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I just wanted to disagree with the author's assertion : >[Netflix has] "slowly reconstructed the old vertically integrated studio system. The company is an int

I just wanted to disagree with the author's assertion : >[Netflix has] "slowly reconstructed the old vertically integrated studio system. The company is an integrated production and streaming service." Netflix is probably the least integrated business in Hollywood when it comes to production. To use an analogy, think of content as sausage. Netflix doesn't make the sausage and they don't care about how it's made. They pay people a lot of money to do it, and that's about it. They're in the business of distributing the sausage. They also buy a lot of bulk sausage that they found at a sausage festival, meaning they had no stake before it was made. (some) Traditional studios do care a lot about the making of the sausage. To make sausage for them, you have to buy their spices, use their casings, and go to a meat supplier that they recommend and might have a co-ownership stake in with other sausage distributors. That's not a bad thing, making sausage is complicated with a lot of people involved - the studios give you a good deal by removing that complexity, and helps keep your costs down before you get to see a profit.

jpalomaki 7y ago
Netflix also has lots of detailed data about what kind of ingredients people want in their sausage. Would make sense for them to start being quite specific with the suppliers what they want to get. This is not just on high level. You could track on individual episodes and even inside episodes (for example do you pause, switch to another app).
- holy_city 7y ago
  The "ingredients" in this analogy are mostly human capital/contractors and locations used in pre/production/post. For example, Netflix doesn't really have the ability to see how much the choice of caterer on set influences their churn. That's contrived, but I hope it illustrates the point. There are dozens to hundreds of these contractors who work on serious productions, and some studios are more integrated than others when it comes to hiring them for different phases of the process. And the sheer amount of real estate and personnel involved in these ecosystems is beyond what Netflix is capable of exploiting today. And while Netflix is uniquely capable of collecting some extremely useful data (which they guard like the crown jewels), I'm not aware of them getting granular with production pipelines to see how changes influence their revenue. And if they were, I'd be skeptical given the amount of variance, since every production is different despite massive efforts to standardize the process. It's a very human problem domain.
  - andreilys 7y ago
    Netflix is in fact getting quite granular with production pipelines, as evidenced by this blog post - https://medium.com/netflix-techblog/studio-production-data-science-646ee2cc21a1 https://medium.com/netflix-techblog/studio-production-data-s...
gamblor956 7y ago
Netflix doesn't make the sausage and they don't care about how it's made. They pay people a lot of money to do it, and that's about it. They're in the business of distributing the sausage. They also buy a lot of bulk sausage that they found at a sausage festival, meaning they had no stake before it was made. This is quite literally the opposite of the truth... Netflix makes a lot of the "sausage". They use roughly the same organizational and production structure that the other big studios use to make and distribute films. They have some of the biggest studio spaces in Hollywood, behind only Disney/Fox, Universal, Sony, and Paramount. If you live in the LA area, you can actually visit some of their studios (though generally to tour the facilities you need to arrange for a tour in advance). The primary difference is in how Netflix pays for the films: Netflix pays extra upfront, with no backend. The studios payout participants over time.
- holy_city 7y ago
  It's a bit weird to say they have "some of the biggest" spaces if you don't count everyone else of note. But backlots and shootling locations are just a part of the recipe. Look at the end credits of Netflix originals and compare them to Disney, especially w.r.t. the VFX and post production shops. That's the difference in vertical integration I was trying to point out.
  - gamblor956 7y ago
    It's a bit weird that you think Hollywood is only 5 studios. That would be like saying Silicon Valley is just FAANG. There are dozens of studios in LA alone, not including the studios in NY, Atlanta, and Vancouver. Netflix is the 5th biggest studio in Hollywood (the industry) but is the biggest studio actually located in Hollywood (the neighborhood of LA) as the other major studios have their own facilities in other neighborhoods or cities of LA. (Sony = Culver City, Fox/Disney = Century City and Burbank, Paramount = Mid City, Universal = Universal City.) Comparing the end credits for Netflix originals and Disney films, I see no difference in the amount of vertical integration. Netflix films generally aren't VFX heavy so there isn't as much outsourcing that needs to be done. Disney films are, and most VFX shots are outsourced since (a) it's cheaper and (b) the specialized VFX shops are usually faster and more nimble than in-house VFX teams. Compare the end credits for thein-house VFX-heavy Netflix original like Bright and Mute. They have just as much outsourcing as a Disney film. (Source: I count Fox Searchlight, Vendome, and Sony Pictures as former clients and I currently work for a media company. I'm well versed in how movies are made.)

