Netflix plays its cards right
Photo credit - Netflix
"the goal is to become HBO faster than HBO can become us" - Ted Sarandos, Netflix Chief Content Officer
The company which made Blockbuster irrelevant in the DVD marketplace was, a year ago, at risk of suffering the same fate. Netflix struggled to evolve its business from DVD-by-mail to streaming - and compete with studios. The size of the major networks and studios meant that Netflix, who was significantly smaller with notoriety for taking market share from them, had a difficult time negotiating low costs for content. Their strategy to create original content to release their dependance on the studios - and offer their customers a differentiated offering has paid off. The internet video service saw an increase of 2 million additional US subscribers in its first quarter - and lost only 8,000 to free-trial gaming.
"The launch of House of Cards provided a halo effect on our entire service," Reed Hastings, Chairman and CEO, stated in a letter to investors.
Figures from NY Times "Subscribers Help Propel Netflix Gain", by Brian Stelter
“I have a sense of satisfaction that we are doing what we do best, which is steadily improving our service.”
With success again achieved, their strategic guidance mirrors that of many retailers today:
1. NEW ORIGINAL PROGRAMMING - EXCLUSIVE PRODUCT OFFERING: “It appears original programming may be driving better subscriber numbers,” finds Michael Olson, an analyst for Piper Jaffray. “At the least, we believe original exclusive programming is reducing subscriber churn.”
2. GLOBAL EXPANSION: Netflix reported an addition of 1 million streaming subscribers in its markets outside the US, which include Canada and parts of Europe and Latin America, bringing the global total to 36 million.
3. INNOVATIVE PRICING STRATEGY:
According to Bloomberg, up to 10 million users could be streaming Netflix's video service without paying, through password sharing. A new pricing option which allows for additional concurrent video streaming will be available. Currently, each account is permitted two concurrent video streams for $7.99 per month. The new option will allow for four concurrent video streams per account for $11.99 per month.