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Tabita Knezevic
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When I was eight years old, I used to visit the local video store with my brother at least twice a week: the first visit was to select a movie and the second visit was to avoid the late fees. Today, my eight-year-old son, with a few clicks, immerses himself in a universe of entertainments.
Such rivals as well-established supply chains, value chains, massive customer bases, recognized brands, efficient operational capabilities, best of class expertise, and deep pockets; Netflix, had no chance to withstand such a war.
But to strategically make an adverse reality in your favor, you need more than a dream. Below, we will apply platform thinking to visualize how an idea can transform into a multibillion-dollar conglomerate.
To make up the prerequisite unit economics, Hastings realized that he did not need a disruptive product or technology; all he needed was a disruptive (simple) business model that could provide a better customer experience.
Since then, the point of integration for TV-on-Demand has been selection and attention. Selection focuses on content acquisition (more titles), and attention focuses on customer acquisition (more customers). Netflix reconfigured the demand into this simple process: You can select a movie, pay online, and receive a physical product (DVD) via the US Postal Service (a physical infrastructure); later, you can play the DVD on your PC or DVD player (physical product).
Allowing customers to stream their favorite TV shows without commercial interruption on a variety of devices (PCs, Macs, Internet-connected Blu-ray players, set-top boxes, game consoles, smart TVs, smartphones, etc.) made Netflix the ideal entertainment gateway; thus, the subscriber base kept growing globally.
With such an unprecedented scale and growth on both ends (supply and demand), Netflix accumulated the necessary data and built its proprietary expertise in other underlying disciplines (creative, marketing, legal, finance, etc.) to create its own content, Netflix Originals.
So what next? It is time for Netflix to move from what its subscribers want to why they want it. Netflix must enable its members to move from merely consuming content to engaging with and even co-creating content. Let us unleash our imaginations.
Entertainment is a tiny slice of our daily needs. Netflix should understand our context to capture more magnificent slices of our daily needs (the totality of our experiences). In other words, it should move from merely capturing lost attention to educating the attention and to enabling actionable engagements.
Netflix, over the past two decades, built a reliable brand name, scaled phenomenally ( to its direct competitors), and embedded itself into an impressive number of devices and platforms to reach more customers.
The transformation from DVD-by-Mail to TV-on-Demand (streaming) took place within almost the same value chain; however, experimenting with new edges (experiences) requires different value chains. It is very costly and risky to operate under several value chains. Netflix needs to leverage the Network Chain: collaboration empowered by interdependent and modular entry points within different network effects.
Under the subscription model, the avenues for growth are predicated on increasing subscribers and/or raising prices. To increase subscribers, Netflix embraced the horizontal model: created a modular interface to provide the streaming service on multiple platforms and devices on a global scale. To raise prices, Netflix evolved vertically: integrating backward into content creations.
During this decade (the 3rd), Netflix cannot differentiate itself from the awakened giants (Disney, Amazon, Apple, etc.) merely by leveraging its old cost structure and conventional subscription model. Netflix needs to experiment with new monetization strategies.
Today, Netflix leverages every frame of the episode to know when we pause, rewind, or fast-forward. But, with stealth advertisement, Netflix can monetize the frames rather than merely extracting and aggregating the data.
Under the margin re-monetization, Netflix shares the upside of its core business with its ecosystem and distributes the production cost over a large number of interested investors (Netflix members included).
While licensed content can bring familiarity from audiences and preexisting demand, relying too much on this can bring future challenges and risks regarding control over medium and long term cash flow as owners of franchises and popular shows can request higher licensing fees. This suggests that, when it comes to the success of a streaming service, there might be significant importance in the balance between licensed and original series and films. With this being said, it is interesting to look at the current demand for original series around the world.
The chart below shows the Netflix original series with the most demand worldwide. As seen in the previous chart, Shadow and Bone and Stranger Things make the top of this list with exceptional levels of demand. The Night Agent, which was released late March this year - and has already been renewed for a second season, is third on this chart, with 38.4 times more global demand than the average series.
