Netflix original programming: trying to stay ahead of the competition?

Netflix has been through some hard times lately, and the industry is evolving in ways that will continue to challenge their core business model. A combined deal between Redbox and Verizon has been struck in order to offer streaming video. Redbox is also buying out DVD kiosks owned by Netflix' old rival, Blockbuster, to expand their on-the-ground presence.

Netflix is already in a market with big-name competitors for streaming video - Hulu, Apple, Amazon and Walmart, to name a few - as well new outfits such as Zediva (which offered rock-bottom prices, but ran into legal troubles due to avoidance of content licensing fees). Netflix sets itself apart with the DVD mailing program, but Redbox is now well-positioned to compete on that front as well.

How to stay ahead of the curve? Netflix just introduced their first offering of original programming, Lillyhammer, with more shows planned in the next year.  Now, with Netflix moving toward an "HBO model" of producing and distributing their own content, their core business will be changing.

There is some clear logic to this decision: instead of paying extravagant licensing fees to stream content (the deal with DreamWorks is estimated to place a $30 million price tag on each film) new shows can be produced internally. New exclusive content could also pull in subscribers drawn to a particular actor or show; this may explain why Netflix is rumored to be producing Arrested Development Season 4.

During the short-lived introduction of 'Qwikster', some speculated that Netflix was drifting away from its core expertise. It's not immediately clear how DVD mailing translates to streaming content. Now, the company is shifting its role once more, and one is left to ask whether film production is also part of the Netflix tool kit.

Vertical integration in the entertainment industry is hardly a new phenomenon. But, most television networks started off producing content, and then acquired more means for distributing it. Netflix got into the distribution business first, and now is trying to backpedal into producing as well.

It's unclear whether the few big-name offerings which Netflix will produce are enough to distinguish them from the other streaming services. But, facing stiff competition in both physical and online distribution channels, moving up the content production chain may be the only choice they have in order to stay relevant.

Ultimate Cakeoff, Econometrics, and Causality Questions

For reality television and competitive cooking enthusiasts the show Ultimate Cakeoff, produced by TLC, is a real tour de force. The premise: top cake artists and decorators are brought together to compete in creating a cake for some high-profile event. The judges evaluate their efforts based on technical difficulty, adherence to the theme, and aesthetic value, then choose a winning team to receive the $10,000 prize.

Each team has nine hours to produce their ultimate cake. In order to keep the competition interesting and generate some much-needed drama, each episode is broken up by one or two smaller challenges designed to test the team leader's technical skill and speed at a particular cake-related task (such as piping, decorating, carving, etc.) The winner of each mini-challenge can choose one of the other two teams to sit out for thirty minutes.

Nine hours is already a short timeframe to create an award-winning cake - many wedding cakes can take up to a week to construct - so it would seem like losing 30 minutes to an hour would be a serious disadvantage. But, after watching two seasons of Ultimate Cakeoff (a dirty job, but someone had to do it) I noticed something strange: teams forced to sit out didn't seem to lose with any greater frequency. In fact, they often went on to win the competition!

This counter-intuitive trend sparked my curiosity, so I decided to put the question to a statistics program. After collecting data on every episode to find the characteristics of each team, who was forced to sit out, and who won each competition, I was able to find some results. The first regression found that being forced to sit out due to a challenge would increase the chance of winning by about 24%, a statistically significant result. After controlling for the individual attributes of of each participant the statistical significance vanished, and being forced to sit out had no measurable impact on the chance of winning at all (Click here to view the regressions performed, in STATA output format).

What might explain these findings? It would seem that less working time would result in a lower-quality cake, that was less likely to take the prize. Discovering the opposite result is somewhat surprising.

Of course, cake artists forced to sit out were not chosen randomly. The most common reason when choosing who to give a penalty was some variation of "(s)he looks way ahead! Take a break and slow down!" Apparently, cake artists are pretty good at judging each others' progress, and the team that is ahead partway through the competition is often the most talented. Trying to stall them with a penalty may even the field slightly, but not enough to overcome superior cake skills and design.

Admittedly, this is a pretty trivial application for a powerful statistics program. But, there may be some broader lessons for social scientists generally. When human choice is involved few events are truly random, which would be the ideal in an experimental setting. Economists can find some clever ways to mimic a true experiment, but perfect success in that regard still remains elusive. Examining how the data are collected and what selection effects are present is crucial to interpreting statistical results... Otherwise one might be inclined to believe that a shorter work-time makes a better wedding cake!

How to live rent-free the rest of your life. OR, Five Big Mistakes Criminals Make During Police Interrogations.

 "...the technique of violence was first developed in 2 million B.C. by the australopithecines and tried by forthwith primates, who had no brains to speak of, but nonetheless invented the tomahawk and used it on each other. This practice led to the enlargement of the brain, another useful weapon. Yes, murder was invented even before man learned to think. Now, of course, man has become known as the 'thinking animal.'"
- spoken during the credits of Death Race 2000 (1975).

One of the reasons I love reality television is that it can make you feel like an expert in fields you have no personal knowledge or training in whatsoever. From watching many episodes of A&E's crime show, "The First 48" I feel pseudo-enlightened about the workings of the criminal justice system, and I'm here to share that almost-wisdom with you.

