Netflix has become a dominant force in the 21st century.
In fact, one of the keys of their success was the ability to use data to their advantage. As other companies were “guessing” to release T.V. shows and movies to consumers, the company utilized data to advance their company’s progress. Today, they hold millions of online subscribers to their business. As other companies try to mimic Netflix’s success, Netflix has had competitive advantages over their competitors for good chunk of time. Let us analyze further the latter situation.
First, we must acknowledge the strength of business model with recurring monthly revenue. Looking at it through Layman terms, we can acknowledge that a recurring business revenue monthly (unless customers actually manually end the recurring model) will triumph over one-time purchases every single time. This is because consumers don’t have the time and resources to dedicate research and commit to the consumption through purchasing every single time they wish to view a movie or T.V. show. This is why Disney released Disney+, or Apple released AppleTV+ — all bundled with some form of subscription plans.
One article described it perfectly “subscriptions tend to offer medium revenue potential and medium to high profit potential. Subscriptions are uncommon (but not unheard of) with premium products and services, but at the right price point, the company can see high volume. Subscriptions can offer high profit potential depending on customer usage. For services that are lightly used, the cumulative subscription fees will more than cover operating expenses.” (Noren, 2013) Subscriptions allow consumers to trust the company, and this trust is rewarded through the quality of Neflix’s ability to dish out content to their viewers every single day.
But then, you should ask, how was Netflix able to capture these many subscribers over the years? Another good question would be asking how did they compete versus the Hollywood giants over the last decade? Well, everyone starts somewhere. In fact, an article on “The Atlantic” stated the following on Netflix’s rise “Netflix has meticulously analyzed and tagged every movie and TV show imaginable. They possess a stockpile of data about Hollywood entertainment that is absolutely unprecedented. The genres that I scraped and that we caricature above are just the surface manifestation of this deeper database.” (Madrigal, 2014)
What Netflix did was unprecedented in the entertainment world. They hired individuals and collected viewing habits. How do viewers watch their content? Would they watch another similar content? Where do they click after selecting a movie? What if they don’t like the movie, what is the aftermath? And many more questions were answered through analysis of data. This process took years, but they refined it and now results into the Netflix we see today. There are still challenges, since other companies such as Disney and Apple are coming for their success. However, the main question becomes whether the competitors can match with Netflix’s strength of analyzing and processing data, in order to create knowledge through sets of data (context + information).
Data is the new commodity.
So now that we have established a brief background on Netflix and its success in the entertainment industry, let’s discuss on why Netflix growth depends on boredom.
My thesis: the more people are bored, the more Netflix will grow.
This includes North Americans, Europeans, Asians, Africans, and so on.
As I write this article, we are in a middle of a well known pandemic. Some nations have already implemented a lock-down emergency to all citizens. Businesses are shutting down temporarily, concerts are being cancelled, travel plans are cancelled — you get the idea. However, people are told to stay home. Forget about pandemics, technology has allowed us to have more time to be “bored”. There was a time when entertainment was reserved for the wealthy. Today, this is no longer the case.
It’s only a matter of time that you enter the “boredom zone”. You will end up watching a movie, playing a video game, or browsing through Medium! Netflix is not the only one to benefit from boredom, but it’s one of the few positioned to be successful.
Content is king on Netflix. Netflix’s originals are no stranger to the public. According to their latest quarterly earnings, more people were interested in “The Witcher” than any of the other popular TV show (The Mandalorian from Disney+, for example) on the market during the last quarter of 2019. Refer to figure 2. The company claimed it was “the biggest one TV series ever”, so they must be doing something well.
“Netflix and Chill” is a cultural slang that is utilized among all millennials. Is there such for Disney? Can anyone really compete with Netflix’s cultural presence, other than maybe Apple who entered the space only a few months ago?
As people stay home and get bored, it’s only natural to assume that more viewing time is logged on Netflix.com. As more viewing time is logged, more data can be mined, and as more data is mined, more information can be extracted. With the sets of information extracted, more knowledge on viewers’ trends is formulated. Figure 3 shows this feedback loop (this is my interpretation of how data is utilized on a very high level — this is for dummies who do not understand the power of data.)
It’s almost as if Netflix was able to reverse engineer viewers entertainment’s consumption and habits. Reverse-engineering is the key. No other company had done this in the entertainment space, and this is why Netflix has this cultural lead over others.
For more information on Netflix’s technology, read their blog posts on Medium! Netflix Technology Blog
References
Noren, E. (2013). Digital Business Models: Analysis of the Netflix Business Model. Retrieved May 22, 2016, from https://web.archive.org/web/20170407030229/http://www.digitalbusinessmodelguru.com/2013/01/analysis-of-netflix-business-model.html
Madrigal, A. C. (2014, January 2). How Netflix Reverse Engineered Hollywood. Retrieved May 22, 2016, from http://www.theatlantic.com/technology/archive/2014/01/how-netflix-reverse-engineered-hollywood/282679/
