Netflix Is the Video-Streaming Behemoth — Here’s Why It May Not Last
Netflix once owned the on-demand video-streaming space, but with players like HBO, Amazon, and Hulu threatening its throne, the company’s future may not be sealed.
According to the Nielsen Total Audience report for Q4 of 2014, more than 53 percent of U.S. homes have access to at least one video-streaming service. Netflix is leading the charge with 36 percent market share, followed by Amazon Prime at 13 percent and Hulu Plus at 6.5 percent.
While Netflix still leads, shares have dipped in the wake of Hulu’s plans to offer ad-free streaming of its programs, recent updates to Apple TV (including Siri voice activation), and Hulu’s purchase of cable network Epix. The 2015 launch of HBO NOW and the growth of services like Sling TV could also chip away at its post.
But despite falling shares and competitors like Apple upping show production, Netflix CEO Reed Hastings remains eerily calm and assured about the company’s continued dominance.
If I were Hastings, I would be worried.
The Video Streaming Landscape
To Hastings’ credit, Netflix has made some savvy maneuvers to stay relevant in the space.
Future on-demand video domination won’t revolve around content development, but content variance. And Netflix has fresh, varied content — the women’s prison drama “Orange Is the New Black” was nominated for 12 Emmys, while “Breaking Bad” creator Vince Gilligan credited Netflix with keeping the show on the air.
Unfortunately for Netflix, the biggest fight will be around which streaming service can offer customers the most value.
And customers are on the fence about Netflix’s value proposition. When the company missed year-on-year subscriber growth forecasts in October 2014, Netflix blamed its price hike the preceding May, which raised its subscription price just $1 to $8.99 per month. Meanwhile, Sony is offering on-demand movies without subscription fees, viewable across devices like PlayStations, tablets, and phones. Amazon is gunning for Netflix’s position by offering video subscribers free two-day shipping, along with unlimited music streaming and unlimited photo storage. It remains to be seen whether these platforms can snare Netflix customers en masse, but they do offer value where Netflix can’t.
Hastings’ passivity doesn’t inspire confidence in a crowded market, and he must demonstrate a competitive strategy to maintain market share, gain consumer respect, and create allegiance. The company’s long-term view is still centered on challenging linear television — a model Netflix has already shown it can compete against.
With players ranging from Amazon to iFlix to HBO, Netflix can’t afford not to watch its back.
Strike Back Against Competition
Like Hastings, most CEOs will face threats from competition, and this situation offers a few valuable lessons:
- Embrace your identity to foster loyalty. When Netflix overtook Comcast in early 2011 as the most popular video-on-demand subscription service, it became a household name. And Netflix is right to play up its Internet fame with its “Netflix and chill” button — but gimmicks won’t keep customers.Focusing on customer loyalty is the surest way to stay on top: Netflix’s original rise stemmed from delivering high-quality, varied videos at a low price. Now consider how growth forecasts tumbled after Netflix raised prices in 2014 — customers needed just one reason to jump ship. Don’t lose sight of what prompted customers’ initial loyalty.
- Go international. As Netflix’s S. growth slows, it’s essential that it emphasize growth in international markets. Netflix has realized this, and it now hopes to capitalize on expanding markets in nations ranging from Spain to Kenya. Analysts attribute Netflix’s revenue growth primarily to overseas subscriptions, but it remains to be seen whether this strategy will enable Netflix to defend its castle against competitors.
Remember, you might have an amazing product for a limited market, but if someone across the world goes global first with a similar idea, your customer base could slip out from under you.
- Listen to what customers want. There’s no denying that we have a love-hate relationship with Netflix. Netflix has the most subscribers of any streaming service, but it scores relatively low in customer satisfaction. While the streaming giant is always adding new shows, customers’ primary complaint is poor streaming selection.It might sound simple, but Netflix’s best move is to listen to its customers. The company with the greatest variety of streaming options will command the greatest viewer base. When customers tell you what they want, listen to them.
- Be generous with your team. With 2,450 employees, Netflix has a veritable army of employees. But these people will eventually leave the company. These employees might even become the competition, such as when Facebook became known for siphoning off employees from tech giants like Microsoft and Google.
If Netflix can keep its talent happy, it will curb competitors’ encroachment. To that end, Netflix recently announced unlimited parental leave for up to a year to new parents. While this generous policy must come with a hefty price, it’s undoubtedly a great move for Netflix.
Employees who feel appreciated tend to remain loyal. They also share their positive feelings when talking about the company to clients, family members, and potential employees.
- Be transparent, even when you don’t have to be. When I heard Netflix’s chief communications officer Jonathan Friedland saw “zero value in disclosing” specific viewership numbers, I became concerned. While it’s not mandatory that Netflix share this data, nondisclosure signals the company doesn’t value transparency.
It doesn’t pay to hide in business. Remember, it takes just one embarrassing leak to cause a firestorm of bad press. Be open to the public and to employees to show confidence and ward off any claims of wrongdoing.
Hastings must be careful — it’s never smart to turn a blind eye to the competition. Netflix may top the video-streaming leader board today, but without acknowledging the threats in its path, market share could nosedive.
By sharpening your perceived value, investing in employees, and strategically planning for the future, you can continue to grow. Competition is always out there, and it’s up to you to stay one step ahead.