FINAL PROJECT: Netflix and Video Streaming: The remediation of the video rental store into the consumer’s home.

 Alvaro Espiritu Santo Raba


This paper ventures to explain the impact that video streaming technology and how the video streaming service offered by Netflix have made an impact in today’s consumers as well as the entertainment industry (television and movies).

By taking Netflix as a case study I seek to understand how the technology works and how it has turned into such a success among users.  The service offered by this website has re-shaped the way users consume media as well as how the entertainment industry approaches its intended market.

How does Netflix acquire new content for its website?  Is anyone responsible for regulating the service?  How is this affecting the user, is the offer of Spatial and Platform Mobility really benefiting our lives or is it just turning us into isolated beings that are willing to sacrifice social experiences in order to watch content in a smaller screen?


Video Streaming and broadband connections help users around the globe download and watch large video files from the comfort of their homes.  Taking advantage of this technology, the American company Netflix launched a video streaming website on 2009 where users could watch the most recent Television episodes and Hollywood Blockbusters.   Netflix changed content consumption models in the entertainment industry and led to the disappearance of the mainstream video rental store in North America.

For today’s audiences it’s all about immediacy and mobility, the content they are looking for must be just a click away to fit their needs.  Now everything is possible.  Maybe you want to watch an episode of your favorite show when you are traveling, or maybe each member of your family wants to watch something different in a separate room of the house.

All of these demands are being fulfilled with the help of video streaming as well as the proliferation of devices that gives the user access to it.  Now if you want to play movies, music or watch an episode of your favorite TV show you can easily do it wherever you may be.

If we want to fully understand the impact of video streaming in society and the entertainment industry we must first look at the technological advancements that paved the road so companies and services like Netflix, ITunes or Hulu could become successful.

  1. – From Dial Up to Broadband: Internet Video

In the early stages of the Internet, a Dial-Up connection was necessary in order to start browsing the web.  The user would use a telephone network to establish a connection with the Internet Service Provider.  A modem attached to the user’s computer would encode and decode information.  However, downloading a large data file would be nearly impossible, as a three-minute video would probably take a few hours to download.  When users ventured onto the Internet to watch moving pictures they would encounter a tiny matchbook sized image that, should the try to enlarge it would become severely pixelated (broken up unto mosaic like titles).  (Klinger, 196)

Video and sound wouldn’t match up most of the time as data had to be streamed through an unstable connection.  By the second half of the 1990’s, Apple, Real Networks and Microsoft produced streaming video players entitled, respectively, QuickTime, Real Video and Windows Media Player, enabling moving images to materialize on individual computers almost simultaneously with their transmission (Klinger, 197).   Using the same compression technologies designed for music, video players compressed and decompressed video information in real time, solving the problem of large data files.  Now users wouldn’t have to wait for a file to be downloaded in order to start watching it.

With the appearance of computers and broadband technologies, the Internet started to acquire status as a place where you could find more and more videos.  And while Internet is a place where users may find lots of content, Hollywood has been reluctant to fully adopt it out of piracy concerns and the amount of information that proliferates on cyberspace.

Broadband solutions such as DSL and cable modems provide greater speed and volume; as a result we are presented with faster and clearer transmission.  With high-speed Internet connections, audio and video are largely free of interference, a huge leap away from the dialup connection era.  (Klinger, 197)

The internet has become a communications platform that is arguable as pervasive, if not more pervasive, than any of our traditional mass media platforms, and its relative ease of access (i.e., very low barriers to entry), individual Internet users stand on closer to equal footing with the traditional institutional communicators in terms of their access to the media. (Napoli, 166)

Some people might point out that the Internet is breaking paradigms and re-shaping the existing media business.   These people are pointing out the growing cascade of information and how hyperlinks are a way of dealing with it. Links to the right information can be extremely valuable –especially to companies that know how to use those links to their advantage. (Rose, 111)

Video and entertainment content now streams from websites and services like YouTube or Netflix, whatever TV show or movie show you are looking for the odds of finding it on the web are getting higher every day.

2. – Streaming video: Connections in the digital age.

Streaming Video accelerates everything.  Now movies are released on streaming services just a few months after their release on theaters.  A whole season for a TV show can be found on the web and binged watched in just one weekend.  With his new service, users now have a voracious appetite for new content.

The media industry much like the print industry when e-books first appeared has to adapt to this new consumption model. Long gone are the days where movie enthusiasts started a DVD or VHS collection and showed it proudly to visitors.  With streaming technology and online movies when you buy something you don’t really own it. Now everything resides within a cloud storage service where we have a false sense of belonging. (Dixon, 8)

UnknownThe first live streaming event occurred in 1995 when ESPN Sports Zone streamed a live radio broadcast of a baseball game between the Seattle Mariners and the New York Yankees using technology developed by a company named Progressive Networks.  A few years later the company would change its name to Real Networks.  (Zambelli, History of Media Streaming) Users would become familiar with the name while using the “Real Audio Player”.   And while the Real Player was a revolutionary technology more would follow.  Names like Adobe Flash, Apple QuickTime, Microsoft Windows Media and Silverlight would soon offer streaming services.

a)      Real Player

By 2000, more than 85% of streaming content on the Internet was in Real Format.  Despite the success, problems started because Real’s primary business model depended upon the sale of servers, while Windows Media and QuickTime were giving those products way.

