How Netflix Survives and Thrives

By Bob Wallace April 24, 2013

When you create a market segment – unlimited delivered movies for an affordable monthly price – everyone from fast followers to re-invent-the-wheelers want a (big) piece of you. By using innovation to drive evolution, Netflix remains a disruptor, instead of the disrupted.

Well beyond launching a streaming version of its subscription service, the company quickly embraced emerging industry trends and realities, converting them from challenges to opportunities that it makes the most of in the marketing realm.

Movie Lure for Pay-TV Operators

Once the staple of premium movie channels, flicks have little pull as they take forever to clear pay VoD status for viewers already paying for movies from the likes of Home Box Office (HBO) and Showtime.

Netflix offers recent releases minus the pay-VOD charge and the premium movie channel monthly charge.

The Rise of Original Series

While premium movie channels beat Netflix to the punch in this area, launching countless series over the last several years, Netflix didn’t take it as a mortal wound. Instead, it launched House of Cards a few months ago, another days ago and carries some that it didn’t create. More are on deck for this year and early 2014.

Changing the Status Quo

Instead of following the same approach to coveted original series, Netflix shattered the mold by deciding to offer all episodes of House of Cards on the same date. Its rivals, including HBO, still take an episodic approach. That makes Netflix a serial killer of sorts.

Global Expansion

Netflix focused relatively early on expanding beyond the 50 states, while its content competitors often lagged, perhaps slowed and drained by helping providers build TV Everywhere offerings. Taking an innovative offering to the largest audience ASAP is a winning formula. International membership grew by one million during the quarter to a total of 7.1 million, generating 14 percent of global revenue, said Netflix.

Explain Change

When it split its mail and streaming into separate offerings and made price changes, there was a chorus of doomsayers claiming it was the beginning of the end, or the end, for Netflix. While there’s no denying many customers fled, there’s also no denying that the CEO’s explanation to customers laid things out in a sincere manner.

The first line read: “I messed up. I owe you an explanation.”

More importantly, the company responded to customer anger and frustration rather than moving on as seemingly most companies do nowadays. It might seem minor, but when you consider all the price and packaging changes in the pay-TV provider and content owner world alone, it’s nearly as rare as a unicorn sighting.

Thankfully, Netflix had plenty of loyal and happy customers. This was before the management of Domino’s Pizza came clean in TV ads to reassure the public that it used cheese and tomatoes to make its pizza, (not cardboard and ketchup as some had complained).

Long-Term Strategy

Companies in the technology, media & entertainment space alone, it’s evolve or dissolve. Netflix management realized the mail DVD rental service and the streaming service were separate businesses and acted accordingly.

In the short-term, Netflix got beat up stock-wise and lost customers. Company heads were thinking of a much longer term evolution. The two very often butt heads.

Now, for all the above reasons and having added over two million subscribers in the last quarter alone, everyone still wants a piece of Netflix. Many wish they had a piece of the company stock-wise with shares at around $220. That’s up about 25 percent since the company’s Q1 earnings release yesterday.

Survive and thrive.

Edited by Jamie Epstein

VP of Content

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