Introduction
If you’re anything like me, you might wonder how HBO can afford a show like Succession, which has a budget of almost $3 million per episode,[1] yet has frustratingly clunky applications and websites.
Unfortunately for these streaming services, it is not as simple as a lack of capability to invent more streamlined platforms. Rather, the platforms of newer streaming services such as HBO Max and Disney+ lag behind, in part, because they cannot use intellectual property which was acquired by early actors, such as Netflix. This issue, while in the shadow of the competition amongst services for content, remains worth exploring, given that the platform is part of the streaming service’s product.
Brief History of Streaming Services: Netflix at the Center
First offering its streaming services in 2007, Netflix was the first streaming “success story,” predated by less successful and less widely known attempts at streaming, such as iTV [2] Over the following years, Netflix refined its product: introduced a streaming-only plan in 2010[3], continuing to acquire more media[4], and improving its streaming option’s technology.[5]
Now, with over 214 million subscribers worldwide, [6] amounting to nearly triple of HBO Max’s number of subscribers[7] and nearly quadruple of its early competitor, Hulu,[8] it is consistently the on-demand streaming service with the highest number of subscribers and the highest ratings.[9]
In most businesses, the early mover has a competitive advantage. One of the less obvious advantages is that it allows for early experimentation with technology, benefitting companies in our current first-to-file patent system.[10] In fact, Netflix retains hundreds of patent applications and granted patents since its inception in the early 2000s, allowing them to essentially monopolize the user experience on streaming platforms.[11]
In its portfolio of nearly 100 patents, Netflix possesses rights over many methods which allow the user to skip the credits in videos and resume content on a different device, enable the automatic translation of subtitles into different languages, minimize delays in loading content, and recommend content to users based on their watch history.[12]
Of its long list of patents, perhaps the most influential is the system for recommending content, which Netflix believes influences the direction of almost 80 percent of its watched content and creates $1 billion of value to the company each year.[13] While other services may try their hand at recommending content, they cannot copy Netflix’s method exactly without risking patent infringement. Through these patents and its continued investment into innovating its platform, Netflix has control over the commercial use of several methods crucial in providing a streamlined user experience.
If competitors are not careful, they may risk extremely costly lawsuits from Netflix. For instance, in August of 2021, Netflix brought suit against CA, Inc., a technology company with less than a quarter of Netflix’s annual revenue,[14] for patent infringement.[15] While this suit is still pending, it’s resolution and the resolution of similar cases could strike fear in competing technology companies.
Conclusion
IP is a major issue for streaming services, not only in the content they are allowed to provide but in how they are able to present it. As large players in the steaming business continue to hold patents and file for more patents, it may be clear that competitors are forced to use substandard presentation methods, algorithms, and interfaces.
[1] https://www.distractify.com/p/succession-cast-salaries.
[2] https://www.britannica.com/topic/Netflix-Inc; https://producthabits.com/how-netflix-became-a-100-billion-company-in-20-years/.
[3] Id.
[4] https://www.nytimes.com/2011/09/26/business/media/netflix-secures-streaming-deal-with-dreamworks.html; https://www.viz.com/news/newsroom/1004878.
[5] https://www.cnet.com/news/remote-controls-to-get-a-netflix-button/; https://money.cnn.com/2013/03/13/technology/social/netflix-facebook/index.html.
[6] https://www.hollywoodreporter.com/business/digital/netflix-q3-2021-earnings-1235033272/.
[7] https://www.nytimes.com/2022/01/05/business/hbo-max-2021-subscribers.html#:~:text=HBO%20Max%20and%20HBO%20hit%2073.8%20million%20subscribers%2C%20topping%20company%20forecasts.,-%E2%80%9CIt%20worked%2C%20and
[8] https://www.adweek.com/convergent-tv/biggest-streaming-services-at-the-end-of-2021/
[9] https://www.usnews.com/360-reviews/technology/streaming-services/netflix.
[10] https://www.justia.com/intellectual-property/patents/first-to-file-rule/.
[11] https://help.netflix.com/en/node/25888
[12] https://insights.greyb.com/netflix-patents-portfolio/; https://www.appleyardlees.com/the-netflix-intellectual-property-story/.
[13] Id; https://www.businessinsider.com/netflix-recommendation-engine-worth-1-billion-per-year-2016-6.
[14] https://www.dnb.com/business-directory/company-profiles.ca_inc.6cd45d921295792e0d8b5b4915429e08.html.
[15]https://www.law.com/therecorder/2021/08/18/holland-knight-steps-into-patent-dispute-between-netflix-and-semiconductor-company/?slreturn=20220021150955.