Consumers started complaining at the intrusiveness of the free Real Player, which installed multiple background processes and made itself the default player for all multimedia content while constantly asking the user for upgrades.

b)      Windows Media

Microsoft dominated the computer landscape, giving the Windows Media Player a dominant share of available desktops and notebooks, and from the early 2000 to around 2007, Windows Media was the most widely used format on the Internet and in most company intranets.

c)       Flash

Web site design transitioned from HTML to Flash, which offered much greater interactivity and design flexibility. Though Flash had a video component, the initial codecs offered poor video quality and sketchy audio/video synchronization.

Via VP6, Macromedia (and then Adobe, who acquired Macromedia in 2005), could match Microsoft’s video quality in a brand able player that could be integrated with the rest of a Flash-based site, and was truly cross platform and near ubiquitous.

d)      HTML

HTML5 is the latest specification of HTML (hypertext markup language), the language used to create websites.  For HTML5 video to function, the user must have an HTML5-compatible browser, and that browser must support the codec used to compress the file. By the start of 2011, only about half of the installed base of browsers was HTML5 compatible. Though that will change with the release of Internet Explorer 9, HTML5 won’t achieve the 96% penetration enjoyed by Flash for many years to come.

All of these technologies have similar components in their solutions.  They include a player, a defined file format or formats that the player will play and a server component for digital and live streaming.  To make large video files accessible, streaming technologies use compression to shrink the size of the audio and video files so they can be retrieved and played by remote viewers in real time. (Ozer, J.  What is streaming?)

These technologies have been widely accepted by audiences, their high penetration on the consumer market have made watching movies on the Web easier and increasingly attractive. And while much of the traffic in streaming video was illegal –called: “Torrenting”- illegal file sharing is now going out of favor, Netflix and other legal content providers are gaining the upper hand.  (Dixon, 57)

3. – A new way to tell stories

Whenever a new technology is introduced in the market, both industries and consumers make changes in order to adapt to it.  Digital delivery of movies has affected the way we watch movies by transforming the living room into our own personal movie theatre.  Social Media now influences how we promote, discuss or share our thoughts on the media industry new releases. (Tryon, 16)

Now the screen has become mobile, individual spectators are now capable of watching their personal library of films, television shows and videos wherever they wish, from crowded subway trains to treadmills at the gym. (Tryon, 59)  We are entering an era of platform mobility where content can be accessed with a smart phone or tablet as long as wireless connection is

There are certainly “evangelists” that have embraced digital delivery with ease. They would probable list the benefits of this technology as mobility, flexibility and even convenience. [Tryon, 59]   Being able to do most of your tasks or chores with the help of mobile devices makes things relatively easier, but how does this affect everything else?

Movies are shifting from a social experience to a mean to fill time in public spaces, to alleviate the boredom of waiting for time to pass, easing the potential discomfort of being alone in public.  Are we perhaps sacrificing social interaction in order to consume more content?  After all, it’s not an odd sight to see people glued to the screen of mobile devices and wearing headphones.  This digitization of the moving image has radically changed cinema, and that the characteristics of this transformation leave open an entirely new field of usual figuration.  (Dixon, 1)

This shift we are witnessing can be referred as an “Inter-media fragmentation”.  We are seeing the growth of new delivery platforms.  These new delivery platforms not only facilitate the delivery of additional content options, but also multiply the platforms in which any piece of content can be accessed. (Napoli, 55)

XboxSmartGlass590Unlike the early days of media where there was only a single dominant platform, we are witnessing the proliferation of platforms, devices and strategies. (Tryon, 20)  Content is always available and accessible, so the urgency of seeing a movie on the big screen diminishes, particularly if there is no compelling reason to do so. (Tryon, 10)   Technologies are becoming defensive in nature, trying to preserve shrinking shares of audience attention in an environment in which outlets for this attention are ever expanding (Napoli, 67)

Nowadays, much media content can be stored and distributed digitally, reducing costs associated with making a wide range of content options available to consumers, increasing the incentives for providing such material. Because so much media content can today be stored and distributed digitally, the incentives for providing such material increase. (Napoli, 58)

With all this available content are consumers just turning into isolated beings?  After all, mobile device technologies are associated with the production of fragmented, often deeply individualized media consumers. (Tryon, 11)

4. – The Audience

For some people, activities online have become more important that their “offline” lives; constant status updates and tweets seem to come first than other daily activities.  We appear to be plugged-in; we are becoming more and more technological dependent as time goes by.  The truth is that a life online is no life at all. It is merely an informative stream – a content stream- manipulated as any media offering, no matter what the format.  (Dixon, 92)

Netflix-on-TVWe may think that technology offers more options and even freedom of choice, but the increased amount of mediated interaction seems to threaten the sanctity of our personal relationships.  When they are new, technologies affect how we see the world, our communities, our relationships and ourselves.  They lead to cultural reorganization and reflection.  (Baym, 2)

People seem willing to sacrifice social interaction when they have a new digital alternative. After all, if you can order a hit movie on your cable system or through the web, why would you patronize a theater?  (Dixon, 65)

By doing so, you don’t wait to buy tickets at the box-office.  You don’t have to drive all the way to the theater or even sit behind someone who is talking all the way through the movie. For today’s audiences, everything has to be instant, and everything has to be now or never. (Dixon, 3)Mobile_Barcode_Closeup1

Despite continued perception of threats to movie going as a practice, such as television, home theater systems, and movie piracy, fans continue to attend movies particularly when that movie is promoted as an “event” that must be experienced in a theater. (Tryon, 63)

Take for instance, the recent release of the super-hero movie “Captain America: The Winter Soldier” a recent release by Walt Disney Studios.  According to the entertainment website Newsarama “The Winter Soldier…” did in fact post the largest April opening weekend of all time, pulling in an estimated $96.2 million at the box office, beating the record held by Fast Five by a full 10 million dollars. The film also already passed $207 million in overseas gross.

