Will cloud gaming become the new streaming disruption?

28

September

2020

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Over the past decade streaming services have gained a large amount of traction, mostly in the music- and movie industry. Companies like Netflix and Spotify are at the forefront of these markets, with userbases of around 193 million and 138 million respectively (Watson, 2020) (Schneider, 2020). The ease-of-use, as well as the attractive pricing for avid music listeners or movie watchers these platforms provide have allowed them to revolutionize the markets in which they operate. An industry that so-far has not been overtaken by the streaming technology, is the video games industry. However, this might very well change in the near future with the introduction of cloud-based gaming.

The concept of cloud gaming is rather simple. Normally, video games are installed by users directly on their system of choice, after which they can be played. This requires users to buy either a video game console (e.g. Playstation 4 or Xbox One) or to have a computer capable of running the game they want to play. Cloud gaming, however, allows users to run video games remotely, so that they do not need high-end hardware to run their games. The games the user plays is run on a remote server, after which the gameplay itself is streamed to the screen of the user (Roach, 2020). Another benefit that comes with cloud gaming is the fact that users will not have to update and/or download games before playing. Essentially, you could compare the service to an interactive Netflix stream, in which every action you perform (through either a controller or mouse/keyboard) is sent to a server, after which the stream is updated to show the video game you are playing (Roach, 2020).

Over the last year, a growing number of companies have entered the cloud gaming market. Google Stadia, Microsoft XCloud, Nvidia GeForce Now and most recently Amazon with its service Luna, have all entered the market in the past year (Peters, 2020). Thus, there are an abundance of options for users to choose from,  depending on their gaming interests. Currently, the subscription basis of most cloud gaming platforms differ from services like Spotify and Netflix, as they do not necessarily offer a large catalogue of games for a fixed monthly fee. Google Stadia, for example, allows users to either use their platform for free, if they purchase games individually, or allows users to pay a monthly fee to get a select amount of games every month (Henderson, 2020). Playstation Now, on the other hand, does allow users to utilize a library of over 500 titles for a fixed monthly fee, but most are games from their older consoles (Pino & Leger, 2020).

Now you might be wondering why these technologies have not become the norm when it comes to playing videogames. This is not solely due to the fact that there is not yet a fixed-fee platform with a large array of games to choose from. The major problem which still inhibits the adoption of this technology is related to both internet speed and latency. Latency refers to the time it takes for a user to provide a command and the system to react to this command. While playing videogames, especially those that require the user to quickly react to their surroundings, low latency is highly important for the quality-of-service (Lampe et al., 2014). Thus, it is essential that users possess a high speed internet connection, so that latency between themselves and the server is limited. Also, while buffering of movies or songs is not ideal, it does not damage the consumer experience enormously. For videogames, however, even one second of buffering can mean the difference between life and death (digitally speaking, of course).

The aforementioned shortcomings, however, could very well be circumvented in the near future. Advances in wireless internet speed, with for example 5G, could open up the potential userbase for cloud gaming services dramatically (Arkenberg, 2020). Also, it is only a matter of time until current (or new) cloud gaming providers increase their available content and offer a large array of videogames for a low fee, similar to how Netflix and Spotify have over the past decade. Thus, the future of cloud gaming seems promising, and it could very well lead to a revolutionized video game industry.

 

 

References:

Arkenberg, C. (2020). Can 5G unleash next-generation digital experiences in the home?. Deloitte. Accessed September 24 on: https://www2.deloitte.com/us/en/insights/industry/technology/5g-cloud-gaming.html

Henderson, R. (2020). Google Stadia pricing, free trial, availability, games list, compatible devices and how it works. Pocket-lint. Accessed September 25 on:
https://www.pocket-lint.com/games/news/google/143589

Lampe, U., Wu, Q., Dargutev, S., Hans, R., Miede, A. and Steinmetz, R. (2014). Assessing Latency in Cloud Gaming. Cloud Computing and Services Science. Springer International Publishing, vol. CCNS, 453, ch.4, pp.52-68.

