Why Netflix Has A 'Game Of Thrones' Problem

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About: Netflix, Inc. (NFLX), T
by: The Entertainment Oracle
Summary

While the final season of “Game of Thrones” could be seen as more of a problem for HBO, the real problem may be more for streaming rivals, namely Netflix.

Part of “Thrones” success is that it is a high profile weekly episodic series which fuels water cooler buzz and essentially forces the majority of viewers to watch live.

Netflix may have hit programs, but by remaining so stringent to the “batch” model, they are losing that weekly blitz which is what helped “Thrones” rise to new levels.

Netflix is especially vulnerable to this as Hulu and Amazon have figured out ways around that problem which has helped result in transforming key award nominations into key award wins.

While “Thrones” will leave a void for HBO, the network will catch fire again with another new series, and when it does, it’ll again have be the ultimate strategic advantage. time.

Image Credit: HBO

As tempting as it would be to make a bold statement like “Winter Is Coming” for Netflix (NASDAQ:NFLX), it just isn’t true. However, that doesn’t mean there aren’t problem points that investors should keep an eye on, and believe it or not HBO’s (NYSE:T) Game of Thrones is one of them.

Yes, the long-running series is embarking on its swan-song season and the song of fire and ice is most definitely coming to an end in a few weeks - but that’s also the point. Game of Thrones was a juggernaut hit for HBO across everything from boosting subscriber counts to pulling in key award wins. Investors will clearly miss the battle for the Iron Throne and it will be hard for any prequel/sequel series to live up to the hype of the original. Still, it’s worth exploring why that is and why it hurts a company like Netflix more than HBO.

As many will attest Thrones was popcorn-TV at its finest and more importantly appointment viewing. It may be safe to say that there is no other show on TV that is more “must-see LIVE” than this one – and that includes The Walking Dead which many believe has lost a step in recent years.

Regardless, it’s safe to say you miss a new episode of Thrones at your own peril. This season characters are likely to be dispatched at a record rate, and if you aren’t watching live, good luck staying spoiler-free – you’ll need it.

And again, that’s the point – Thrones has thrived because it was water cooler TV in an era where water cooler TV is becoming harder and harder to achieve. Whether it was your favorite character or most despised villain being killed off, brought back to life or placed in some sort of new danger, we watched and we talked – rinse and repeat.

There is no show on Netflix that has that same buzz.

Now before the Netflix diehards try to refute that - think about it for a second. Netflix has had major hits in House of Cards, Orange Is The New Black, 13 Reasons Why, etc., but the only one that has ever come close to “we need to talk about this instantly” status is Stranger Things – and even then it is not consistent.

That’s the problem with the all-at-once binge watch – you have one big media push at the beginning and then residual bumps here and there creating a stop and start method. For Thrones, even its ratings – which make little difference since the company trades in subscribers – becomes a big deal and that again fuels the momentum.

The batch-model also means fans don’t know where someone else is in the process of watching and you don’t want to run the risk of spoiling a big twist so the conversation lessens. Yet, that type of buzz is why Thrones became what it became, and that begs the question, is Game of Thrones the last show we’ll watch together?

That question first smartly posed by Vulture earlier this month makes sense in this binge-first society – however, I wouldn’t count out HBO to hatch another dragon of its own. Investors have steadily watched HBO become the crown jewel of Time Warner (NYSE:TWX) over the last few years and it’s that type of success that ultimately led to the acquisition by AT&T. Remember HBO carried Time Warner when none of its other divisions were coming close and Warner Bros. itself was mired in its defective DC universe of films.

And at the center was Game of Thrones. Even when the show was on one of its legendary extended hiatuses, it was still there. It was a sleeping giant that everyone knew would awaken with a roar. Netflix just doesn’t have that type of program… and that’s a problem.

And it’s not from lack of trying either (clearly).

Netflix does have its big hits and its instant-conversation starters, but by remaining so steadfast in its “all-at-once model”, it’s hurting the long-term possibilities for shareholders and that’s expanding out into the marketplace. And I don’t want to hear the stock is trading for triple digits – great, I’m happy for those investors – but you're short-sighted if you think that will ALWAYS be the case.

I also want to be clear because it merits repeating – the end is NOT near for Netflix. My point is investors just can’t get to comfortable because like with any company operating at that high of a level, there are few areas of concern.

Here it’s that Netflix’s competition is evolving – even the free-to-watch Pluto TV is making its mark in the space (courtesy of Viacom). And I’m also not saying Netflix’s “binge-model” is a bad idea, I’m just saying some flexibility helps.

Look at Hulu which solved their water-cooler problem with The Handmaid’s Tale by releasing a batch of episodes to start and then one-per-week. Or Amazon (NASDAQ:AMZN) which may keep the batch-model but strategically drops a priority show like The Marvelous Mrs. Maisel during the holidays where people are more likely to binge–watch shows (plus Maisel isn’t exactly offing characters left and right, so the spoilers are minimum).

And to those that say it doesn’t have an effect? Both of those shows and Thrones have won top honors at the Emmys over the last few years while Netflix has still not been able to break through there. Nominations are one thing, but you can’t tell me it doesn’t irk company executives and investors that the first trailblazer in streaming TV is the only one of the big three not to take home the top prize.

For how much Netflix spends (of investor money) on award campaigns, it has to be a thorn in its side as for them, HBO, Hulu, Amazon and even Disney (NYSE:DIS) and Apple (NASDAQ:AAPL) – it’s all about prestige and bragging rights. While Netflix broke through the wall, it’s Hulu and Amazon who have enjoyed the spoils thus far.

Last week the buzz leading up to the Thrones premiere was deafening and it was everywhere – and it will stay amplified right up until its May finale. Investors need to remember that when making their streaming investments because even without the Emmy-winning Goliath, the now AT&T juggernaut still has trick or two to play – and one that comes with the ultimate strategic advantage… time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.