Netflix’s Decisions and Payoff

10 thoughts on “Netflix’s Decisions and Payoff”

• What I find most interesting about Netflix’s recent decisions is that they seem to indicate a change in their business plan. In the past, the company had been devoted to putting popular content from other sources in one place for its subscribers. Currently, it has partial control over its supply chain in that Netflix completely controls the shows they produce. At least for those programs, they know that unexpected interferences from other companies will not negatively impact their functionality. The Disney decision also hints at what Netflix might be planning for the future. Many companies, interested in creating their own streaming services (one example that comes to mind is HBO Go), may end their contracts with Netflix as well. If this extreme option occurs, it appears that Netflix is hoping to be able to adjust by providing solely original content. In this scenario, Netflix would have complete control over the products they sell from creation to distribution, a rare position of power. That being said, the company most likely still hopes to maintain business with their best content providers, as customers certainly value being able to watch existing popular shows. Their preparation for a possible independent future is smart and could prove crucial to their survival.

  • I agree that Netflix will continue to remain popular in the near future even if Disney and other companies remove their content from Netflix. Netflix has expanded exponentially in its international markets in the last few months. One of the main reasons for the rise in Netflix viewership is its availability in Asian and South Asian countries where it was not available before. Even though the subscription price (after conversion from dollar to other currencies) might be too high for international customers, they are willing to pay more for Netflix not only because of the original content of Netflix but also because Netflix has a wide array of international programs specifically catered to the audience in these countries. For example, I was studying abroad last semester and I found a different set of shows on Netflix whenever I changed my location. There were different shows on Netflix in UK, in Netherlands, in Italy etc. Since customers can find shows in a specific language and have multiple subtitles options for international shows, there is no doubt that Netflix will continue to remain popular in the near future in spite of the price surge. On the other hand, even though HBO GO is gaining popularity because of the Game of Throne series, it is far behind Netflix when it comes to being available to customers throughout the world. Therefore, even if Disney and other companies take off their content from Netflix, it will continue to remain popular in the near future. However, in order to continue to dominate the streaming business, it is important that Netflix finds other creative ways to attract customers.

• I think this post is very interesting, especially the statement about Disney removing all of its programming from Netflix and establishing their own streaming service. This seems to be a growing trend since many networks,like NBC for example, are also removing some of their original programs from Netflix in order to establish their own streaming platform. It seems that many of these companies have noticed the profit that Netflix has been able to make in the streaming business, and believe that they can do it themselves. This is most likely why Netflix continues to invest more and more into their original content. If this trend continues to grow, it is possible that in the future Netflix will not have much content that will entice consumers to use their service other than their original productions. In this highly market environment, it was in Netflix’s best interest to make their product more exclusive and to show value in their pricing strategy.

• Hi Sarah,

  I’m really glad your post included the news about Disney pulling its content from Netflix. I think this speaks to a growing acknowledgment of the power of streaming websites to be profitable. I heard about the Disney news over the summer while I was interning with PBS in the corporate communications department. PBS also noticed the success of streaming platforms, and has its own new platform called Passport, which offers users over 1,000 episodes that grows weekly. My supervisor highlighted the binge-watching trend, and explained how Passport allows users to binge popular shows like Downton Abbey.

  While working at PBS I learned a lot about its organizational structure. PBS produces its own content, which is then offered to member stations across the country. Member stations are required to carry some specified content, while the decision to show other PBS content or not is up to each individual station. Over the summer, PBS was in the news a lot as Trump pushed to defund public broadcasting. Stations in large cities usually don’t have a problem with funds, but the ones in rural locations would be at a very high risk of shutting down if public broadcasting was defunded. The PBS Value and Protect My Public Media campaigns were instrumental in informing and motivating users to call his or her legislator and ask that public broadcasting not be defunded.

  To help member stations, the money spent on a PBS Passport account is given to the user’s local station, rather than to the corporate PBS. I thought this was an interesting decision, but one that could increase funds to local stations regardless of location in the US. PBS saw an opportunity to take advantage of the common habit of binge-watching and decided to use it to address an area of need in its company. Additionally, Passport makes it easier for younger generations to be involved as donors to local stations, despite PBS having a traditionally older audience.

  https://current.org/2017/02/farewell-tote-bags-pbs-passport-draws-younger-donors-as-membership-reward/

  http://protectmypublicmedia.org

  http://www.pbs.org/value/home/

• Having experienced success with this most recent price increase I find it likely that they will continue with this process until they encounter resistance. A poll conducted by Business Insider showed that almost 40% of users would be willing to pay $12-$15 a month for the service and almost 10% would be willing to pay $16-$19. Netflix is likely very aware of the pricing power it holds. As previously stated a great deal of this power comes from the original programming that Netflix creates exclusively for its service.
  An interesting development in the streaming service industry has been the expansion of original programming from Netflix’s competitors. As competitors, Hulu and Amazon gain success in the production of original content it may be interesting to consider how this will impact the pricing power that Netflix holds. When consumers are pushed to have multiple streaming services as to gain access to original content there is some potential for backlash. Another possibility may be the bundling of these services into something that resembles a cable package.