Peters, J. (2020). How Amazon’s Luna cloud gaming service compares to Stadia, xCloud, and GeForce Now. The Verge. Accessed September 23 on: https://www.theverge.com/2020/9/25/21454917

Pino, N. and Leger, H. S. (2020). Plastation Now review. Techradar. Accessed September 21 on: https://www.techradar.com/reviews/gaming/playstation-now-1213666/review

Roach, J. (2020). How Does Cloud Gaming Work? A Guide for 2020. Cloudwards. Accessed September 22 on: https://www.cloudwards.net/how-does-cloud-gaming-work/

Schneider, M. (2020). Spotify Posts 138 Million Paid Subscribers, Big Operating Loss in First Earning Entirely During Pandemic. Billboard. Accessed September 22 on: https://www.billboard.com/articles/business/9426290/spotify-earnings-2020-q2-subscribers-revenue-forecast-covid-19

Watson, A. (2020). Number of Netflix paying streaming subscribers worldwide from 3rd quarter 2011 to 2nd quarter 2020. Statista. Accessed September 24 on: https://www.statista.com/statistics/250934

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Super-bundling – is it coming?

21

September

2020

Are super-bundling services feasible and will they exist in the future? It is unlikely, but the demand is there.

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237 US Dollars. That is what an average US citizen pays for all their subscriptions. Per month. For entertainment, they have 12 subscriptions on average, of which 3.4 are for video entertainment (amounting to 29 US Dollars per month). 

We are all too familiar with the struggle: we receive word of an awesome new movie or TV series, and when asked where we can see it, it turns out to be shown only on a platform to which we haven’t subscribed yet. The willingness to see it is there, but the willingness to subscribe to yet another platform is not. This could be perceived as customer rent for the producers/distributors, because they miss out on additional income. 

The choice is no longer which movie to watch, but rather to which streaming service to subscribe to, that most appropriately fits with your general preferences. The only issue is that these services are not genre-based, they are all universal streaming services, with content that pleases everyone. The only solution is to subscribe to all. 

The reasonable question then rises: why is there no ‘super-bundling’ service yet? The internet is filled with questions regarding a super-bundling service, that combines all the streaming services into one platform. Although some (illegal) services do exist, not one major party has stepped up yet to realize this. The streaming services are getting more and more consolidated, however, with remaining parties such as Apple TV+, Prime Video, Netflix, Disney+, Hulu, HBO Max, etc. The main issue with more consolidation will be regarding fairness of competition (monopolies), copyright issues, and giving up power (who will buy who?)

Will the future allow for one party to control all these streaming services? Will the streaming industry consolidate and be dominated by one monopoly player that bundles all the services together? Or will they work together in a consortium that has the goal of satisfying customers’ needs? And in case a super-bundling service rises, will it include other media, such as music streaming, newspapers and business articles, or even groceries?

 

Do you think a super-bundling service is feasible? Let your voice be heard in the comments!

 

 

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The Streaming Wars: when streaming services become a more expensive cable

20

September

2019

Netflix is more than just an online digital platform; it has become a cultural phenomenon. Three years ago, Netflix became this one channel to watch virtually anything: from Jurassic Park to Breaking Bad to Toy Story. Many people take their first-month-free subscription because they don’t want to miss out on the latest season of Stranger Things, and never left since. It introduced a trend of binge-watching shows, finishing hours of series in one go until the screen blacks out and asks “Are you still watching?” Television became a device that streams Netflix instead of being its own thing. It lost its meaning so much that many people become cord-cutters – ditching their expensive cable TV subscriptions for a mere $9.99 per month Netflix accounts. It seems that the development of internet goods has yet again made life much cheaper and simpler.

 

Or so we think.

 

Direct-to-consumer distribution model

As Netflix’s popularity and valuation grow, linear (traditional) TV suffer. It is not long when media companies such as WarnerMedia, NBC Universal, and Disney start to launch their own streaming platforms, too. These networks apply a direct-to-consumer distribution model (Sherman & Evans, 2019); instead of selling the licensing rights of their shows to Netflix, they use their brands to make their own platform. These so-called streaming wars prompt TV networks to spend millions of dollars to buy the rights to their most popular shows – such as The Office, Friends, and every Disney movie – back from Netflix to be streamed in their own online platforms NBC’s streamer, HBO Max, and Disney+, respectively (Steinberg, 2019).

