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TMFPostOfTheDay (< 20)

Netflix's Shifting Consumers



March 01, 2011 – Comments (3) | RELATED TICKERS: NFLX

Board: Netflix

Author: Sc000t

I have a whole bunch to say on Netflix so I'll try to keep this somewhat brief and save those thoughts for a more in-depth post.

But I'd like to try to spark a conversation/debate on what I view as coming changes in this industry and see what others think.

In my opinion, I think we're at the cusp of a paradigm shift in the way consumers consume content in general (TV, Movies, Music, Magazines, News, etc.)

For television specifically, I feel the days of people waiting for their 7 p.m show are numbered and that content will start to allow consumers to adapt it to their schedule...and not the other way around. If you've watched new releases of TV shows on the internet (South Park studios for example) or used youtube to see the latest show that was just aired (I just watched high stakes pokers' newest episode on youtube) then you'll understand where I'm coming from. I don't need to be by my television or stay up late to catch a TV show when I have access to it on the internet whenever I want.

I think the whole time schedule that has people setting alarms and calender dates for when TV shows run is going to fade. And that the growth of consumers using the internet and companies like Netflix are the main cause of this shift. Their doing more than "cutting the cord" from the cable companies...their cutting their dependence to their time schedule as well.

As growth comes with lower cost and more personalized content for consumers (not large cable packages with 120 shows you never watch), I think we'll start to see content starting to be released at specified dates to Netflix, Apple TV, Google TV, Amazon and the Cable companies and then consumers will find time to watch what they want. Similar to how we listen to music.

This throws a kink in the business model of the current industry obviously but it's something the cable companies should try and adapt to...not fight. We're currently see them struggling to do just that but in the coming year(s) I think we'll see them loosen up and embrace this change as their really won't be another solid alternative.

The large costs of older cable companies setting up physical networks that wire directly into your home and into a cable box will eventually be replaced by lower cost and more advanced streaming content from the internet to your television, tablet and smartphone.

This healthy competition from the big tech players should help drive down price for consumers who will start to be more selective on what they pay for and this has caused a lot of the power in the industry to shift back into the content providers hands. Comcast obviously recognized this as seen in their recent NBC deal.

This is more or less my thoughts on the coming changes in this industry. If anyone agrees or more importantly, disagrees, I'd love to hear why.


Thanks for reading.

3 Comments – Post Your Own

#1) On March 01, 2011 at 8:38 PM, TDUBFISH313 (52.25) wrote:

You have a good point as for how the consumer wants to watch tv. Unfortunately it is the advertisers that run the show.

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#2) On March 01, 2011 at 11:27 PM, Goofyhoofy (< 20) wrote:

You're a little late. DVR penetration in American households has climbed to 40%, so the networks have already lost control of having people sit down at 8:00 for their favorite shows (exceptions noted for live events like sports, Oscars, breaking news).

However from an image standpoint it still makes sense for content aggregators to do so under a promotable thematic umbrella (HGTV, Comedy Central, CNN) and to deliver it via cable and whatever other distribution channels become widely available. 

I can envision a time when differing delivery option corporations (Netflix, Hulu, Comcast, NBC (over the air), Apple TV, etc.) bid on various properties in much the same way as networks have traditionally bid on sports rights. If Netflix thinks having exclusive rights to "The Good Wife" will be meaningful in adding subscribers, why would they not bid for an exclusive showing window (the same way windows now exist for theatrical, network, airline, on-demand, cable, DVD, and other exhibition windows)?

In some ways, Sirius and XM Radio were doing just this before they merged. (Dish and DirecTV are doing it now.) One had the exclusive MLB package while the other had 16 channels of NFL games. One had Oprah, the other had Howard Stern. DirecTV has NFL Sunday, and so on.

I have little doubt that the business model for the cable companies will change, but then so will it for the content producers and providers, and for the other nascent companies fighting to get into what has, to this point, been a very exclusive club (limited by available bandwidth to the TV networks, and by capital costs of stringing cable all over town for the cable boys).

What that means for Netflix I can't really say; there is a lot of competition in the space (Amazon, Apple, Hulu, et. al) but Netflix has been making the right moves, aggressively pursuing other delivery options. At some point I suspect they will have to start pursuing more and better content, as multiple pathways will (indeed, already) exist into most households. At that point, the Netflix business model will likely undergo significant change, as well.  

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#3) On March 02, 2011 at 9:29 AM, khj25358 (< 20) wrote:

I've already made the shift to watch on my timeline, not the networks timeline so would have to agree that "on demand" and streaming is the profitable future. Will be interesting to see how advertising adjusts. 

Netflix has for several years declared its strategy of building a large customer base due to its convenient mail order DVD business and then shifting this customer base to streaming.

It's success in DVD by-mail rentals is linked to its proprietary software for selecting and cuing up DVD's.  Netflix needs to translate this success into the streaming world -- including making successful recommendations on soon to be released shows. While cable companies offer on demand, the titles are very limitted and the interface is very cumbersome.  Netflix has been successful with an easy interface that makes viewing automatic, and they need to bring this into the streaming world as well. 

 Another challenge for Netflix with streaming is to get the billing right.  Today past customers pay for by-mail rental and you get streaming free. New customers are offered unlimitted streaming for $7.99 and the option to add fees for by-mail rental. Is there a need to have tiered streaming prices and products?   Differentiation will come through a combination of ease of use, fee structure, overall viewing options, and release timing.  


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