So even though audiences are transforming and changing, we can certainly say that box office receipts are not diminishing if the movie released is worth the attention.  Moviegoers who own or subscribe to four or more home entertainment technologies are far more likely to be frequent moviegoers than those who do not, attending 10.5 movies per year, while those with fewer than four attend approximately seven movies per year in theaters. (Tryon, 87)

The entertainment industry is always adapting to the audience’s needs.  Every so often a new video entertainment format will be released so movies can seek additional revenue after their theater-run.   Who can forget flops like the laser disc or even the High Definition VHS? They were removed just a few months after being replaced with better products.   Apparently, the entertainment industry seems to struggle to find a product that will attract contemporary audiences.

As of today, audiences have become more and more autonomous.  They have control over when, where, and how the consume media; and now they also have the power to affect the content they consume and to become producers and distributors in their own right. (Napoli, 77)

A great example of this contribution culture is; where one of the most successful cases in crowd funding in recent years was the Veronica Mars movie.  Based on a teen noir drama in the CW network, it was prematurely cancelled after its third season in 2007.  Even though fans were outraged, the cancellation was final.

veronica-mars-kickstarterAfter years of behind the scenes chatter about a “Veronica Mars” movie, director Rob Thomas started a Kick Starter project last year aimed to collect 2 million dollars in pledges in a month.  The goal was far exceeded in its first day.  By 8:30 am, the tally stood at $2.5 m: the fans had spoken. (Holpuch, Veronica Mars’s movie halfway to $2m goal)

Kick Starter and the Veronica Mars movie are clear examples that “Audience Autonomy” not only blurs the boundary between audiences and content producer (also affecting the monetization of audiences accordingly) –it also undermines established audience information systems while simultaneously providing the foundation for alternative audience information systems. (Napoli, 84)

People are now multi-tasking to meet the demands of today’s world.  They are now playing many roles and existing in many different worlds. (Baym 107)   And it doesn’t stop there; people are now being bombarded by more content than ever before.  Watching a movie is now being turned into a process with multiple services to choose from.   Now that the consumer is faced with decisions of an ever-expanding array of content options, it’s understandable that they must feel confident in order to navigate this complex media environment. (Napoli, 60)

In order to navigate the complex media environment, users need to be equipped with the necessary tools so any extra expense associated with receiving these additional content options provide genuine value.

We see these tools in the new video streaming services like Hulu, the ITunes Store and Netflix. These tools may go from peer recommendations, site-generated recommendations, and robust, multidimensional search features.  The user is just looking for an interface that makes things easier and rewarding in this environment of increased content abundance.  (Napoli, 60)   This is how the digital audience uses streaming services and consumes additional content.

Furthermore, the digital environment has raised some questions by those who had access to previous forms of entertainment. The biggest concern raised by people against “platform mobility” is that new generations may become “platform agnostic”.  This refers to people who consume media no matter the size or quality of the image.  For them, there is no difference at all between watching a film on a big screen or staying home and watching a movie in a tablet or smartphone as long as they can find the movie they are looking for. (Tryon, 83)

Are the digital delivery and movie streaming services just lowering our standards as an audience?  Is this content abundance just making us less demanding as an audience?

5. – New Media for new generations

Six years ago, when the Apple IPhone was gaining momentum; there was an advertisement called “Calamari”.   In the ad, the narrator explains how easy it is to make the transition from watching Pirates of the Caribbean on this mobile device to looking for seafood restaurant options.  (Tryon, 91)


The advertisement’s intention was to explain audiences how easy it is to navigate through content when you have the appropriate tool, and audiences really listened to this message.  The idea here, for instance, is that people will watch more DVD’s when offered the easily searchable cornucopia of Netflix than when confronted with the more limited, and more difficult to navigate, selection at a video store. (Napoli, 62)

This content cap is referred, as the “Bandwagon Effect” where consumers will gravitate to content they know is popular. (Napoli, 64)  The most popular items are shown first, so they are the most likely to be accessed.  So popular content becomes even more popular and niche content becomes harder to find. (Napoli, 65)

One can only wonder if our consumption decisions are becoming automatized? Is the whole process shortening audience’s attention spam?  Today’s movie watching ritual may include pausing movies to take phone calls and then send e-mail while hearing some music.   Content abundance and Digital Delivery may be affecting us in ways deeper than we think of.

Digital Delivery is not an entirely new phenomenon.  Video On-Demand and Pay-per View events you could order using a telephone line preceded streaming. The truth is that new technologies are providing audiences with more choice and control in terms of when, where and how they consume their media; now audiences have opportunities to interact with their media, to provide feedback and to influence outcomes. (Napoli, 54)

Content libraries such as Netflix and Hulu provide users with access to numerous titles, changing how movies and television shows are distributed by altering the speed with which content is made available for repeat or catch up viewing. (Tryon, 26)

HouseofCardsNETFLIX_large_verge_medium_landscapeTake for instance Netflix’s original programming.  Hit television series like “House of Cards”, “Orange is the New Black” and “Hemlock Grove” have become popular with viewers because the whole season (12-13 episodes) for each series is released at a time.  That completely challenges the model built by other networks where a season is longer (24 episodes) and is released on a weekly basis for months.

