Has Netflix’s reign come to an end?

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By Dr Finola Kerrigan, Lecturer in Marketing
Department of Marketing, University of Birmingham

Netflix will continue to appeal to large mainstream audiences […] But for those seeking to find hidden gems, more niche providers still have a place.

While video on demand services have been a reality for quite some time, Netflix has really come to dominate this space, both in terms its market share and by embedding itself within our culture. But is its reign over?

Since its inception, Netflix has continued to increase its subscriber base year on year. However, Netflix’s share price has fallen in the second quarter of 2018, and the company’s financial future is being debated. Taking this into account, it is important to examine how the company’s performance differs in terms of the stock market and public understanding of the company i.e. market share, customer satisfaction.

Is it sustainable?

Douglas Rushkoff’s 2016 book, Throwing Rocks at the Google Bus, sets this issue up very well. Rushkoff criticises the pursuit of ‘growth’ in financial terms without focusing on any other types of value. For Rushkoff, an obsession with financial growth that is determined by share price – as opposed to creating a company which contributes more broadly to the economy and society – is a frustration. Rushkoff’s critique echoes David Harvey’s warning about solely focusing on compound growth, meaning that the company’s market share increases by a fixed amount each year (say 10%) – if this were to be the case, the company’s second year growth would need to be 10% of 110%. Eventually such growth will be unsustainable.

While the financial press may bemoan Netflix’s reduced share value, marketing scholars will instead look at the company’s ‘value’ as perceived by its consumer and in terms of new product development.

A step change in subscription models

In the past, the dominant models were;

  • streaming (watching for ‘free’ in exchange for viewing advertisements) and,
  • pay per view (where consumers paid for each individual viewing experience).

More recently, the subscription model (offering consumers access to a large library of titles for one flat fee) has become the most popular, providing the company with regular payments from consumers in exchange for access to regularly updated content. In theory, this subscription model offers a lower risk to consumers as they can easily move on to something else if they make the wrong choice, rather than paying for a film upfront that they may not like.

Tackling the ‘spending time scrolling’ problem

Netflix prides itself on the accuracy of its algorithm, which makes suggestions to viewers based on previous watching habits and expressed tastes. But, looked at from a marketing perspective, this methodology is lacking. Netflix lacks the curatorial hand of more niche services like Mubi or Curzon Home Cinema, where film specialists carefully select titles which are offered to film fans for limited periods of time. While many viewers spend their time scrolling through and sampling the Netflix library, their Mubi-subscribing friends are already sitting engrossed in a film that seems hand-picked for them.

Mirroring the film industry’s origins

Another key area of value that Netflix has is exclusivity. Unlike Amazon, Netflix requires exclusive distribution deals for titles to be included in its library, and secondly, Netflix has continued to invest heavily in producing self-owned and original content. This seems reminiscent of the film industry’s origins in which cinema owners started to invest in production to ensure access to films for their audiences. This increasingly squeezed out independent producers, resulting in a range of policy interventions to tackle what became seen as anti-competitive practice.

What does the future hold?

So, what’s in store for Netflix? As it continues to expand into new territories and invest in content production, their subscriber base is bound to grow in the future, but what about consumer satisfaction?

A focus on volume and variety versus curation will help us to understand the evolution of such platforms, where bigger is not always better. Netflix will continue to appeal to large mainstream audiences, as well as those who know exactly which titles they want to watch. But for those seeking to find hidden gems, more niche providers still have a place.

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