Just like most industries, giant tech companies also plans to infiltrate the entertainment industry. Following Netflix’s path of bringing more on-demand consumer base by introducing original content, Amazon Prime Video and Apple TV+ are also in the game with their exclusive contents. For streaming services, the ability to deliver quality content for their platforms is crucial. Take Disney+ as an example: people most probably already have the physical form of their movies, so they need to add value to this new channel (Horner, 2019).

 

Pricing plans

Netflix’s current monthly subscription fee of $9-16 is one of the highest among competitors, Amazon Prime Video ($13), and Hulu ($6-12). However, newcomers’ subscription prices are way lower; with Disney+’s $7 per month and Apple TV+’s mere $5 per month, these prices will definitely damage Netflix’s subscriber count. Other platforms also continue to respond by cutting their subscription prices, like NBCU’s free for cable or satellite subscribers ($12 for non-subscribers). Rao et al. (2000) mentioned that cutting prices may not always be a good retaliation move on their parts as it reduces the overall pie of the market. The other route that each player can take to win is to maximise their platform’s value. Disney, with its extensive collection of movies and series, definitely has the upper hand on this matter. Everything Disney, Pixar, Marvel, Star Wars, National Geographic, 21st Century Fox will be on its platform, which will launch in November this year. Not only that, Disney+ also has a subscription bundling plan with other streaming platforms Hulu and ESPN+; both of which are owned by Disney Corporation as well.

Streaming platforms are, in general, a great innovation because it decouples watching TV and watching advertisements (Texeira & Jamieson, 2014). Nonetheless, it seems that the losing party in this war are the consumers. Taking all the pricing plans mentioned above (plus HBO Max’s rumoured subscription price of $16-20 per month), subscribing to all of these platforms would cost – if not more – the same as cable TV subscriptions. The only difference is that giant tech companies have now also entered the battlefield.

Although we have more choice in what to purchase, more options often mean that we might (reluctantly) spend more money than we should have. “Unbundling” Netflix would only create a fragmented market, which will generally increase prices for content (Steinberg, 2019), and induces the need to – yet again – have a platform that bundles everything together again. So, how many loops will it take before the system breaks?

 

References

Horner, A. (2019, July 3). Streaming wars: Why Disney and Apple rivalling Netflix is good news for fans of great TV. Retrieved September 17, 2019, from Independent: https://www.independent.co.uk/

Rao, A., Bergen, M., & Davis, S. (2000). How to Fight a Price War. Harvard Business Review, pp. 107-116.

Sherman, A., & Evans, D. (2019, August 10). How the streaming wars between Disney, Netflix, Apple and everybody else will change TV forever. Retrieved September 17, 2019, from CNBC: https://www.cnbc.com/

Steinberg, B. (2019, July 18). Why Consumers Are Already Losing in the Streaming Wars. Retrieved September 18, 2019, from Variety: https://variety.com/

Teixeira, T., & Jamieson, P. (2014, October 28). Disruption Starts with Unhappy Customers, Not Technology. Harvard Business Review.

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ORANGE MIGHT BE THE NEW BLACK, BUT SPOTIFY IS UNDOUBTEDLY DIFFERENT FROM NETFLIX

18

October

2018

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The recent news about the growth of Netflix subscribers reveals a strong and sound business model. Executives prediction of 5m net new users was far below the actual number of subscribers who joined the platform in the past three months (around 7m). Furthermore, more than 6m of them are international clients, meaning that the business is steadily expanding outside the US.

Because both companies are massive, rapidly expanding and active in the media and entertainment industry, Netflix and Spotify are often compared and considered alike enterprises. In reality, there are some important and structural differences that cannot be disregarded.

Although the two offer an all-you-can-stream service in exchange of a monthly fee, Spotify also provides customers with a free of charge subscription, while Netflix does not, having user subscriptions as the main source of revenues. This implies that as thousands of active users of the music stream app are not paying for the service, accepting the limitations that this entails, the Swedish company also relies on revenues from advertisement.