Netflix-Streaming-XboxNetflix’s instant streaming service over the Internet is witnessing escalating growth.  There are various devices worldwide that can stream content from Netflix instantly. These include the Microsoft Xbox 360, Nintendo Wii and Sony PS3 Consoles; Blu-Ray disc players, Internet-connected TVs, home theater systems, digital video recorders and Internet Video Players; Apple iPhone, iPad and iPod touch, Android devices, as well as Apple TV and Google TV.  Devices such as the iPhone, iPad and iPod touch enable viewers to watch movies and TV shows while on the move.  Netflix’s business model provides customers with the most convenient way to view DVD’s as they are delivered to their addresses and the subscribers can return them through pre-paid envelopes. (Netflix, Inc. SWOT Analysis)

Audiences are now part watching television shows and movies on their own time schedules.  In case you missed an episode of your favorite show you can use your DVR (Digital Video Recorder), Apple TV; Netflix Account or even buy a DVD boxed set to watch it whenever you want to.  It isn’t just television, the time-span between a theatrical release and a DVD release is getting shorter so people don’t have to worry if they missed a movie in the movie theater.

Digital delivery is clearly making changes in the film and television industry. Users are now part of a menu-driven viewing culture where channels have been rendered increasingly irrelevant. (Tryon, 57)  Portable media players like the iPod or smartphones have not served as substitute of the movie going experience but rather they have become supplements, tools where studios can disseminate trailers and other promotional materials associated with a film (Tryon 83)

netflixBeyond merely altering movie-going habits, portable media is frequently discussed in terms of the ways in which it alters -and even threatens- traditional social norms. Conservative commentator George Will, for example, offers an extreme version of this condition, worrying that the video iPod will contribute to a “social autism” in which bored youth become so caught up in their tiny screens that they have no notion of propriety when in the presence of other people, because they are not actually in the presence of other people, even when they are in public”. (Tryon, 89)

Consumers in this digital age are deeply affected by technology.  They are no longer simply “consumers” but they are transformed into “Multipliers”, people who treat the good, service or experience as a starting point. (Jenkins 124)  With this audience, the conversation doesn’t stop after credits roll.  With digital technologies, audiences can boost entertainment products like never before as long as they can get an experience from it.  If products don’t offer anything new, people will surely get their voices noticed and then it’s back to the drawing board.

The popularity of portable media player effects in some ways has led “to the self-sufficient family home.” Portable media players offer the promise of perpetual, privatized entertainment, one that would seem to extend the possibility for further social isolation from a larger community.  This “Anything, Anytime, Anywhere” mantra associated with convergence culture has led film critics around the world to worry about the potential demise of cinema (Tryon, 61)

6. – Netflix: From Red Envelopes to Internet Mogul

netflixqueueIn 1998, Netflix launched its website.  And while it only offered mailing services for DVD copies, the servers reached capacity in about ninety minutes after launch and crashed. In the first four months of service, the company’s vault mailed out and got back twenty thousand rented DVD’s; and Netflix hit $100,000 in revenue becoming in theory a million dollar company. (Keating, 35)

adNetflix is the world’s largest subscription service sending DVD by mail and streaming movies and TV episodes over the Internet with over 40 million subscribers.  The number of customers opting for Netflix over the traditional model is on the rise as it offers greater convenience. (Netflix, Inc. SWOT Analysis)  A Netflix subscriber can choose from more than 100,000 DVD titles, something that may proof impossible for video rental stores, as they cannot stock such a large number of DVDs.

Based in Los Gatos California, Netflix is an online subscription service streaming television shows and movies.  Initially attracting customers by offering a month-free trail, those who decide to subscribe can watch unlimited TV shows and movies streamed over the Internet to their TVs, computer and mobile devices, as well as receive digital versatile discs (DVDs) and Blu-Ray discs, delivered to their homes. (Netflix, Inc. SWOT Analysis)


With Netflix, customers pay a fixed monthly subscription fee, eliminating due dates, late payment fees, shipping fees and pay-per-view fees.  (Netflix, Inc. SWOT Analysis)  This business model has proven clearly beneficial, since it has driven consumers away from video rental stores and into Netflix’s base of subscribers.

Customers stayed home and turned to Netflix for cheap entertainment and got hooked on a growing number of devices that could suddenly stream video-game consoles, cellphones and DVD Players.  The Netflix application was everywhere, and consumers signed up at a rate of then thousand per day in the 2008 and early 2009. (Keating, 229)

Variety lauded 2008 as “the year when global revenues from digital media exceeded revenue generated by movie theaters and home video combined”. (Keating, 231)  The first-ever decline in pay TV subscriptions ignited a debate about whether recession-weary consumers were cancelling their pay TV services to watch videos online via Netflix and other Web-based sources. (Keating, 231)

By 2011, Netflix had 23.6 million subscribers, or more than 7% of all Americans.  It had replaced Apple’s ITunes Store as the top U.S. online seller of movies and T.V. show –its signature subscription service claiming 44% of total online movie business to 32% for Apple (Keating, 255)

NETFLIX, INC. HASTINGSNetflix has consolidated its lead on streaming downloads of films and television programs. Six out every ten digital movies streamed and originated from Netflix. (Keating, 241)  By January 2012, its more than 20 million subscribers in 45 countries worldwide have streamed more than 2 billion hours of TV shows and movies, the average user consuming more than a gigabyte of data per day. (Dixon, 145)

Business is booming for Netflix.  Thousands of users are subscribing daily to the video streaming service. But why is this tech-company on the rise?  What makes it stand out among its competitors?

