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CULTIVATING A QUALITY BRAND

A companies aim to thrive in the shifting television industry, it is not a battle between the pendulum of creativity and commodification, but more of a correlation of the two. Acknowledging the intricate interrelationship between innovation and quality branding seem to be the crucial factor that helped push companies further, distinguish themselves against the many other akin competitors. The study of the evolution of HBO networks offers insight into the progression of scripted television on premium TV. Though not directly linked to our study of online distribution, it underpins our awareness of the potential challenges and risks posed by the shifts in modes of distribution in the current television landscape.



For subscription base networks, professor Deborah Jarmaillo, argues the ‘brand is the lifehood’ that can help gather a firm followings and a niche audiences. The brand is the bargaining chips for smaller organisations, which can help to differentiate their products from other competitors and larger network corporations. As mentioned previously in our case study on Netflix – “television is in a state of flux” where there are numerous options for audiences to consume content either through online, on-demand, broadcast or even piracy. Standing out amongst the midst of shifting industry turmoil is getting tougher and tougher. Selznick affirms our research, writing that branding ‘became necessary in order to deal with the increased number of options offered to viewers’ (Selznick 2009: 181), shading highlight to the value of ‘taste cultures, quality and art’. Jarmaillo considers HBO as the pioneer of quality television that ‘broke ground’ with their original ‘cinematic’ programs like Oz and The Sopranos:



“HBO came to symbolize the pinnacle of success in the post- network era. The broadcast networks were terrified of digital video recorders and the Internet, but it turns out that they had much to fear from HBO. Premium cable was using traditional broadcast genres to garner acclaim. In addition, the lack of regulation and advertising on HBO engendered a premium cable sensibility that allowed for a greater degree of creative freedom” (Jarmaillo 2013: 168)


In a market research done by MarketLane (2013), researchers suggests TV programs that received ‘critical acclaim’ can draw attention from ‘viewers who may not have access to cable TV’. This is beneficial as companies can then gain from the resulting increased sales of secondary products like DVD and Blue-Ray box sets. In 2010, shortly after Boardwalk Empire won the Golden Globe for Best Television Series in the Drama category, HBO immediately releases the DVD set for the program, timely in tune with the public’s attention, resulting in a rewarding return – Boardwalk Empire Season One DVD gathered a sales of 159,000 units in its first week which was second best on the US sales chart marginally behind one other critically acclaimed feature film Moneyball (Marketlane 2013: 10). Award ceremonies are often broadcast live on major network channels, attracting a substantial numbers of ratings, much more than cable networks viewership. This is a great opportunity for cable network to gain a high level of exposure. According to Huffingtonpost, the 67th Annual Golden Globe Awards that aired on NBC in 2010, gathered 16.9 million viewers in rating. When comparing to the weekly average ratings of Boardwalk Empire which is around 3 millions, on the night of the ceremony, 16.9 million witnessed the HBO show won the award for best Drama series, a great publicity for HBO let along the press and overseas distribution benefit that comes along.

During the global financial crisis of 2009, the entertainment industry suffered a decline of 4.2%. However, Time Warner was able to ‘counter-cyclical’ their revenue by 4.1% in the subsequent year as a result of its Network division. HBO’s success in gathering a strong growth in their subscription revenues, balanced out the lost of revenue caused by reductions in other income streams (MarketLane 2013: 6).

The above graph indicates the numbers of Emmy Award nominations that HBO received between 1997 and 2011; it helps to verify HBO’s success in maintaining what Jaramillo considered as a ‘quality brand’.


In It’s Not TV: Wahtching HBO, in the Post-Television Era, Marc Leverette unpacks the premium cable’s attempt to focus on ‘counter-programing, resisting other commercial networks’ formulaic approach’. HBO’s tagline – “IT’S NOT TV. IT’S HBO” signifies this idea. Leverette points out HBO’s strategy to subsist on “first-order commodity relations” that aims to satisfy actual consumer demand rather than advertiser demand (Rofers et al 2002: 46).


“The premium cable model, in contrast to the network model, is underpinned by a direct economic relationship between the institution and subscribers who pay a fee in exchange for access to its programming; as a consequence, episodes of premium cable series are not interrupted by commercial pods” (Smith 2013: 152).


Organizations like Netflix and AMC also follow this trend. While HBO spokesman explained in an article from The Economist in 1998:
“We don’t care how many people watch our show, we just want people to decide at the end of the month that it’s worth renewing their subscription,” (Leverette 2002: 50)


Netflix’s chief marketing officer, Kelly Bennett echoes this idea, stating:


“Our intention is not to release ratings, and that’s for a very good reason: We don’t have to,” “We’ll define the success of these original shows in our own way” (Maclean 2013). 


