Netflix and its Effects on the Entertainment Industry

Abstract

The disruptive primetime entertainment company Netflix was started as a DVD rental service focussing on logistics and delivery. Many analysts predicted the early downfall of the company due to rising competition and internet. But Netflix proved them wrong when this video-streaming service started in 2007 changed the way people watch TV and movies forever. Its subscriber based business model is very interesting as it is advertisement-free and attracts the customers through its personalised recommendation engine. The company's growth has introduced Internet TV which is replacing linear TV.

Traditionally TV guides are standard whereas the data-driven personalised recommendation offered by Netflix gives unique suggestions and analyses user behaviour to improve the suggestions. Recent expansion in other countries has increased its loyal user-base and also given rise to local competitors who are venturing into the streaming business. Producing its original content is another reason for its loyal subscribers and the company is increasingly investing in Netflix Original shows like House of Cards', Orange is the New Black' , Riverdale' and movies such as To all the boys I've loved before' and Crazy Rich Asians'. This has put pressure on TV producers and movie industry to not lose out to Internet TV. This paper aims to study the rise of Netflix and its effects on TV and movie industry to understand how an unconventional business model can change the world of entertainment.

Introduction

Netflix is an innovative entertainment-based company that has changed the way we watch movies and TV shows. In the words of the company, "Netflix is the world's leading Internet television network with over 81 million members in over 190 countries" (Netflix 2016). It offers TV shows and movies as well as original series, documentaries and feature films exclusively produced by and for the service. Subscribers can watch the offered content when and whereever they like on nearly any Internet-connected screen and all that without any kind of commercials. What began as a DVD-rental company, Netflix is now a dominating player in the international entertainment field. It was successful as a DVD- rental company too and many business analysts predicted the downfall of the company due to rising competition.But Netflix is different in the sense that it had recognized the power of data and analytics. It had developed a superior recommendation engine, Cinematch to better predict the pattern of request of DVD titles by subscribers. It even organized open contest???”??Netflix Prize???”??to win $1 million prize to anyone who could improve on its algorithms. It was a data-driven company before data and analytics were in vogue. Since 2007, Netflix started its video streaming service and thus began a colossal change in the TV and movie industry while Netflix became the defacto primetime entertainment.

Growth data-international expansion

Netflix's global growth is a big factor in the company's success. By 2017 it was operating in over 190 countries, and today close to 73 million of its some 130 million subscribers are outside the U.S. In the second quarter of 2018, its international streaming revenues exceeded domestic streaming revenues for the first time. This is a remarkable achievement for a company that was only in the U.S. before 2010, and in only 50 countries by 2015.

Netflix does not share its data with respect to how popular the show is and how many times it has been watched so it is difficult to ascertain which shows are bringing in money and which are not. International growth plans have been brewing for some time, and recently paid off. Its plans of international expansion can be divided into three phases. The first was introducing Netflix in Canada which is culturally similar and geographically closer to US. Lessons were learnt and applied in the second phase where Netflix expanded to 50 other countries. Finally the third phase required rapid expansion in 190 countries across the globe. Due to this globalization and expansion, its international revenues have in fact surpassed its domestic streaming revenues.

This past quarter, of the 7.41 MM subscribers, 5.46 million were international, and last year the company doubled its customer base despite raising prices in all regions. Netflix combines local market strategies with an understanding of "taste communities" that the company mines from actual user behavior and determines what you might like based on activities of other people that like similar shows.

Internationally, Netflix had way less content. the company had to bulk up on international licensing deals. there's huge demand from foreign audiences for both additional and completely different content. In 2016, Netflix had targeted primarily on English-language films and series, with an 80/20 model of U.S. vs. native content in most territories. It had centered a lot of of its native investment on marquee original productions ?” with foreign-language series like Columbian crime drama Narcos, French political heroic tale Marseilles or Hibana (Spark), a series set in the world of Japanese stand-up. the majority of its content, however, had been in English, something that, in several territories, restricted Netflix' audience attractiveness.

Netflix self-addressed this drawback by introducing dubbing and subtitling in Poland and Turkey and is tilting a lot of towards native content in countries like Japan.
Netflix plans to spread the enormous content budget on local market production, while also finding shows to back that would have deep local appeal, giving high talent local creators access to a global market. Thus, Netflix achieves a virtuous circle of subscription lock-in and growth. For now, the rate of growth justifies the costs of original content, marketing in local regions, and global expansion.

Perceiving that in a few sections of the world, especially rising and creating economies, portable is the essential way the vast majority get to the web, Netflix likewise started setting a more noteworthy accentuation on enhancing its versatile experience, including recruits, accreditations and confirmation, the UI, and spilling effectiveness for cell systems. It has been creating associations with gadget producers, versatile and TV administrators, and network access suppliers also.

Netflix has worked with, and reacted to, the new markets it's entered. The organization has banded together with key neighborhood organizations to produce win-win connections. At times, it has joined with mobile phone and link administrators to make its content accessible as a feature of their current video-on-request contributions. For instance, when Vodafone propelled a TV benefit for its clients in Ireland, it incorporated a committed Netflix button on its remote controls. Also as of late, Netflix reported deals with Telefonica in Spain and Latin America and with KDDI in Japan.