Furthermore, the two industries they are engaged in, are indeed very dissimilar. First, in terms of production expenses: while almost anybody can produce and broadcast a song, films and series are extremely more costly. This is translated into different incentives for producers: on the one hand, artists and songwriters are likely to rely on as many platforms as possible to increase the diffusion of their pieces to extrapolate most value out of them. On the other, to start the process, filmmakers need sponsors who spread the risk they face by investing in more than one production.

With respect to this, it can be highlighted that Netflix is also involved in the creation of content, while Spotify is not. The former therefore is both a producer and a distributor, while the latter merely offers a product that can be easily found on other platforms.

Spotify is in a weak position when setting prices. In particular, its costs rise as more people subscribe to the platform and stream the song because labels, that still play a major role in the industry, generally pay artists per user who listens to their songs. For this reason, scalability constitutes an issue for the company. Instead, Netflix enjoys a reduction in its per unit costs as more users subscribe to the platform, becoming over time a crucial partner that enables studios to enlarge their reach.

Only the following years will tell us whether Spotify succeeds in the difficult task of transforming its business model into a more sustainable one or whether, after having changed the way people listen and pay for music, it will be replaced by some other company.

Sources:
https://www.barrons.com/articles/spotify-why-it-is-and-isnt-like-netflix-1522939226
https://www.bloomberg.com/news/articles/2018-03-23/why-spotify-can-t-scale-like-netflix
https://www.ft.com/content/f6512c08-d163-11e8-a9f2-7574db66bcd5
https://markets.businessinsider.com/news/stocks/spotify-stock-price-netflix-cant-compare-2018-4-1020586061
https://www.valuechampion.sg/5-reasons-why-spotify-not-netflix-music

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Cutting the TV cord: Streaming live sports

20

September

2017

Live sports: the last bastion of traditional pay-television

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Tens of millions watched the recent Mayweather vs. McGregor fight on pirate streams. According to VFT Solutions, which monitors live streams in social media, over 7000 live streams were being watched in social media platforms by roughly 100 million viewers. (Granados, 2017)

Tens of millions watched the recent Mayweather vs. McGregor fight on pirate streams

How many of you do still pay for cable TV to watch live sports? In the first quarter of this year a record number of people cancelled their pay TV subscriptions and the number continues to slip at the fastest pace ever (Gallagher & Elder, 2017). The number of losses would have been greater, if it wasn’t for sports programming. Over the last few years, people have been talking about the inevitable disruption of the television industry and the threat of new streaming models, like YouTube, Netflix, Hulu and Amazon Video. Telecom companies have seen their revenues switch from pay TV to their broadband Internet services. In the past, a large share of revenue was generated by traditional TV subscription, whereas now steaming video services have become more profitable. This shift in consumer preferences summarises the TV industry disruption.

According to a research by CouponCabin.com 43 percent of cable TV subscribers say that the only reason they still pay for TV subscriptions is for watching live sports (Nooney, sd). Live sports is a major factor keeping people tethered to their cable TV plans and is often referred to as “the last bastion of traditional pay-television.” (Ryan, 2017)

Cutting the TV cord

To give a few examples of live sports migrating to digital platforms, Amazon has been negotiating with some of the U.S.’s biggest sports leagues to acquire the rights to stream sport games. It reportedly paid $50 million to the NFL to stream 10 Thursday night NFL games (DiPietro, 2017). Soccer club AC Milan signed a partnership with live streaming app Sportle, a sports start-up that is changing the way people watch sports. Tech giants are pouring money into acquiring content rights. YouTube secured a deal to broadcast the UEFA Champions League in the UK. This year, Facebook signed multiple deals to broadcast Major League Soccer matches, MLB games and World Surf League events. Meanwhile, Twitter is streaming the WNBA games and exclusive MLB program (Tran, 2017). You might be asking yourself what Netflix is doing. According to the critics, Netflix will not be joining anytime soon. Netflix stays close to its long-term mission saying that they are not a generic “video” company that streams all types of video, such as sports. They want to stay a movie and TV series entertainment network (DiPietro, 2017).

