Why Your Favorite Netflix Show Just Got Cancelled
Streaming TV has generated immense consumer value. Consumers can now watch whatever they want, whenever they want it. If you haven’t Netflix and Chilled recently, you’re in the minority now.
According to research by Statista, 74% of the U.S.A. now subscribes to at least Netflix, Amazon Prime, or Hulu. To put that into perspective, that’s 120 MILLION people, 1/3 of the American population, opening an app to stream TV every single day. Are we still watching? Hell yeah, hit us with another episode!
This time last year, I theorized that all media will eventually go digital, including ad-supported media. The trend has accelerated past analyst predictions for three main reasons we covered last year.
- Digital media reduces friction, bringing content and consumer closer together. No cable box set up. Watch it on demand. Cancel anytime. It’s simply a better consumer product.
- Digital media provides advertisers more granular metrics beyond basic reach based on impressions. Track your clicks, engagements, and conversions through shared data sets between platform and advertiser.
- Digital media gives media distributors more leverage. Networks can quickly assess what’s doing well, make snap programming decisions, and negotiate contract terms based on huge troves of proprietary audience data.
However, these massive changes are not just affecting the content viewer experience, but the content producers as well. The economic incentives behind the streaming subscriber model are critical to understanding why certain shows and films get made or cancelled. The content production game has fundamentally changed — and this has huge implications for the people behind and in front of the camera and, ultimately, what you get to watch.
Quantity Over Quality — Are You Still Watching?
In a traditional ad-driven model, individual shows compete for viewership. The most appealing TV shows attract the most viewers (ratings) which in turn drive revenue for the networks by selling advertisers time against that audience. In exchange, show creators who attracted those desirable audiences are rewarded through profit participation on the backend.
The more viewers your audience attracts, the more money you make for producing said content. Big shows with big audiences benefit, rewarded with big contracts and many seasons. Grey’s Anatomy has run for 15 seasons on ABC, South Park for 23 seasons on Comedy Central, the Simpsons 30 seasons and counting.
The longest running show on Netflix? Orange is the New Black cancelled last year after 7 seasons.
As TV shows mature over their life cycles, they become more valuable. A massive hit like Friends, running for 10 seasons, has tremendous recognition and IP value which is why the streaming rights went as high as $100 million dollars for a single year.
As shows gain more value over their life cycle, so does the expense to produce them. Actor, director, and producer contracts expire after one or two seasons. The creative payday comes when you make a hit and get renewed. Case in point — Gal Gadot was paid $300,000 for the first Wonder Woman movie. After it was a box office smash, Gal Gadot was paid an estimated 10 million for the sequel.
But unlike an ad-driven model which rewards hits, a subscription model only cares about their net total subscribers. Therefore, the value of content is determined by how many new subscribers that piece of content can generate. Individual show performance does not matter because a streaming TV network does not gain incremental value off individual show viewership by selling advertisements against it. Third and fourth seasons get expensive and pay diminishing returns while new, buzzy shows bring in more subscribers.
The average season lifespan for Netflix shows is two to three seasons, according to research by Business Insider. A quality show that generates a loyal following, but no new subscribers will get the axe. When shows get expensive, they get canceled. The result — a glut of new content to drive subscriptions with short life cycles for individual programs.
Only the Buzz and Award Worthy Survive
Maybe your Ted Sarandos and you’ve landed on an amazing story that you don’t want to give up on or a format that keeps people coming back for more. Do you pay up to renew?
Not a chance. Spin that sucker off! Narcos, the breakout bi-lingual hit about Colombian drug lords becomes Narcos Mexico, the breakout bi-lingual hit about Mexican drug lords. Nailed It! becomes Nailed It! Holiday! and proves that we need even more quirky derivative baking shows in the oven. All with new casts, new crews, and — best of all — new contracts.
A constant stream of new PR-worthy shows keeps subscriber growth going while keeping creative costs as low as possible. Spinoffs offer streaming platforms the high of new shows while keeping existing audiences hooked on the stronger stuff the platform has to offer.
Wait Wes! Bojack Horseman, Orange is the New Black, House of Cards, and Grace and Frankie all went for six or seven seasons. Yes, but they also won Emmys. When your model only incentivizes subscriber growth, the only path to streaming survival is to worship at the altar of entertainment’s golden idols — the Gods Emmy, Golden Globe, and Oscar.
The 2013 Emmy win for House of Cards put Netflix on the map as a legitimate studio. Scorsese’s 2019 the Irishman was an investment to win an Oscar. Awards convey prestige, encourage creative participation, and, most importantly, drive subscribers. If your favorite show doesn’t get a trophy for season 4, start scrolling for something new.
The reason your favorite streaming show got canceled wasn’t its quality… it was streaming economics.
Wes Morton is the Senior Marketing Manager at BEN Group. For more on entertainment, marketing, and strategy check out wesmorton.com.
