In 2013 Watching Television Changed Forever

Posted by Miles.Weaver

2013 was an important year for a number of reasons the death of Nelson Mandela, the election of the first Latin American Pope in history, and the Snowden revelations - that spurred the debate around government spying. Away from the more impactful, serious, world-shaping news stories though, there was a trend throughout the year that never grabbed headlines but produced a more fundamental change in the way we live our day to day lives and that change was in the way we watch television.

The year began on the heels of Netflix's blockbuster close to 2012, surpassing 30 million subscribers while streaming content profit surpassed that of DVD for the first time, heralding a big shift in the way users across its service were consuming content. (The decline of physical media as whole was an ongoing story throughout the year). But it was on February 1st that the first major shot was fired across the bow of the old model, and the ship that fired it had three words to its name: House of Cards.

That's how you devour a whale, Doug, one bite at a time.

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When Netflix announced back in October 2012 that they were paying the best part of $100 million to remake a critically acclaimed, early 90s BBC political drama starring Kevin Spacey, a lot of people wondered what on earth they were thinking. While the subject matter, cast, and producer (David Fincher) all but guaranteed a success, the fact that Netflix were making such a big play with their first attempt at original content was rightfully seen as a bold but risky move. Everyone waited for its debut with baited breath to see what would happen.

House of Cards was the first cultural phenomenon of 2013, a juggernaut of watercooler talk that ran rampant over Facebook, Twitter, Tumblr, Buzzfeed, and Mashable, to name just a few of today's major trendspotters. It was a critical smash upon its debut, and sits today on a very comfortable 76/100 rating on Metacritic. In addition to its huge popularity, the show became the first online-only TV series in history to receive consideration for an Emmy, picking up 3 awards (Directing, Casting and Cinematography) out of its 8 nominations (the big 3 categories were scooped by Breaking Bad (which won two of them) and by Homeland).

While all of this was certainly newsworthy (and the mainstream press eagerly covered all of it) a web only show winning Emmys says a great deal about the impact it had on both the creators and producers of television. The risks Netflix took with House of Cards particularly the bold move to release the entire series at once, which proved to be a huge success and confirmed the binge viewing model paid off, with a significant increase in subscribers and profit attributed to the show's success. In addition, House of Cards also provided the bedrock platform that Netflix launched its other original content offerings like Hemlock Grove and Orange is the New Black from. While the success and response to these shows has been more varied, they have all garnered strong followings and varying degrees of critical praise. Indeed, it is hard to believe that the Netflix's Season 4 of Arrested Development would have been taken as seriously as it was if not for the prior success of the Spacey/Fincher venture.

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But how did this change TV? you might ask. It didn't do it alone, but House of Cards heralded the dawning of a new era, an era where the viewer did not need to have access to any cable or satellite provider to get original content. For the first time in history, there was first run, compelling, episodic, television drama with big name stars and high quality production values available solely online. Best of all, binge viewing - just like the preferred method of consumption for the DVD box set was available from the get go, meaning the episodic cliff-hanger effectively became a thing of the past.

Netflix took a huge gamble on making and releasing House of Cards in the manner that they did, and it paid off. Reviews were strong, viewing figures were believed to be high (an estimated 11% of Netflix customers watched the show) and the number of subscribers shot up, from 33 million to 36 million in just one quarter.

Additionally, House of Cards established a new trend in the monetization of content, something Netflix had been pioneering for some time. At initial release, a lot of industry watchers were wondering how much viewers would continue to engage with the series once it had finished if every episode available at launch. This was proven to be thinking derived from the old model of television, where weekly high ratings were needed to justify a networks advertising rates and prices for show sponsorship. Netflix's goal was not to get viewers to watch with the show on a regular, weekly basis once they have their subscription, no more advertising is needed - but to harvest their analytics behaviour what devices they watched on, where and when they watched, where they paused, where they skipped, where they replayed. When you have a sample size as large as the one provided by House of Cards the data that can be gathered from the interactions of that user group is invaluable. Whether or not users binged or watched weekly was irrelevant to Netflix's success criteria, it was the simple knowledge that they watched in that manner that mattered.

