The streaming giant has profoundly affected our viewing habits — but not necessarily in a positive or even a permanent way, suggests Chris Harvey.
Last year, there was one TV show that everyone was talking about.
The premise sounded a little odd: an eight-part drama about a 12-year-old girl with psychokinetic powers, who escapes from a top-secret laboratory into the protection of a gang of nerdy boys. And with four unknown child leads, and a pair of unknown brothers at its helm, there was little buzz around it in the run-up to its launch.
But Stranger Things was a phenomenon - loved for its homage to 1980s horror and sci-fi films, it was watched by eight million people in its first 16 days.
Millie Bobby Brown, 13, who played Eleven, the mysterious escapee, became a breakout star.
Season two, released in New Zealand on Friday, is the TV event of the year.
The success of Stranger Things - not to mention other hits, from political drama House of Cards to royal family saga The Crown, its first British production - has put Netflix firmly on the map as the entertainment company of the moment.
Since launching as an online streaming service in 2007 (after a previous incarnation as a DVD-by-mail business) the company has gone from strength to strength - it now reaches more than 100 million subscribers and produces an increasing number of original TV shows andfilms.
A key factor in its success is its use of algorithms - where once, film and television companies relied on test screenings and focus groups to gauge audience reaction, Netflix feeds off vast amounts of data on the viewing habits and tastes of its subscribers; it classifies its shows and films using about 77,000 individual "micro-genres" - and commissions more programmes that fit into the most popular ones accordingly.
Ted Sarandos, Netflix's chief content officer, has suggested that 70 per cent of its commissioning decisions are based on data, and 30 per cent on human judgment.
It therefore had deep insider knowledge of the potential appeal of Stranger Things before it was commissioned, just as it did when, in 2013, it released its first original series, House of Cards.
Robin Wright-Penn and Kevin Spacey in House of Cards. Photo / Supplied
The show's star, Kevin Spacey, has said that the company came to him and said: "We've run our data and it tells us that our audience would watch this series. We don't need you to do a pilot. How many do you wanna do?" Not only was Netflix right - as five seasons and numerous awards attest - but this competitive advantage is now turning the film and TV industry upside down.
The company also has a reputation for granting artistic freedom, something that arguably serves creators and viewers well. Film director David Ayer recently suggested that his disappointing 2016 blockbuster, Suicide Squad, had been marred by studio meddling, so it's understandable he has transferred to Netflix for his next film, Bright, a fantasy thriller whose star, Will Smith, has also been singing the praises of the company's relatively hands-off approach:
"[They] will just give you the money and let you go make the movie you want to make," he said in July.
While this may may lead to self-indulgence, it has also led to a lot of innovation, whether that's mixing up episode lengths or representing those who have been previously under-represented on screen.
Take another of its flagship shows, women's prison drama Orange Is the New Black, for example; when it was launched in 2013, it was seen as pioneering for putting a racially diverse ensemble of women centre stage.
If you think Netflix is big now, it's only set to get more powerful. The company is spending US$8 billion to make its library 50 per cent original by the end of 2018, including plans to make 80 films (Warner Bros made 25 in 2016).
There wasn't much to suggest this startling future back in 1997 when Netflix's founders, a pair of late-thirtysomething Silicon Valley entrepreneurs, began talking about starting a new internet-based business together. Reed Hastings - whose software company had just been swallowed up in a US$585 million merger that signalled to venture capitalists that he was a safe bet - and Marc Randolph saw an opportunity in a format that was still being tested - DVDs. They were small, light, cheap to post and easy to protect from damage in the mail. The video rental business had long been a major earner, but relied on customers going into shops to collect bulky VHS tapes - and so, in April 1998, after six months of careful preparation, the duo launched Netflix, an online DVD store. The response was instant: their servers crashed and their laser printer couldn't handle the 100 orders that came in.
From the start, though, Hastings had the idea that the 4.7 gigabytes of data that could be stored on a DVD could one day be delivered over the internet. Less than 10 years later, in 2007, with video rental giant Blockbuster heading towards bankruptcy, Netflix launched its online streaming service. In 2012, with subscriber numbers growing, the company began to expand internationally. By 2016, in less than 20 years, Netflix had become a global power, existing in 130 countries.
However, not everything about the rise of Netflix is welcome - certainly not to the film and TV industry as we know it. Fed by Netflix's release format, when all episodes of a series are released at once, audiences are becoming addicted to binge-watching - making them increasingly impatient with the old, once-a-week format for TV drama - and less likely to head to the cinema.
Major figures in the industry are starting to speak out against the "Netflix-isation" of culture: Dunkirk director Christopher Nolan said recently that he wouldn't make films for the company, which he believed was helping to kill off cinemas, while revered British director Michael Winterbottom recently told me Netflix would destroy British television, because of the way it demanded stories with global appeal.
For all that it presents itself as a brave new world for entertainment, it's also up to some old tricks. As revealed recently, it doesn't appear to be paying its way in Britain, where it is thought to have about 6.5m subscribers, generating an annual revenue estimated at about £400m, which it instead reports in the Netherlands - its reported profits in Britain last year were less than £1m, and it paid about £270,000 in tax.
Then there is the fact that its output is becoming ever more hit and miss. While it presents itself as a creative pioneer, it is also propped up by some lowest-common-denominator content, such as sitcoms The Ranch and Fuller House and its ongoing series of Adam Sandler films. And it is starting to behave more like a traditional TV network in its ruthless cancelling of failing shows, including the Naomi Watts psychodrama Gypsy and Baz Lurhmann's hip-hop musical The Get Down. It also hasn't managed a significant breakout film success yet.
So where does it go from here? Will Netflix truly get a stranglehold on viewing habits, for better or worse - or is its bubble likely to burst?
Financially, questions have been raised about whether, if interest rates rise, the company can continue to spend such mind-boggling sums on its productions (the first season of The Crown cost US$130m; and The Get Down cost US$120m), which it financed through borrowing.
But above and beyond that, there is the question of whether this will continue to be the way we want to watch TV. Yes, we may have dispensed with the old formula of eking out the pleasure of a series week by week, in favour of a gluttonous all-in-one-sitting binge. But does this really increase our viewing pleasure? Or are we becoming jaded by the can't-stop experience, forcing ourselves to down another series in order to make room for the next must-watch?
Time will tell whether there will be a backlash. In the meantime, don't expect to see much of Stranger Things fans. Netflix's run certainly hasn't ended yet.
• Series two of Stranger Things is available on Netflix now.
