Netflix’s video algorithms team had developed a number of quality levels, or recipes, as they’re called in the world of video encoding. Each video file on Netflix’s servers was being prepared with these same recipes to make multiple versions necessary to serve users at different speeds. ... Netflix’s service has been dynamically delivering these versions based on a consumer’s bandwidth needs, which is why the quality of a stream occasionally shifts in the middle of a binge-watching session. But across its entire catalog of movies and TV shows, the company has been using the same rules — which didn’t really make sense. ... they decided that each title should get its own set of rules. This allows the company to stream visually simple videos like “My Little Pony” in a 1080p resolution with a bitrate of just 1.5 Mbps. In other words: Even someone with a very slow broadband or mobile internet connection can watch the animated show in full HD quality under the new approach. Previously, the same consumer would have just been able to watch the show with a resolution of 720*480, and still used more data.
The company that got its start delivering loaner DVDs in the mail is now positioning itself to be first truly global content network, and its original shows—especially marquee titles like Daredevil—are key to that ambition. ... perhaps the even bigger deal is that sending a new show worldwide felt like no big deal at all; the Netflix war room was less Dr. Strangelove than late-night potluck. Champagne was poured, a countdown ended, the show began, and that was that. Absent the dim lighting and the bubbly and a gaggle of international journalists, it felt like just another day at the office. ... That seeming ease of execution belies the time, money, and effort Netflix has sweated in the years leading up to now. From building up its global IT infrastructure to harnessing a world’s worth of data to creating content with global appeal, Netflix has been focusing its corporate energy on this exact moment. ... For Netflix, becoming a truly global network presents a path for steady growth over the next decade and beyond. It has 75 million subscribers today; there are seven billion more out there. For the world, Netflix’s aspiration could mean much more: the first glimpse at what happens when every part of an online entertainment empire, from interface to content to delivery, is engineered to be everything to everyone, all of the time.
Easy access to capital has allowed the company to bid aggressively on content for its service. This year Netflix will spend $5 billion, nearly three times what HBO spends, on content, which includes what it licenses ... dozens of original shows (more than 600 hours of original programming are planned for this year) often receive as much critical acclaim and popular buzz as anything available on cable. ... But the assembled executives also had reason to worry. Just because Netflix had essentially created this new world of internet TV was no guarantee that it could continue to dominate it. Hulu, a streaming service jointly owned by 21st Century Fox, Disney and NBC Universal, had become more assertive in licensing and developing shows, vying with Netflix for deals. And there was other competition as well: small companies like Vimeo and giants like Amazon, an aggressive buyer of original series. Even the networks, which long considered Netflix an ally, had begun to fight back by developing their own streaming apps. Last fall, Time Warner hinted that it was considering withholding its shows from Netflix and other streaming services for a longer period. ... At the moment, Netflix has a negative cash flow of almost $1 billion; it regularly needs to go to the debt market to replenish its coffers. Its $6.8 billion in revenue last year pales in comparison to the $28 billion or so at media giants like Time Warner and 21st Century Fox. And for all the original shows Netflix has underwritten, it remains dependent on the very networks that fear its potential to destroy their longtime business model in the way that internet competitors undermined the newspaper and music industries. Now that so many entertainment companies see it as an existential threat, the question is whether Netflix can continue to thrive in the new TV universe that it has brought into being.
For decades, Globo has had a near monopoly in Brazilian living rooms. Its channels control the broadcasting rights to many of the nation’s most popular sporting events, including the World Cup, the Olympics, and the top Brazilian soccer league. Every night about 42 million people watch Globo’s newscast. ... For the past several years, Netflix has been pouring money into Brazil. Local audiences at first met the company with skepticism, bafflement, or indifference. Over time, Netflix started to gain a following, particularly among affluent, young urbanites ... For Netflix, this Brazilian invasion is just the start. The company wants the attention of the world’s well-off cosmopolitan consumers, and is investing billions of dollars in a multifront effort to create a lingua franca of original programming, while also upgrading the world’s video streaming structure. It’s like a worldwide Marshall Plan for premium home entertainment.