He's Knocking

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The fundamental shift in the way audiences consumed television changed in 2013 due to the propensity of original On Demand programming, of course. But for all the column inches that may have been devoted to talking about the next big trends in television, the vast majority of viewers still watch programming that is produced and broadcast by traditional production houses and cable companies in a traditional manner. And while 2013 started with Francis Underwood forging entirely new ground, it ended with Walter White changing the existing landscape in drastic ways.

When it came to pop cultural impact, 2013 belonged to two things: Miley Cyrus and Breaking Bad. Given that Miley's twerking did nothing to impact on anything more than E!, Breaking Bad is what we need to focus on. Bitch. (If you haven't seen the how you won't get that reference. Please don't be offended).

The hype going into the second part of the final season of the critically acclaimed show reached fever pitch before the first episode even aired, as the years of carefully crafted stories finally started to pay off. (There will be no spoilers here, so you can read on safely). Viewers around the world found new perches on the edge of their seats as Walt and Jesse's epic final chapter drew to a close.

As the final part of the season posted successively higher ratings week after week, with the finale crescendoing with an all time series high of 10.3 million viewers and 1.24 million tweets. Impressive numbers for sure, but not amazing, considering that fellow AMC show The Walking Dead had 12.4 million viewers for its Season 3 finale. So what gives? How was the biggest TV event of the year beaten (so relatively easily) by other shows? Once again we turn to the On Demand space:

I think Netflix kept us on the air," said [series creator Vince] Gilligan. "Not only are we standing up here [with the Emmy], I don't think our show would have even lasted beyond season two. [¦] It's a new era in television, and we've been very fortunate to reap the benefits.

- Vince Gilligan quoted by Business Insider

The first episode of Breaking Bad's fourth season debuted to an audience 2.6 million, the second part of its final season debuted to an audience of 5.9 million. Many wondered if the huge growth in in audience and pop culture relevance between seasons but lower than expected viewing figures was down to with so many audience members turning to On Demand services like Netflix to watch the latest episode, rather ensuring they were in front of the TV for each episode.

The NBC crime thriller, Hannibal, also saw similar success on On Demand services around the world that made up for its low ratings impact. While the series debuted strong, its ratings slumped part way through the first season, leading many to believe it would be cancelled by NBC. Yet, as soon as this news became public, many outlets - including Amazon - expressed interest in picking it up should NBC choose to let it go, based in large part on the strength of its performance on various On Demand services. This proved to be, in fact, one of the primary reasons NBC decided to hold onto the show for at least another season:

Time shifting is here, we all know that. We live with it. We always appreciate when you report beyond just the premiere night ratings, but it's interesting to see the sort of growth of some of our shows when you look at the L+7 ratings. [¦] 82 percent boost for Hannibal out of the time period is really significant."

NBC Entertainment Chairman Robert Greenblatt, quoted on IGN

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So while the two shows had wildly variant levels of impact and ratings success, both found homes on On Demand so comfortable and successful that they were saved from cancellation. The idea that one no longer needs to be in front of the TV in order to watch a first run episode of one's favourite show has finally taken root in the mind of a significant proportion of the public, and has propelled services like Netflix, Hulu, Lovefilm and Amazon to new heights in their quest to acquire premium grade content. A few years ago, all you heard about these services was that it would be content that would make or break them. Now they are having direct impact on the success of the content they acquire.

This impact extends beyond mere ratings success; while Breaking Bad had some of the most pirated episodes in history, in the UK which did not get a network airing of the show there was a lower piracy rate than the US or Canada, both of which did. The reason? Netflix. Every episode of season 5 was available on Netflix within 24 hours of airing in the US and the UK contributed to 8.5% of the overall piracy of the show. Australia on the other hand, which had a TV airing on Foxtel, but no Netflix release, contributed almost double that: 16.1%.

On Demand services are driving down levels of piracy in addition to contributing to show success that cannot be ignored any more. As a result, there is little reason to believe that networks like HBO, AMC or NBC won't begin actively courting them. 2013 made it clear that cable companies can no longer hold back the tide on On Demand viewing, and much like the music industry was initially resistant of iTunes, the time has come that shows will be offered to these services, all of whom will gladly bid for the rights to show them. On Demand services now have the audience reach that they require marquee name TV shows to appear on their platform, and they continue to take ever larger bites out of linear viewing figures while maintaining and even accelerating the cultural impact of programmes. Networks can no longer ignore that, so they either need to give Netflix or Amazon a cut of the pie or accept that they will lose that value additional viewing stream.

