How Netflix Uses Intellectual Property To Its Advantage

Netflix saw its stock price close to double last year as the American streaming service giant gained 16 million new subscribers in just the first three months of 2020.

How does Netflix manage its IP portfolio? Let’s find out.

The Netflix Revolution

Netflix has been a serious disrupter in its market since day one – the platform has shaped and changed what we understand as the at-home viewing experience, from box sets to live shows, to watching whatever we want, whenever we want. Gone are the days of following the schedules of TV channels or missing moments on the television due to toilet breaks. Audiences on streaming services are now able to rewind, pause, rewatch, replay or save series and films for later, and there is a huge array of entertainment on selection for audiences to do so, on a single platform. No doubt Netflix has established itself as a key player in its field, even with plentiful competitors vying for its number one spot. Amazon Prime, Hulu, Disney + and the like have emerged as alternatives to Netflix, but with 183 million paid subscribers as of March 2020, Netflix comes out on top amongst streaming services available on the market.

Success doesn’t come easy, therefore it is no surprise Netflix would seek to protect its accomplishments. Intellectual property is at the face of Netflix’s protection against competitors from appropriating its resource and to prevent potential infringement cases.

Trademark

Trademarks would provide Netflix security over its branding, for example, its trademark red ‘N’, ‘Netflix’ as a brand name and the design of its logo. Further marks registered under the Netflix brand include ‘Netflix 3D’ and ‘Netflix Super HD’. Trademark registration for these aspects of the business will ensure protection over the ‘Netflix’ name, meaning third parties offering streaming services will not be able to operate under the same or similar name. Trademarks work not only to protect Netflix’s brand recognition and value, but also to foster and grow its identity as the number one streaming service in the world through advertising and publicity.

Patent

News reports suggests that Netflix has been actively making patent applications for its patents since its early days as a DVD rental store. Netflix’s first ever patent concerns consumer renting (US6584450). This patent allows the identification of items to be rented out by the consumer. It also works to limit the number of items that can be rented at a time, and to manage the consumer’s renting queue. Other prominent examples of Netflix’s patents include its current rental processing system (7848968), its envelopes in usage (6966484) and its rental management system (7546252). Current patent applications include automated video cropping (US-10834465-B1), adaptive streaming for digital content distribution (US-8631455-B2) and digital content distribution system and method (US-8433814-B2).

Patents are crucial to Netflix’s business model in gaining and retaining its consumers. Netflix’s patented technology works to provide a streamedlined user experience and a comfortable viewing experience, whilst maximising consumer engagement to ensure the viewer returns to Netflix’s services time and time again, which translates into regular, habitual use. One example of a patent that works to serve Netflix’s business model as such is the WO2019018164. This particular patent is responsible for the technology behind the ‘skip’ observed at the end of each episode of a series, an automisation that enables the consumer to stay hooked onto whatever they are viewing:

…a sequence analyzer parses previous episodes of the serial and selects a representative frame for each shot sequence. The sequence analyzer then generates a fingerprint for each shot sequence based on the associated representative frame and compares fingerprints associated with a current episode of the serial to fingerprints associated with one or more previous episodes of the serial to identify shot sequences that have already been played. The user may then skip those repeated sequences via a playback interface.

Netflix’s technology in curating recommended content is attributed to patents EP3152723 and US2020143448, the former of which displays selected most likely to be watched and the latter an artificial intelligence algorithm which works to pick out a selection that would suit the viewer best. Learning human behaviour and influencing viewing patterns appear to be at the core of Netflix’s patents.

Copyright

Netflix licenses and distributes content from a multitude of picture and filmhouses on its platform. This allows viewers to consume creative content of which IP rights belong to a third party company on Netflix, an act of which we understand today as streaming. Licensing and distribution deals between Netflix and third parties differ depending on popularity of the media in question in each region. This explains why some tv series or films are available under Netflix in a few particular countries, but not in others.

Deals as such are extremely expensive for Netflix. An annual report submitted to the United States Securities and Exchange Commission states that Netflix spent USD 14.7 billion on licensed content alone in 2019. Netflix Originals, a series of tv shows and films originally produced by the streaming service giant, appears to be a remedy to Netflix’s licensing issue. Independently producing content meant that Netflix gained the opportunity to take a step back from licensing deals. Concurrently, Netflix’s core consumer base set it up for decent viewership for its original content. Many of Netflix Originals have gained applause and recognition, such as ‘Stranger Things’, ‘Money Heist’ and ‘Bridgerton’. ‘The Queen’s Gambit’, a Netflix Original starring Anna Joy Taylor, is reported to be Netflix’s greatest success with a viewership of 62 million within the first 4 weeks of its date of airing.

It would not be out of line to suggest that intellectual property plays a part in Netflix’s success as the number one streaming service in the world. Netflix’s strong IP portfolio serves as an example to start-ups and small businesses of how clever IP strategy combined with a well-managed portfolio can take your business from zero to hero.

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