Anthony N. Smith’s article, Putting the Premium into Basic, unpacks the objective of this strategy. Sighting former HBO’s CEO, Chris Alrecht he points out the specific aim of HBO targeting ‘wealthy, educated, blue-chip audiences’ due to the prospect of such audiences being the ones that ‘can probably more easily afford to keep [the subscription] service” (Meisler 1998: 45). In this case, the value of ‘quality content’ is even more essential to HBO’s success. It is logical for HBO to welcome shows that explore more sophisticated and challenging themes. In a sense, television shows become ever more culturally relevant and no longer just ‘dramas for your entertainment’ but shows that actually encourage viewers to reflect deeper into the themes explored.


“HBO narratives’ unorthodox storylines concerning such sensitive topics as death in Six Feet Under (2001–2005); polygamy in Big Love (2006–2007); and drug cultures in The Wire contribute to this process. These themes tie into HBO’s efforts to promote its series to blue-chip audiences as distinct, sophisticated, and culturally superior to “regular” TV fare” (Smith 2013: 158).


The nature of HBO’s non-ad-supported programs further breaks away from conventional network model, which is heavily advertiser driven. This means that rather than targeting the widest demographic, hoping to pull in a large enough number of ratings to please the advertisers, HBO are allowed to explicitly attribute their products to ‘audience satisfaction base not on quantitative data, but qualitative measures (Leverette 2000: 50). Deborah Jaramillo’s paper, The Family Racket: AOL Timer Warner, HBO, The Sopranos, and the Construction of Quality Brand, looks deeper into the advantage of HBO’s movie library and sees how the cable network mobilises its ‘inherent advantages and creatively, amounting to a qualitative difference from broadcast television’ (Hamilton and Brown 1999: 68). It is worth noting that HBO subscribers are not only attracted to the network for its critical acclaimed programs but also are interested in its substantial movie library. Hence, not only is HBO not required to produce many original programs to fill their weeklong schedule, they also have the opportunity to fulfill their customers’ movie seeking demands, structuring their program to be more ‘cinematic’. HBO’s shows are thus referential with not only television text but also film text. Jaramillo uses the example of HBO referencing Martin Scorsese’s Goodfellas with their similarly gangster-themed program, The Sopranos, as a way to demonstrate the extent to which HBO innovatively tailor-made their brand’s image to match that of their audience’s interest.


“These inter-textual references of varying degrees of difficulty are well-defined niche—that of the film buffs. But, these are not just any films. As Hollywood films go, these are royalty. They are what The Sopranos aspires to be and what HBO is betting The Sopranos will become, while the conglomerate behind it all carefully positions its product in the marketplace”(Jaramillo 2002: 68).


Although Netflix is an online streaming service, through the company’s recent diversification into original content , analysts see traces of HBO’s analogical model of production. Netflix’ chief content officer, Ted Sarandos recently asserts their company’s goal – “To become HBO faster than HBO can become us,”, an indication of Netflix’s ambition to move away from its plain content distribution roots, embarking on its current content producing phase. HBO also began with movie streaming, delivering ‘non-intervening’, ‘ad-free’ movies to subscribers. Hence , it is logical for Netflix to follow a similar path. With the David Fincher-directed original series House of Cards, starring Kevin Spacey, it is clear Netflix certainly is following HBO’s ‘cinematic’ approach. Apart from Netflix’ online distributed infrastructure, there is another advantage of Netflix, which is its more precise and detailed customer data-collecting service. An article from Gigaom notes down the power of Netflix algorithms, listing down the many statistics that Netflix are tracking everyday.


Netflix is currently tracking:
• More than 25 million subscribers
• About 30 million plays per day (and it tracks every time you rewind, fast forward and pause a movie)
• More than two billion hours of streaming video watched during the last three months of 2011 alone
• About four million ratings per day
• Around three  million searches per day
• Geo-location data
• Device information
• Time of day and week (it now can verify that users watch more TV shows during the week and more movies during the weekend)
• Metadata from third parties such as Nielsen
• Social media data from Facebook and Twitter



House of Cards is the result of the company’s Big Data algorithmic. Netflix utilises its algorithm to indicate the ‘best match’ for their customer’s ideal program.

 

Although it seems bluntly arithmetical and does not guarantee a successful product; this tactic has been successfully mobilized as a method to gather public’s attention, creating hype around its product. This counterintuitive strategy aimed to both address Netflix’ desired image of satisfying their customer’s needs as well as luring new audiences.



