1. Netflix Keeps Veering Mainstream

The prevailing perception of Netflix is that it is “streaming HBO” (not that HBO isn’t streaming these days, but anyway...) —a place to watch high profile upper middlebrow shows like The Crown that are released all at once rather than weekly.

That hasn’t been true for a while, but the perception remains. 

This, despite the fact that the two most popular series on Netflix Ginnie and Georgia and The Night Agent are both far more ABC than HBO.

This perception will eventually change—it takes the world a while to catch up with these things. Which is why it’s worth noting that Netflix is still doubling down on broadcast network-like fare.

To wit, they just signed a deal with Dick Wolf, the man responsible for NBC’s Law and Order franchise, a franchise that is now on its 25th year. 

Let that one sink in.

Why It Matters

Granted Wolf is only going to do a two-part “true crime docuseries” for Netflix and not a franchise-level show, but true crime is one of the hottest genres these days and so if this turns into something bigger and more long term, I doubt anyone would be surprised.

Wolf is not the only mainstream talent Netflix is signing up though.

Just this past week, they struck a deal with comedian Shane Gillis. And while Gillis is mostly famous as the guy who was fired from SNL and then brought back as a host, his comedy is still mostly mainstream. He’s the sort of comic who used to wind up with a show on network TV.

Sort of like BoJack Horseman. But without all the alcoholism and depression.

And if that wasn’t enough proof, on Thursday Netflix announced a deal for a boxing match with Jake Paul and Mike Tyson, two stars whose audiences are decidedly not in the “I never watch broadcast” demo.

These are all smart moves on Netflix’s part, proof they are taking to heart the advice of the anonymous executive who advised them last year to stop making “snobby shows no one watches.”

Ouch, sort of.

For while that comment may seem harsh, it’s also true.

Or mostly true.

What so many people who opine about the state of television forget is that what the Chattering Classes think of as “quality”, the masses think of as “boring.”

This was a lesson the TV industry learned about 60 years ago when the first Golden Age of Television gave way to CBS’s slate of rural comedies like Green Acres.

The explanation was that while the early audiences for TV were affluent and highly educated (early day TVs were expensive), that dynamic quickly changed as prices fell and the networks needed to give the people what they wanted. 

Not only the people but advertisers too, which brings us to Netflix’s second goal here.

When you are a subscription-only service you have one pretty basic goal: keep people subscribing. That’s a relatively easy ask too. All you need is for people to think that there is likely to be at least one show they’ll watch that month, and they’re in. Whereas with an ad-supported service, you need them to tune in multiple times each week—each day, ideally—and watch those shows for increasingly longer periods of time.

That’s why ad-supported Netflix needs to be looking for both bigger audiences and more engaged ones, something a Dick Wolf or Jake Paul can give them.

What You Need To Do About It

If you are in the industry—or you just write about it—it’s time to accept that Netflix is a mass market content vendor, not bingeable HBO, and as such, it’s going to have a wide range of programming, much of which caters to a mainstream audience. 

If you’re Netflix—and stop me if you’re heard this before—it’s time to roll out some linear channels. You have so much library content around such a wide range of genres, from Seinfeld to American Dad to documentaries and non-fiction. All of which would make for popular linear channels. You also have the reputation as a place people go to binge watch. And what is linear if not another way to binge watch? Which ultimately means people watching more TV for longer periods which gets you ad revenue.

Easy peasy, though I am guessing there are all sorts of rights deals that would need to be negotiated.

2. ​​VIZIO’s FAST Success

We still don’t know much about how the VIZIO/Walmart deal will play out. But we do know that Walmart Connect is getting a very good property in VIZIO’s Platform+ ad and content business.

In the latest Q4 numbers, Platform+, which includes advertising on Watchfree+, VIZIO’s FAST service, plus home screen placements and sponsorships – grew a whopping 28 percent YOY. 

SmartCast, VIZIO’s overall operating system, ended the quarter with a monthly active user base of 18.5 million, an increase of 3.4 percent over Q3.

And on a YOY basis, SmartCast saw the number streamed hours grow 15 percent, which was also the percentage by which ARPU—the big number—grew.

So an impressive quarter overall, and an indication of a number of positive trends.

Why It Matters

The rapid growth of SmartCast, which is VIZIO’s native OS, can be seen as further proof that dongles are dying.

Not instantly or in the next year, but slowly but surely, the way everything in this industry works.

This, in turn, is why the OS Wars matter so much, something you can read more about in an upcoming TVREV report.

It’s also indicative of the popularity of ads on FASTs and the real estate on the home screen, both of which have different audiences.

Media companies love home screen ads because it gives them a way to promote their services and programming in what is essentially a point-of-sale play. 

And advertisers love FASTs because (a) there’s still not a whole lot of inventory on streaming and (b) they can do all sorts of targeting, geotargeting in particular.

This, to sort of give away the ending, is one of the conclusions of our upcoming series of reports on the OS Wars and why control of the operating system is so important.

Margins on TVs are pretty low, replacement cycles are long and so alternative revenue sources are needed. All of the players—digital giants, CE giants and independent vendors— have plans for how to make those alternate streams happen, which is why the sector is so much fun to watch. (Yes, I need to get out more.)

What You Need To Do About It

If you are William Wang, Mike O’Donnell and the rest of the team at VIZIO, take a bow—well done building a successful business from scratch.

If you are Walmart Connect, or at least the people who negotiated the deal, you can also take a bow, as VIZIO’s numbers are going to make you look good. 

If you are the other players in the space, you can also feel proud, because VIZIO is not an outlier—Samsung, LG, Roku, Amazon et al are doing very well with their OS-based businesses. Ditto independents like ZEASN, Titan and Xperi.

And if you are watching the streaming wars, definitely turn your attention to the OS Wars, which is where all the industry’s many changes are going to eventually play out. TVREV’s upcoming report being a most excellent place to start.