From a Darwinian workplace culture to a cavalier approach to free speech, the streaming giant is behaving badly.
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It is time to think again about Netflix. We may love The Good Place, Black Mirror, Stranger Things and The Crown, but when it comes to out-of-control tech giants the $150 billion entertainment giant ticks every box. Netflix cannibalises our traditional culture. It must eliminate its rivals. It wants to control our children, mine our data and hack our brains. It has a too cosy relationship with authoritarian regimes. And, to cap it all, the streaming platform even has its own crazy internal culture.
This is not hyperbole. There is a mountain of evidence to back it up.
Like its Silicon Valley rivals, Netflix used to keep its subscriber numbers to itself. Now it has become a little more open – and the numbers are big. In January, in a signal to Wall Street about how much more Netflix can grow, Netflix told investors that their shows account for 10% of TV screen time in the United States.
The platform now has close to 140 million subscribers and they are adding eight million every quarter. The recent hit Netflix movie Bird Box has been watched by 80 million people since it was released just before Christmas. Hit shows such as You and Sex Education are also highly popular: 40 million households were expected to see each show in its first four weeks on Netflix. Thanks to the ‘Netflix effect’, the number of cancelled TV licences in the UK spiked for the first time in six years.
Research published by Ofcom last month showed that children overwhelmingly prefer YouTube and Netflix to any other platforms. The children in the study did occasionally watch platforms such as the BBC’s iPlayer and network television, but they saw them as less relevant. In fact, watching this kind of ‘traditional’ television was associated with those dreaded people: parents.
Disney’s purchase of Fox for $52 billion shows that traditional media corporations know they are fighting for survival. Netflix has recently cancelled the last of its (Disney-owned) Marvel shows in what is easy to see as a “show of force” by the streaming service. Our cash-starved public sector broadcasters are contemplating banding together on a new shared streaming platform in an attempt to fend off Netflix. But it is the lengths Netflix will go to in growing their subscriber base that should horrify us.
On 1 January a story dropped on FT.com that should be seen as a warning about Netflix’s power. The headline read simply: ‘Netflix pulls episode of comedy show in Saudi Arabia.’ We don’t know the specific lines from Hasan Minhaj’s show that offended the Crown Prince; the American comedian said so much about Saudi Arabia that the thin-skinned autocrat could have found offensive. Perhaps it was his comment that Saudi Arabia was “the boy-band manager of 9/11”. Or it could simply have been the fact that the young American referred to the Saudi ruler by his initials, MBS.
Executives say they received a “valid legal request” from the Saudi authorities to take down episode 2 of Patriot Act from the streaming service in Saudi Arabia. And, in a worrying act of political self-censorship, they did so, even if an edited version remained up on YouTube.
Whatever the specific source of distress for the Crown Prince, executives at Netflix clearly didn’t want to upset him. Interestingly, in the same episode, Minhaj also criticises Silicon Valley for “swimming in Saudi cash” and urges tech companies to stop taking investment from the kingdom. It has been estimated that the Saudis have invested over $6 billion directly into the Valley, and more indirectly through funds such as SoftBank and BlackRock. The New York based fund is one of Netflix’s largest institutional investors. It is known to have close economic ties to Saudi Arabia. Larry Fink, its CEO, has described himself as a friend of Saudi Arabia.
These behaviours are driven by a desperate need to grow – fast. This is what makes the entertainment platform vulnerable to pressure from authoritarian regimes. It’s not a surprise that Netflix will bend over backwards for ‘MBS’ when roughly two-thirds of the population of the oil rich desert kingdom is under 30 – a source of wealthy new subscribers for the platform – and Silicon Valley is awash with Saudi cash and the soft influence that it buys.
This is not the first time the entertainment giant has bowed to the demands of autocrats. In Singapore the service took down three episodes of different programmes after it received a similar request from authorities who didn’t like drug use being portrayed in a positive way.
In these decisions our favourite streaming service has displayed a cavalier approach to freedom of speech – and to its responsibilities as a major, and potentially dominant, cultural medium.
It’s an approach reminiscent of Facebook at its worst. Netflix’s critics claim that the corporation’s capitulation is fuelling digital authoritarianism by emboldening autocrats across the world in their attempts to control global streaming services as they do their national television.
