How is Netflix going to differentiate itself?

Blain’s Morning Porridge – March 29^th 2022: How is Netflix going to differentiate itself?

“I am an artist, the track is my canvas and the car is my brush.”

This morning: “Hi. My name’s Bill, and I am a Netflix addict..” The streaming wars may be heading in a completely new direction as brilliant disruptive programming demonstrates the potential value of “Content” not just on TV, but for the Metaverse also. I think I just glimpsed the future – and for some it’s going to work.

I have a demanding new mistress. Not what you think… but a Netflix series I’m bingeing. It’s even more addictive that Dopesick’s Oxycontin. How quickly the programme has grabbed me, and is changing my behaviours is a little bit frightening.

Today’s Porridge is about the nebulous concept of Content. My binge-watching highlights the long-term potential of streaming in terms of influencing the way we consume content, and thus what can be advertised at us, and what we will pay for it…  If you are watching the streaming wars and trying to predict winner, losers and what the future looks like, then you need to understand why Netflix has lucked out by stumbling onto a new riveting and perhaps monetizable format. It’s a game changer – and they’ve been doing it for years… only most of us haven’t noticed!

It opens a host of new possibilities – not least for the streamers, the “subject” and its stars to monetise themselves in terms of digital content and to expand into the metaverse. Yep. I wrote metaverse – it has real potential. It works because Content has value. Give folk the Content they want and they will pay for it. In subscriptions and premiums. It means content providers have something of value.

I’m not talking about Content based around slaps at the Oscars, or the billions Netflix has spent trying to buy credibility and industry awards for its movies. Power of the Dog is a damn fine film. So are lots of others. But I don’t subscribe to Netflix to watch Movies. I subscribe to Netflix to watch TV pap when there is nothing else worth watching…  TV Pap is Content also.

The TV in the Blain Household – as I suspect elsewhere – is Pavlovian. Imagine the typical family home…. The kids are playing computer games, your partner is still working or making dinner, you’ve walked the dog and so you sit down, switch the TV on and are quickly bored by the same footage of a Ukrainian refugees you watched that morning… So… you press the Netflix button (the best thing the company ever did was getting its name on every remote), and press next episode on your binge “carry-on-watching” list…

Let me start this morning’s tale by going way, way back to the late 1960s…  (Dah da da da.. Time Tunnel music..)

In 1968 my favourite toy was a green Lotus with a yellow stripe – the racing car of Jim Clark, the greatest F1 driver of all time. The whole of Scotland loved him. I remember my dad almost in tears telling me he’d died in the heats for an unimportant Formula 2 race. That was back in 1968. (Maybe we were a curse to speed kings – one of my earliest clear memories is Dad and I building a model of Donald Campbell’s Bluebird speedboat just weeks before he died.)

Jim Clark was followed by hero worship of Jackie Stewart. I met him – my primary school was picked to make a film on “cycling proficiency” starring Jackie. I was in it – falling off my bike. Years later I was introduced to him at Goodwood – and he charmingly told me he recalled the day filming (which I doubt… but what a lovely guy.) I had a model of his blue Elf-Tyrrel-Ford, and I aped the tartan band around his helmet by putting tartan stripes on my bike. I also had the black John Player Lotus of Emerson Fittipaldi sitting next to it on the toy-shelf my brother and I shared. For Christmas we got the Scalextric models of both cars and fought over who got to race Jackie’s.

I’m not sure what happened next.. Maybe it was skiing, sailing, rugby, or girls. I remember James Hunt and Nicky Lauda, and years later thinking what a great film was made about them. Murray Walker’s breathless F1 commentary will remain eternally etched on my mind. But I stopped following F1.

Years later, as a young banker I went to a few Grand Prix as a guest of clients, but I never really got into them. They were opportunities for rising bankers to “Swank”; the art of quaffing champagne on the Corniche, bragging about business, trying to chat up the ladies, while “Ligging” in VIP lounges and acting “cool” as only a plump sweaty Scotsman could do in the summer heat of Monaco. I was introduced to Fernando Alonso at the Shanghai Grand-Prix in his heyday, but someone told him I sailed and he made the mistake of asking me about it – once I get talking about sailing, there is no shutting me up. Yep. I can be an absolute j*rk.

But now I have discovered Drive To Survive… the Netflix Docusoap about Formula 1. I am absolutely hooked.

It is changing my life. I have started trawling websites to see if I can find models of Clark and Stewart’s cars. I am reading the reports of races in the press. I am buying books about F1. I know all about porpoising, compounds and DRS. I even suggested we might get tickets for the British Grand Prix. I am fascinated by the story-lines of each programme – which are clever beyond belief. Yes, there is a real story – but what matters it’s how you tell it and sell it. Truth is not the product. The narrative is. The content is just so damn addictive.

The skill of the Netflix programme-makers is how they present the content. They exploit the addictive aspects of great soap opera, overlay it with exaggerated personalities we want to learn more about, while they present it as tension, tension, and more tension. They wrap it up and sell package in 40 min hits to fans. It’s got absolutely nothing to do with automotive engineering excellence, little do with skill or even speed, but is all about crafting an addictive narrative about the characters.  They know the addicts will look for more.

It is nothing short of brilliant.

Wearing my banker hat I am watching the screen explode with cartoon dollar symbols of opportunity: how they are going to monetise it? Formula 1 fans are addicts. How are you going to get them pay more bucks for a programme when they have cold-turkey when they’ve binged every episode?

It’s a fascinating programme. Part of it’s charm is in the more desperate second and third tier Teams, and the drivers fighting to preserve their places – all desperate for attention. Over the first three seasons Sir Lewis Hamilton has given it a nod. Now that’s he finding himself at the back of the Grid and results (having to ask if a 10^th on Sunday’s Saudi Grand Prix got him any points), that will likely change. The old king is dead, long live the king..

I suspect Max Verstappen, who has declined to engage, will find that he has to – why? Because of the content value other drivers are creating around themselves.

The villains are fascinating. Some say the team principals are almost pantomimic. The Ferrari PR Girl trying to stop a vengeful and sacked Sebastian Vettle p*ssing all over their dismal 2020 parade was hilarious. And the owner of Racing Point, now Aston Martin, oh… he is just plain scary. But what makes the villains so damn good is they are actually real people behaving exactly how real people behave. I would love to meet the scheming Christian Horner of Red Bull – the Iago of F1. If I wanted to have a beer with anyone, it would be Gunther Steiner of Haas.

Laurence Stroll, the billionaire owner of Aston Martin….? Maybe, I loved my Aston, and am always thinking about a new one, but he would probably start by telling me has 3 minutes for a pint and then walk off as I told some amusing anecdote.

So… enough saying what a great programme it is.. How to monetise it?

It’s clear it has the ability to attract and develop fans. They share attributes. The data on them makes the advertisable – if they have consented (the regulatory trap that is killing Facebook). But it’s an opportunity for the stars; the teams and the personalities to garner income by monetising their digital wealth which is in the Content created around them, and content they create for themselves to sell.

Effectively I own the content of the Morning Porridge – it has minimal value. This concept of the worth of a team, sportsman, or celebrity, creating, owning and monetising their content is fascinating. It’s not just about ticket sales, revenues, but each owner of a digital persona has the potential to monetise their content value to fans. Fan channels, digital driver events.. Formula 1 is a great example of the potential to monetise celebrity sports.

It just so happens I’m looking at deal for a digital wealth management concept. If you get the content concept – we should be talking!

No Time for Five Things this morning.. running very late..

Out of time and back to gazing at the River Nile…

Bill Blain

Strategist – Shard Capital