Teamster wisdom on political economy

If God allowed everybody to die in bed, the government would regulate that we'd have to sleep standing up."

-Alex (on History Channel show Ice Road Truckers, Season 2 Episode 4).

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For context: Alex is driving a big-rig and hauling a 45-ton piece of mining equipment across the arctic ocean. The road he's driving on consists of nothing but frozen ice, and there's a blizzard rapidly approaching.

In addition to steady nerves and a dry sense of humor, the man has an intuition for political economy. I'll just let the quote above stand on its own. Thoughts?

Money Melts the Pounds Away -- an in-depth look at The Biggest Loser outcomes.

No, this is not veiled commentary on my social life.

Obesity is a growing issue in the industrialized world generally and the United States in particular. The science behind obesity is still developing, but the popular culture response has already begun. Reality television, which has previously attempted to resolve our lovelessness, joblessness, and lack of fashion has now begun to confront the ‘American lifestyle.’ 

Television network NBC’s hit reality series “The Biggest Loser” takes a group of overweight individuals and sequesters them in a large housing and gym facility. There, under the oversight of expert personal trainers and medical personnel, they attempt to lose weight as quickly as possible. Taking place within a competitive team setting, at the end of each week the people who lost the least weight risk being eliminated. At stake is $250,000 cash for the winning player and a $100,000 prize for the eliminated player losing the most weight by the finale.

The Biggest Loser's game-show world bears only loose relation to the reality of an average person looking to drop a few pounds. However, its dramatic format and inspiring message have proved a global success, with the creation of Biggest Loser UK, Biggest Loser Australia, and Biggest Winner Arab (to name a few). The American version of the show has produced nine seasons since 2004, with a tenth being filmed as of this writing. 

 

With each contestant’s weight loss announced weekly, this television series provides a wealth of data on weight loss under ideal and controlled conditions. With 6 to 8 daily hours of exercise, a rigidly structured diet organized by top-rate personal trainers along with a strong monetary incentive, participants on The Biggest Loser have every advantage in losing large amounts of weight. Some drop over twenty pounds, or over 5% of their body mass, in a single week. The vast majority go on to change their lives by adopting healthier eating habits and frequent exercise. These results demonstrate weight loss at the absolute limit of human capacity. 

 

While every participant on The Biggest Loser puts in a monumental effort to lose weight, there can only be one winner. Contestants experience different outcomes in weight loss in spite of a generally high standard of effort. There have been many debates in the bio-medical field on whether obesity is caused by genetics, culture, age, or something else entirely, and a consensus has yet to emerge. With its wide demographic variety, The Biggest Loser provides an opportunity to test how these differences impact optimal-scenario weight loss. 

Is Hoarding a disease, or just un-economic? Some advice for the cluttered.

Who doesn't need 70,000 empty beer cans?

People with their finger on the pulse of reality TV (like myself) are shocked and disgusted by the spate of shows surrounding the issue of "hoarding." For the unexposed: the premise of such a show is that people with a serious clutter problem ("hoarders") ask for help from the reality television deities to clean their places. Then, the audience gets to be amused and disgusted as the hoarder whines, moans, and otherwise impedes the cleaning crew from taking out the junk. Apparently it's a successful formula, because several different networks are now doing "Hoarder" themed shows.

Economics does a lot of theorizing about consumption, and generally the assumption is that more = better. Presumably, a person will only buy something if it makes them happier or brings them some sort of utility. TV about hoarders is a case study in diminishing returns from possessions. In other words: the first 10 antique lamps and teddy bears were wonderful, but after there are 500 and you're sleeping on a single chair while living in fear of death by trash-alanche, then more stuff has become a dis-utility.

Kitchen Nightmares -- restaurant makeover or yelling contest? Let the numbers decide.

Gordon Ramsay's show, Kitchen Nightmares, has brought hope to the greasy spoons and dirty dive restaurants across America (but mostly New York) for two seasons now. Ramsay made his name first as a soccer player, then gourmet restaurant owner, and now as a TV host to a variety of competitive cooking shows, most notably Hell's Kitchen. He's been named the #1 most successful restauranteur in the world thanks to his kitchen acumen, high standards and vitriolic temper.

For Fox's show Kitchen Nightmares, Gordon Ramsay visits restaurants which are financially floundering and attempts to turn them around. This may mean producing an entire new menu, renovating the décor, or installing state-of-the-art kitchen appliances. In spite of these efforts, many still go belly-up after Ramsay leaves.

Before the show starts, most Kitchen Nightmare restaurants are under a mountain of debt. The stubborn owner of Sabatiello's was over a million in the hole before Gordon Ramsay showed up. Facing such a dismal business scenario, even expert advice can only go so far. Are heavily indebted restaurants doomed to bankruptcy, or is Gordon Ramsay not the miracle worker he's sold as?

With some simple econometrics, we can take a stab at answering that question. Data were collected on the amount of debt, proportion of male owners, and whether each restaurant was still open. After watching the twenty-one episodes from Season 1 (so I like reality TV, sue me) and running it through a regression program, here are the results: