industry grinding the same old water over and over and over, in different easy-to-digest combinations. In order for this finite number of combinations to not be depleted, they will rely on innovative production companies that must survive. So don’t kill off Indie Hollywood just yet – it is the truly innovative startup community within the industry.
Here lies the difference between a discovery and an invention. The sciences rely on discoveries. The creative world relies on inventions. Big data is great for discoveries; it can lead to realizing things we never knew were there. But just because we did not know they were there does not mean that they did not exist already. Big data is dangerous for creative inventions, because once Netflix makes boatloads of money, everyone will want to emulate them and it will become increasingly difficult to justify an expansion of the existing creative horizons, beyond what the average TV viewer is currently capable of seeing. Netflix’s technology, as well as their business plan for rocking the foundations of traditional network TV, are admirable. However, hailing them as a game changer from a content point of view is wrong. Let Netflix be the parable for the critical difference between discovery and invention.