Have you seen the latest season of “Casa de Papel”? Have you already subscribed to Disney +? Well, if yes, you are one of many, otherwise, it’s just a matter of time: sooner or later we will all dive into a streaming service. That’s a fact. Month by month, the number of people around us that have (or more often share) a Netflix or similar account is getting bigger as the market is expected to grow to roughly 500 million customers by 2025.
At the very beginning, traditional broadcasters seemed not that interested in that business: Disney, Universal, Warner Bros were happy to license their films and movies to Netflix and get “free” revenues from their old and dated products.
Flashforward a few years and Disney +, Prime Video, Sky Box Sets and many others are here to compete in the streaming industry. It’s a tough war and it just got started. Now, Netflix, no longer a new entrant, is the incumbent and market leader as its position is threatened by many followers. Will Netflix keep its leadership? Or will it drop like Snapchat back in the days?
The topic is very sensitive and, in Netflix’s board room, they are aware of the hard times ahead. On the other hand, Netflix has a strong customer base, a very personalized service, which offers a vast number of contents but is also capable, thanks to machine learning, to perfectly understand your tastes and tailor the offering to your preferences. On the other hand, customers can switch very easily from one service to the other as cancellation is rather quick and without second thoughts.
Will Netflix survive in this competitive industry? Think about Disney: their “+” service, recently released at a lower subscription fee with respect to Netflix, will offer a myriad of super popular movies, cartoons and series: The Lion King, The Avengers or Star Wars are just a few of them. Netflix cannot compete at this calibre and is well aware of it.
Nevertheless, the key success factor comes from people loving the content. Netflix has been able to attract and retain customers mainly thanks to the content that subscribers could find only there. Now that many players have decided to stop licensing their movies and series, as they see Netflix as a threat to their business rather than an opportunity, the firm is trying to push and innovate its original content, and, honestly, that’s the key and best thing to do.
To survive in this competitive environment, Netflix has to put a lot of effort in the content generation because, as long as successful series will be there, I believe that Netflix will continue to play a leading role. However, this position is very fragile. There is no reputation or heritage backing Netflix as in the case of Disney, whose content will always be recalled by the youngest and eldest.
As of now, Netflix is winning. We can see that as Sky and other lagging traditional broadcasters have tried to strike cross-selling deals with Netflix in order to keep up with its standards and customer base. Let’s say that since nobody is able to beat Netflix for now, it’s better to cooperate with it.
Nevertheless, the future is still a question mark. Netflix secret sauce resides in the power and appeal of its content. If, in any point in time, Netflix will lack that creativity and genius, then, nobody, even the most popular and renowned streaming service provider, our beloved Netflix, will be safe from the cannibalization coming from Mickey Mouse, Jeff Bezos & Co.
Riccardo Terzi
Build Sustainable Innovation 