另一個財大氣粗的新競爭對手是蘋果，11月1日蘋果將推出 TV+ 流媒體服務。為了引起轟動，蘋果斥巨資聘請一線明星詹妮弗·安妮斯頓和瑞茜·威瑟斯彭出演原創劇集《早間新聞》。iPhone制造商蘋果在9月初表示，TV+收費僅為每月4.99美元，遠低于其他頂級流媒體競爭對手。舉例來說，美國Netflix用戶每月要看節目和電影的話，每月費用從8.99美元到15.99美元不等。（在印度和馬來西亞等海外市場，Netflix正嘗試更低價格，可以觀看移動端專享內容。）迪士尼+將于11月推出，內容來源包括漫威、盧卡斯影業和皮克斯，收費為每月6.99美元。
On the fourth of July, Netflix released the much-hyped third season of its wildly successful series Stranger Things. Since it debuted in 2016, the show—a science fiction story set in small-town Indiana in the early 1980s, featuring a psychokinetic tween girl, top-secret government experiments, and a portal to another dimension—has become a cultural phenomenon. To promote season three, the global streaming giant partnered with everyone from Burger King (which debuted an “Upside Down” Whopper) to Coca-Cola (which gamely revived its failed ’80s New Coke for limited release) to Nike (which rolled out a retro-style “Hawkins High” line of sneakers and apparel). The stage was set for a blockbuster binge fest. And Stranger Things delivered.
Netflix couldn’t help but gloat a little. On July 8, the normally tight-lipped company announced that nearly 41 million households had streamed at least part of season three in its first four days of release, and more than 18 million had already devoured the entire season. (By way of comparison, back in April, HBO reported that 17.4 million people had watched the premiere episode of the hotly anticipated final season of Game of Thrones.)
That was the good news.
The bad news came nine days later, on July 17, when the Los ?Gatos, Calif., company announced its second-quarter earnings. Netflix revealed that it had lost subscribers in the U.S. for the first time in eight years—with some 120,000 American viewers abandoning the service. Slower-than-expected growth outside the U.S. also hurt: Overall, Netflix added 2.7 million subscribers in the quarter, but that was well below its target of 5 million. According to Netflix, a weaker content slate was partly to blame for the tepid results. Translation: Not enough Stranger Things-type successes had appeared in Netflix’s lineup in the previous three months. The stock plunged more than 10% in a single day.
For a juggernaut like Netflix, one anemic quarter is hardly a crisis. With 151 million subscribers in more than 190 countries, the company is now a global entertainment brand. Last year its revenues soared 35% to $15.8 billion, placing it at No. 197 in the Fortune 500. And the company’s explosive growth—sales gains of at least 30% annually since 2006—has made it a Wall Street darling. Shares of Netflix have rocketed up some 4,300% over the past decade vs. 280% for the tech-heavy Nasdaq.
But as its wild ride in July illustrates, for Netflix, it’s no longer enough to celebrate the occasional smash hit. To meet the expectations it has created for itself, the company that essentially invented the business of streaming entertainment must create a diverse pipeline of viral hits with global appeal. That’s especially true because Netflix is about to enter into the biggest battle in its 22-year history.
Why? At long last, the streaming wars have arrived. Over the next several months, establishment Hollywood powers Disney, NBCUniversal, and AT&T’s WarnerMedia are all launching their own Netflix-like services. As a result, Netflix will lose a significant portion of the licensed content it has long relied on for much of its usage. Friends (which will move to WarnerMedia’s service) and The Office (which will go to NBCUniversal) are just two of the high-profile content departures expected in the near future, and they account for 5% of all viewing on Netflix, according to estimates from Wedbush analyst Michael Pachter. The migration of licensed shows and films away from the platform won’t happen immediately, says the analyst, but he also adds that it is “unclear whether Netflix can replace them with quantity and quality sufficient to keep its current subscriber base loyal.” Netflix made one major move to mitigate the exodus in mid-September, when it announced a five-year deal, beginning in 2021, with Sony Pictures Television for the exclusive rights to Seinfeld, which currently runs on Disney-owned Hulu.
