From product to service
When Netflix started in 1997, video stores and tapes were still very visible in the market. You would rent the videotape for a couple of days and you had to return tapes to the video store, with penalties for late returns and not rewinding (yes, those were the days). In a sense it was already a service because you could watch it without owning it.
However, the idea that you could have unlimited access to resources is something that appealed to Netflix founder Reed Hastings. He introduced the unlimited plan but limited the number of DVDs that you could have in your possession at a given time. This service is still in use by the way, with about 4.3 million subscribers. The whole model uses regular mail to deliver and return DVDs.
But that is not what Netflix is known for. What Amazon is to cloud computing, is Netflix to streaming. For a small amount per month (it does not allow you to buy one DVD) you can watch whatever you like.
All you can eat
Many unlimited offerings have a fair use policy, often indicated by an ‘*’ or footnote in advertising. Netflix approaches it differently with, as far as we know no limit to the number of series you can watch on one device. This might be a reason why they can offer it, even if you watch 24/7 there is only a small part of the library of films and series that you can watch. So, there is no possibility that a single user will put a large strain on the system.
Data, data, data
Another thing that Netflix and Amazon (in this case the retail part) have in common is the collection of user data. They know what the user likes, watches and dislikes. With an expanding library, recommendations and of course choice is important. As well as findability. More data will let you know what people like and potentially also will like as far as themes and actors go.
Binge watching vs regular tv
But there are more things that others do not do. Netflix is known to put a whole season online, as well as having the more well know weekly episode delivery.
But the success of Netflix is also due to the commercial broadcasters. Especially in the Netherland a shrinking market has resulted in every more commercials. With the advent of restarting the movie using digital delivery some broadcasters force viewers to watch the commercials without the possibility to fast forward. This will drive viewers straight into the hands of Netflix who might offer the same film without the commercial interruptions.
Success is earned
But Netflix has grown exponentially and has in Q1 2017 125 million subscribers worldwide and about 11.8 billion dollars in sales. Netflix is now also a phenomenon as ‘Netflix and Chill‘ which is only possible when you are a household name (click on the link if you do not know the expression).
How do they do it
There is much more to the success of Netflix than I touched on in this blog. What becomes clear is that the success of Netflix is great content and balanced and well thought out business model made possible by IT. Both on the delivery side as well as on the data analytics side. They gather slice and dice data and almost know that you will watch a film tonight before you will.
Ctrl-A, ctrl-C, ctrl-V
So, can you copy the model of Netflix? Or is it a case that Netflix was in a perfect storm, where everything came together? I think that latter is to some extend the case but what Netflix did can be copied. I mean by that the approach that you CAN abandon the established practices in the industry. That a product might become a service even if people do not believe it (or the industry does not want it). Like I said in a previous blog, Netflix is not only successful for what they sell but to a large extent also how they sell it. They personalize suggestions per customer based on their viewing history, personal details and behavior. Netflix didn’t change film, they changed the way films are brought to the customer. What ever you do, everything starts and ends with top class IT. Without it (or should I say IT). Netflix is not possible since essentially what they are selling is the delivery of bits and bytes.
Go Netflix yourself
Look at your business model and see where you are doing what you have always done and if you can change that. See what your customers think. It might be that the model needs tweaking or explanation. The next logical step would be to take a good look at your IT capabilities. Is your IT landscape up to it? Do you have a top-notch API Management solution? Download our whitepaper to find out.