Netflix vs TV industry

Especially during the last ten years the television landscape changed drastically due to video and streaming providers entering the market.Adaptation to new demands and competitors who started to employ online content has become key to stay competitive in the media landscape. With their strong online presence streaming services put pressure on the entire TVlandscape: producers and programme providers, DVD distribution, Pay TV as well as TV advertisement, cable networks and satellite operators. Sources show Millennials love Netflix, with 89 percent using the service to watch most of their TV.As seen before television use has an overall downward development. Nearly all present studies about TV usage show that especially the young recipients are in favor of the online-moving-images offer, wheras classical television becomes less important in relation to useful period and range. Another aspect to be considered in this discourse is the fact that portable devices have a large influence on this development. Streaming services can be used on TV-screens as well as on computers, laptops, tablets and smartphones, which is one reason for the popularity of services like Amazone Prime, Maxdome and especially Netflix. A lot that used to be reserved for the medium television appears now also on other devices. Another tendency observed is multiscreening: consuming moving images non-linear and simultaneously via various devices. That means that television as a device becomes one of many and has lost its unique position. Classical TV is still appreciated by the audience due to the easy handling associated with a high feel-good factor. But with every new generation of devices the handling gets easier and the audience is willing to learn more and more. This is evident as the number of Netflix subscribers in the US has steadily increased and has exceeded the already declining pay-TV subscribers. The future of traditional TV is uncertain due to the huge advantages Netflix offers and a more technologically compatible generation of tomorrow.

Netflix vs competition

Netflix's main challenge comes from native competition. In Europe, Sky could be a major purchaser, and producer, of the sort of binge-worthy TV that Netflix focuses on. Netflix aforesaid it expects to check robust growth ahead at the same time as it faces more competitors like Amazon, that is additionally increasing globally. Amazon Prime's streaming service could be a major Netflix rival in choose European markets. In Germany, Amazon is truly prior to Netflix. Hulu is another major international player which is a tough competition for Netflix. The advantage Netflix has over other streaming services is that Netflix subscribers are satisfied with the service and have chosen Netflix over other services time and again. Netflix is perceived to be highly ranked in terms of customer satisfaction due to its ease to watch on TV, device portability, original content and reliability. This has resulted in a faithful customer base where 80 per cent of the customer base only subscribe to Netflix and no other streaming services.

Netflix Originals

In 2013, the political show House of Cards, featuring Kevin spacy and Kate Mara, was launched on Netflix, making it the 1st exclusively available content on the video streaming service. Netflix had started the way toward anchoring select rights to content in March of 2011, and furthermore the accomplishment of House of Cards immediately dismissed further exclusive partnership deals with content suppliers that masterminded the dream for Netflix to build up its own in-house exclusive content.Netflix had restrictive appropriation rights to TV ventures from set up Hollywood makers, for example, Lana and Andy Wachowski (Sense8) and Judd Apatow (Love) and had additionally anchored partnerships with Hollywood studios, for example, The Walt Disney Company and its associated subsidiaries to gain exclusive streaming rights.The organization's choice to secure exclusive rights was fruitful.

Netflix additionally ventured into securing the licensing of feature films, that varied its exclusive content beyond tv shows. In 2015, Netflix purchased exclusive international distribution rights to the film Beasts of No Nation,which was released to its subscribers on October sixteen, 2015, the same day that it had been distributed to motion picture theatres.The film was met with vital acclaim and won various awards upon its release. Despite the crucial and business success of the film, Netflix's venture into the business|movie industry was met with backlash by established stalwarts within the industry. The film's cooccurring release through on-line streaming was viewed by american film theatres as a violation of the industry's 90-day release exclusivity. That rule restricted films from being created accessible on-line within ninety days of being released to traditional moving picture theatres. Netflix's actions resulted in a boycott of the film from major cinema chains.Netflix planned to continue securing exclusive licensing deals from content suppliers within the future however was additionally trying towards any reducing its dependence on content suppliers by exclusively creating its own content. The choice to supply its own shows came amidst increasing resistance from content suppliers like twenty first Century Fox opposition., who were turning reluctant to license their content to third-party streaming services.

The company's original content strategy is about more than just volume. Netflix's original programming has received over 430 award nominations and 72 awards given. House of Cards holds 29 of those awards.

Challenges

But Netflix's globalization strategy, and many of the challenges it's had to overcome, are unique. Netflix must secure content deals region by region, and sometimes country by country. It also must face a diverse set of national regulatory restrictions, such as those that limit what content can be made available in local markets. International subscribers, many of whom are not fluent in English, often prefer local-language programming. And many potential subscribers, accustomed to free content, remain hesitant to pay for streaming services at all.

Furthermore, strong competition in streaming already exists in many countries. In France and India, for example, homegrown leaders offer local-language video content, thus depriving Netflix of first-mover advantage. In some countries, like Germany and India, rivals such as Amazon Prime were already established. Yet the majority of Prime subscribers are in the U.S., and Netflix has managed to make inroads into even those markets where Prime arrived first. Now Netflix, with its global reach, has more subscribers worldwide than all other pure streaming services combined.

Future scope and summary

All signs keep on indicating a brilliant future for Netflix, yet 2018 and past could result in some decline for the organization. While the administration keeps on including clients in all business sectors, its market development in the U.S. is probably going to begin leveling off in the U.S. as the organization expands its potential in its command post. And keeping in mind that the organization still overwhelms in many markets where its accessible, expanding weight from more up to date benefits mean it should keep up its as of now viable spending to remain ahead. In any case, the organization can't work at a misfortune inconclusively. In the long run, it should turn a benefit, which may mean balancing out, and not consistently expanding, its substance spending plan. All things considered, with a great deal of space to develop outside of the U.S., Netflix is as yet a decent wagered in 2018 and ahead.

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