Another deep-pocketed new rival is Apple, which will debut its Apple TV+ streaming service on Nov. 1. To make a splash on arrival, Apple has shelled out big bucks to secure A-listers Jennifer Aniston and Reese Witherspoon as costars for its original series The Morning Show. The iPhone maker said in early September that the price for Apple TV+ would be just $4.99 per month, well below the cost of the rest of the top streaming rivals. Netflix subscribers in the U.S., for instance, pay anywhere from $8.99 to $15.99 per month to access its offerings of shows and movies. (In some foreign markets, like India and Malaysia, Netflix is experimenting with much lower price points that give access to mobile-only content.) Disney Plus, which launches in November with content from Marvel, Lucasfilm, and Pixar, will cost $6.99 per month.
And Netflix already has formidable competition in the form of Amazon and Hulu. Amazon has more than 100 million subscribers to its Prime service, which includes video, and it has had some hits with its original programs, such as the The Marvelous Mrs. Maisel. And Hulu, which lowered its basic-level pricing from $7.99 to $5.99 earlier this year, now has more than 26 million paid subscribers. According to fresh numbers from research firm eMarketer, Netflix has 87% penetration of the video-streaming market in the U.S., compared with roughly 53% for Amazon Prime and 41.5% for Hulu.
So while Netflix remains the streaming king, it will have to fight harder than ever to defend its crown. And the dynamics of the competition are shifting dramatically. Netflix’s meteoric rise over the past two decades, from DVD-by-mail service to entertainment powerhouse, has been fueled primarily by cutting-edge technology. From the cloud infrastructure that enabled its seamless streaming service to the data-driven personalization engines making educated guesses at what viewers wanted to watch, the company has been a step ahead. Even though Netflix believes its tech prowess will continue to give it a competitive advantage, its top executives concede that its rivals are narrowing the technology gap.
To win in the new era of streaming, Netflix must become as good at producing original content as it has always been at delivering it.
“While we certainly have our roots in tech, Netflix today is an entertainment company,” says Ted Sarandos, Netflix’s longtime chief content officer. The new key to growth, according to the company, is an expanding roster of must-see shows and movies that get an increasingly global audience to not only sign up for Netflix but also stay subscribed. “Our challenge every day is making a show you can’t live without, and that show is different for every person,” says Sarandos.
Netflix says it has been preparing for this moment for years. And the proof is the enormous spending spree on which the company has embarked in recent years to produce everything from the hit prison-drama series Orange Is the New Black to the Oscar-winning film Roma—and gobs of niche content in between. In 2018, the company invested some $12 billion to produce 700 new, original programs in every conceivable category—scripted, unscripted, documentaries, stand-up comedy specials, animation. And analysts expect Netflix’s content budget to rise to $15 billion this year. To help finance all that programming, Netflix has borrowed a lot of money: It currently holds $12.6 billion in long-term debt on its books, up from $6.5 billion at the end of 2017.
The gusher of new content, Netflix believes, will provide benefits and draw subscribers well into the future. But its success hinges on launching shows that resonate with viewers. While Netflix’s algorithms may be able to predict the loyalty of a subscriber with uncanny accuracy based on how long she takes to finish watching a series, predicting whether a script will become the next Stranger Things is less scientific. “There are some things you can’t necessarily model out with great precision,” says Sarandos.
To address this new challenge, Netflix has assembled a team of veteran content developers who bear little resemblance to the typical C-suite crew sitting around a Silicon Valley conference room. Most of them have joined Netflix just in the past few years and were poached from the traditional Hollywood ecosystem. They present a diverse range of ethnicities, races, and sexual orientations—an approach that reflects Netflix’s strategy of continuing to build its user base by connecting with audience segments across geographies and categories. Several of the senior members of the team also happen to be women. As Netflix enters the streaming wars, they’re the ones leading the charge.
“他們預料到了。”好萊塢公司Creative Artists Agency的資深人才經紀人馬特·德爾皮亞諾表示，（目前德爾皮亞諾是制片公司Cavalry Media的合伙人。）“他們料到這部劇的重要性后，就再沒有猶豫過。”
On a recent Tuesday evening in West Hollywood, about 200 fans file into a women-only coworking space above a Sprouts grocery store to celebrate the third season of GLOW, a popular Netflix show about female wrestlers. The inside of the space looks like a slightly more adult version of a teenage girl’s dream bedroom: There are plush, pale-green sofas, peach-hued chairs, and wall-to-wall shelves neatly filled with color-coordinated books. The attendees, almost entirely women, mill about sipping complimentary wine. The show’s leading actors (all women) and its creators (also women) are on hand for the screening. Over by registration, someone is handing out hot-pink fanny packs, a throwback to the 1980s era in which GLOW, which stands for Gorgeous Ladies of Wrestling, takes place.