Live fast, die young and leave a good looking corpse.

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"These days, when Mr. Obama retreats to the White House residence after a long day on the other end of the colonnade, he is working his way through the DVD box set of AMC's Breaking Bad

- Michael D. Shear in the The New York Times

The leader of the free world is working his way through a DVD box set? Well, I suppose someone needs to, given how the sales of physical media slowed even further in 2013. While Blu-ray sales helped keep the flagging revenues of disc based content alive (the sales of physical media dropped overall by 8% in 2013), online video sales rose by 47%. Why?

2013 was the first year that big name movie studios got behind online video. In much the same way that TV networks are starting to do with services like Netflix, Hollywood while continuing to push Blu-ray as hard as it could (a format living on borrowed time) finally accepted that it was no longer possible to hold the floodgates closed when it came to online distribution. Happily for them, they chose to avoid the same obvious mistakes the music industry fell foul of a decade earlier, and by giving their blessing to digital distribution on services like iTunes and Amazon, they managed to control that new sales arm, rather than become a slave to it.

By creating a new release window Digital HD where studios make new movies available to purchase up to a month before their DVD/Blu-ray/rental release dates, studios saw a significant portion of sales growth. So much so that the sales of digital media covered the decline in physical media, growing the revenue of home-entertainment market by 0.7%.

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Enough people are now aware of digital distribution to take notice when they see that Despicable Me 2 is available on iTunes in HD a month before it's available on store shelves. With marginal price differentiation between the two formats there's little incentive not to purchase early online and download or stream the movie right then and there. This is a behavior and model that was firmly established in 2013; it will be tough to change it.

Combine this new model of purchasing movies with the accelerating trend towards binge viewing a form of content consumption popularized by the DVD box set that is now helping to kill the format and it becomes clear that the previously established models of viewing changed drastically as well. Faced with the option of going to the store, buying the box set, and watching the box set disc by disc, viewers that have the opportunity to simply stream from an SVOD (subscription video-on-demand) service like Netflix or a TVOD (transactional video-on-demand) service like iTunes have more incentive than ever before to do just that. The content is available, in HD, and no changing of discs is required. The point at which the programme was stopped is saved, ensuring that places are never lost, and it takes up no shelf space in the living room.

This is a powerful proposition to a huge proportion of TV viewers, and one that over the course of a year changed the landscape of television so significantly that 2014 feels like we are almost starting from a clean slate, with the established model that worked so well in the past TV and movies that gave a doff of the cap to the online world, but mostly ignored it now fighting to retain an audience that is no longer willing to accept accessing and watching content in the manner they were told to accept.

2014: Way Over The Top?

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The impact of the digital shift of 2013 has been so large, that early in 2014 the sports-entertainment organization WWE announced its decision to run the worlds first 24/7 streaming network, effectively freeing itself (as a content creator) of having to be beholden to the whims of Comcast or Sky. When a programme that pulls an average of 4 million viewers a week on USA and consistently polls as one of Facebook's 15 Most Talked About Brands decides to eschew the networks and broadcast its own content, its negotiating position as pertains to selling that content gets a great deal stronger.

The announcement of the WWE Network effectively underscores 2013 as the year that changed television. That a $650 million company has embraced the online realm as the place to launch its own dedicated network, rather than go cap in hand to the old guard, says more than I ever could about how important the online realm is now to television. From the meteoric rise of AAA original online content, the impact online viewing had on viewing figures (to the extent that it saved entire shows), to the way that Hollywood studios are embracing online distribution models to cover for the falling revenues of physical media, 2013 was the year that the promise of online distribution changing the way audiences consume television was realized.

So what will 2014 herald?

Will multi-screen viewing finally overtake the living room TV? Will the second screen establish itself as actual viewer behavior, rather than occasional interest? Will 4K avoid the pitfalls that sunk 3D? You might very well think that. I couldn't possibly comment.

But you can below - let's us know what you think.

 

Miles Weaver Headshot

Miles Weaver is the Product Manager of Piksel's second screen application, 2Si. He writes on technology, entertainment and culture at www.milesweaver.com. Connect with him on Twitter with @mrmilesweaver or @piksel.

Topics: Analysis, Insights