Netflix shares another similarity with Big Tech gone bad. Mark Zuckerberg’s quote “Move fast and break things” – once exciting, now quite chilling – would fit as well on the wall of Netflix’s HQ as it does on Facebook’s. Netflix must cannibalise or destroy traditional cinema and television in order to achieve the growth it needs.
The giant was happy to release its recent films Bird Box and Roma in the cinema just long enough to qualify for awards such as the Oscars – success in which will drive subscriptions. While consumers can save money by watching a film on a streaming service at home rather than in the cinema – and producers can be ‘bought’ by the big budgets Netflix offers – something is lost when you watch a film on a TV, laptop or mobile. The collective experience and immersive storytelling offered at the cinema is powerful. For the moment, at least, traditional cinema is still attracting audiences.
The sheer amount of video Netflix is producing is turning into a “raging flood” that threatens to sweep away quality control, and our beloved public service broadcasters with it. Screen-testing new shows via pilots may not be a perfect process, but it at least offers a base level of quality. Netflix doesn’t commission pilots. It doesn’t have the time, if it wants to conquer the world. Instead, it commissions whole seasons at a time. Insiders say there are now so many people who can greenlight a show at Netflix that it acts like 10 to 15 different production companies.
This is where consumers lose out. By not piloting shows, Netflix stands accused of cancelling more than would be expected of a traditional broadcaster. The shows Netflix has cancelled include the expensive Sense8, the critically acclaimed Unbreakable Kimmy Schmidt and flops like Girlboss. In fact, lists of all the shows Netflix cancels make the headlines each year. The cost of these cancelled shows is then passed on to consumers through higher subscription charges and – in the future – perhaps even the introduction of advertising.
For big-name showrunners such as Ryan Murphy, the man responsible for American Horror Story, Netflix offers the chance to satisfy their wildest fantasies. But let’s be honest, $300 million for a five-year contract to produce whatever you want is not a recipe for quality. It is a recipe for a great deal of self-indulgent rubbish. “I’m building a team that is orientated to say yes in a town that is built to say no,” said Ted Sarandos, Netflix’s chief content officer. He’s not kidding.
Like the other out-of-control behemoths, the streaming giant even has its own bizarre Darwinian culture that is credited with enabling the company to grow so fast – and which may now be amplifying its mistakes. It’s called “radical transparency”or “the Netflix Way”. Former employees have called it “a culture of fear.”
If you make a mistake, you are asked to “sunshine” the incident in front of your peers. This is Netflix lingo for standing up in front of your colleagues to tell them what you did and even apologise to them. If you are a manager, you are told to apply a “keeper test” to your staff – asking yourself whether you would fight to keep a given employee. If managers don’t fire people, whistleblowers say, they risk being fired themselves. And even if you’ve been fired, you have to go through a merciless post-mortem in front of your former colleagues. It is a brutal recipe to ensure the survival of who the company deems the fittest.
Netflix has to grow fast for a simple reason. The streaming service may be a 20-year-old company, but it has the business plan of a start-up. Like Uber, Netflix has to grow at ever-increasing rates to justify its valuation, while it is making only a small profit and carrying massive debt. This exponential growth depends on a feedback loop: subscriber numbers increase rapidly, which fund the digital “box sets” Netflix needs to keep existing subscribers happy, which attracts new subscribers and increases revenue even more.
Keeping subscribers means that, just like Facebook or YouTube, Netflix has to work out ever better ways to hack our brains. It already personalises recommended shows, and the landing cards for each show. It even selects the shows it suggests to you according to what time you’re on the app. If you log in late at night, you’re more likely to be shown shorter programmes, or those that you haven’t finished watching.
Netflix needs to work out how to manipulate us into staying on the platform even longer, in preparation for the day when subscriber numbers plateau. This would make Netflix even more valuable – and should give it the ability to raise prices as it penetrates our lives more deeply.
It now turns out that, without our knowledge, Netflix has been watching you while you watch-play the interactive show ‘Black Mirror: Bandersnatch’. The choices you make in the show – for example between Frosted Flakes or Sugar Puffs– are being saved by Netflix to improve its shows in the future and, presumably, what it markets to you.
Like the characters in Netflix’s hit show, we may think we are in The Good Place, but it turns out we are in The Bad Place. We love Netflix, the shows it produces, the choice it gives us and – for my children – it is hard to imagine life without it. But we loved Facebook once, before we knew what they were really up to.