“I couldn’t think of a better place to hold this event,” says Cindy Holland, Netflix’s vice president of original content, addressing the crowd as they take their seats. Shortly after she speaks, the lights dim, and the first episode of the new season of GLOW pops up on a large screen.
Holland is no-frills, in both ensemble and personality. Dressed in her signature dark jacket and pants, the self-described introvert doesn’t seek the spotlight, however visible her role has become. Holland joined Netflix in 2002, at a time when the company was still known for its signature red envelopes, not shows like GLOW. The DVD-by-mail business was launched in 1997, the brainchild of current CEO Reed Hastings and his cofounder, former CEO Marc Randolph. Back then, ?Sarandos and Holland’s task was to find and license programs for DVD distribution, and they did it with a lean team of transplants from tech and entertainment circles. (Today, Netflix’s content department employs some 400 people worldwide.)
“What I saw in her right away was a very logical decision-maker,” Sarandos says of his first hire. “She also had a superpower: Cindy could read and break down the mechanics of a script better and faster than anyone I know.”
A decade later, even as Netflix’s streaming business began to boom, its leadership anticipated an eventual challenge to its model: At some point, the company wouldn’t be able to keep expanding its library of licensed content, at least not at a reasonable cost. Eventually, the traditional Hollywood players who had created all of those must-see programs and movies would want to keep them for themselves. “Pretty soon, you could see a world where it would cost us just as much to license a show as it would to make one for ourselves,” says Holland. Netflix didn’t want to wait until it had to create its own content.
The catalyst for jumping into original content came in February 2011, when the producers of House of Cards, a British-made political thriller, came to Netflix with an interesting proposition: buying the rights to make an original version of the popular series for an American audience. Netflix quickly bit on the opportunity. The bet paid off. Netflix’s House of Cards, starring Kevin Spacey and Robin Wright as ruthless Washington opportunists, was a streaming sensation. (Spacey eventually left the show after allegations of past sexual misconduct.)
“They saw it coming,” says Matt DelPiano, a longtime talent agent with Hollywood firm Creative Artists Agency, who was involved with inking the deal for House of Cards. (DelPiano is ?currently a partner with production company Cavalry Media.) “And once they saw what that show did for them, they never looked back.”
This past August, Netflix announced that it was canceling a program called The OA—and the tech giant was promptly confronted with some very vocal backlash. Launched in 2016, The OA is a supernatural drama about a missing blind woman who returns to her suburban Michigan family with her vision inexplicably restored. The series was expensive to shoot and its audience relatively tiny. For a broadcast network, cancellation would be a no-brainer. But the show’s ardent fans were incensed. They put up billboards and organized flash mobs in Times Square. They started a Change.org campaign to save the series, gathering 80,000 signatures. Some protested outside Netflix’s offices in Hollywood and New York. And one hard-core devotee, an unemployed TV writer named Emperial Young, went on a hunger strike, saying she needed The OA more than she needed food.
Netflix canceled the show anyway.
The episode illustrates two things about Netflix’s evolving operating model: First, niche appeal is still good—just not too niche. Second, Netflix is learning to operate a bit more like a traditional Hollywood studio.
Because Netflix isn’t dependent on advertising dollars and because it has so much data at its fingertips, it can micro-?segment audiences to create programs for a wide variety of different so-called taste clusters. As a result, the company has built a reputation among artists and viewers as a haven for obscure, narrow-cast content. “We’re not so focused on what is the best thing to put on Tuesday at 8 o’clock,” says Holland.
Success is measured in viewership numbers proportional to the cost of production. A low-budget show that secures a loyal tranche of niche viewers may have high relative value; an expensive show that fails to catch on with a wider audience doesn’t add up. To be sure, Netflix wants as much viewership as possible. And it wants to wow critics and land awards. But for every Stranger Things, there are probably a dozen other programs that don’t garner large audiences or big headlines but still generate significant return on investment. But not The OA.
Netflix has always been a data-driven company. It’s not a hand-holding culture. That has always been true on the product side—the engineers, designers, and developers who work behind the scenes—and it’s true today on the content side. “Talent for hire”—like writers, directors, and actors—appreciate the freedom and the speed at which Netflix moves. From the very beginning, with House of Cards, the company shocked the industry by snapping up entire seasons rather than just commissioning a pilot—the long-standing process by which Hollywood develops programs. And once a show is in development, there are typically no “network notes,” the copious feedback provided by television executives, to cater to.