In terms of the number of subscribers, Netflix (33.3 million) is catching up with HBO (30 million). However, according to Rebecca Greenfield’s Atlantic Wire report (2013), Netflix doesn’t currently own any of their original content. They only own the first window streaming rights to House of Cards and the syndication rights belong to the production company Media Rights Capital. As such they would not be able to monetize the success of its funded program outside of its own platform; they would have to pay more for future streaming past its initial runs. Netflix reportedly spent $100 million dollars to produce the first season of House of Cards that calculated to a minimum requirement of 520,834 new subscribers, paying the $7.99 subscription fees for two years to break even. This is a high risk business model, especially as the company intends to double their original content productions by the end of 2014.

Streaming content obligation chart created by Seeking Alpha’s Cris Frangold shows that Netflix’s rental for the rights to stream other content from Disney and Epix are also extremely costly.

“The real problem for Netflix is that their subscription revenue is not growing as fast as their content costs,” stated by Greenfield as she refer to analyst with Wedbush Securities, Michael Patcher, who informs that “Netflix will continue to generate negative cash flow going forward, driven by the company’s ever-increasing streaming commitments.”

The above analysis alarmed the questionable sustainability of Netflix’s ability to afford its high-risk investments.


Netflix has built up a brand that has grabbed the public’s attention, but has yet to deliver the consistent ‘quality’ programs HBO exhibits. Analogous to HBO, Netflix’ income is highly dependent from the subscription fees; it might be worth looking into the possibility of other source of income. AMC and Hulu were also once non-ad supported networks, yet they had since adapted to embrace advertisement and benefited fruitfully. Although this transition may risk alienating their subscription base and in tern muddle their brand, if transition is successful, it would sure be rewarding. Drawing back from Jaramillo’s claim the ‘brand is the lifehood’ of the network, Netflix is currently still in their experimental phase, where their brand is yet to be fixed. As such this allows Netflix vast opportunities to explore both content creation and distribution methods. Keeping in mind the world is constantly inspecting their development and shifts, their aim to establish a ‘quality’ brand, producing innovative content constantly is prominence to their long-term success. HBO has so far withstood the test of time, not because of its ratings, but of reputable products, which has kept them afloat amongst the shifting state of the television industry turmoil.


“Only the truly reputable brand succeeds in maintaining a stable image through time” (Jaramillo 2013: 170).

REFERENCES:

Jaramillo. D. L. (2013). AMC : Stumbling toward a New Television Canon. Television New Media. 14 (2), p167-183.



Selznick, B. 2009. Branding the future: Syfy in the post-network era. Science Fiction Film and Television, 2, p177-204.


Jaramillo, D. L. 2002. The Family Racket: AOL Time Warner, HBO, The Sopranos, and the Construction of a Quality Brand. Journal of Communication Inquiry 26 (1), p59-75.
Meikle, G. Young. S. (2008). Beyond Broadcasting? Tv For The Twenty-First Century. Media International Australia. 126 (1),  p67-70.



Rogers, Mark C, Epstein, Michael, Reeves, Jimmie L. (2002) ‘The Sopranos as HBO brand equity: the art of commerce in the age of digital reproduction’, in This Thing of Ours: Investigating The Sopranos, ed. David Lavery, Wallflower, London, pp. 42–57.



Smith . A. N. (2013). Putting the Premium into Basic : Slow-Burn Narratives and the Loss-Leader Function of AMC's Original Drama Series. Television New Media. 14 (2), p150-166.

Leverette, M (2008). It's Not TV: Watching HBO in the Post-Television Era. Colorado: Routledge. p49-52.



Weinman. Jaime, J.. (2013). Who's watching? Who cares? ; Who's watching? Who cares?. Maclean. 126 (4)



Meisler, A. 1998. Not even trying to appeal to the masses. New York Times, October 4, p45.
Hamilton, Kendall, and Corie Brown. 1999. HBO goes where the big networks fear to tread and rules the summer. Newsweek, 21 June, p68.


Marketline. (2013). Driving revenues and profits for Time Warner.MarketLine. 43 (1), p1-17.

Moore, F. . (2010). Golden Globes Ratings Way Up in 2010. Available: http://www.huffingtonpost.com/2010/01/19/golden-globes-ratings-way_n_427924.html. Last accessed 9th June 2013.

Carr, D. (2013). Giving Viewers What They Want. Available: http://www.nytimes.com/2013/02/25/business/media/for-house-of-cards-using-big-data-to-guarantee-its-popularity.html?pagewanted=all&_r=0. Last accessed 9th June 2013.

Greenfield, R.. (2013). The Economics of Netflix's $100 Million New Show. Available: http://www.theatlanticwire.com/technology/2013/02/economics-netflixs-100-million-new-show/61692/. Last accessed 9th June 2013.

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