Netflix vs. HBO: Using social intelligence to predict long-term commitment

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WHAT ARE YOU GOING TO WATCH? Netflix vs. HBO: Using social intelligence to predict long-term commitment

An evolution of viewing entertainment

Viewers begin with

watching major network

programming

Then comes HBO,

Showtime, Cinemax— “A

theater experience in your

living room”

The wave of “Primetime

is anytime” is birthed with

Netflix and Hulu

revolutionizing the

entertainment arena

Begins with…

Along comes…

Next generation…

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Original programming - the latest battle

HBO brings viewers new and competitive original

programming in a push to win your attention, subscriptions,

renewals, and brand loyalty with programs such as Trueblood

and Game of Thrones

Netflix competes in the original programming battle

with the creation of House of Cards and Orange is the New

Black. Original programming becomes a new territory for

Netflix as they’re looking to find innovative ways to capture

your attention and dollars

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Today’s focus - who is winning and why?

Using social intelligence to:

• Highlight the changing landscape of

entertainment viewing

• Identify the extent to which original

programming is creating a competitive

advantage

• Evaluate customer journeys to understand

distinct points of difference

• Understand which brand is ultimately delivering

what matters to create long-term brand affinity

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Social intelligence

gives you a

contextual view into

your customers’

experience

5

80%

Businesses think they understand their customer

8% 6

The value social data brings

*Source: Gartner

By 2015, the 20% of enterprises that employ social media beyond marketing will lead their industries in revenue growth.*

7 7

Customer Relevance Score (CRS)

SHARES

Brand Commitment Score (BCS)

ADVOCATES

Our social intelligence tools

Product Commitment Score (PCS)

SHOPS

Driving measurement from the business goals

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Measuring who is winning the game and why…

• PCS allows us to look at viewers’ desire to subscribe and/or continue subscribing to a particular network

• BCS allows us to look at the emotional commitment viewers have for the network

• This connection contributes to whether or not viewers become brand evangelists and be loyal to the network

Brand Commitment Score (BCS)

ADVOCATES

Product Commitment Score (PCS)

SHOPS

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So let’s get on to the winner…

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+/- 30 Million subscribers

Brand affinity is about more than just subscription numbers…

This industry and the consumers are multi-dimensional:

• We wanted to see which brand is better enabling its customers along the emotional and purchasing journey - knowing there are a number of elements that contribute to whether or not a consumer subscribes and/or continues a subscription

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The actual programs viewers prefer to watch on

a particular network

Creating a difference in long-term commitment

Content - the programs

The actual experience viewers have when interacting with the

network

Experience - the delivery

The actual success of a network in connecting its

programming with its overall brand

Branding - the alignment

Three main elements

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Original programming – standouts

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0

5000

10000

15000

20000

25000

30000

35000

40000

45000

38

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42

44

46

48

50

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ArrestedDevelopment

House of Cards Orange Is TheNew Black

Hemlock Grove True Blood Game ofThrones

The Newsroom BoardwalkEmpire

Content is important

• HBO is the leader in creating strong emotional connections with their programming content • Overall Netflix trails HBO – but not by much

BC

S sc

ore

(r

epre

sen

ted

by

line

grap

h)

BC

S volu

me

(rep

resented

by b

ar graph

)

BCS: programming scores and volume

HBO Netflix

“I love, love, love The Newsroom. Please bring it back for Season 3!!!!!!”

“I think True Blood and Game of Thrones should have two seasons a year. Omg that would be soooooo great!”

“I started watching the Netflix show Hemlock Grove and I'm so hooked. Like a drug....bam. Episode number 5”

“Just finished Orange Is The New Black. Easily the best show on TV. Netflix is killing it w/ Arrested Development and Orange. #OITNB”

How does emotional connection to programming affect overall long-term commitment to the network?

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• Despite HBO viewers having a stronger emotional connection to HBO original programming, this does not necessarily translate to overall loyalty for the ‘HBO’ brand

• Netflix is building stronger emotional commitment to its overall brand

40

42

44

46

48

50

52

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Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

Content is important, but…

BCS: network scores

BC

S sc

ore

HBO

Netflix

HBO has strong emotional connection to their programs, so shouldn’t they have the strongest emotional connection to the brand?

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The customer journey to brand loyalty

6 7 8 5 4 3 2

Eight core emotional states

1

17


6 7 8

When you become aware of a gap that needs addressed, this creates initial stages of interest or intrigue in brands that might satisfy that need

5 4 3 2


1

AWARENESS

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1 6 7 8

When you connect your need or desire with potential brands and create your consideration set

AWARENESS

2

CONNECTION

5 4 3


19


1 6 7 8

You explore the brand and react reflexively to emotional impressions and responses

AWARENESS

2 3

CONNECTION EVALUATION

5 4


20


1 6 7 8

You are attracted enough to the brand that you believe the assertions that brand makes and you become excited about the hopefully positive experiences to come

AWARENESS

2 3 4

CONNECTION EVALUATION TRUST

5


21


1 5 6 7 8

You buy the brand and begin to have reactions to it. These reactions can be positive or negative and can be conscious or subconscious

AWARENESS

2 3 4

CONNECTION EVALUATION TRUST EXPERIENCE


22


1 6 7 8

After a positive experience with the brand, you begin to develop loyalty

AWARENESS

2 3 4


5

AFFINITY


23


1 7 8

You leverage your affinity and experiences to influence other people’s opinions about the brand

