"Globes" ranks Netflix as Israel's top 2019 brand

Netflix

After years of Coca Cola and Google topping "Globes" brand rankings, Netflix takes over as streaming conquers broadcast TV and binge viewing has changed TV habits.

After years of Coca Cola and Google topping "Globes" ranking of Israel's leading brands, Netflix has skipped easily above them all and captured the crown. Streaming has triumphed over traditional broadcast content and binge viewing has changed our TV habits, and Israel is no exception.

Everyone loves Netflix, the innovative streaming service that has disrupted the conventional television industry. It offers cool series that everybody is talking about and documentaries about every subject in the world. It has infinite content for a regular monthly fee that doesn't damage your bank account too much.

Everyone loves Netflix - that this the only way to explain why the hefty 17.5% price hike for its services in Israel, from NIS 40 to NIS 47 per month, announced by the company in recent weeks was accepted with relative stoicism by consumers and few comments on talkbacks, which rant and rave whenever veteran Israeli television broadcasters Hot and Yes take similar steps.

Everyone loves Netflix, but Netflix does not like to publish information, although it loves gathering it. That is why estimates of how many subscribers Netflix has in Israel differ so widely. Some industry sources talk about surveys showing that the number is at least 500,000. For the sake of comparison, Cellcom TV and Partner TV combined have less than 400,000 subscribers.

On the other hand, in order to establish a lower bound, we can use the number of subscribers that Partner reports to the Tel Aviv Stock Exchange (TASE) each quarter. The most recent such report, in May, was 152,000. Given the fact that Netflix provides most of the content that Partner offers its subscribers, and that most Partner subscribers are also Netflix subscribers, we can probably say that Netflix almost certainly has more than 100,000 subscribers in Israel, a number that will undoubtedly increase.

Local multichannel television providers like to explain that Netflix is a "supplementary service." This is a nice way of telling themselves that Netflix does not really threaten them, because consumers regard a Netflix subscription as an addition to the package that they buy from the local providers, not a replacement for it. It is a fact that both Hot and Cellcom are following in Partner's footsteps by offering Netflix to their subscribers as a built-in part of their packages, with a special button on the remote control and installation within the interface, plus plans for synergy that will increase. Only Yes declined to follow suit.

It is an open question what Netflix, which has globe-spanning ambitions and a business plan based on substantial future growth in revenue, thinks about this narrative, and it is especially uncertain what Y and Z generationers think about this thesis, and what they will think about it in the years to come.

In the US, on the other hand, where the industry structure is very different, no one in the television market takes Netflix lightly. In order to understand how this company, founded in 1997 as a competitor of the Blockbuster video cassettes lending service, managed to infiltrate the world's largest television industry, dominated for decades by a limited number of large companies, and to disrupt it, it is necessary to review the sequence of events.

The last word has not yet been spoken

Netflix is in effect a synonym for the streaming revolution. In 2007, just over a decade ago, it was the first to realize that the Internet was knocking down the entry barrier that enabled the giant corporations to dominate the television market's entire value chain. Up until then, these corporations controlled the special infrastructure - cable or satellite -through which the content passed. They controlled the home converter through which the content was presented, and through a series of mergers, they also controlled the content itself, whether it went through one of the national broadcasting networks or through one of the premium channels, such as HBO, for example.

As soon as this procedure was done through the Internet, however, the rules of the game changed completely. At first, Netflix was nothing more than a large video-on-demand (VOD) pool, with a modern interface and a smart algorithm, of old content produced by the large media corporations. These corporations were glad to sell used content to Netflix in order to make a little extra profit from an unexpected source. It took Netflix five or six years to understand that it should also be the owner of at least part of its content. Its first original series came out in 2012 and 2013. The most prominent of these, "House of Cards" and "Orange is the New Black," were a rousing success.

Launching these series was also an opportunity to further change another key rule in the television industry. Who says that you should have to wait a week between episodes in order to watch a new series? Why not put all of the episodes online immediately, and let everyone watch it at their own pace? Thus, binge viewing (and spoiler warnings) entered our lives. Netflix reinforced its image as a cool and innovative company, and also strengthened its grip on our leisure time. The company also made sure that its broadcasts could be viewed on every possible device and interface. In 2010, it was already possible to connect to the service with PlayStation and Xbox.

Netflix's enormous success finally aroused the sleepy US television giants, and they have been fighting back now for several years. It began with Hulu, an Internet content service shared by several large networks, which now has a 13% share of the US streaming market. More serious competition for Netflix is coming from another disrupter - Amazon, with its Prime Video service, which now has a third of the market.

The last word in this struggle, however, has not yet been spoken. Do you remember the old content that the large companies were initially delighted to sell to Netflix? It turns out that with all of the hype surrounding Netflix's original series, a large proportion of the viewing on the service was of beloved old series. How large? No one knows exactly, because of Netflix's policy of publishing only self-serving anecdotal information, not regular viewing data. An examination by the Recode website using analysis of data on viewing of the service via Internet browsers, however, showed that an absolute majority of the most widely viewed series on the service were not owned by Netflix. The most prominent of these were old series like "The Office," "Friends," and "Grey's Anatomy."

Even if these data are not completely accurate, there is no doubt that they are a good indication of the trend, and Netflix is well aware of it. The company only recently agreed to pay no less than $100 million for the right to broadcast just one more year of "Friends" - yes, the one with Ross and Ritchie, whose last episode was broadcast 15 years ago. What will happen at the end of this year? WarnerMedia, which owns the series, has already announced that the series will be completely removed from Netflix, and will be broadcast only on HBO Max, the new streaming service that it is planning to put on the air in 2020. Almost all of the old hits will almost certainly share the same fate when their current contracts expire.

Threats: Disney and Apple

The biggest threat to Netflix from the conventional industry comes from Disney, which holds the rights to a very long list of hits and content brands, and which plans to put out its own streaming service, "Disney Plus," online in November 2019. On the way, it also spent over $70 billion (more than Israel's annual state budget) on buying the movie and television series assets of 21st Century Fox. Looming in the wings is Apple, with its inexhaustible pile of cash, which also has plans for entering the sector.

But why end on a sour note? As of now, Netflix can gaze with enormous satisfaction at the brand it has created out of nothing in a little over a decade of broadcast streaming. It sits astride half of the US streaming market with 60 million subscriptions and is adding new subscribers to its ranks every year. Netflix already has 150 million subscribers worldwide, and its broadcasts can be viewed in almost every country in the world.

The best illustration of Netflix's success to date is the company's share price, which has posted a 15,000% yield in the past 12 years. In other words, someone who invested NIS 100,000 in Netflix shares in 2007 now has NIS 15 million, enough to retire comfortably on and watch all the series he or she wants - on Netflix, of course.

Published by Globes, Israel business news - en.globes.co.il - on July 24, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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