jpalomaki 7y ago

Netflix also has lots of detailed data about what kind of ingredients people want in their sausage. Would make sense for them to start being quite specific with the suppliers what they want to get. This is not just on high level. You could track on individual episodes and even inside episodes (for example do you pause, switch to another app).

holy_city 7y ago
The "ingredients" in this analogy are mostly human capital/contractors and locations used in pre/production/post. For example, Netflix doesn't really have the ability to see how much the choice of caterer on set influences their churn. That's contrived, but I hope it illustrates the point. There are dozens to hundreds of these contractors who work on serious productions, and some studios are more integrated than others when it comes to hiring them for different phases of the process. And the sheer amount of real estate and personnel involved in these ecosystems is beyond what Netflix is capable of exploiting today. And while Netflix is uniquely capable of collecting some extremely useful data (which they guard like the crown jewels), I'm not aware of them getting granular with production pipelines to see how changes influence their revenue. And if they were, I'd be skeptical given the amount of variance, since every production is different despite massive efforts to standardize the process. It's a very human problem domain.
- andreilys 7y ago
  Netflix is in fact getting quite granular with production pipelines, as evidenced by this blog post - https://medium.com/netflix-techblog/studio-production-data-science-646ee2cc21a1 https://medium.com/netflix-techblog/studio-production-data-s...

gamblor956 7y ago

Netflix doesn't make the sausage and they don't care about how it's made. They pay people a lot of money to do it, and that's about it. They're in the business of distributing the sausage. They also buy a lot of bulk sausage that they found at a sausage festival, meaning they had no stake before it was made. This is quite literally the opposite of the truth... Netflix makes a lot of the "sausage". They use roughly the same organizational and production structure that the other big studios use to make and distribute films. They have some of the biggest studio spaces in Hollywood, behind only Disney/Fox, Universal, Sony, and Paramount. If you live in the LA area, you can actually visit some of their studios (though generally to tour the facilities you need to arrange for a tour in advance). The primary difference is in how Netflix pays for the films: Netflix pays extra upfront, with no backend. The studios payout participants over time.

holy_city 7y ago
It's a bit weird to say they have "some of the biggest" spaces if you don't count everyone else of note. But backlots and shootling locations are just a part of the recipe. Look at the end credits of Netflix originals and compare them to Disney, especially w.r.t. the VFX and post production shops. That's the difference in vertical integration I was trying to point out.
- gamblor956 7y ago
  It's a bit weird that you think Hollywood is only 5 studios. That would be like saying Silicon Valley is just FAANG. There are dozens of studios in LA alone, not including the studios in NY, Atlanta, and Vancouver. Netflix is the 5th biggest studio in Hollywood (the industry) but is the biggest studio actually located in Hollywood (the neighborhood of LA) as the other major studios have their own facilities in other neighborhoods or cities of LA. (Sony = Culver City, Fox/Disney = Century City and Burbank, Paramount = Mid City, Universal = Universal City.) Comparing the end credits for Netflix originals and Disney films, I see no difference in the amount of vertical integration. Netflix films generally aren't VFX heavy so there isn't as much outsourcing that needs to be done. Disney films are, and most VFX shots are outsourced since (a) it's cheaper and (b) the specialized VFX shops are usually faster and more nimble than in-house VFX teams. Compare the end credits for thein-house VFX-heavy Netflix original like Bright and Mute. They have just as much outsourcing as a Disney film. (Source: I count Fox Searchlight, Vendome, and Sony Pictures as former clients and I currently work for a media company. I'm well versed in how movies are made.)