Quelle: Pexels / pixabay.com

Quelle: Pexels / pixabay.com

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

Zur Person: Isabelle Hachenberg studiert an der European Management School in Mainz International Tourism Management.

 

 

Dieser Artikel hat 13 Kommenatre

  1. In the light of most offline channels, I really like the idea of Netflix. Without endless advertisements, it creates a far better atmosphere and costumer satisfaction. At the moment I’m not yet registered, but if the offer on TV doesn’t change soon, I might rather pay than watch something I don’t want to see. It’s also good that they produce their own series and bring more variety on screen.
    Maybe they will sell their own gadgets which are optimised for the service. This could help them to win even more customers.

  2. Katharina Blanckart

    Being skeptical when I first experienced Netflix in the US some years ago (Netflix wasn’t established in Germany back then) the on-demand video provider has now become totally normal and its existence has become as natural as watching videos on YouTube. In my opinion Netflix did a very clever move when they started producing their own series and although many people seemed skeptical, these shows are in no way inferior to regular TV series, as you stated, some of them are quite successful. If this development continues I could imagine Netflix to produce entire movies in future. Nevertheless, they should not become inattentive to their competitors’ development as other companies have hopped onto the train of Video on demand as well as for example database giant Amazon who started amazonvideo as part of their amazonprime package and by now they are also producing their own series. Netflix, be on your guard!

  3. I honestly have to say that I love this development towards Internet TV. It is amazing to not have to watch any advertisement and that I can decide on my own what I want to see: movies, series…whatever.
    It surprised me to hear, that Netflix took 20 years to become that successful. In order to get even more successful I think it is extremely necessary to come up with new innovations and unique selling propositions. Amazon prime and maxdome are competitors who could be a serious danger or rather already are. To my mind, creating new series is a very important point in order to stand out from their competitors. Investing in making really good series is probably the best way to gain new customers and achieve customer loyalty. Next to the USP of own great series, getting the copyrights in other countries, could be another USP. Not only in order to create equality, also because many people find it annoying that they are only having limited access to the content on their vacation or business travels as they are used to another offer. Achieving a good solution in this aspect would definitely be a reason to register for Netflix. And that is what Netflix does have to do: find more good reasons to register for them and not their competitors.

  4. Being able to watch wherever and whenever I want is definitely a huge plus for online-streaming. And the fact that Netflix introduced the feature to „download“ content to watch offline, outlines the incremental characteristic of this innovation. With this development I can download my favourite TV Show and watch on-the-go, whether it is on the way to the university in the bus or when flying to my holiday destination. However, it seems that there is a war in the Streaming industry. Amazon vs. Netflix. We discussed that consumers had to decide between Blu-ray and HD-DVD in the past with only certain films being available on certain Formats. This kind of reminds me of this situation, creating not the same but similar dilemma. If you decide to have a Netflix account, you can have a huge variety of movies and Shows, however, some are not available and are only available at Amazon and vice-versa. Probably the only way to overcome this, is having two accounts- both a Netflix and Amazon account to enjoy the best-of-both world.

  5. Is Netflix the future of TV watching? Personally I have to admit: It’s already my present. Out of all the advantages netflix offers I enjoy watching TV without annoying adverts the most. We are faced with marketing everywhere we go: On the streets, in shopping malls, on social media and even at home. Netflix is not only an escape into other realities with its broad TV offer but also pure relaxation without any media pressure. I cannot imagine my friday nights without Netflix anymore. Maybe I should feel ashamed, but I am really not. The variety Netflix is offering and the availability the customer can take advantage of is outstanding. The idea did not only improve TV, one of the most powerful mediums since 1960, but is rather completely restructuring and revolutionizing our image of TV and the way we use it. Good job, Netflix, for being one of the best innovations ever.

  6. I really enjoyed your article. Very insightful and mind-opening. A good (and affordable) way to solve piracy problems. What I like about Netflix is that I don’t have to wait every week to watch a new episode, but have the opportunity to watch all episodes at once. As you mentioned did Netflix disrupted the TV industry and gained a competitive advantage. Sure, Netflix has a huge user base of 93 Million. They are growing – but just not fast enough. The subscriber boom is (mainly) over. What I see is that Netflix is going to need a change in their strategy to stay profitably. Either expand more globally for instance India and China or rise the price, which is also a problem as customers have low switching costs. But again in India and China we have cultural as well legal issues as you mentioned before to consider. To keep a low price is in my opinion crucial as price becomes a weapon in the Shakeout-stage.
    Competition is process driven. The market is growing fast and intensity of competition is increasing (like Katharina said Amazon Prime, Hulu). Once Netflix create value while fending off competitors and imitators and find a solution to their user-growing problem – they will clearly come off as winner.