Social media platforms consider live sports as a key catalyst to drive user engagement, growth and eventually revenues. One of the biggest goals for 2017 is to create a social experience around live sports. In February Facebook announced a new app for set-top boxes, including Apple TV, Amazon Fire TV and the Samsung Smart TV. This app enables you to watch Facebook videos on a big screen, which is immensely important for watching live sports. (Forbes, 2017) Summarising, live streaming is one of the biggest social media trends in general, but it reaches it peaks around major sports events.

Resources 

DiPietro, F., 2017. Amazon and Twitter Are Streaming Sports. Will Netflix Follow?. [Online]
Available at: https://www.fool.com/investing/2017/04/22/amazon-and-twitter-are-streaming-sports-will-netfl.aspx

Forbes, 2017. Why Facebook Is Focusing On Live Sports. [Online]
Available at: https://www.forbes.com/sites/greatspeculations/2017/02/23/why-facebook-is-focusing-on-live-sports/#546a27c82dc6

Gallagher, K. & Elder, R., 2017. Pay-TV subscribers continue to slip. [Online]
Available at: http://www.businessinsider.com/pay-tv-subscribers-continue-to-slip-2017-5?international=true&r=US&IR=T

Granados, N., 2017. Tens Of Millions Watched Mayweather Beat McGregor On Pirate Streams. [Online]
Available at: https://www.forbes.com/sites/nelsongranados/2017/08/28/tens-of-millions-watched-mayweather-beat-mcgregor-on-illegal-streams/#7b4bca5179a3

Nooney, C., sd The Future of Sports Streaming In a Cord-Cutting Age. [Online]
Available at: https://www.wired.com/insights/2014/06/future-sports-streaming-cord-cutting-age/

Ryan, K. J., 2017. 5 Industries Ripe for Disruption in 2017. [Online]
Available at: https://www.inc.com/kevin-j-ryan/industries-ripe-for-disruption-in-2017.html

Tran, K., 2017. Facebook is becoming a go-to platform for live streaming sports. [Online]
Available at: http://www.businessinsider.com/facebook-becoming-go-to-platform-live-streaming-sports-2017-6?international=true&r=US&IR=T

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Amazon Prime just got even better

4

October

2016

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Just this week Amazon and Twitch announced that you can now link your Amazon prime account to your Twitch account and you will receive all the benefits of a premium Twitch account. For those who are not familiar with these platforms and the pricing models they offer, here is a brief summary:

Amazon has a premium membership that is $99 per year in the US and 49€ in Europe. This membership gives you free express shipping on Amazon and also access to Amazon Video, which can be compared to Netflix.
On the platform Twitch, people can live stream when they play games and others can tune in to watch them. The platform is very popular for e-sports and reaches 45 million viewers every month. Twitch also offer a premium membership that gives you access to ad-free view. By linking both services together, Amazon also added discounts for certain games and free in-game content to the premium membership.

Since Amazon acquired Twitch in 2014 they have not made any strategic move to combine Twitch and Amazon services and industry insiders were curious how a potential strategy will look like. Now Amazon has made its first move as described above and opened premium services of Twitch to its Prime subscribers. Considering that the premium tier at Twitch costs €8.99 (or$8.99 in the US) per month and Amazon Prime only costs €4,08 ($8.25 in the US) per month, the new offer is an excellent deal and adds another argument to Amazon Prime

In a recent move, Youtube has launched a new service dedicated to gamers that is called Youtube Gaming. With this service, Youtube positioned itself as a direct competitor to Twitch. Under these circumstances, Amazon’s move to unify its services can be seen as a direct reaction to the launch of Youtube Gaming. In addition to that, Twitch also announced that creators can now upload content directly. Before that, creators always had to live stream their content.

It remains interesting to see what Amazon has planned for the future. A possible option could be to fully integrate Twitch within its Amazon Video platform. Another thinkable option would be to expand Twitch and use its young and very active community to build a potential rival to Youtube. An advantage of Twitch here might be that it has far more experience with freemium models for its viewers, which in the end makes it more interesting for creators. For instance, it is possible to subscribe to a creator for a small fee to support him and parts of the revenues from the premium tier also go to the creator. Youtube Red, the premium subscription for Youtube, that costs $10 per month in the US, was only announced less than a year ago and is only available in five countries as of now.

