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Netflix is the leading service provider for online movies and television series in the world. FOR NOW.
Back then, Netflix started in a market space of digital streaming with no competitors. This made the initial entry easy, but the journey has been difficult and will continue to be so if they do not give reinvention a serious thought.
Netflix started operations as a movie rental company. They focused on keeping entertainment delivery and people’s happiness as their focal points in business. They solved the difficulty of finding and searching through stacks of good movies at an offline retail store like Blockbuster. While Blockbuster and others continued to rely on VHS tapes, Netflix adapted DVDs. Their competitors could not compete on the speed of execution because Netflix had an inventory management system to find DVDs faster and a custom delivery strategy through the US Postal Service.
Constant technology innovation led to Netflix being ahead of their competition. They built their own IT infrastructure by using technology solutions provided by the Amazon, Microsoft, Akamai, Limelight, and Level-3. They used Dynamic Streaming over HTTP or DASH which provided good quality levels of entertainment depending on the user’s bandwidth and internet connectivity. They used high-speed data centers with state-of-the-art content delivery networks known as CDNs.
Netflix built its customized tagging system to categorize movies and TV series based on data collected from user likes and dislikes. The user’s viewing history was used as a key component for their artificial intelligence-based suggestions. Using and analyzing these huge amounts of data lead to personalized content delivery to all their loyal subscribers. This is how the genres were created. And till today it helps people select better content than searching through a list of movies to finally pick one. Within two years, they transitioned from online movie rentals with costs per rental to a subscription model with unlimited rentals.
In short, Data analytics backed decisions gave Netflix the needed competitive advantage.
Today companies like Google, Amazon, and Walmart have built a sustainable competitive advantage using data analytics too. A new competition is almost impossible. They have today become so huge that new competitors cannot enter the market without a good amount of investment. The key competitors to Netflix like Amazon Prime, Disney, Hulu, and the rest are providing similar services and at a comparable price. The competition gets a lot more serious in Asian countries like India where local players like Airtel, Zee, Hotstar, Voot, and Balaji have their own video streaming services.
Amazon Prime has started production of TV series much like Netflix Originals. Amazon Prime, Hulu, and the rest have started taking subscribers from Netflix. The fight will be to remain relevant in countries like India where price matters more than anything. Local mobile network providers like Airtel have started their video streaming service with association with Hooq to provide content that has a blend of local and international entertainment.
Countries like India are still predominantly TV subscribers. Direct-To-Home or DTH is the most sought-after mode of entertainment. Also, with the internet speed and connectivity being an issue, Netflix will face issues expanding in regions other than metro cities in India and other developing countries. The price tags that Netflix charges will also need to adapt to the countries that they try expanding in to remain relevant there.
The competition will keep growing over time. Netflix will need to reinvent themselves from time to time. The analysis of data has helped Netflix come up with suggestions for content consumption at this point. Netflix would need to try to tie-up with multiple service providers to gain the needed attraction. The current strategies of providing a 3-month free subscription have proven to be unsustainable post the Covid-19 lockdown. Netflix will need to think about providing budget-friendly plans and increase their volume of sales to remain relevant.
The key to relevancy in many countries is an adaptation to local culture. Local content needs to be given more importance. Netflix needs to focus on creating local shows in regional languages. Some TV channels in India currently support regional languages for Hollywood entertainment. Netflix needs to learn from its competitors in regional markets and provide adaptations to be accepted and increase its paying customers. Options like Live TV need to be incorporated learning from their competitors.
Netflix needs to have a tie-up with DTH providers to get access to their customers. DTH rules the market in India and Airtel is making the first step towards integrating internet streaming to the DTH network. Netflix needs to move fast and capture the market before Airtel in India. The game is about capturing the maximum volume of subscribers through content that people want to watch rather than doing the same old processes in the past.
They have a tough road ahead. They have faced a strain on their servers during the recent lockdown situation. With the world entertainment consumption on the rise, Netflix will need to look at better ways to keep the consumers engaged. Data will need to be leveraged and acted upon immediately to bring more original shows to keep the advantage in the market. The goal must be to capture the maximum market and retain them to make it impossible for the competitors to challenge them. It seems to be a tough road ahead to build the needed competitive advantage. Only time will tell if Netflix will survive.
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