AWARENESS

2 3 4


5

AFFINITY

6

INFLUENCE


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1 8

You develop such close affinity with the brand that you promote it whenever possible and it becomes your go-to to fill that need

AWARENESS

2 3 4


5

AFFINITY

6

INFLUENCE

7

EVANGELISM


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The experience plays a crucial role

Viewers are enjoying their experience with Netflix more • What we see is that of the eight core emotional states – HBO does not lead in any

of them • Netflix is better enabling its customers to feel emotionally connected to the

network

AWARENESS CONNECTION EVALUATION TRUST EXPERIENCE AFFINITY INFLUENCE EVANGELISM

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Brand Commitment Journey Scores

There is more to building long-term brand commitment than just having strong programming

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Experience enablers - Netflix is winning

• Next generation of viewing

• Values diversity

• “Rebel” from the norm

• Free trial with no commitment

• Not dependent on having cable (but need internet)

• Variety of content at my fingertips

• Access to content not available elsewhere

• Primetime is anytime

• Recommendation engine

• Feeds “binge” / “all you can eat” viewing

• No commercials

• Netflix customers share through a variety of social media channels (some of which are automated)

• “Netflix” comprises nearly 85% of the data set

Netflix is enabling important brand building experiences

INFLUENCE EXPERIENCE TRUST EVALUATION CONNECTION

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• Free trial with no commitment

• Upfront pricing - $8 month for unlimited online access

• Dependent on cable (even to access HBO GO app)

– Consumers would love to pay separately for HBO GO app only

• Question the value of HBO (price of cable + price of HBO)

Experience barriers - HBO is missing the mark Significant separation exists between the programs viewers love and the network delivering it

• Reputation of being owned by ‘the man’ (aka Time Warner)

• Viewed as constrictive – have to experience it the HBO way (e.g. one new episode a week)

• Primetime is not anytime

– HBO GO accounts for less than 0.5% of online video streaming*

• Lacks variety to take the place when “my show” is over or on break

– This gives customers a reason to unsubscribe during breaks in their favorite program(s)

28 *Source: Sandvine

– Game of Thrones is one of the most pirated shows

“Netflix is the future of TV...online rather then a typical cable subscription.. House of cards is a great example.”

“Netflix has shown us that we can watch whatever we want whenever we want for a fraction of cable's ridiculous price. There's no going back.”

“Almost a year in between seasons is ridiculous. Fans of game of thrones deserve better. i love the show. The planning of which i detest. 10 episodes in season 3? Come on?”

“ I honestly think Game of Thrones should win the Emmy for “Best Drama Series”, but a large part of me wants House Of Cards to win just to stick it to HBO (Time Warner). Netflix feels like what the future of television should be. Traditional Cable as it stands right now needs to adapt or die..”

Netflix is giving viewers the experience they want 29

Branding - leveraging program affinity

Netflix original programs are tightly aligned to the network

HBO struggles to create positive network associations with its original programs

A popular program does not necessarily equate to a popular network

% of network conversations that mention network and program in combination

17% 23% 7% 6% 45% 50% 40% 25%

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48

50

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Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

Netflix is sustaining product commitment

• Netflix is creating customers who want to commit to Netflix and stay with Netflix • There is reduced dependency of having to have “hit” content, when experience and branding are strong

• HBO is more strongly dependent on “hit” programs • Viewer loyalty is fleeting and remains with the program, not the network

PCS: network scores (measuring the commitment viewers have to subscribe to the network)

PC

S sc

ore

HBO

Netflix

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“I would say the value of Netflix Originals isn’t just in driving new subscriptions, but retaining existing ones. I’m more likely to stay subscribed if I know there is a new season of House of Cards coming, or some other new show in the pipeline.”

“Have you guys seen that Netflix show Orange Is The New Black?? Its soooo good!”

“I just want you to know that I will be cancelling my HBO after True blood ends, I watch GOT [Game of Thrones] but it is Cheaper for me to buy it at seasons end…”

“Other then GOT [Game of Thrones] and BE [Boardwalk Empire] that is – [HBO] is not worth $18 a month on dtv [Direct TV] after BE ends this season—I’m out.”

Netflix viewers are creating loyalty to the brand not just the shows 32

And the winner is…

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Enable the right experiences

Content • Give some time for original programs

to build up their fan base – should see growing BCS over time

• Offer similar genre and programming in the off season of popular shows to shorten the “gap” feeling between seasons

Experience • Improve customer pain points

currently creating barriers for some viewers (e.g. streaming quality)

• HBO GO app is not equally comparable to the fully mobile feeling of Netflix, consider offering at a higher price without a cable subscription

Branding • Continue to align the Netflix brand

with original programming content • Ensure that popular programming is

always extensively aligned/stamped with the HBO brand

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Thank you Lisa Tanaka Research Director

Stacey Megoloff Social Research Analyst

“Cutting the Cable Cord”—Analyzing the Entertainment Shift to Streaming Services A certain sub-set of consumers, who refer to themselves as Cord Cutters, have decided to cobble together their own entertainment solutions instead of finding the ‘best of the worst’ cable or satellite provider. These consumers are quickly revolutionizing the entertainment industry and demanding programming on their terms – content when, where, and how they want it without contracts and lengthy bills.

Join us for this webinar on October 30

SDL analysis of publicly available data; not commissioned by any representative clients. All company product or service names referenced herein are properties of their respective owners.

Netflix vs. HBO: Using social intelligence to predict long-term commitment

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