A big bet, backed by lots of data: why Netflix renewed Orange is the New Black

Netflix (S NFLX) loves Orange is the New Black so much that it has renewed the hit show for a third season before it even released the second season — which makes a lot of sense for Netflix.

News of the re-up was broken by one of the show’s actresses Monday, according to Reuters, and the video service went on to confirm the news.  The move is kind of remarkable because it speaks to the success Orange has enjoyed. Netflix has never released ratings for any of its shows, but the company said last year that the show was watched more during its opening week than both of its other high-profile dramas Arrested Development and House of Cards.

But there is another aspect to the early renewal that is interesting: Netflix is commonly seen as a company that makes extensive use of analytics. New features on its site or in its apps routinely get A/B-tested with thousands of viewers, and the company is diving deep into its data treasure trove before deciding which shows to sign for its audience. So why would a company that consults data for pretty much anything make this decision without first waiting for more data to be available?

The reason may be that, for Netflix, bigger viewing trends matter more than the reception of just a few episodes. A TV network that sees the ratings of a show tank can decide to pull the plug within weeks. But Netflix has proven that with endurance, it can grow the audience of a show even after a network would have thrown the towel. Case in point: Crime drama The Killing never did all that well on AMC, but found an audience on Netflix, leading the video service to produce an exclusive fourth season that will debut in August.

Binge watching may also factor in this decision. Viewers may be more likely to commit to watching an entire season of a show if they know there’s another season waiting for them in the future. Also, the trend to more complex dramas that treat a season like a 12-hour-movie makes us feel more forgiving about those one or two slow episodes that would have resulted in ratings taking and executives getting nervous in the traditional TV world. Waiting another week for a show that’s been getting boring is a long time — but skimming through 45 minutes during a binge session isn’t all that bad.

I’m pretty sure Netflix has studied audience development of the multi-season TV shows it already has on the service very closely before renewing Orange is the New Black. It’s still a big bet — but one backed up by lots and lots of data.