Netflix (NFLX) is the dominant player in the on-demand media industry, with 167 million paying subscribers worldwide. By creating compelling original programming, analyzing its user data to better serve customers, and most of all by allowing people to consume content the way they like, Netflix disrupted the television industry and forced cable companies into their own business. Forced to change the way of doing business.
This has certainly accelerated the cord-cutting trend. An estimated 27% of US households plan to cancel paid cable service in 2021 (ie more than 35.5 million households), a trend expected to continue into the future.
In the long run, the success of Netflix may lead to cable unbundling. That is, cable subscribers can be allowed to pick and choose channels, and not pay for the entire batch they want.
in the video clip below the new York TimesAt the 2015 DealBook conference sponsored, Netflix CEO Reed Hastings Reid discussed the company and its unique corporate culture: “Ultimately, flexibility is more important than efficiency in the long term,” he said.
- Netflix has around 167 million paying subscribers globally.
- It has disrupted the television programming model and is largely doing the same for the cable industry.
- Netflix is
facing stiff competition from rivals including Amazon, Google and Disney.
In early 2020, Netflix had three tiers of monthly subscription prices: $8.99 for the Basic plan, $12.99 for its most popular HD-quality service, and $15.99 for the Premium plan.
The number of American households projected to cut cables in 2019
The Normal family pays $156.71 per month for a base cable television package, but they pay $217.42 per month with add-on fees and taxes.
How did netflix get started
This is a far cry from the company’s humble beginnings. Netflix started in 1997 as a website that allowed people to rent DVDs online, have them delivered by mail, and return them as is.
From the beginning it competed with networks and cable for people’s entertainment time. But its real competition at the time was the established brick-and-mortar video rental business.
It was in 2007 when Internet speeds became fast enough, and personal computers powerful enough, to allow streaming services to take off commercially. Netflix brought the streaming service that year.
For the first time, customers can watch a TV show or movie on a computer, TV screen, tablet, phone or gaming device. And consumers could see what they wanted, when they wanted it, and how they wanted it, without being limited to a schedule, interrupted by commercials, or even leaving the house.
That last innovation largely decimated the video rental business. Soon, cable companies and TV networks began offering their own on-demand content.
move to original content
In 2013, Netflix began creating its own original content, a risky and costly proposition.At a time when networks typically approved shows based on pilots that hit certain metrics, Netflix offered series producers and showrunners an upfront contract to produce an entire season or two.
Soon, the most critically acclaimed and discussed new series surfaced on Netflix instead of established networks including “House of Cards”, “Orange is the New Black” and “The Crown”.By building a loyal fan base, original content has been a major source of Netflix’s success and the appreciation of its stock price.
the birth of a binge
Around the same time, Netflix began uploading entire seasons of established TV series at once, essentially creating a trend for binge watching, in contrast to the once-a-week installment model of broadcast and cable TV.
Netflix’s production methods have forced TV networks to be more flexible and more aggressive in recruiting and retaining top talent.
Innovation to stay on top
Another innovation from Netflix has been to mine user data aggressively. This data was initially sought to serve customers and help them find content that they might like. However, Netflix now analyzes this data to determine which genres and which talents it should pursue in response to real demand.
Now, Netflix is