What is your opinion on Amazon’s strategy? Are they doing it right? Or should they rather focus on international expansion for example, such as Netflix does? I look forward to seeing your opinions in the comment section!

 

For more background on the market of videos, you might also check out our technology of the week blog post here.

Twitch’s official announcement

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Streaming services VS traditional pay-TV: The battle for viewers of the 21st century

27

September

2016

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Almost everybody has one at home: a TV. A lot of the TV’s that are being sold nowadays are so called smart TV’s, or are made smart with devices like google Chromecast. What makes them smart is the option to connect to the internet and make use of apps. This in combination with the ever growing streaming services provided online could be a potential threat for the traditional pay-TV market(cable, satellite, or telco-TV) as we know it. Television executives are already sounding the alarm. With a 3% decline in the overall TV viewing time in the U.S. in 2015, were 50% was accounted for by Netflix, the question to ask is: Is the traditional pay-TV really going to be replaced with streaming services, or is the ‘death of TV’ we hear about just an illusion?

Recent research from Marketing Charts in conjunction with Newfronts claims that viewers prefer digital video to primetime TV. The results show that people associate streaming services with terms such as “innovative”, “exciting”, “edgy”, and “worth my time”. And with a recent survey from AllFlicks stating that 75.5% of people who have experience using Netflix are convinced that a streaming service like Netflix is the ready replacement for traditional TV, the end for traditional pay-TV seems to be just around the corner. But still almost every household has a pay-TV contract. A big explanation seems to be imbedded in age difference.

The role of age
Age seems to be an very important factor for the liking and using of the new ongoing streaming trend. Researches like the one from TDG Research show a distinctive age gap in TV viewing between younger and older Americans. The researchers asked adult broadband users who were using traditional TV as well as subscription services the following question: “if you had to choose between traditional pay-TV service (cable, satellite, or telco-TV) and subscription streaming video services, which would you choose?”. As you would expect the responses differed strongly by age group as shown in the table below. The older people tend to stick more to the traditional way of watching TV while the younger generation prefers an subscription on the streaming of videos. This result is backed up with other study’s worldwide confirming this distinctive distribution, such as the figure released by Ofcom, showing the results in the UK.

2016-09-272016-09-27 (1)

It is clear that young people are driving down the average time spend watching traditional TV while the older generations are keeping traditional TV alive. With an increase in supplied streaming services more and more consumers are shifting towards streaming, giving them the possibility to watch what they want, when they want. This makes it hard to imagine a future with traditional TV as we know it. However I wouldn’t call it the ‘death of TV’. With networks such as HBO and CBS already having launched their own online offerings it is clear that traditional TV channels are evolving and finding ways to survive, extending beyond the traditional television screen and including custom (not full TV package) programming from new sources that can be accessed in new ways. This in combination with TV companies pivoting their business models to distribute on social platforms and the formation of partnerships with digital media brands to create new content will probably secure the future of TV companies for the following years to come.
So, will streaming change the way we use our television as the competition becomes increasingly direct in the years to come? It’s definitely something that’s worth keeping an eye on.

 

References

BI Intelligence. (2016, July 12). More young people are watching less traditional TV. Retrieved from http://www.businessinsider.com/more-young-people-are-watching-less-traditional-tv-2016-7

 

Loechner, J. (2016, June 01). Traditional TV vs. Streaming Video; It’s In The Eyes/Age Of The Viewer. Retrieved from http://www.mediapost.com/publications/article/276939/traditional-tv-vs-streaming-video-its-in-the-ey.html

 

Lovely, S. (2016, March 02). 76% Of Netflix Subscribers Think Netflix Can Replace Traditional TV. Retrieved from http://cordcutting.com/76-of-netflix-subscribers-think-netflix-can-replace-traditional-tv/

 

Spangler, T. (2016, March 03). Netflix Caused 50% of U.S. TV Viewing Drop in 2015 (Study). Retrieved from http://variety.com/2016/digital/news/netflix-tv-ratings-decline-2015-1201721672/

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