Netflix - Disrupting the Entertainment Industry

Today’s Brew is for Netflix
Brew date: 19th July
Type: Served Hot, to be Consumed a.s.a.p.

How Netflix has potential to disrupt the Home Entertainment industry and driving its Consumerization index to enhance the User Experience? Building on an Sustainable advantage now, rather than passing it over to either Google or Amazon

To understand the business model of Netflix, check out the following links:

Netflix, Inc. , provider of on-demand Internet streaming media available to viewers in all of North America, Australia, New Zealand, South America and parts of Europe (Denmark, Ireland, The Netherlands, Norway, Sweden, Finland, France, Switzerland, Austria, Belgium, Luxembourg, United Kingdom and Germany), and of flat rate DVD-by-mail. The company was established in 1997 and is headquartered in Los Gatos, California. It started its subscription-based service in 1999.

The Brew will analyze Netflix on the following parameters:
a)    Business Analysis

      1)    Netflix’s Business Model
Though Netflix started as a DVD rental company, shifting gradually from a product pricing to a relationship based subscription pricing model, it’s current business model is to provide its offerings on an On – Demand mode over the Continuum of Home Entertainment needs, with offerings majorly in Movies to Consumers.

The Brew will like to lay emphasis on 2 key points that will help drive Consumerism to higher levels, incidentally, both of which, Netflix possesses and should as well exploit for higher value unlocking, The On – Demand nature of the Human Needs and Secondly, the Understanding of the Consumer Needs in Home Entertainment Segment, which Currently, as per Netflix model is limited to Movie Library more, and with improvisations it can make attempts to increase its spread to entire Home Entertainment segment encapsulating the content from the existing providers and offering them to Consumers on an On – Demand Basis.

With high expansive shifts in the Entertainment industry as well its Enabling Technologies, Companies in this segment have a choice of either being a Technology player or to shift on a Content side. Netflix, in this scenario, post understanding its Competence (covered below) should ideally move on the Technology Enablement side, providing a platform model to the Content Players, thus disrupting the entire Entertainment industry and driving an On – Demand Personalised Entertainment experience for the Consumer.

Being said that, Technology players like Google and Amazon have already started making inroads by conceiving On – Demand solutions for the Consumer, however, Netflix does have an edge given that it has a Competence developed drawing insights from its experience of the Movie Entertainment offering.

       2)    Competence:
Netflix finds it’s competence in its movie recommendation engine which power’s Netflix to understand its Consumers better making it a pseudo Personalised offering which fuels its engagement with the Consumer.

Netflix, as well needs to understand that it’s a Technology Company offering Entertainment services to the Consumers, and not the other way round, that of being an Entertainment providers enabled by Tech, and hence there is a dire need for Netflix to extend its Competence spread to the all pervasive content in the Entertainment segment, driving a higher understanding of Consumer needs, relevance and disrupting it with the On – Demand flavor.

By focusing on its Competence and on Technology enabling it, Netflix can increase its spread to entire Home Entertainment segment, triggering a business model disruption in the segment along with enhancing the User Experience for the Consumers, marking it a definite Contender of a High Growth – Consumer centric firm.

    3)    Disrupting the Services, Business Models & Business Model Innovations: Platform, Service and Hardware spreads
With figuring out the Competence and the business model, Netflix finds itself placed comfortably (but not for long though) in a zone from where it can trigger innovation and next level industry consolidations. The objective is to extend its Continuum of Entertainment Experience from Movies to all kinds of Content, Primarily, by being a Platform (basically developing its Content arm inorganically, with the existing plethora of players in the Content segment). Secondly, by integrating its Content Recommendation engine with the existing Home Entertainment players, to understand the segment wide needs of the Consumers, but as well to provide the Content players with the insights from the Consumers.
The Former offering leverages the On – Demand model of Netflix’s reach, enabling a Content Platform Model, whereas the latter leverages the product side of Consumer Recommendation insights to be used by the Content players to better their relevance and offerings.

With the given insights, if Netflix is able to effect its spread covering entire Entertainment industry, both in Content and in Consumer Insights, it paves way for a disruptive Business Model Innovation in the entire segment, by altering the entire value chain of Entertainment industry, by redefining the Consumer experience & expectations and by exploiting inherent Monetisation potential which can be exploited by the 3rd parties given the high engagement and impact levels of these Channels with the Consumers.

Though still a theory, Netflix still remains a strong contender to drive the innovation at a business model level and along with it, ability to spread its reach further to the Consumer by triggering a presence in the Hardware, which enables the technology led On – demand experience to the Consumer, on the lines of Google’s Chromecast and Amazon’s Fire TV, Apple TV etc. A hardware presence will further enable and support Netflix’s spread to entire Entertainment continuum driving an enhanced and holistic Consumer centric experience.

      4)    Expanding to the Continuum of User Needs
With entertainment getting redefined in to a high consumer centric engagement and experience, the model can as well be leveraged to expand and Converge with other Continuum’s Consumer needs (Shopping, Gaming, Food, Lifestyle etc.), either through organic or inorganic modes.

The Brew as well recommends Netflix to explore The Brew Framework for Enterprises, with respect to its macro – capabilities of Innovation, Value Creation, Value Enhancement and Purpose to chart out its next growth story.

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