What’s wrong with Netflix? By Ashley Turing

What's wrong with Netflix

By Ashley Turing

 

Let’s take a trip back into digital prehistory. We’re in 2004 and improved internet speeds and connectivity mean you no longer need a physical DVD to watch your favourite film or TV show. You can stream your entertainment over the net, in your own time, in your own place.

 

Netflix, a Californian entertainment company founded in the late Nineties as a DVD-by-mail operation, has recently gone public (2002), selling 5.5 million shares at a price of $15.00 of common stock (approx. $85million, LiveTree’s current Seed Token Sale cap is approx. $50m more on this later). It is also busy migrating its postal business into a streaming business in an effort not to die with DVD. But to its credit, Netflix persevered. And we all know the happy ending to this particular story.

 

Happy ending for Netflix, that is. The jury is out as to how happy the ending will be for the creative community.

 

Today, Netflix has become a household name, a meme and a synonym for streaming video. It’s on virtually every device with a screen. It’s become a powerful force in modern culture. From an end-user perspective, Netflix provides a great service. But there’s a darker side to the Netflix phenomenon, namely its practice of using your data to maximise its profits.

 

Next time you switch on Netflix, check out your ‘personalised content’ feed. This is compiled via algorithms similar to those used by Facebook’s newsfeed. It works like this: Netflix gathers data from its users’ viewing habits, which it then uses to rate everybody and everything involved in a production — actors, directors, set designers, even romance levels, plot conclusiveness and the ‘moral status’ of characters — to judge whether a piece of content is worthy of transmission. This user-data-based scoring system has a single objective: to maximise Netflix’s profits.

 

I personally find this annoying — I seldom want to watch what Netflix has decided I should watch — but, more importantly, it’s dangerous. It’s dangerous for creativity. It’s dangerous for consumers. And we need to rethink it.

 

Netflix is a centralized operation. In other words, the power resides in the top execs and it is answerable only to its shareholders, not to its users or the creatives who produce its product. In essence, it takes your data and controls it within a non-transparent structure.

 

The unstoppable growth of the centralized online giants — and I’m not just talking about Netflix here, but also YouTube, Amazon, Apple — is creating an entertainment marketplace dominated by content whose sole function is to make money. Brave, thought-provoking, game-changing content that adds to society’s creative and cultural stock isn’t part of their remit. I call that scary.

Netflix doesn’t share the data it uses to drive the algorithms that determine what content it shows to its subscribers. Even the people who create its content aren’t allowed to see the data. This is bad news for consumers, because it limits choice and will ultimately result in a world of cookie-cutter content. And it’s bad new for content-makers, because creativity and originality will be sacrificed on the altar of profit.

Unfortunately, the bad news doesn’t stop there. Digital rights management (DRM) is shaping up to be the next battlefield. Netflix’s DRM policy is to license content in perpetuity. This means that content-makers cannot realize the true value from their IP from any other channel, Which in turn means that their IP’s long-term value is lost. Irretrievably. Again, this is disturbing, not least for the distributors whose job is to navigate the increasingly murky waters of DRM to realize the best price for content. Distributors are also beginning to be cut out of the deal. You may think this is no bad thing — but if the alternative is a single gorilla that could overpower you in a heart beat, it’s a worry.

In October, Netflix had 109 million subscribers worldwide, including 52 million in the US. A rudimentary calculation shows that, at a subscription of roughly $5, it’s netting around $545m per month.

 

Pause to catch breath.

 

I keep thinking that, if just one month of Netflix’s revenue were invested into LiveTree’s new digital token, Seed, it would be enough to reinvent the entertainment industry. It would be enough to create a new marketplace that’s fairer, more efficient and more transparent. More importantly, we could create marketplace that would be sustainable because it would protect and nurture the product — creativity — that drives it, rather than exploiting it for short-term gain.

 

In today’s world, dollars equal power. Netflix is using this power just like the Hollywood studios — themselves centralized ecosystems — to increase their power, profit and control. For example, it is now making lock-in deals directly with Hollywood stars, including Will Smith. Netflix also declines to license to cinemas, which means none of its films will ever be seen on the big screen. Ergo more money and control to Netflix; less choice and diversity for consumers and creatives.

 

All this has me worried about the future of creativity. Imagine if Netflix decided to up its subscription fee to $10? Or $15? Or $50? After all, who’s to stop it? That would put a severe dent in not only your entertainment choices, but your entertainment budget. The spectre of creativity governed by profit rather than passion was one of the reasons we at LiveTree ADEPT started to think about what could be done to turn the ship. It’s possible, achievable and, actually, not that difficult. We’ve got the technology, we’ve got the vision. All we need is your help.

 

For more information, or to register to participate in the LiveTree ADEPT token sale, please visit adept.livetree.com

 

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