  http://www.businessinsider.com/how-much-more-expensive-can-netflix-get-2016-9

• Adding to Michael I too have seen many networks trying to branch out and create their own niche platforms. While I was in Australia this past summer the company I worked for was in the process of creating an Indie film streaming platform that was designed exactly like Netflix but featured original content for up and coming Indie movie producers. Although these small competitors are beginning to form they do not hold substantial weight when facing Netflix’s powerful reign. I would also like to note that Netflix’s business strategy has a cyclical approach in which old movies are taken out and new movies are added in place. This happens when they end their licensing agreement with the content provider which is all done strategically. Netflix wants to have the most exclusive content across all markets to make their service the most necessary. They do face a small amount of backlash when people’s favorite series are cancelled or shows are pulled but not not enough that would actually affect user’s decision to renew their subscriptions. The money that Netflix is saving on these ultimately worthless shows they are filtering back into their original content budget will which hold and also gain subscribers in the long run.

• What is the future of Television? Prior to modern day technology the televisions was the fast way to reach the public with information and entertainment. As technology has changed, the average person no longer needs to but a large screen to retrieve this, and portable and more flexible computer and tablet allow for even more information that the Television could ever have. With people increasing becoming more involved with globalization, and the increase of global information available to the public, many people are on the computers or, most hours of every day. With this Netflix has discovered the opportunity of providing its viewership the option to watch their favorite entertainers and story lines, wherever they go, which satisfies a convenience that the television could never provide. Why the original content is genius, because it makes the a direct competitor with each television station all at once, as they can provide any genre of television and movie to their viewer in a more convenient way. Although there was an increase in price to own am Netflix account, relative to the price of purchasing a modern day television, the decision is obvious. The real danger in the scenario of Netflix increasing their prices, is not with Netflix but with television companies, and Netflix has shown that the future is with their company, and other companies like them, and its being led by a viewership that it willing to pay an increasing price to have access to it.

• I think that it is important to look at this story through a supply chain lense, specifically what Netflix is speculating in their trade-offs. First, let’s think about rising price and what in the supply chain that would directly affect. The rise in price would have a direct affect on the consumer branch of the supply chain because it makes people question the worth of Netflix. Next look at the suppliers, the first supplier to note is Disney. Disney has decided to start their own streaming service to counter Netflix. However, one of the order qualifiers for customers who use Netflix is variety. This is because Netflix has no allegiance to one broadcast network so they can make deals to put up shows from all of them. To counter both the raise in price and Disney leaving, Netflix has promised new content produced by them. Many of Netflix’s show are very popular, in this day and age you really can not go a day without hearing someone talk about one of Netflix’s original shows like Stranger Things. By promising new shows, Netflix is able to meet the customer’s order qualifier of variety with the trade off of an increased price. By Netflix developing their own shows they are able to rely less and less on outside suppliers which in the long run can save them money. Overall Netflix’s decision to raise their price was not a bad decision because the ends justify the means especially in terms of supply chain.

• I wouldn’t be surprised to see more companies pulling their shows from Netflix to start their own streaming platforms, similar to what Disney is doing. However, with Netflix creating their own shows, there becomes less and less of a chance for these other companies to succeed. Netflix’s array of content is become so diverse that consumers may simply opt to not watch television or movies they previously loved due to additional fees for an alternate streaming platform. Instead, they may potentially just go with shows offered, a greater portion of which are produced by Netflix itself. Adding their own shows also gave them further press and media attention, primarily by means of shows like Stranger Things. In amassing such a huge following, people who have not seen it would be more and more likely to purchasing a subscription solely because of the incredible hype behind it. Thus, I think it will be interesting to see what companies, if any, pull their shows. Furthermore, in combating this movement, in my opinion, we will most likely see more and more Netflix-produced shows to build an even bigger base for the streaming site.

• By producing content Netflix has begun to create a dependency on their product for people to access their favorite shows and movies. It is changing its self image from being a middle man in the supply chain to being a content creator and supplier. By cutting out producers of shows it allows itself to make more effective use of its capital as well as create a better brand name as an entertainment company rather than just a streaming service. However I would caution Netflix to be wary of a drop in the quality of the content they are creating as recently their reputation for putting out quality shows such as House of Cards and Narcos is being diminished by flooding their site with quickly produced filler shows. The increase in price is acceptable to most viewers as they will be receiving more high quality content for a reasonable price. Netflix is a premium service that people are willing to pay for in order to continue to have access to their entertainment content. However if Netflix’s makes a wrong gamble or produces too many shows that aren’t as popular as they have previously been, they could lose subscribers as entertainment doesn’t have much brand loyalty because audiences follow what they like.

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