But some aspects of Netflix’s culture haven’t been as well-received. Showrunners grumble that executive shuffles at the company make it tough to hold on to an internal champion. There are so many projects in the works that it’s hard to stand out—and to get a decent budget. Contrary to its free-spending image, Netflix has a reputation in the industry as a frugal boss, at least on a day-to-day basis. “They’re always trying to save money and looking at the cheapest way to do things, even when that isn’t best for the long term. It’s a very ‘startup-y’ place,” says one TV writer currently working on a Netflix series who did not want to be named.
There’s another kind of stinginess at the company that has come under fire by many in the industry—Netflix’s reluctance to share its data. The company has a treasure trove of numbers that Nielsen, the ratings provider, would kill for. And yet it has historically kept this information hidden from the very people it commissioned to create content for its platform. That is a habit the company will likely need to kick, especially as competing platforms vie for the same talent.
“You think they’re not gonna tell Martin Scorsese how many people watched his ?movie?” says DelPiano, the former talent agent. The legendary director’s upcoming film, The Irishman, with a reported budget north of $150 million, launches on Netflix this November.
Working with a name-brand director like Scorsese not only has marketing value for Netflix but also helps address one of the content team’s central priorities: “How do we make sure that we are continuously producing the most exciting and compelling stories and also ensuring that as a creative environment, we are the place that filmmakers want to come to do the best work of their lives?” says Lisa Nishimura, VP of independent film and documentary features at Netflix. She contends that emphasizing Netflix’s belief in art—not its tech prowess—is key in wooing creators.
Nishimura joined Netflix in 2007, a relatively early hire who was brought on board to help build out the company’s library of licensed documentaries. In more recent years, she has spearheaded the company’s move to original “docuseries,” like Making a Murderer, and comedy programming, like Dave Chappelle’s stand-up specials.
Netflix’s strategy to court directors and writers is rooted in pragmatism. The explosion of competing streaming services means that writers, actors, and the like are in high demand—and in this new arms race for content, attracting talent is key. Paying them well and offering the right incentives and opportunities, is a must. But so is appealing to their sense of imagination.
Two years ago, for instance, the company hired Melissa Cobb, a longtime DreamWorks producer, to build out its slate of original kids and family programming. Cobb now has more than 20 separate animated series at some stage of production in Netflix’s Los Angeles hub. “What we’re doing is looking for a diverse range of shows versus trying to build a very specific brand identity,” says Cobb.
In some cases, that means green-lighting passion projects. “They brought me in here on my birthday and asked me, ‘What’s your dream thing that you don’t think can be made?’?” says Jorge Gutierrez, a director and animator. “I said, ‘I want to make The Lord of the Rings with brown people.’?” Gutierrez is now developing Maya and the Three, an animated series inspired by Mesoamerican mythology. The show’s protagonist is a warrior princess on a journey to save humanity.
Getting the right balance of art and technology has been tricky for Netflix, especially as it has evolved into an entertainment powerhouse. On the one hand, it wants to be seen as a bona fide Hollywood player. On the other hand, it still views its technological underpinnings—and culture—as a competitive advantage that it wants to hold on to.
“I’ve spent my life in the entertainment business,” says Channing Dungey, the former head of ABC Entertainment, whom Netflix hired earlier this year. “And I wasn’t quite prepared for Netflix and the integration of the shows we make with the platform on which they live.”
Landing Dungey, now VP of original series at Netflix, was a coup for the company—she had spent 15 years at Disney-owned ABC and worked with producers like Shonda Rhimes, the TV hitmaker behind Grey’s Anatomy and spin-off Private Practice who is now collaborating with Netflix. But Dungey’s initiation into the company also highlights some of the growing pains it is dealing with as it tries to transition from a tech-led to a creative-first company. The first day on the job, she couldn’t even understand the lingo. “There were a lot of acronyms,” she says, laughing.
The differences between Netflix and traditional Hollywood players are not restricted to jargon. The Silicon Valley–based ?company has always prided itself on being nimble and moving fast. But its relatively flat organizational style has proved to be tricky as it now manages hundreds of disparate projects in different countries.
So, for once, Netflix is taking a network note from traditional Hollywood: Sometimes a bit more process can be beneficial. “We’re doing a little more development now,” says Dungey, referring to the method that TV networks use to evaluate and shape programs before fully committing. “It gives us a little bit more freedom in case we’re, like, ‘Oh, that was a great pitch. It didn’t quite turn out the way we wanted it to, so we’re not going to do that one.’”
