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Netflix—Are You Still Watching?

In a world heavily supplemented by an influx of technology with various applications, the television industry is one of the many key players in the entertainment collective. The current leading entity in this bid, with 158 million subscribers worldwide, is Netflix. An American media-services provider that offers a wide range of television programmes and movies, Netflix’s content is specifically curated to the interests of each viewer. This model of viewing content has risen to become the norm and has replaced old-fashioned mediums such as cable TV, and up to a certain extent, the big screen. As of April 2019, Netflix has an 87 per cent market share in the USA and nearly 30 per cent globally in the streaming services market. 

Netflix was founded in 1997 by its current CEO, Reed Hastings. Netflix began as a web service that allowed people to rent DVDs online and have them delivered, or returned, by mail. It adopted the approach of enabling people to stream content online in 2007. Consumers were able to watch what they wanted, whenever, or however, they wanted, without being limited to a specified time frame. In the late ’90s, Netflix rapidly grew as a competitor to many leading companies at the time. By the early 2000s, Netflix was in prime position to be acquired by Blockbuster. However, the proposed deal wasn’t mutually agreed upon by both parties. Netflix soon began putting Blockbuster out of business and eventually, the latter declared bankruptcy in 2010. Soon after, Netflix started growing on its own as a streaming business by releasing its original television series and movies, and by striking exclusive deals with studios and show-runners. As a result, the stock value skyrocketed in 2013 and has only proliferated since. 

A Blockbuster outlet closing down as a result of Netflix making their service obsolete. [Image Credits: Entrepreneur]

Cable companies are by far the most affected entities by the advent of Netflix. In 2013, Netflix began competing with TV networks and cable directly for original content. While most networks only approved shows based on pilots hitting specific metrics, Netflix offered series producers and show-runners contracts upfront to create an entire season or two. Additionally, show-runners were given creative leeway to develop their programs without notes or approval from Netflix. As a result, many of the most critically acclaimed and popular new series now release on Netflix instead of the established networks.

Netflix also started uploading entire seasons of established TV series at once, resulting in the advent of binge-watching, in contrast to broadcast and cable TV’s once-a-week programming model. Many TV networks, such as NBC and BBC, are now experimenting with this model, even if it means sacrificing advertising revenue. Netflix’s production methods have forced TV networks to be more aggressive in recruiting and retaining talent by paying more generously and offering more creative freedom. Netflix’s most salient feature is its on-demand library of media, along with the option to download the same. If this trend continues, cable services such as Tata Sky are vulnerable to becoming obsolete in the coming years.

 Comparison between Netflix and major cable companies in the US. [Image Credits: Statista]

An inevitable consequence of global streaming services is its impact on the Hollywood sector. Netflix is creating greater original and award-winning content and offering it to the customers for affordable subscriptions. By doing so, it is constantly feared by Hollywood studios and film distributors, due to their entire business model being disrupted. In the first six months of 2018, Netflix had released as many movies as the six major studios of Hollywood combined. It is also planning to spend around $8 billion on creating original content, television series, and movies that would give competition to the other studios. It is increasingly producing movies that are released to the customers on the same day as they hit the movie theatres. For the active user, an average subscription to Netflix is a cheaper alternative to purchasing a movie ticket. Netflix reflects people’s tendency to prefer quality content and value for money over 4D and IMAX. Movies such as The Irishman and 6 Underground are a testimony to Hollywood producers capriciously shifting their business model to generate a larger revenue by directly broadcasting movies on Netflix instead of the theatres.

[Image Credits: Statista]

Despite Netflix’s boundless success with its extensive variety of regional and international programmes, it does have several limitations. To start with, all the new content isn’t readily available for streaming on Netflix. This is owing to the long and onerous process at the corporate level to put pen to paper on lucrative deals and contracts. Secondly, Netflix’s library is quite outdated. Viewers often have to wait for a long time before its library is updated and new content is added.

Another significant drawback is the lack of a quality adjustment feature, which leads to a large data cap that eats away a sizeable chunk of bandwidth. Moreover, Netflix has an odd way of eliminating some TV shows and movies. Periodically as the library is revised, old media is discarded without warning, which is frustrating for consumers who must rely on third-party sources to be informed. Lastly, Netflix does not have a live-streaming feature. This is one of the primary issues when it comes to the entertainment sector, and is overcome by competing services such as Amazon Prime and Hotstar, which offer live broadcasting of sports events.

Netflix also sports an easily overlooked Achilles heelits outstanding debt problem. As of November 2019, Netflix is at a debt valued at about $12 billion, which is not quenched by its relatively minor cash revenue. By the end of 2019, Netflix is expected to generate a cash loss of $3.5 billion. The driver of its cash problem is hefty content costs. The concern of the hour is that if the consumer market stops growing, it won’t be able to meet its debt obligations, and this will quickly throw the company into bankruptcy.

[Image Credits: Statista]

India has shown a penchant for Amazon and the multitude of services that are offered along with Prime Video. To combat this, Netflix executives are working on a new long-term plan in India to offer cheaper subscription rates. As of now, Indian users are privy to a mobile-only subscription plan at a considerably lower price, thus benefiting the company in the short run. Despite having poured money into original Indian titles such as Sacred Games, Chopsticks, and Lust Stories, as well as a multitude of beloved Bollywood titles in their library, Netflix has a relatively low footprint in the Indian market.

Due to the country’s capriciously unsaturated market and the broad range of ethnic communities, it is an increasingly unassailable challenge to cater to everybody’s interests. A pivotal player in the Indian market that shuts the doors for any further expansion by Netflix is Hotstar, which offers incredibly cheap live-streams of cricket and football matches. Netflix most recently has an estimated four to six million monthly active users in India, in comparison to Hotstar’s 300 million users.

Sacred Games, which enjoyed nation-wide success, was widely advertised in India by Netflix. [Image Credits: BBC]

Another important aspect to consider in today’s scenario is data mining and artificial intelligence. Netflix utilises a highly efficient algorithm that controls the content being suggested on the platform based on user interactions with the various titles. Their selection is based on the existence of over 75,000 ‘micro-genres’ that are latent to the user, which allows for ludicrously specific recommendations.

By cross-referencing basic geographical information and the data produced by the 70 million-odd Netflix subscribers, Netflix can produce comprehensive charts detailing exactly what people watch. Given the vast wealth of statistics about viewing habits Netflix has at its fingertips, the company abstains from micro-managing shows because they have more than a fair idea of what will flourish. Perhaps the best example of this is House Of Cards, Netflix’s first original series, which was predestined to succeed even before its production as the company possessed user data that indicated users would enjoy it.

Just a few years ago, most television programming could only be consumed on television. This has changed largely due to Netflix, whose success has been deemed an existential threat for the entrenched TV industry. Many consumers have already cut the cord from existing cable, as the cost of a Netflix subscription is a small fraction of that of most cable packages. Numerous companies are working to overtake Netflix, and the firm faces competition from other digital operators like Amazon and Google. All of this merely points to the fact that Netflix has broken the mould for how television is made, watched, rated, and ultimately exhibits the extent of its influence on all future content.

Featured Image Credits: Unseen Opportunity