The Key to Netflix Recent Success

STORY BY Candace Bryan

Published: April 23, 2013

In a world where the availability of watching movies and TV shows online for free is only ever increasing, how is it that Netflix continues to grow? In the last quarter alone, Netflix saw an enormous boost of U.S. and international subscribers to its service, with over 3 million new users in three months. This put their total user base at 29.2 million in the U.S. and 7.1 million abroad. Stock shares are shooting up as well, and the company shows no sign of slowing down. People don’t seem to mind paying Netflix for what they could easily access elsewhere. What is the key to their success?
 
When Netflix came on the scene, its main competition was movie rental stores like Blockbuster. Netflix immediately exploded, and Americans were grateful not to have to leave their houses in order to acquire movies. But in the last years, as media shifts to be almost exclusively online, Netflix has faced a more competition than before. Now that the core of their business is through their online-streaming service instead of their snail-mail DVDs, it must compete with other sites making the same content available for a lower price, or even free. It also has had troubles buying permission to make videos available for streaming on the Netflix site. The owners of digital videos rarely bargain with Netflix, and the cost of quality movies and shows is high.
 
In 2011 to make up for these high prices and decreasing demand, Netflix prices were raised 60%, and subscribers were displeased to have to pay $16 a month instead of the previous $10. Netflix growth practically came to a halt, and their stocks plummeted.
 
It looked pretty grim for business, and just as Blockbuster died when Netflix changed the movie rental market, it looked like Netflix might be on a similar path. But unlike Blockbuster, Netflix made a plan that, as seen in the numbers above, is clearly working. What business tactic has saved them from near destruction, and given them a huge boom in business?
 
Chances are you’ve probably heard of the show House of Cards by now. The Netflix-original series has seen wild success since it premiered last February, and Americans are talking about it. The show is almost exclusively to credit for the Netflix turnaround. It’s part of the solution to the Netflix problem that is, as Netflix’s chief content officer described to GQ “to become HBO faster than HBO can become us.” That essentially means that in order to make consumers feel like they need Netflix, Netflix is creating a slew of original shows, only available on the site.
 
So far it’s working, and the media giant is confident that the strategy will continue to work for them. It’s not certain if all the other content they create will be as huge a success, but for now things are looking peachy for Netflix.
 
Via Businessweek and Forbes
Other Stories by Candace Bryan
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