Isabelle Hachenberg, 19 March 2017

Is Netflix the Future of TV Watching?

Did you know that Netflix, Inc. is celebrating its 20th birthday this August? No? Me neither. After it was founded in 1997 by Marc Randolph and Reed Hastings in the US, it took almost 20 years to get worldwide popularity. Back then it was a small start-up delivering mail order DVDs. Today its No. 15 of innovative companies on Forbes' List and is the world’s leading source of international movie streaming.

Since 2007, Netflix’s annual revenue increased from $1.2 Billion to $6.8 Billion and about 93 Million people worldwide are subscribed to their on-demand business model. In the past decade, the TV industry has changed completely. Away from linear TV watching, people nowadays prefer Internet TV. Thanks to Netflix, each of us can decide when, what, where and how often we want to watch our favorite series and movies.

Netflix’s way of conquering the market

Netflix eliminated classic DVD rental and forced the modern entertainment industry to conform to a new paradigm. Experts call this process disruptive innovation. This term is not used to describe
the market entry of a product or service, it is used to delineate the evolution of how the product or service disruptively entered and developed the market. Best example - Netflix. When they launched in 1997, their primary service appealed to few customers of their rival company Blockbuster, which at the time was the biggest US company for movie rental. When Netflix shifted to online streaming ten years later, they suddenly targeted almost all of Blockbusters customers. If Netflix had begun to launch a service addressing a larger competitor’s core market, Blockbuster would have had a response and perhaps a successful counterattack. But failing to respond effectively to the path that Netflix was on, led to Blockbusters bankruptcy in 2010. By that, Netflix disruptively changed the market with their innovation of a wider selection of content, on-demand and high quality for a low price.

Why should you watch Netflix?

The on-demand Internet TV model revolutionized the industry of movie watching. Society changes, following market trends and innovative ideas made Netflix create their business model.

Factors for their success are:

Flexibility: web-based streaming allows to watch content from everywhere, at any time and on any screen
Freedom: with the new introduced offline function people can download content and watch it without internet access
Personalization: adapted profiles to every user’s preferences and watching behavior with the help of algorithms

Have you noticed that you cannot find any commercials on their website? This has advantages for both sides. On the one hand, the customer feels more comfortable and not distracted by shown advertisement. On the other hand, Netflix gains profit because they do not need an ad sales department.

What can we expect for the future?

Instead, Netflix is working on the augmentation of their own productions. As „Narcos“, „Orange is the new Black“ or „House of Cards“ have gained international success since 2013, they intend to produce more of their own original programmes. As you have already noticed, Netflix is working on the adaptation of the watching pleasure to the customers personalized needs. By launching their own program, it is feasible to publish whole seasons at once, without being dependent on prime-time broad-casting slots. Moreover, they can go for a more creative storytelling, without following standards. Due to that, the industry invented the term „binge watching“ which basically describes watching several episodes of a series at once. This evolves from Netflix’s freedom of creating their own shows and unlimited access for the customer.

Still, Netflix is struggling with copyright issues. Since they went global in 2016, local and international laws are blocking certain contents in certain areas. In each market, content from multiple suppliers is licensed. You might have experienced while traveling that your favorite series was not available at your holiday destination. For this reason, Netflix is working on standardized worldwide licenses, to create a feeling of equality among their international customers.

By looking at all those facts, Netflix’s development is unbelievable and they achieved something, other companies only dream of. I have to admit that I’m subscribed to Netflix as well and I love it! After almost 20 years of innovation I’m asking myself, what’s coming next? What new innovation will Netflix bring to the market, climbing the list of innovative companies? Let me know in the comment section what you think about Netflix’s development and if you have any suggestions for future innovative steps.

Isabelle Hachenberg

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