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The Effect of Networks on Television

On September 29th, 2013, over 10 million people tuned in to AMC to watch the season 5 finale of Breaking Bad – a staggering 500% increase from the viewership of the previous season’s finale only two years prior [1].  The incredible snowball-like success of Breaking Bad shows the power of viral networking and how technology has enabled TV shows to break network effects and acquire new viewers years after it first airs.

As we learned from Networks I, when there are network effects the willingness of a person to pay for a good depends on their own intrinsic interest and the number of other people using the good.  In the context of television, a traditionally solitary or semi-solitary activity, one would think that network effects wouldn’t have much of an impact.  However, social media has opened the door to connect us with online communities and changed the way we think about many activities we typically think of as being done individually.

For television, social media gives people access to the opinions of people outside your own personal network and as a result, consumers get to observe the actions of millions of buyers before they make a decision.  In this case, the more people there are that like a show, the more likely a new consumer chooses to watch as well.  This is a quintessential information cascade example, but is also key to increasing the value of viewers in the network effect example.  Not only does an increase in congruent opinions increase the likelihood of buying a product, but it also increases the perceived disadvantage consumers feel who have not bought it because of humans natural desire not to miss out.

The idea of FOMO (fear of missing out) is a very real concern people have with TV shows they don’t watch and this is only exacerbated by the recent explosion of social media.  In the past, a user’s fear of missing out would only really be a factor of how many people the user comes into contact with in a given day.  Nowadays, social media has increased that number exponentially so collective opinions propagate even faster through various channels of distribution online.  The more people who share, tweet, and post about a given phenomena, the more value a potential viewer will perceive from jumping on the bandwagon.

On one hand, we have a classic network effect example made possible by the advent of social media technologies where the value of watching a show is directly linked to how many other people are already watching.  On the other hand, we have seen the price consumers pay to catch up on a show drop dramatically due to the prevalence of after-airtime methods of watching.  Up until a few years ago, the predominant way to catch up in a tv show was to buy the DVD packages, which is fairly expensive – especially for a long running show.  Other methods included researching the TV Guide to find if and when reruns were playing or to just bite the bullet and not catch up at all and dive right in to new episodes.  Each of these methods caused some degree of frustration, financial or otherwise.

The invention and integration of DVR systems into cable boxes, along with the increasingly available streaming services like Netflix and Hulu have drastically reduced these barriers to entry, causing less friction for new users to enter the system and start watching episodes months or even years after they air.  The prevalence of both social media and recording/streaming arising at the same time combined to both lower the price of starting a new show as well as increase the value of doing so [2].

Taking a look at the timeline for Breaking Bad, we see some interesting trends that shed some light on the network effects in place as well as the link to technology’s role leading up to the breakthrough finale.  Between 2012 and 2013 (years where social media was already very popular), 7% of people said they were aware of more shows when asked [3].  And, in the time between the season 4 finale and season 5, Netflix recorded over 13 million new subscribers [4].  This increase in social buzz about the show and increasing number of people with access to the previous seasons content contributed heavily to its eventual success.

Breaking Bad’s story certainly shows an increase in networked behavior and could be a sign of new trends in the TV industry.  Going forward, it would be a good idea for executives and producers to pay more attention to social media as well as the effect of streaming platforms on acquiring new viewers season after season.  Vince Gilligan, the creator of the show went so far as to credit Netflix for keeping the show alive in a speech at the Emmy’s [5].  This is a great sign for smaller networks that may not have the advertising budget to get people watching early on because if the content is enticing, they can leverage social and streaming technology to break network effects to create hit shows [6].

[1] http://en.wikipedia.org/wiki/List_of_Breaking_Bad_episodes

[2] http://www.cnbc.com/id/101074132#

[3] http://www.nielsen.com/us/en/insights/news/2014/living-social-how-second-screens-are-helping-tv-make-fans.html

[4] http://www.statista.com/statistics/250934/quarterly-number-of-netflix-streaming-subscribers-worldwide/

[5] http://variety.com/2013/tv/news/breaking-bad-amc-vince-gilligan-credits-netflix-1200660762/

[6] http://www.vulture.com/2013/08/lessons-from-breaking-bads-ratings-explosion.html

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