Netflix Looks at the Little Picture

As video consumption on mobile devices ramps up, with several recent studies demonstrating the shift towards video viewing on smartphones, Netflix Inc. (Nasdaq: NFLX) is re-thinking its production and post-production practices and evaluating opportunities for specialized mobile versions of its shows. (See It's Mobile or Bust, Says Ooyala's Global Video Index.)

According to a recent report, Netflix Chief Product Officer Neil Hunt briefed journalists yesterday about the company's plans to explore making "a different cut for mobile," aimed at a growing audience of mobile-only viewers.

So far the company has been offering the same shows, shot-for-shot, across the wide variety of distribution platforms it supports. Of course, there is still a significant degree of customization in terms of screen sizes, players, video compression and adaptive bit-rate (ABR) profiles. But this is all done at a later stage in the process -- production and post-production workflows have not been affected. This initiative would take device optimization further upstream than anyone has to date.

Yet, it does seem like a logical next step. Netflix has been very active in the area of video compression, creating efficiency through a greater level of customization, to create lower bit-rate versions of its content. In fact, founder and CEO Reed Hastings recently said that the company is aiming to develop a sub-200Kbit/s stream aimed at 4-5 inch smartphone screens. (See Sandvine: Netflix Traffic Share Falls, But Still Dwarfs Rivals' and We'll Make Buffering Obsolete, Like Dial-Up: Netflix CEO.)

And there has been extensive discussion within the industry about the importance of creating content that suits the platform, and the way video is consumed on it. But that discussion has centered more on marketing and promotion of TV shows and movies and the development of specialized short-form content for distribution channels such as Facebook and Snapchat. (See Rambles & Rants: Who Rules Video?)

This effort from Netflix would take things further, into the actual editing, and perhaps even the production, of the TV show. Netflix's plan is to create versions of a show where shot compositions are simpler, and easier to see on small screens. That would mean shooting multiple versions of some scenes -- for large and small screens -- and also editing different versions in post-production.

This will have cost implications. The additional editing cost may not be too onerous, particularly if the initial production planning factors in these requirements. But actually shooting multiple versions could have an impact on production costs, particularly given the scale of some of Netflix's shows -- think epic productions like Marco Polo, reportedly cancelled after a $200 million loss for Netflix.

But as Netflix has expanded globally, it is increasingly having to think about audiences in less developed economies, where mobile penetration has leapfrogged fixed-line. Hunt mentioned the example of India, where most viewing is on mobile devices. That's because India has 1.3 broadband subscriptions per 100 people, compared with 78.8 mobile cellular subscriptions per 100, according to the World Bank. And even within developed countries, smartphones are increasingly the preferred video viewing device for younger generations, though much of that viewing is not necessarily movies and TV shows, but rather social-media videos or short video clips.

Hastings said that he expected viewing to be fragmented for the foreseeable future, with viewers picking different devices for different content, and that it would be up to streaming service providers to ensure positive experiences regardless of device preferences.

As such, Hunt's comments simply follow on that theme. As the global market leader in the OTT space, Netflix has to keep pushing for innovative approaches to improve QoE. Its significant investment in original content just gives it more options in its efforts to do so. I would expect to see others -- notably Amazon.com Inc. (Nasdaq: AMZN) and Home Box Office Inc. (HBO) , both with growing global audiences and original productions -- to follow.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation