Traditional television viewership is on the decline, and fewer people are actually going to the movies. Meanwhile, streaming video services like Netflix, Amazon’s Instant Video, and Hulu keep adding subscribers and original programming.
It’s getting harder and harder to deny that digital content providers are dramatically altering the entertainment industry. So, how did they do it—and what will be required for traditional networks and studios to stay in the game?
Michael Smith and Rahul Telang—two professors at Carnegie Mellon University’s Heinz College of Public Policy and Management—explore these questions in their new book, Streaming, Sharing, Stealing: Big Data and the Future of Entertainment, published by MIT Press last month. In an interview with Fortune, Smith discussed the new book, Netflix’s hit, House of Cards, and the future of entertainment.
The following conversation has been edited and condensed for clarity.
Fortune: Your book describes the success of Netflix’s House of Cards as a turning point for the entertainment industry and digital content. Why was that such a big deal?
Smith: The making of House of Cards illustrates how a bunch of different changes coming together at the same time can be really disruptive to the traditional industry. The thing that Netflix had that nobody else in the industry had was they didn’t just know that there were a bunch of [fans of the House of Cards‘ lead actor, Kevin Spacey] in the abstract, they knew exactly who those Kevin Spacey fans were and they could use the platform to target them directly. So, Netflix went out and created nine separate trailers for House of Cards and targeted them directly to those users. So, I think part of the story is the power of detailed customer data to help you do a better job of marketing the content.
Has the thinking among traditional media giants—who have frequently downplayed the competition they face from services like Netflix—evolved at all in recent years?
There are a lot of very smart, very capable people, who I respect, saying we’re in a content bubble [and] there’s way too much content being made right now for what’s economically feasible.