Good disruptions: The rise and rise of Netflix

Good disruptions: the rise and rise of Netflix

Disruption seems to be the name of the game and in the entertainment industry the disruptor of the moment has to be without a doubt Netflix

Netflix started life as a DVD subscription service mailing DVDs by post and pivoted along the way to become a major entertainment industry player. In business timing is everything and the rapid adoption of mobile devices as entertainment players combined with faster internet paved the way for the success that Netflix enjoys today. In a relatively short period of time Netflix has grown into a global brand with millions of subscribers and a once industry outsider has become a real player and entertainment industry power house. In the home entertainment business there are two main expenses, content and distribution. Creating TV shows costs big money and getting those shows to your audience used to cost really big money, that is until broadband internet came along…

Distribution or broadcasting – getting entertainment into your home

Until recently broadcasting has been a very costly and restrictive business, massive barriers to entry. If you are a satellite TV company like SKY, you need to beam TV shows onto an expensive satellite and then have it beamed into homes, this costs eye watering amounts of money. If you are a cable company you need a costly cable infrastructure that reaches peoples homes and if you are a traditional TV broadcaster you are talking massive regulation, licences and again huge costs. With the mass adoption of internet in the home we have a distribution system that is available for anyone to use. Granted the technology behind the streaming and video hosting will be costly for millions of users but I would hazard a guess that it´s still less than satellite, traditional broadcasting or cable infrastructure. With the internet as the distribution medium anybody can become a content producer and have their own channel, just look at the amount of people on Youtube with their own channels. Netflix is using a readily available distribution system and avoiding the costs and barriers that normally would stand in the way of a new entertainment distribution system.

Content is king and it costs big!

Broadcasting or entertainment distribution systems are pretty worthless without the content, that´s the tv shows and movies we want to watch. Content is very costly to make and licensing is extremely complicated. Licensing of TV shows and movies is still a relic of our current and dated system which restricts broadcasting to specific regions only. This one even Netflix cannot escape for now and is likely one of the reasons why they clamped down on VPN usage where people were faking their location in order to watch Netflix content in other countries. If Netflix wants to offer a TV series it must licence it for every country where they offer it. It can also be that some TV show owners will licence the TV show for some countries and not all due to their own distribution strategy and agreements with other broadcasters. When Netflix produces its own shows it is the content owner and has much more freedom which is probably one of the reasons why Netflix has invested so much in original programming.

Netflix original content was a master stroke

One of the major master strokes of Netflix was the production of original content like House of Cards starring Hollywood heavy weight Kevin Spacey. By producing original TV shows Netflix achieves many things in one stroke, it as the content owner has freedom of distribution, it has shows not available on other platforms which will help attract new subscribers and it establishes Netflix as a real player in the entertainment business which leads to top acting, directing and producing talent getting in on the action. It doesn´t harm that Netflix has very deep pockets, with a market cap of just over 60 billion US dollars as of April 2017 Netflix can afford to produce high quality shows and that is exactly what they have done. Netflix has produced a huge amount of original TV shows like House of cards, Orange is the new black, Love, Grace & Frankie and Narcos just to name a few. As a Netflix customer I can honestly say that on the whole their original content is good and often puts the Hollywood old timers to shame.

Netflix has the cash to produce excellent shows, a global distribution system that can get it into the homes, tablets and smart phones of entertainment consumers and enough of these subscribers to potentially make the whole thing viable. What I believe are some key reasons why Netflix has succeeded so far is the relatively low monthly subscription cost for all you can watch and new content added regularly. The recent ability for customers to download content to their tablets and smart phones for viewing offline has also been a welcome addition.

All in all Netflix is in my eyes a good disruption, it has brought some amazing shows to our TV screens, made it easy to watch TV at our convenience without the inconvenience of advertising and all at a reasonable price. I´m not affiliated in any way with Netflix and this isn´t a paid commercial, it´s just my view of a great service that has disrupted the entertainment industry nicely…

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