Why Netflix’s Newest Experiment Comes At A Favorable Time

Summary:

• After a rough year, the pressure was on for Netflix to once again be an innovator and own both the conversation and the best content.
• Netflix explored a few options with them eventually landing on “live TV” as the best avenue to explore, but how to do “live” was the question.
• The streamer is known mostly for scripted or taped reality content and with its chance to own sports has seemingly gone, comedy was left as the most likely avenue.
• Comedy is something Netflix knows well and its debut “live” experience features comedian Chris Rock – who is finally ready to talk about the slap heard around the world.
• With a hot microphone and no limitations this could be a gift to Netflix to not only help draw a crowd, but get a much-need subscription driver category properly launched.

Last March Chris Rock was set to perform in Chicago.

When booked there was nothing out of the ordinary about it… it was another stop on his tour and he had a full set ready to go.

However, when he arrived though it was three days after Will Smith smacked him on live TV at the Oscars, the situation had clearly changed.

Yet at the time Rock only briefly addressed the incident saying he was still processing it and he was going to stick to his prepared set – and the night went on as planned.

Now it looks like Rock has had some time to process and Netflix (NASDAQ:NFLX) is about to be the beneficiary of that reflection period…and at a very important time.

First as always, some background.

The saga of Will Smith and Chris Rock’s Oscar-gate moment has been played out dozens of times and with the Oscars coming shortly, it will play out a least a dozen more… but this is a new take and it seems its convergence here with Netflix is more of a happy accident.

To understand what I mean, you have to go back to last year when Netflix stock was in freefall and the company had to go back on its various versions of “never would I ever.” All of a sudden, it became “never say never” and the streamer rolled out a host of changes.

What led to the drop and the various adjustments was Netflix got so wrapped up in the slow and steady streaming approach that had carried for so long, that when the wheels came off – they really came off. The streamer, which innovated streaming in the first place, was being lapped by its rivals in key areas and investors were circling their wagons.

The pressure was on to once again “innovate” and Netflix explored a few options with them eventually landing on “live TV” as one avenue to explore. For Netflix “live” is hard given it usually streams scripted content or taped reality fare.

Yes, you could do reunion shows and the like, but the odds are low you’ll see Bridgerton: Live In Front Of A Studio Audience anytime soon. And sports was out because Netflix passed on that avenue years ago and its rivals quickly pounced on the opportunity.

That left comedy.

Comedy is something Netflix knows well. It has a strong roster of stand-up specials and its multi-day comedy festival last year was a huge success. So comedy it was and given the treasure trove of viewer data Netflix has, it saw that Chris Rock was a favorite of its subscribers – and also one of the first celebs to sign a multi-year deal with the streamer.

Not exactly kismet... but this next part was.

While it may seem like the timing of Rock’s Netflix special – and the streamer’s debut of live events – was selected to coincide with this year’s Oscars, Netflix’s VP of Stand-Up/Comedy formats Robby Prawn told the Wall St. Journal recently it was really a coincidence.

“It really was a factor of when Chris felt like he was ready and when the technology was ready… I know you’re looking for a more fun answer than that, but that’s really what it came down to.”

Whether that’s the case or note, what Netflix has is the perfect storm of promotion and a potential dream scenario for investors.

You have an edgy comic with a hot microphone and a story to tell with no limits or censors imposed on him.

Chris Rock was born for this type of moment.

For Netflix, you couldn’t ask for more of a timely milestone to launch this next evolution of its service. And let’s be clear, despite two solid back-to-back earnings periods, Netflix needs a big win. It’s one thing to put out numbers and spin-them in a controlled way, but it’s another to be able to point to something concrete that it can own and everyone is talking about afterwards.

And that’s the other big point to make for shareholders, Netflix’s win here is less the promotion of the event, but more so the aftermath. Rock is expected to devote at least some part of his special to the Oscar incident and when he does, that will be picked up by every news outlet around the globe – and all will note it happened during his live Netflix comedy special.

You can’t put a price on that.

The words “live Netflix comedy special” is the only four words you need in any story for it to be a success because it encapsulates the message perfectly.

And yes, you can argue “live” is nothing new for streaming – but in some ways it is relatively in its infancy. Take sports out of the equation and the other streamers don’t dabble in “live” as much as you may think – the closest on that level is ABC shifting Dancing With The Stars to Disney+ and live-streaming it.

This is also not the same thing as mirroring a linear broadcast or running a YouTube TV or Hulu TV hub of networks online – this is content made for the screen designed to air in the moment. One of my biggest criticisms of Netflix over the years is how its batch method reduces the shared audience experience.

For example, if you watch Stranger Things in full after a drop and your friend is still two episodes in – you are limited in the conversation (and media is limited in covering to avoid spoilers). Concurrently HBO’s The Last Of Us has hit a stride because the conversation around it continues weekly and builds week-to-week.

Live changes things.

And Netflix seems to get that message as while the special will be on demand after, it is also programming live pre and post air specials with A-list names that will NOT be able to be streamed after that first airing.

The whole experience is truly best in the moment.

That’s part of why sports do so well on TV, because you want to know in the moment what happened. It’s why Thursday Night Football was a priority for Prime Video, it’s why WWE does so well for Peacock, it’s why Apple invested so heavily into Major League Soccer – live plays.

It’s also worth pointing out that Apple not only invested in live-streaming, but it also smartly invested in live by association. Its Super Bowl halftime sponsorship was a genius move as it comes at a fraction of the price of a traditional NFL package and it has as much impact.

Netflix used to be good at that approach as well – they were connected with ideas as much as they were programming. They did a choose your own adventure episode (with Black Mirror: Bandersnatch) and an algorithm chooses the order for your series (with Kaleidoscope)… both innovations in the space that made you remember why they are who they are.

They’ve gotten away from that recently and it’s nice to see them return.

That’s how Netflix saves itself… not just be new content, but by new themes and ideas. Netflix has the chance this weekend to reclaim some of its cache and with Rock as the lead expect them not to pull any punches (or slaps) in the process.

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

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