7. – Original Programming

For Netflix to stand out from the competition, they need to make an additional offer to customers besides renting other people’s content.  In March 2011, Netflix announced plans to begin acquiring original content, beginning with the hour-long political drama House of Cards, which debuted on February 2013.  (Andreeva, Netflix picks up “House of Cards”.)

orange is new black netflix billboard

In late 2011, Netflix picked up two eight-episode seasons of Lilly hammer and a fourth season of Arrested Development.  Other series like Hemlock Grove and the animated series Turbo FAST were up on the production schedule as well.

In November 2013, Netflix and Marvel television announced a five-season deal for four Marvel superheroes: Daredevil, Jessica Jones, Iron Fist, and Luke Cage.  The deal involves the broadcast of four 13-episode seasons that culminate in a mini-series called The Defenders. Broadcasting is planned to commence in 2015. (BBC, Marvel Shows to Debut on Netflix)

house of cards Emmy 2013 billboard

In addition to the Marvel Television deal with Netflix, The Walt Disney Company announced that the television series Star Wars: The Clone Wars would release its sixth and final season exclusively on Netflix, as well as the previous five seasons and the Clone Wars feature film.

This original content is just part of the equation.  This only a piece of what makes Netflix so relevant to today’s audiences and how it has achieved success so far.  But in order to really understand the company, we need to look at everything that has contributed to its success.

8. – The Cine-Match Algorithm

Part of Netflix’s success is “The Cine-Match Algorithm”.  A computer algorithm, Cine-Match gives users movie and television show recommendations.  A recommend system is a prime example of the mainstream applicability of large-scale data mining.  (Amatriain, 1)

netflixRecommendationsBy giving out recommendations, Netflix has personalized the experience as much as possible. Most of the personalization in the site’s interface is spread out in rows, what is included and what order those items are placed in. The system is not only optimizing for accuracy, but also for diversity and awareness.   With all these elements falling into place, the users should be aware that the system is adapting to their tastes.

While building up recommendations, the Netflix system uses different data in order to build up a recommendation that tailors itself to every users needs.  Among the key factors that come into place we may find some of the following: (Princeton,   How does Netflix Recommend)

  1. Film Quality: A fundamental component of all recommendation systems.
  2. Genres & Movie Elements: How much users tend to like or dislike genres and detailed elements of films.
  3. Anchoring:   The idea behind anchoring is that the order a viewer watches movies in also matters. If a viewer watches several movies in a short period of time, the view will anchor his ratings around the first movie he watched.
  4. Movie Fads Movies fluctuate widely in popularity, especially in response to news about the actors in the film or when sequels are released.
  5. Rating If a viewer rates several movies at the same time; the ratings follow significantly different patterns than when movies are rated immediately after each movie is watched.

netflix-wrestlerBy explaining to the user how the system works, it encourages members to give feedback that will result in better recommendations. The system also explains to the user why a certain movie or TV show was recommended.  It all works from the information the user gives out to the company, explicit taste preferences and ratings, viewing history or even friend’s recommendations.  This sense of transparency makes user feel somewhat safe and important, this is clearly a huge leap from asking the video clerk at the video rental store for recommendations.

By openly explaining to the user how the system works, it encourages members to give feedback and that will result in better recommendations. Recommendations are given out by the information Netflix has from the user: your explicit taste preferences and ratings, your viewing history, or even your friend’s recommendations. (Amatriain, 2)  Users may watch more content or rate more movies and TV shows in order to get better recommendations and explore the whole catalog.

The goal of any ranking system is to find the best possible ordering of a set of items for a user, within a specific context, in real-time.  The goal the system wants to accomplish is to find a personalized ranking function that is better than item popularity, so everyone in a subscribing household may feel satisfied.

The algorithm also uses Social Data for personalization features.  You may have noticed your Facebook account linking to your Netflix account.  This set of interactions and information from friends and family improves the recommendation system and takes the conversation into the digital world. (Amatriain, 5)

Cine-Match is an important part of the process.  But this is only one of the elements that make this brand so appealing for consumers.  We have to dig deeper in order to understand what drives people to this website and why many of them choose this as their preferred content platform.

8. – Opening the black box: How Netflix works.

mystery-box-jpegOn March 2007, during a TED talk event director JJ Abrams came up on stage with a small Mystery Box.  He explained to the audience that the box: “Represents infinite potential. It represents hope. It represents possibility. And what I love about this box and what I realize I sort of do in whatever it is that I do, is I find myself drawn to infinite possibility and that sense of potential”. (Rose, 151)

             The same thing happens with technological advancements.  Sometimes we open the box and learn from what others have built, however sometimes we keep the lid close; afraid of awakening the giant.  In this research, we will open the Netflix’s black box.  We will look at how it works in hopes of better understanding video streaming technology and how Netflix has risen in popularity through out the years.

8.1. – Video Streaming: How it works.

To fully understand the Netflix phenomenon we first have to look at the video streaming technology and how it delivers content into the user’s home.  In a streaming session, video content is transferred in two phases: a buffering phase followed by a steady state phase.  (Rao, 2)

a)                           Buffering Phase: the data transfer rate is limited by the end-to-end bandwidth. The video player begins playback when a sufficient amount of data is available in its buffer. Video playback does not wait for the buffering phase to end.

b)                          Steady State: The average download rate is slightly larger than video encoding rate.  We call the ratio of the average download rate during the steady state phase and the video encoding rate the accumulation ratio. The average download rate in the steady phase is achieved by periodically transferring one block of video content.

netflixThese periodic transfers produce cycles on ON-OFF periods.  During each ON period, a block of data is transferred at the end-to-end available bandwidth that can be used by TCP; the TCP connection is idle during the OFF periods.  We call the amount of data transferred in one cycle the block size.

The reduced transfer rate in the steady state phase ensures that the amount of video content does not overwhelm the video player while keeping the amount of buffered data during the buffering phase constant or increasing. The reduced data transfer rate is important for mobile devices, which may not be able to store the entire video.  We observe the following three streaming strategies for Netflix and YouTube videos.  (Rao, 3)

1) No ON-OFF Cycles. For this streaming strategy, all data is transferred during the buffering phase. The video streaming session can be considered as a simple file transfer session. One disadvantage of this strategy is that it can overwhelm the player and cause a large amount of unused bytes if users interrupt the video playback.

2) Short ON-OFF cycles. We define this streaming strategy as the periodic transfer of blocks of size less than 2.5 MB (called an ON period) followed by an idle period (called the OFF period). The goal of this streaming strategy is to maintain an accumulation ratio, which is slightly larger than one. This is achieved by a periodic transfer of a block of data followed by an OFF period. This strategy ensures that the client is not overwhelmed by the amount of data sent by the server.

3) Long ON-OFF cycles. This streaming strategy produces a traffic pattern that resembles the periodic execution of buffering phases following long idle periods. The primary difference between this strategy and the strategy of short ON-OFF cycles is the amount of data transferred in a cycle. The amount of data transferred during the ON periods for this strategy is larger than 2.5 MB.

8.2. – Creating the online movie experience.

Most people don’t know it, but Netflix only uses its own IP address and hostname for two key functions.

  1. Registration of new user accounts and capture of payment information (credit card or PayPal Account
  2. Redirection of users to or based on whether the user is logged in or not respectively.  (Adhikari, 1)

Netflix_architectureAfter the user signs up or registers a new account Netflix’s system will usually tell the user to start download depending where they are trying to watch movies from. If they are a desktop user, they will have to download Microsoft Silver light; if they are using a mobile device they will have to download an app in order to star streaming.  (Adhikari, 2)

Netflix’s servers are based of the Amazon Cloud technology, where the data encoding/decoding process will begin for those who are trying to watch a movie or a TV show.  So this video streaming website has risen to fame despite working with outsourced resources because it sells the audience and comfort.

Netflix’s content is not stored in one single server, but instead it’s distributed between multiple CDN´s (Content Delivery Networks) or a collection of ¨servers in different points that transfer content to the computer that made that request.   (Adhikari, 3)

The requested content is divided into small chunks by ¨The Dash¨ protocol. The user’s computer will request one chunk at a time, with “The Dash” determining the quality and size of each chunk.  Silver light, the software that Netflix uses for desktop computers will collaborate with the Dash protocol constantly. Silver light will send information about the user’s bandwidth as well as the point of consumption; adapting the content’s streaming.  (Adhikari, 4)

This means that the data transfer process for a mobile phone is very different from the data transfer process for a desktop unit.  (Adhikari, 6)

9. – Content Regulation and the Open Internet

There has been some controversy surrounding Netflix’s success, after all the company uses the network provided by another company in order to provide content to its customers. This constant debate over web content has sparked controversy over “network neutrality” or the “the open internet” a topic you may have heard previously on the news.

The “network neutrality” discourse began in the technologist community in the early 2000’s to describe efficient network design encouraging technological innovation. (Stiegler, 34)  By the mid 2000’s “net neutrality” became and advocacy issue for public interest groups such as Free Press, and it began to take on more political meanings related to freedom of expression, civic argument, and democratic participation.

Much of the conflict in the net neutrality debates, then, has been a struggle between the largest content providers like Google and Amazon and the largest access providers such as Verizon and Comcast over the latter ability to assert more control over the profit extraction from the products of the former (Stiegler, 43)

Many years has the Internet operated as an UN regulated, competitive free market.  That was until residential Internet service providers demanded payment to deliver Netflix traffic to their own customers.  After many months of public debate, Netflix has agreed to the demand of the North Americas largest broadband provider Comcast.  (Gustin, S.)

Apparently, the deal will transform the debate over network neutrality regulation.  Comcast’s deal with Netflix is about interconnection, not traffic discrimination.  Companies’ claim that by making this kind of deals “Net Neutrality” will not be violated.

However, if Netflix gave in to the demands by this Internet service providers, one can only wonder if smaller companies, even independent bloggers or news channels may be forced into a variation of this agreement in the near future.

10- Netflix and content licensing.

One of the biggest investments Netflix does over every year is regarding content licensing. In audiences are to have the most successful movie releases on their home menu, Netflix has to enter into a number of strategic partnerships.

Most recently, Netflix committed to pay an estimated $300 million a year for exclusive rights to stream Walt Disney Co. films after 2016.  This gives the company rights to become exclusive US subscription television service provider for first-run live-action and animated feature films from The Walt Disney Studios.  (Barmes, B.  Netflix Reaches Deal) Beginning with its 2016 theatrically released feature films, new Disney, Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios and Disney Nature titles will be made available for Netflix members to watch instantly in the pay TV window on multiple platforms.