In the webinar, Hamilton also pointed out the success rate of Apple TV+ and Paramount+ and explained that, considering the average demand for their original series from the year, a high number of the original series they had aired over 2022 reached an exceptional level of demand. Ted Lasso from Apple TV+ and Halo from Paramount+ are good examples of this.
The chart below shows the global demand distribution of Apple TV+ and Paramount+ original series over the last 30 days. For Apple TV+, Ted Lasso still sits comfortably at the exceptional level, with 63.2 times more demand than the average series worldwide. Moreover, the Apple streaming service saw a number of new releases this year, Hello Tomorrow!, Extrapolations, and Liason, which are all sitting within the outstanding section at the moment. In addition to this, comedy drama, Shrinking, which stars Harrison Ford and Jason Segel, aired on Apple TV+ at the beginning of this year and is sitting close to an exceptional level with 25.63 times more global demand than the average series.
As for Paramount+, Star Trek: Picard, with 51.0 times more global demand than the average series, and Tulsa King, with 33.8 times more global demand than the average series, are both at exceptional levels of demand. School Spirits, Wolf Pack, and Rabbit Hole, where all released to the streaming service this year and all are all at an outstanding level of demand. Rabbit Hole, in particular, which had 29.9 times more global demand than the average series over the last 30 days could be one to keep an eye on, considering it was released just over one month ago.
Netflix is an American subscription video on-demand over-the-top streaming service. The service primarily distributes original and acquired films and television shows from various genres, and it is available internationally in multiple languages.[6]
Launched on January 16, 2007, nearly a decade after Netflix, Inc. began its pioneering DVD-by-mail movie rental service, Netflix is the most-subscribed video on demand streaming media services, with over 277.7 million paid memberships in more than 190 countries as of July 2024.[5][7] By 2022, "Netflix Original" productions accounted for half of its library in the United States and the namesake company had ventured into other categories, such as video game publishing of mobile games through its flagship service. As of October 2023, Netflix is the 23rd most-visited website in the world, with 23.66% of its traffic coming from the United States, followed by the United Kingdom at 5.84% and Brazil at 5.64%.[8][9]
Initially, Netflix offered a per-rental model for each DVD but introduced a monthly subscription concept in September 1999.[20] The per-rental model was dropped by early 2000, allowing the company to focus on the business model of flat-fee unlimited rentals without due dates, late fees, shipping and handling fees, or per-title rental fees.[21] In September 2000, during the dot-com bubble, while Netflix was suffering losses, Hastings and Randolph offered to sell the company to Blockbuster for $50 million. John Antioco, CEO of Blockbuster, thought the offer was a joke and declined, saying, "The dot-com hysteria is completely overblown."[22][23] While Netflix experienced fast growth in early 2001, the continued effects of the dot-com bubble collapse and the September 11 attacks caused the company to hold off plans for its initial public offering (IPO) and to lay off one-third of its 120 employees.[24]
DVD players were a popular gift for holiday sales in late 2001, and demand for DVD subscription services were "growing like crazy", according to chief talent officer Patty McCord.[25] The company went public on May 23, 2002, selling 5.5 million shares of common stock at US$15.00 per share.[26] In 2003, Netflix was issued a patent by the U.S. Patent & Trademark Office to cover its subscription rental service and several extensions.[27] Netflix posted its first profit in 2003, earning $6.5 million on revenues of $272 million; by 2004, profit had increased to $49 million on over $500 million in revenues.[28] In 2005, 35,000 different films were available, and Netflix shipped 1 million DVDs out every day.[29]
In 2004, Blockbuster introduced a DVD rental service, which not only allowed users to check out titles through online sites but allowed for them to return them at brick and-mortar stores.[30] By 2006, Blockbuster's service reached two million users, and while trailing Netflix's subscriber count, was drawing business away from Netflix. Netflix lowered fees in 2007.[28] While it was an urban legend that Netflix ultimately "killed" Blockbuster in the DVD rental market, Blockbuster's debt load and internal disagreements hurt the company.[30]
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