How you spend your hours in front of the TV or gazing at a mobile device's screen means a lot to tech companies -- particularly those like Netflix (NASDAQ:NFLX), which are designed to serve you during your leisure hours.
Netflix cares a great deal about what people watch and for how long, and the viewing habits of its subscribers can have a huge impact on how it directs its content-related efforts and funds. But how the company actually measures viewership has not always been clear. The metrics that Netflix releases to the public seem lacking, and the company is secretive about its viewership figures.
The curtain has been drawn back at least a little bit: In "supplementary written evidence" sent by Netflix to a United Kingdom Parliament Committee, Netflix provides an inside look at how it tracks viewership and what it shares with directors and producers. Looming large among Netflix's metrics are three categories of viewers: "starters," "watchers," and "completers."
What Netflix's terms mean
Whether you end up as a "starter," "watcher," and/or "completer" in Netflix's eyes depends on how long you watch whatever title you choose. Per Netflix's filing, a "starter" is any household that watches "two minutes of a film or one episode." (In other words, Netflix doesn't appear to count those who watch less than two minutes as anything at all.) To reach "watcher" status, a starter has to get through 70% of whatever episode or film they're viewing. A "completer" makes it past 90% (apparently, Netflix doesn't care if you stay for the credits).
We've seen Netflix's "watchers" metric before: Netflix used the 70% standard to declare Bird Box a hit, and it also used that metric to evaluate Stranger Things 3 in its recent Q3 earnings report. When used with series, though, Netflix's 70% rule applies to just a single episode -- viewers can watch less than one episode and still count as "watchers" of the series.
There is, presumably, some margin for error here. A "completer" has let at least 90% of an episode or movie play out, but Netflix can't know if users have left the room or fallen asleep. Netflix's app does prompt binge-watchers to confirm that they're still there and watching in between auto-played episodes, a measure that would help cut down on false positives.
What Netflix announces and what it doesn't
Netflix's "starters" and "completers" metrics are self-evidently useful, but its "watchers" metric looks far more arbitrary -- especially as it applies to series like Stranger Things. To call a viewer a watcher of a series, Netflix applies the 70% standard to a single episode. Viewers can watch less than three quarters of an episode and end up counting.
This helps explain why Netflix's declarations are sometimes at odds with independent analysis. Nielsen's streaming ratings system is in its relative infancy, but it has given us at least some figures to look at -- and Netflix and Nielsen are sometimes pretty far apart in their figures. Netflix claimed that the third season of Stranger Things pulled in 40.7 million viewers in the first four days of its release. Nielsen's own data gave a figure of 12.8 million -- still a major hit, but significantly less than half of what Netflix claimed. Netflix's use of its generous watcher definition allows it to publish eye-popping numbers for PR purposes.
These three categories are almost certainly not the whole story -- especially given the oddities of the "watcher" metric, which seems unlikely to be driving any huge spending or content decisions behind the scenes. But even this simple set of categories is more than we previously knew about Netflix's internal metrics.
Assuming Netflix is being forthcoming, it's remarkable to see how important these metrics seem to be. From Netflix's filing:
The information we give [content creators like writers and producers] mainly consists of "starters" (i.e. households that watch two minutes of a film or one episode) and "completers" (i.e. households that watch 90% of a film or season of a series) for the first seven and 28 days on Netflix.
Netflix may give its creatives a bit more information that it suggests here -- there's room for speculation in that "mainly" -- but it's clear that Netflix cares a great deal about these metrics. Two big questions loom: Does Netflix use these metrics extensively for any purposes other than sharing insights with producers, writers, and directors? And does Netflix use other metrics internally -- ones that might not be getting shared with writers and producers? If Netflix is telling the truth about its information-sharing relationship with content creators, then Netflix is making huge content decisions based on simple metrics that seemingly ignore factors like the relative length of movies and TV shows and the differences between one-time views and re-watchable sitcoms. A less charitable view would be that Netflix is sitting on better information, which it is not interested in sharing with the government -- or, "mainly," with content producers.