How Netflix is Changing the TV Industry
Netflix is the dominant company within the on-demand media sector with 167 million paying customers around the globe. 1 With its original programming and ability to analyze user data to better serve subscribers, and most importantly, by letting users consume content in the way they like, Netflix has disrupted the TV industry, forcing cable companies to change how they do business.
This has accelerated the trend toward cord-cutting. It has certainly accelerated the trend towards cord-cutting.
Netflix’s success could lead to unbundling cable. This means that cable customers might be able to choose and select channels, rather than paying for all of them.
Below is a video clip from The New York Times-sponsored Dealbook Conference in 2015. Netflix CEO Reed Hastings Reed discusses the company’s unique corporate culture and states that flexibility is more important than long-term efficiency.
The Key Takeaways
- Netflix has approximately 167 million customers worldwide.
- It has disrupted television programming and is now doing the same for the cable industry.
- Netflix is facing fierce competition from Amazon, Google, Disney, and other competitors.
Subcutting the Competition
Netflix is a repository of content. It includes movies, documentaries, and Renewed TV Series. Subscribers can access any program they want, at any time and on any device for a flat monthly charge.
Netflix offered three levels of monthly subscription pricing as of early 2020: $8.99 for the basic plan and $12.99 for the most popular HD-quality service. 4
According to estimates, approximately 80% of American households cut their cable in 2019.
A typical household pays $156.71 per month for a basic cable TV package. However, add-on taxes and fees can increase the cost to $217.42 per month.
How Netflix Started
This is a far cry of the humble beginnings of Netflix. It’s a far cry from Netflix’s humble beginnings.
It competed from the very beginning with cable and the networks for entertainment time. Its real competitor was, however, the brick-and-mortar rental of video equipment.
Before internet speeds were fast enough and personal computers became powerful enough to support streaming services, it was 2007. 6 Netflix launched its streaming service in 2007.
Customers could now watch TV shows or movies on their computer, TV screen, or tablet. Consumers could view what they want, whenever they want, and how they want it without having to adhere to any schedule or be interrupted by commercials.
This innovation almost ended the video rental industry. Soon after, TV networks and cable companies began to offer on-demand content.
The Move to Original Content
6 In 2013, Netflix started producing original content, which was risky as it did not approve shows that met certain metrics. Instead, Netflix offered upfront contracts to showrunners and series producers to create entire seasons. 7
Many of the most talked-about and critically acclaimed new series were soon available on Netflix, instead of being produced by the established networks like “House of Cards”, “Orange Is the New Black” or “The Crown.” ” 8 Original content is a key factor in the success of Netflix and the appreciation of its stock prices.
Binge-Watching is a new phenomenon
Netflix began uploading whole seasons of TV series simultaneously, creating the binge-watching phenomenon. This is in contrast to cable and broadcast TV’s weekly installment model.
Netflix’s production methods force TV networks to be more flexible in recruiting and retaining top talent.
Innovation to Stay at the Top
Netflix’s mining for user data aggressively is another innovation. This data was originally gathered to help customers find the best content. Netflix now analyzes this data to identify the genres and talents it should pursue to meet real demand. 9
Netflix is now facing stiff competition from Amazon, Google, and Disney for viewers and programming. It pays a heavy price for changing the way television is made and viewed.