"Hype is the fog of business" or "you should've known something was up when Netflix bought the billboard company"

How do you decide if a business scenario is viable? What heuristics do you use? How do you form your informal informative priors? How do you decide the necessary conditions for success have been met? Obviously, there are endless possible answers for these questions, but most probably fall under the general categories of looking for things you would associate with success, growth, drive, and competence.

Consider Netflix. The scenario that has been put forth to justify the extraordinary market The company has recently reached is that it has a reasonable chance of achieving a near monopoly of online media distribution. This would seem to be an unbelievable claim but it does have what we might call heuristic support. Things we can all observe which make the arguments seem somewhat more credible.

Though Netflix is a notoriously secretive company, there are still a number of established facts that back up its case. The subscriber base is undeniably large and growing. The company has an excellent reputation and fantastic name recognition. Its shows generate a tremendous amount of buzz and you can't argue with all those Emmys (actually, you can, but more on that later).

There is, however, one piece of context which is absolutely essential for understanding these indicators of success and yet which is routinely underplayed or omitted entirely from the conversation. Netflix has taken hype to a new level.

To be clear, no one would ever suggest that the entertainment industry is a PR virgin.
Planted news stories, awards campaigns, "creative decisions" designed solely to get attention, the fairly open quid pro quo that drives almost all entertainment journalism. None of the techniques that Netflix uses to promote itself are new, but the scale is unprecedented.

Obviously, some of this has to be inferred, but the inferences are all straightforward and largely undeniable. To live in LA particularly west of the 110 and north of the 10 is to be besieged by outdoor advertising for Netflix, particularly around the longer and longer Emmy season when it seems that every available surface will bear the letters F YC.

Likewise, you can draw fairly reliable inferences about PR spending by looking for certain kinds coverage. If you see a cover story, and interview, a what's on [client's name] tonight article or anything that reads like a press release, the odds are very good that it was either initiated or nurtured by a PR agent. Here too, Netflix has taken old approaches and pushed them to a new level.

We also need to take into account indirect PR, business decisions that are nominally made for some other reason, but have the real purpose of generating buzz. Everyone does this, but, once again, Netflix goes much bigger. The company spent hundreds of millions of dollars promoting art-house fare like Beasts of No Nation and documentaries  like Icarus (ass far as I know, Netflix was the first to mount “best picture”level Oscar campaigns in the documentary category). Though thrse are deserving films, in terms of viewership, their marketing budgets are impossible to justify, but if your objective is getting journalists to talk about your company, it's money well spent.

Netflix also has a history of commissioning award bait shows going all the way back to House of Cards. Emmy awards play a special role in this process. Within the industry, they aren't taken all that seriously. Their impact on viewership has long been question and increasingly who gets the nominations and awards is seen as a function of who's willing to pony up the big campaign budgets. (This point was beautifully illustrated when Tatiana Maslany couldn't get a nomination despite incredible buzz and reviews. It was only after the snubs became news that she broke through).

None of this is intended as a criticism of Netflix. Marketing and self-promotion are a part of the game and you can't blame the company for being so good at it. The ads and carefully cultivated press coverage help drive subscriber growth and support the narrative that makes the skyhigh stock prices possible. You can hardly fault management for increasing revenue and maintaining market cap. You can, however, blame analysts and journalists who fail to recognize the impact of this unprecedented marketing and PR push and who casually throw out references to buzz and Emmy awards as if they meant anything at all in this context.