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Data day: authors Michael Smith and Rahul Telang show how the success of 'House of Cards', starring Kevin Spacey, upended the film and TV industries © Bloomberg
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When the makers of the US version of House of Cards were pitching their series to television networks they were sure they had all the makings of a hit. The only problem was that none of the networks they approached wanted to take the risk of funding a pilot, let alone the series, because according to conventional wisdom in the industry, political dramas were not successful.

But streaming service Netflix analysed data on its 33m subscribers to discover that many were fans of lead actor Kevin Spacey, director David Fincher and had rented the original BBC series. Those data were proof enough for Netflix to dispense with a pilot and instead offer $100m upfront for two series — a decision greeted with scepticism in the industry, but which turned out to be inspired. The programme has proved incredibly popular with audiences and critics alike and its fifth series is due for release next year.

The story demonstrates the role that data now play in entertainment industry decision making — Netflix was even able to produce several trailers targeted at its various audience categories.

It shows how the balance of power is shifting away from film, TV and music businesses, traditionally the biggest and most powerful, towards such entities as Netflix and Amazon — those that distribute content.

Streaming, Sharing, Stealing charts the history of film, TV and music industries, going back a century to show how developments in technology and changing consumer habits have created a period of unprecedented change for them.

The book, by two professors at Carnegie Mellon University, offers many lessons for executives in the creative industries, as well as serving as a case study of the challenges faced by any industry grappling with disruptive forces.

It is packed with examples, from the nimble-footed who reacted quickly to adapt their businesses, to laggards who lost empires.

Consider Apple, which was struggling when Steve Jobs rejoined in 1997 and became its chief executive. Jobs pinpointed the failure: Apple relied upon third parties to sell its computers and staff in those shops were often happier to recommend the cheaper products of competitors. He hunted out market and demographic data to show where Apple could build its own shops in the most convenient locations and sell directly to its customers — a strategy that went against the grain at the time.

The book also offers insights for artists, film-makers and writers, pointing to how they can maximise what they earn and provide incentives that discourage piracy. The band Radiohead decided to bypass traditional music publishers when releasing their 2007 album In Rainbows. They made the tracks available to fans directly through their website, for any price they wished to pay, including nothing at all. It was the band’s most profitable album at the time.

Those that failed to recognise the changing climate include NBCUniversal, which took a gamble in 2007 to remove its TV shows from Apple’s iTunes player. However, viewers largely opted for piracy rather than following NBC to other digital outlets.

In one sense, Streaming, Sharing, Stealing highlights what the seasoned marketer has always known: the immense value of knowing your customer. Yet this study of the triumph of data is still much needed, as evidenced by the many executives who refuse to believe that the age of “gut instinct” and the “taste maker” has passed.

The upshot for businesses is clear: change is happening and the way to ensure your business survives is to be ready to adapt and take bold decisions — just as Netflix did with its $100m bet on a series the industry said would never work.

Streaming, Sharing, Stealing: Big Data and the Future of Entertainment, by Michael D. Smith and Rahul Telang, MIT, 232 pages

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