Salma Hayek is resplendent, even when jetlagged. The ?actress, director, and producer has flown to Mexico City from London for a day-long press junket promoting her new show Monarca. Hayek, who got her start as a telenovela character in her native Mexico, doesn’t act in the series, which centers on the complicated dynamics within a family atop a tequila empire. But her production company, s, developed it. Hayek originally sold the drama to ABC. It reached the development phase but ultimately didn’t get made. Her production company then bought back the rights, and she eventually took it to Netflix.
“They loved the concept,” says Hayek, visibly proud. The diminutive star gushes when speaking about Monarca.
Wearing a crimson satin top that matches her lipstick underneath a mint green suit, her dark hair perfectly parted, Hayek doesn’t look like she just stepped off a plane. “We did it completely in Mexico and completely in Spanish,” says Hayek. “This show will be seen in more than 190 countries around the world. Everyone can relate to power or corruption or family drama or dealing with sexuality or parenthood.”
Indeed, Netflix says its strategy isn’t to “Americanize” content for a global audience. Rather, it is trying to develop programming that appeals to particular regions, some of which will also appeal to a broader market because the stories tap into universal themes.
“We are obviously a global platform, and every show will launch everywhere, right at the same time,” says Bela Bajaria, head of Netflix’s non–English language original programming. “But when we go into a country, it really is about the storytelling—a creator with a vision from that country.”
Bajaria, the former head of Universal Television, came to Netflix three years ago. The longtime entertainment industry exec is of Indian descent, was born in London, lived in Zambia, and moved to the U.S. at age 9. She says Netflix’s goal is to appeal to an increasingly global audience with an increasingly global slate. And the key to doing that is to have people on the ground in entertainment hubs around the world—not just in Hollywood. Netflix now has production hubs in London, Madrid, and Toronto and content teams on the ground in numerous other markets, including Mexico.
當然，在全球拓展內容不僅要縮小文化差異，還要正確使用語言。但這并不像看起來那么簡單。在影視劇圈，“subs and dubs”代表字幕和配音，都是幫全球觀眾理解對話的方法。Netflix也為用戶提供了兩種服務，平臺上每部劇都能同步翻譯成10種語言，還有20多種字幕可選。在很多美國以外的國家，人們更喜歡配音版。但配音是很難實現完美的藝術形式，而且極難規模化。
Churning out hits abroad isn’t just a nice-to-have; it’s a necessity. A majority of Netflix’s user base now lies outside the U.S., and the vast majority of its growth today comes from foreign markets. While the company has all-but-saturated the U.S. market, its increasingly global footprint gives it room to grow. It also presents a sandbox that allows it to experiment in ways that aren’t possible when catering just to U.S. viewers.
Exhibit A: On Sept. 20, Netflix debuted a crime drama called Criminal that it launched in four different versions, each tailored for a specific country—France, Spain, Germany, and the U.K. The show isn’t just the same script in different languages. It is actually the same concept (three episodes, each consisting of an hour-long police interrogation) but with different, local actors and culture-specific scenarios. All four versions are available in all Netflix markets. That means a viewer in the U.K. can click on the French version—and maybe even like it better than the British one.
The model, if it works, is an attractive one for Netflix. Because most U.S.-based television networks don’t have robust distribution channels in other countries, they have to license their content to existing networks in other regions. But Netflix controls a global pipeline to more than 190 countries—and, increasingly, to its own slate of programming.
“If they can create content and globalize it, that makes for much better scale economics,” says Mark Mahaney, an analyst with RBC Capital Markets, who is bullish on Netflix’s prospects.
Of course, scaling content globally requires not just bridging cultural gaps but also getting the language right. And that isn’t always as straightforward as it might seem. In show biz, “subs and dubs” stands for subtitles and dubbing, the two methods by which dialogue is translated for global audiences. Netflix offers both for its users—every program it airs on its platform is simultaneously available dubbed into 10 languages and in more than 20 with subtitles. In much of the non-U.S. world, dubbing is preferred. But it is an art form that is hard to perfect—and very, very hard to scale.
Netflix says it has a “content operations” team looking for innovative ways to address the subs-and-dubs challenge. But whatever it come up with is unlikely to be a whizbang solution cooked up by engineers. “There’s no easy technology fix for it,” says Bajaria. Like much of what Netflix is doing these days, it’s more art than science.
A version of this article appears in the October 2019 issue of Fortune as part of the Most Powerful Women package with the headline “Once Upon a Time at Netflix.”