How does Netflix evaluate to renew a TV series?
The below mentioned process may be one of the ways how Netflix evaluates.
Firstly, we would would like to first understand the motive behind renewing the deal, after the show has been aired for a year on Netflix. One of the followings can be the possible rationale:
- To increase the customer base.
- To increase the active users in 30 days period.
- To increase the revenue.
Assuming the main motive is to increase the active users in 30 days period. Netflix has a user base of around 200 million users. Of these only 15% are active in 30 days period. Since the show has been already streaming on Netflix over a year, we have relevant data over the series. Through the existing data, we would like to make the following queries to proceed further, which will help us to know how cost viability of the hit TV series
- Do non-active users become frequent visitors after watching the show? If yes, in past one year what percentage of non-active users become frequent visitors?
- What percentage of new users viewed the TV series and remained active users?
- What percentage of users watch the show repeatedly after having watched once?
The answers to the above three questions help us to understand the impact made by the hit TV series on the new users and existing users. Without going much into the details of the above 3 queries, let’s directly conclude by what percentage there is increment in the active users. Let say there was an increment in 2% active users. 2% sounds small but there is an increment of 4 million users.
From cost perspective, we need to compare the alternative as to how much it costs to increase the active users in 30 days period. Let say the cost is $100 million for the entire year to increase the active users by 5%. Assuming the show will result in bare minimum 2% active users. It is worth of around $40 million.
Until then enjoy the sitcoms on Netflix…
