Have you ever heard of Castlevania?
If you're not a gamer or close to one, you'd be forgiven for not knowing. This long-running Japanese fantasy-horror video game has been around for more than three decades and has been released in dozens of versions on a variety of platforms. The premise of the game centers on the Belmonts, a family of vampire hunters battling Dracula and other classic monsters. The game has a fervent fan base, and new versions continue to be released.
You might also be surprised to learn that video-streaming pioneer Netflix (NASDAQ:NFLX) has announced a July 2017 release date for an anime series based on the nostalgic video game. Previous video-game adaptations have had a sketchy track record and have largely suffered from scathing reviews, though some have been commercially successful. Why would Netflix venture into a genre with such a poor track record, for a series that so few people are likely to watch?
The long tail
In a now-famous Wired article from 2004 titled "The Long Tail," author Chris Anderson explained, among other things, the economics of the summer blockbuster, which required a certain number of moviegoers in order to make money. This concept also applied to physical retail due to limitations resulting from space constraints. He detailed how the online distribution model had changed all that, creating sufficient audiences for niches, genres, and subgenres.
This was an example of what he called "the Long Tail" -- titles with limited audiences that a company like Netflix could aggregate for the dispersed masses. Not every concept has to support a $100 million budget and require the accompanying number of viewers to justify its existence. This simple notion that made the company's DVD-by-mail model so successful is also what will drive growth going into the future.
Large pockets of varying interest
At 100 million subscribers and growing, Netflix can create content out of these niche interests for fans located around the globe. As the company's subscriber base grows, so too will these pockets of interest that the company can exploit. Remember, also, that Netflix possesses mountains of data concerning what is popular on its streaming service -- this gives it opportunities to leverage that data.
Consider the widely reported deal in 2014, in which Netflix partnered with comedian Adam Sandler for four films -- a deal that has recently been extended to eight films. While the first three of those movies, The Ridiculous 6, The Do-Over, and Sandy Wexler, have been largely ridiculed by critics, Netflix has a different perspective. In its April 2017 shareholder letter, the company stated "Since the launch of The Ridiculous 6 [in Dec. 2015], Netflix members have spent more than half a billion hours enjoying the films of Adam Sandler."
With the level of granular subscriber data the company possesses, it has better visibility into what content will find an audience on its platform. Here's what Netflix had to say about the upcoming series:
Inspired by the classic video game series, Castlevania is a dark medieval fantasy following the last surviving member of the disgraced Belmont clan, trying to save Eastern Europe from extinction at the hand of Vlad Dracula Tepe himself. The animated series is from Frederator Studios, a Wow! Unlimited Media company, written by best-selling author and comic book icon Warren Ellis and executive produced by Warren Ellis, Kevin Kolde, Fred Seibert and Adi Shankar.
The power of the company's worldwide streaming model and the value of data gathered over the past decade give Netflix numerous advantages when deciding what content to produce. The company clearly believes, and the data likely corroborates, that there is a market for the crossover between anime and video games. In the most recent quarter, the company generated $2.6 billion in revenue, up 35% year over year, and subscribers grew 21% over the prior-year quarter.
Netflix seems to be making all the right moves. I'm willing to bet that this one will work out as well.