Netflix Inc. is the current leader of not only the streaming industry but the TV industry as well. The overall market has several big name players that include HBO, Amazon Prime Video, Hulu, FX, and many others. Besides all these, it has a very different method of evaluating its success monthly, quarterly, and annually. It is not similar from any traditional TV providers or movie studios.
Most of the TV companies (whether cable TV or internet TV) are dependent on good ratings to declare their victory for a certain time period. Netflix works on a subscriber based model. This suggests that the most vital economic metric for it is not about the good ratings of an online movie or TV show but the content contribution to Netflix’s ability in capturing or retaining customers. The chief product officer of the company, Neil Hunt, told Business Insider that it is quite hard to calculate, as in order to be close enough, the main metric that the organization uses to evaluate success is a variation on viewing hours known as "valued hours."
Valued hours are not a raw total of how many hours subscribers are spending on Netflix for streaming purposes. The streaming service provider does not care about the number of hours spent by a streaming subscriber on the platform but the subscriber himself. It is the most vital unit for the company but the percentage of someone’s total hours spent is also taken into consideration.
To clarify this, if a particular show on the catalogue makes the subscribers go crazy, it is considered as the most valuable show to Netflix. For instance, if House of Cards starts bringing more subscriptions for the company, the subscriber is not only paying for one show but for Netflix every month. The internet TV firm will realize the importance of that show and will consider it more valuable in the future.
Neil Hunt says that Netflix probably considers this metric as the biggest single factor for its evaluation but this is not all. This metric is one of many factors that constitute the firm’s analysis.
Furthermore, the streaming business also considers ‘enjoyment’ as a crucial factor and it is currently trying to nail down its concept. This means that it will account on how much a subscriber liked the show. Business Insider previously reported that the organization would soon change its five star rating system.