In February 2013, the company entered into an exclusive licensing agreement with Flavor Unit Entertainment, a production company owned by Queen Latifah and Shakim Compere, for the streaming of Flavor Unit Entertainment’ s movies in the US.  (Netflix Inc, Swot Analysis)

Further, in May 2013, Netflix and The Disney/ABC Television Group entered into a new multi-year licensing agreement, which makes the company an exclusive US subscription TV service for one of the popular shows on Disney Junior: Jake and the Never Land Pirates; and Tron: Uprising

Netflix will also be able to stream complete previous seasons of several Warner Bros.-produced shows, including several that debuted this season, starting a couple of months after each season ends.  The deal is expected to be worth hundreds of millions of dollars, depending on how long each of the included shows stays on the air, a person familiar with the matter said. Netflix will pay more per episode for shows that stay on the air longer. It is the biggest deal struck by Time Warner with Netflix other than a 2011 agreement with the CW network, which is jointly owned by Time Warner and CBS Corp.  (Jannarone, Netflix reaches deal with Time Warner)

Even before that deal was announced, Netflix had $5 billion in streaming content liabilities as of Sept. 30, up from $3.5 billion in 2012.  Deals like these are what makes Netflix an exclusive and important company, the bring out entertainment so users can get most of their subscription service without ever wondering what is happening back-stage.

11. – The Future of Video Streaming

Video streaming doesn’t stop with Netflix.  There are other companies that are trying to get some of the business and subscribers Netflix has built over the years. Hopefully, this competitiveness will drive innovation and better services for users.

a) Aereo

aereo_antenna_array1Aereo is an $8-a-month service that lets you tune in to TV channels that are broadcast over the air, from the comfort of your own laptop or tablet. Anything that’s being broadcast right now, you can watch live (actually, delayed about 6 seconds from real time).  Aereo is basically capturing the networks’ broadcasts for free and then collecting money from us to watch them. Aereo isn’t paying licensing fees for those shows, the way a cable company must.

Aereo disagrees. Aereo says that it’s simply an antenna-renting service. And indeed, it does maintain a separate tiny TV antenna for every single subscriber. The Supreme Court is set to hear the case. (Pogue, Aereo Delivers Great Local TV Service)

b) Amazon Fire TV

Amazon-Fire-TV-Homescreen-002Amazon unveiled new video-streaming hardware, a move that pits it against market leader Roku and Apple TV in a fight to be the entertainment engine in consumers’ living rooms.  The device costs $99 and features 2 gigabytes of RAM, Wi-Fi, a Bluetooth remote, and access to numerous content providers, including Hulu Plus, Watch ESPN, Showtime, MLB, Disney, YouTube, Netflix, and, of course, Amazon Instant Video. (Ytam)

c) XBOX Originals

1398700787000-xboxoriginalsMicrosoft announced that they are planning on releasing Xbox original programming beginning in June to current Xbox owners and Xbox Live subscribers. Lately streaming video services like Netflix, Hulu and Amazon have been increasingly able to dominate cable by creating original programming and offering a huge selection of movies, which is quickly becoming the cornerstone of how most households are receiving their entertainment. (Hillburn)

d) Netflix moves to cable

Netflix just announced it has inked a deal with three cable TV companies to make watching Netflix as easy changing the channel.  Under the agreement, cable companies RCN, Grande Communications, and Atlantic Broadband will offer access to the Netflix service straight from their TV set-top boxes.  Subscribers must have a specific TiVo box provided by the cable companies, and they must have a Netflix account, but once everything is up, the experience should be seamless. (Lapowsky, Netflix is getting its own cable channel)

Video Streaming is here to stay.  The Future of media entertainment is just beginning; more and more options will appear for users who want to enjoy a movie from their own living room.  There is no way to guess how far video streaming technology will go.

12. –Conclusion

Video Streaming is a technology that has completely changed the entertainment industry as well as consumption models among audience members. A lot has changed since that very first Real Player transmission in 1995.  Since then, technology has been constantly improving, making content delivery and access easier no matter the platform trying to access it.

Netflix, Inc. is one of the best examples regarding commercial applications for Video Streaming.  With millions subscribing to the service all over the world, the company has found a way to capitalize it services using it’s title stock and outsourced infrastructure.

Recently, Netflix sparked some debate around the “open internet” topic.  Other companies have complained that Netflix is getting revenue by using Internet services provided by third parties.  And while the discussion appears to be settled, Net Neutrality and Open Internet is now in everybody’s mind.

We have seen some repercussions appear regarding Video Streaming. Film experts fear audiences may be turning “platform agnostic” consuming content regardless the size of the screen or the image quality. Nonetheless, audiences have proven they are willing to return to cinemas if the movie is worth the price of admission.

However, content abundance has made audiences “socially autistic”.  Always connected to a device and somehow always isolated from others.  Apparently audiences are willing to sacrifices social experiences “offline” in sake of personalized content.

With other big players like HBO, Amazon and XBOX starting to produce their own versions of original content and streaming service the competition for audience’s attention is just starting.



Stiegler, Z. (2013). Regulating the Web: Network neutrality and the fate of the open Internet.

Keating, G. (2012). Netflixed: The epic battle for America’s eyeballs. New York: Portfolio/Penguin.

Klinger, B. (2006). Beyond the multiplex: Cinema, new technologies, and the home. Berkeley: University of California Press. (191-197)

Rose, F. (2011). The art of immersion: How the digital generation is remaking Hollywood, Madison Avenue, and the way we tell stories. New York: W.W. Norton & Co (107-190)

Jenkins, H., Ford, S., & Green, J. (2013). Spreadable media: Creating value and meaning in a networked culture. New York: New York University Press

Tryon, C. (2009). Reinventing cinema movies in the age of media convergence. New Brunswick, N.J.: Rutgers University Press. (59-91)

Napoli, P.M. (2011). Audience evolution: New technologies and the transformation of media audiences. New York: Columbia University Press.

Dixon, W. W. (2013). Streaming: Movies, media, and instant access.

Tryon, C. (2013). On-demand culture: Digital delivery and the future of movies. New Brunswick, N.J: Rutgers University Press

Baym, N. K. (2010). Personal connections in the digital age. Cambridge, UK: Polity.


Online Sources

Mitovich, M. (2014, February 13). Netflix Lands Star Wars: The Clone Wars’ Final Run, Plus Five Seasons of Director’s Cuts. TVLine. Retrieved May 9, 2014, from

Andreeva, N. (2011, February 18). It’s Official: Netflix Picks Up David Fincher- Kevin Spacey Series ‘House Of Cards’. Deadlinecom. Retrieved May 9, 2014, from

Lieberman, D. (2013, February 12). DreamWorks Animation To Produce First Netflix Original Series For Kids. Deadlinecom. Retrieved May 9, 2014, from

Marvel TV shows to debut on Netflix. (2013, November 8). BBC News. Retrieved May 9, 2014, from

Jannarone, J. (2013, January 7). Netflix Signs Streaming Deal With Time Warner. The Wall Street Journal. Retrieved May 9, 2014, from

YTam, D. (2014, April 2). Amazon unveils $99 Amazon Fire TV for streaming video – CNET. CNET. Retrieved May 9, 2014, from

Hilburn, T. (2014, May 5). Will Xbox Originals be a challenge for Netflix?. :: La Prensa. Retrieved May 8, 2014, from

Pogue, D. (2014, April 17). Aereo Delivers Great Local TV Service to Cord-Cutters. For Now.. . Retrieved May 8, 2014, from

Lapowsky, I. (0014, April 23). Netflix Is Getting Its Own Cable Channel | Business | WIRED. Retrieved May 8, 2014, from

Holpuch, A. (2013, March 13). Veronica Mars movie halfway to $2m goal on Kickstarter after half a day. Retrieved May 5, 2014, from

Siegel, L. (2014, April 7). CAPTAIN AMERICA: THE WINTER SOLDIER Sets April Opening Record, Eclipses First Film Overseas. Newsarama. Retrieved May 5, 2014, from

How does Netflix recommend movies?  Retrieved  May 3, 2014 from

High Beam Business, Video Tape Rental. (n.d.). market report. Retrieved May 3, 2014, from

Taube, A. (2014, April 16). Proof That Netflix Is Destroying Cable TV. Business Insider. Retrieved May 3, 2014, from–experian-2014-4#!HJHFt

Ozer, J. (2011, February 26). What is Streaming? – Streaming Media Magazine. Streaming Media Magazine. Retrieved May 3, 2014, from

Zambelli, A. (2013, March 1). A history of media streaming and the future of connected TV. Retrieved May 3, 2014, from

Lee, T. (2014, February 23). Comcast’s deal with Netflix makes network neutrality obsolete. Washington Post. Retrieved April 28, 2014, from

Gustin, S. (2014, March 20). Netflix vs. Comcast ‘Net Neutrality’ Spat Erupts After Traffic Deal. Time. Retrieved April 28, 2014, from

Barnes, B. (2012, December 4). Netflix Reaches Deal to Show New Disney Films in 2016. Media Decoder Netflix Reaches Deal to Show New Disney Films in 2016 Comments. Retrieved April 28, 2014, from

Bajaj, V. (2014, February 24). Netflix, Comcast and Net Neutrality. Taking Note Netflix Comcast and Net Neutrality Comments.  Retrieved April 28, 2014, from

Academic Journals and Articles

Netflix, Inc. SWOT Analysis. Netflix Inc. SWOT Analysis [serial online]. March 2014;:1-8. Available from: Business Source Complete, Ipswich, MA. Accessed May 7, 2014.

Adhikari, V. K., Guo, Y., Hao, F., Varvello, M., Hilt, V., Steiner, M., & Zhang, Z. L. (2012, March). Unreeling netflix: Understanding and improving multi-CDN movie delivery. In INFOCOM, 2012 Proceedings IEEE (pp. 1620-1628). IEEE

Rao, A., Legout, A., Lim, Y. S., Towsley, D., Barakat, C., & Dabbous, W. (2011, December). Network characteristics of video streaming traffic. In Proceedings of the Seventh Conference on emerging Networking EXperiments and Technologies (p. 25). ACM.

Amatriain, X. 2013. Big & personal: data and models behind netflix recommendations. InProceedings of the 2nd International Workshop on Big Data, Streams and Heterogeneous Source Mining: Algorithms, Systems, Programming Models and Applications (BigMine ’13). ACM, New York, NY, USA, 1-6.

Annotated Bibliography

Dixon, W. W. (2013). Streaming: Movies, media, and instant access.

This is the most important book consulted during my research for this paper.  As the title suggests this is a book about streaming technology and how it has made an impact on today’s society. Netflix is constantly referenced in the book and important information and numbers about the company are brought up.  Quite certainly, the book is fundamental because of the insights on streaming technology as well as its functionality.

Napoli, P.M. (2011). Audience evolution: New technologies and the transformation of media audiences. New York: Columbia University Press.

If Dixon’s book is about the technology, this book is about the audience and how they are transformed by technologies such as video streaming.  The author clearly explains how audiences change, adapt to the introduction of new technologies in the world.  I think it’s important to look at the human side of things to get the whole perspective.

This book certainly works as a counterpart to “Streaming” as it gives the other side’s perspective.

Tryon, C. (2013). On-demand culture: Digital delivery and the future of movies. New Brunswick, N.J: Rutgers University Press

On-Demand Culture is important as it gives out information about Netflix as a company, it also provides a perspective of “Video-Streaming” as movement and how audiences may use it to their advantage.

Content consumption and production are the main focus here, so I clearly benefit on the authors perspective on how we use and consume video-streaming content on a daily basis.