We're Better TV Viewers When We're Binge Watching

PORTLAND, Ore. (TheStreet) -- Netflix  (NFLX) and Amazon  (AMZN) pay a small fortune to stock their streaming libraries, but full seasons and nuanced viewers help those investments pay for themselves.

Netflix makes it incredibly clear just how much its streaming service has riding on content. Of the $6.3 billion in assets it claimed during the second quarter, nearly $1.8 billion lies in its content library. However, of the company's $2.3 billion in liabilities, a whopping $1.86 billion stems from the deals for that content alone. Amazon, meanwhile, hasn't disclosed the terms of many of its biggest content deals, but the acquisition of Time Warner's  (TWX) HBO programming this year is believed to have cost the company upward of $300 million.

There's a big increase in overhead when Netflix starts producing original content including House Of Cards and Orange Is The New Black or when Amazon thumbs through its pilot shows to pick up Alpha House, Mozart In The Jungle and Transparent, but each service's host of third-party shows only helps it discover what will work in its originals and what won't. Amazon has been streaming HBO's The Sopranos for the last few months and has given viewers a reminder of the peaks and valleys of one of television's most acclaimed series. They see the great moments when Tony Soprano kills a gangster in witness protection while taking his daughter to college, they watch the character profiles of his closest henchmen fill out during a botched execution in the Pine Barrens and they see the show lose its way a bit after he gets shot in the fifth season.

On Netflix, viewers get to watch Breaking Bad's Walter White restart a dead RV in a desert to save the meth business that's paying bills for his cancer treatment, watch the jokes between him and his former pupil disappear as they kill their gangland partners and watch White's complete metamorphosis into a loathsome tyrant by the series' end. They're able to consume it all in minimal sittings, without commercial interruption and with immediate analysis through online reviews and social media. They're able to see the connections that show runners like The Sopranos' David Chase and Breaking Bad's Vince Gillian make, and raise concerns about loose ends and left turns -- like Tony Soprano's out-of-nowhere gambling habit and the unresolved fate of White's wife's other gentleman caller, Ted Beneke.

Having the ability to watch, absorb and obsess over these shows has justifiably changed the way that viewers consume their television. Nearly three in four members streaming the first season of Breaking Bad finished all seven episodes in one session, according to Netflix. With ensuing seasons, the binge-watching rate was higher than 80% of all Netflix viewers.

Partnering with Harris Interactive, Netflix conducted an online survey in the U.S. in November and found that 73% of viewers consider binge watching to be "watching between 2-6 episodes of the same TV show in one sitting." Of those same viewers, 61% of the people survey said they binge watch regularly. A full 73% of those binge watchers feel pretty good about watching television that way, though most viewers only consume an average of 2.3 episodes per sitting.

Why do they do so? Well, 76% just like the fact that watching a few episodes at a time limits distraction while also distracting them from the outside world. With that kind of time to mull shows over, 79% say binge watching makes a show seem better than when it's presented in its regularly scheduled, commercial-chopped format.

While multichannel content providers are getting into the mix -- another Harris survey found that 41% of Americans binge watch TV on demand through cable (34%) or satellite (9%) -- a full 40% use Amazon, Hulu's Hulu Plus or Netflix. That's left networks struggling to adapt to viewers' habits while retaining advertisers.

AMC Networks  (AMCX) has been more successful than most with this strategy, using binge-watched seasons of Breaking Bad and Walking Dead to generate interest in new seasons of those series, while following each with the talk shows Talking Dead and Talking Bad. Run by Nerdist podcast host Chris Hardwick, both of those post-show programs took time to wrap up the events of that night's episode while discussing them with celebrities and fans on Facebook and Twitter.

It's a smart move, as fans are just going to hit social media to discuss the outcomes anyway. Netflix has used that knowledge to great effect to channel fans of House Of Cards and Orange Is The New Black into online discussions of each show to keep the buzz going and to get critics, bloggers and even more potential viewers involved.

Perhaps the only nasty side effect of this new round of normalcy is that audiences are more reluctant than ever to immediately embrace new content. The Netflix/Harris survey found that just 37% of viewers would give a new show a shot -- but even then would bury it in their queue for a while as they watch other, more proven shows.

It's tough to blame them. Television shows have a tough time gaining momentum, with the first seasons of Breaking Bad, The Sopranos, NBC's The Office (or 30 Rock and Parks and Recreation) looking only like vague outlines of the beloved seasons that followed. But fans who have binge watched their way through a couple of series already know that. When you can breeze through the first season of a sitcom in a night or the first season of a drama in a week, it's a whole lot easier to make it to the point where the series has hit its stride. You can recognize the kinks and flaws as you've seen them in other shows and give them time to work themselves out.

Just as HBO, Showtime, Starz, AMC and other multichannel networks killed the idea of a quick, midseason death for shows taking a long time to develop, Netflix and Amazon have used those networks' shows to reach the next phase of content development. Show runners now have a longer leash to flesh out not only instant hits like House Of Cards and Orange Is The New Black, but slower-burning series like Lillyhammer or Hemlock Grove.

While audiences develop patience for details like the phantom gambling addiction that Mad Men creator Matthew Weiner gave Tony Soprano without the benefit of a Don Draper-style flashback, streaming video companies are learning just how long it takes for audiences to give them that leeway. They're watching their viewing habits, they're engaging with their viewers and they're learning from the successes and failures that came before. That's paying off for Netflix in growing income and for Amazon in new Prime subscriptions, but it's also creating a better viewing experience for customers who've come to expect more from their programming.

While Netflix's 31 nominations for this year's Primetime Emmys are still well behind HBO's 99, the fact that it's more recognized than Fox (30), AMC (29) and Showtime (24) indicates that both streaming companies and their audiences are fast learners. Television is now a thinking viewer's game, and those who disagree will be left to the shrinking audiences of reality shows, cookie-cutter procedural dramas and laugh-track sitcoms.

-- Written by Jason Notte in Portland, Ore. 

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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