{"id":4223,"date":"2017-02-26T19:28:24","date_gmt":"2017-02-27T00:28:24","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/netflixs-uncertain-future\/"},"modified":"2017-03-02T18:34:27","modified_gmt":"2017-03-02T23:34:27","slug":"netflixs-uncertain-future","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/netflixs-uncertain-future\/","title":{"rendered":"Netflix\u2019s uncertain future"},"content":{"rendered":"

It is not common for digital platforms to enter content production field. Netflix made the bet, threatening traditional TV networks and film studios, but it is a long way to say that it was the right decision. It may happen that Netflix will find itself in a perfect content trap.<\/strong><\/p>\n

Netflix took off years ago as a DVD rental company. It had been a profitable business but in 2007 Netflix\u2019s CEO Reed Hastings, recognizing new digital trends, decided to build a video streaming service. It quickly turned out to be a success. Netflix has been quickly growing customer base. 性视界ing for content seduced TV networks and bought \u2018streaming rights\u2019 for relatively small amount of money. Content providers were impressed with exponential customer growth numbers but in the beginning did not recognize and undervalued Netflix\u2019s strategy. The networks treated deals with Netflix mostly as an additional source of money not thinking much about Netflix\u2019s endgame.<\/p>\n

Netflix\u2019s goal is to be the world\u2019s first streaming video platform. But this idea goes across interests of TV networks. Netflix doesn\u2019t care about viewing ratings and is also not interested in the TV bundling protection. The more people \u2018cut the cord\u2019, the better for Netflix. The only thing it cares about is subscriber growth. This is the most important thing that matters to Netflix and to any\u00a0other digital platform. What is also important, Netflix\u2019s CEO is not a TV producer, nor an old-school media executive. He studied computer science at Stanford, at the heart of Silicon Valley, and his company is a tech first company. The platform is based on a solid users\u2019 data foundation. The viewers\u2019 recommendations system is shaped to embrace network effects and connections among streaming videos. Majority of the Netflix\u2019s content is watched through suggestions delivered by the recommendation system.<\/p>\n

The relation between platforms and content producers is often called \u2018freenemy\u2019. On one side platforms may serve businesses to expand exponentially their customer base but on the flipside platforms\u2019 end game is usually total. They want to take over businesses which seem profitable enough. Amazon starts competing with its best sellers bypassing them and offering the same products with prices below minimal advertising price. Facebook provides platform and tools for media companies allowing them quickly growing user base but takes away majority of advertising money leaving pennies for content creators.<\/p>\n

The same rule applies to Netflix. The TV networks finally realized that they cannot sell \u2018streaming rights\u2019 for pennies because that way they feed the monster which some day may eat them. They try to find their own way into digital age what is also difficult when old TV culture prevails. Netflix can talk to its users individually because has mastered the art of data analyzing and personalization. This kind of thinking is not common for companies with broadcasting or cable roots.<\/p>\n

Netflix decided to take significant risk and produce its own content. In 2013 it offered for streaming \u2018House of Cards\u2019 which quickly turned out to be a huge success and sparked also the phenomena of \u2018binge watching\u2019. But this step may turn against the platform. Content creation is very expensive and Netflix is a subscription based model. Producing more content demands aggressive fight for new users and subscribers. Taking decision to be content producer Netflix has entered a fast pace path where it is easy to get breathless. Some critics underline that Netflix makes very little profit in comparison to actual revenues.<\/p>\n

Netflix subscriber base grows quickly but in non-English speaking markets it may face a problem. For example in Poland Netlix\u2019s offer is pretty poor, probably due to licensing and legal rights, but the price is the same as in the US. Netflix doesn\u2019t offer local content but only its universal content with Polish subtitles. Will it be enough in the future to get attention of its users and built engagement? How to produce original local content for non-English speaking markets? It would be pricey and the platform may find itself in a perfect content trap; or may charge more its customers in order to pay for growing content creation operations. Maybe it will get back to professional content producers, TV networks, but offering them more money. On the flipside the future of TV is on the Internet \u2013 whether it will be a Netflix type platform, or a traditional TV platform transformed some way into digital; or a mix of the two.<\/p>\n

    \n
  1. \u2018Can Netflix survive in the world it created<\/a>\u2019, The New York Times, June 15, 2016<\/li>\n
  2. \u2018The Content Trap\u2019, Bharat Anand, 2016<\/li>\n
  3. \u2018Televison Is The New Television\u2019, Michael Wolff, 2015<\/li>\n
  4. \u2018Facebook is eating the world<\/a>\u2019, Columbia Journalism Review, March 7, 2016<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    Netflix and the content trap<\/p>\n","protected":false},"author":2786,"featured_media":4225,"comment_status":"open","ping_status":"closed","template":"","categories":[1195,110,644,90],"class_list":["post-4223","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital-distribution","category-digital-video","category-media","category-netflix"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/growing-businesses-in-the-age-of-platforms\/","yoast_head":"\nNetflix\u2019s uncertain future - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/netflixs-uncertain-future\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Netflix\u2019s uncertain future - 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