  7. Netflix is not only the future of TV watching, but also the present. Some days ago a friend of me complaint about the fees of the German broadcast companies, saying that those fees are worse two monthly subscriptions of Netflix. Not only the variety of Netflix is not comparable with Tatort & Co. but also the fact that the present generation needs the flexibility on when watching TV and on which devices plays a big role. One major problem that I see with watching TV online is that the different platforms have different movies and shows what makes it inconvenient for the user: to watch exactly what you want you would have to subscribe to many different platforms such as Maxdome, Amazon Prime etc.

  8. To be honest I first heard about netflix when everyone was talking about netflix&chill. Then I tried it myself last year during my semester abroad in Peru. I have to admit that it is very easy and you’re very flexible when and what you want to watch on netflix. The variety is huge and that makes it so attractive especially for young people. The only struggle I see is that different TV shows or movies are online on different platforms which forces you to subscribe to different online movie platforms like Amazon Prime Video.
    Of course netflix had a big advantage towards the normal television because it had such a wide spectrum of what you could watch. Nowadays netflix needs to develop its strategy to reach more people or to make it interesting again.

  9. As a Netflix user I have to admit that it is great. This innovation gives each user more freedom because he is not bounded to specticular times when his or her favorite show is on air. Since Netflix none of my friends is watching regular TV anymore mainly because Netflix has no adds. Nevertheless in order to stay competitive and gain growth Netflix should work with Intellectual Property Organizations on how they can make everything available for everyone everywhere.

  10. I definitely think that Netflix and other provider are the future of TV watching. I personally already watch just Netflix and Amazon Prime cause I´m annoyed about the advertisement on the TV. In addition is Netflix the “better” TV. There you have the possibility to be flexible what Is a huge advantage regarding breaks to get more popcorn or a drink for example. Another nice thing that Netflix does is that they show you what films you might like regarding your previous watched film. I like this personalisation. I can totally understand why Netflix is so successful!
    Nevertheless, I´m curious what the future brings. Nice article and interesting topic.

  11. I had my first experience with Netflix many years ago in the United States and immediately thought ‚I wish we had that in Germany‘, but I never thought that it was founded 20 years ago. And now you can use it all over the world. The monthly price for Netflix is affordable and you can even share it with others, which is great. And it comes with many more comfortable functions as you mentioned in your article.The fact that it’s recognizing what you watched and how much of it you watched and that you can use it wherever you want and whenever you want, totally satisfies the needs of the society nowadays. You’re completely flexible and don’t have to remember which episode you watched last time. What I also really like is that you can personalize it and it’s suggesting you movies and series you might like. Because sometimes I just want to watch a movie and don’t know which one and this makes the decision process much easier. So yes I’m convinced that Netflix or in general internet tv is the future of tv watching. Even though compared to other online tv providers in my opinion Netflix really is the number one. And if it can solve the difficulties with the licences I’m sure it will become even more popular, because some people might just not use it, because their favorite series isn’t available yet. It maybe even kicks others out of the market. So I’m excited to see how Netflix will improve his services in the next years. Who knows, maybe soon it will also enable you to watch the latest news or sport events live?

  12. I totally agree with you that it has changed the TV industry quite a lot and I also believe that it will be even more used in the early future. I also think that it has many advantages and a lot to offer!

    However, personally I do not have a Netflix account yet and I am still not sure whether I should get one or not. I think the copyright issues that Netflix is struggling with is still a big issue and should not be underestimated. We, as users, often tend to oversee the problem behind this but we should keep in mind that it is indeed a big problem and it should be solved as soon as possible.

    You also mentioned „binge-watching“ in your article. I guess everyone of us has already done that and was happy to be able to watch the entire season of the series in 2 days or so. But is this really a good development? Back in old days you simply had to wait one week to watch the next episode and thus you had this exciting feeling. Nowadays you simply click next and watch the next episode. I think that through this development we somehow lose our interest in series or movies. If they are always available for us, it makes them something normal and not something special. Shouldn’t they still be something special and not something to watch in 2 days? I mean, the producers of a series certainly don’t have the goal that customers watch the entire series in 2 days and forget about it in 2 months because they have already watched so many more series…
    Anyways, I can see the many advantages of Netflix but I still think we should also analyze our own watching behavior critically…

  13. I think Netflix was a great idea. I personally use it and find it very convenient. It is a whole new experience of watching TV. Before you were usually relying on the TV program and had to wait for a good movie to be broadcasted. Now you can have a choice what to watch, you can pause if you need a break and you even can watch it on different devices even in offline mode. Therefore I can watch movies on my phone while being on a long trainride or on the plane. I think due to Netflix a lot of people, including me, do not watch regular TV anymore which will be effected by that and will eventually have to adapt to these changes. How it will develop in detail we will await in the future. Thanks for your article!

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