The Media & Entertainment industry is dealing with a rapidly changing environment since the emergence of online streaming platforms such as Netflix. The traditional brick-and-mortar DVD rental landscape and cable TV services were particularly effected by the rise of these services.
Before the industry got shaken up, pipeline companies ruled the DVD rental landscape with Blockbuster being the largest player. Customers were required to visit physical stores in order to rent content. These stores failed to anticipate on the rise of internet technologies such as faster broadband and better video compression. Something the online streaming platforms did manage to do. Blockbuster ended up filing for bankruptcy marking the end of the traditional DVD rental era (Halal, 2013). Nowadays, Netflix (used as prime example in the video) has even surpassed the number of TV subscriptions in the US (Huddleston, 2017).
Multiple characteristics have contributed to user’s preference for these platforms. Firstly, online streaming services offer a lot more variety when it comes to their titles than TV or rental stores. They’re not tied to shelf space and are able to attract customers with less popular titles, thus tackling the long-tail phenomenon (Goodfellow, 2014). Furthermore, they use their data to offer users customized content and are more affordable than cable TV subscriptions and rental fees. Lastly, by streaming content online users have considerably more freedom regarding their watching behaviour.
These benefits obviously contributed to the growth of streaming services, but it’s the communities that derived from the usage of a platform that truly accelerated the industry disruption.
Let’s take a closer look at Netflix’ platform structure: Netflix acts as both the owner and provider of the platform. It controls intellectual property and governance, while also being the platform’s interface. Producers are studios, while the users of these services are labelled as consumers. It’s the positive cross-side network effects between the two sides of the market (producers and consumers) that adds the tremendous value to the platform (Van Alstyne et al, 2016). Because of the great number of subscriptions, content creators sell Netflix more streaming rights expanding the size of the Netflix library. This content growth subsequently leads to an increase in subscribers, which again results in more content.
When analyzing the current streaming industry using Porter’s five forces (2008), it was concluded that current players might deal with negative impacts based on the high threat of suppliers, substitution and high competitive rivalry. The SWOT analysis that was conducted showed this high threat of suppliers as well. As for the future, it was concluded that Netflix and similar players should limit this threat of suppliers by producing their own content, eliminating the fact that they’re just the middle man. It is expected that many suppliers will follow Disney’s example and pull their content from platforms, negatively affecting the current supply platforms offer (Castillo,2017).
At last, players will have to innovate their offerings on time and follow trends like smart devices (virtual reality headsets etc.) closely to avoid the risk of being disrupted themselves.
https://www.youtube.com/watch?v=WRffR5TVNHQ&=&t=6s
References:
Castillo, M. (2017). Disney will pull its movies from Netflix and start its own streaming services. Retrieved from https://www.cnbc.com/2017/08/08/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.html
Goodfellow, C. (2014). Netflix’s long tail is forcing the entertainment industry to evolve. Retrieved from http://www.huffingtonpost.co.uk/christopher-goodfellow/netflixs-long-tail-is-for_b_4716228.html
Halal, B. (2013). How Netflix beat Blockbuster: an exemplar of emerging technologies. Retrieved from http://billhalal.com/?p=295
Huddleston, T. (2017). Netflix has more US subscribers than cable TV. Retrieved from http://fortune.com/2017/06/15/netflix-more-subscribers-than-cable/
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86 (1), 25-40.
Van Alstyne, M. W., Parker, G. G., & Choudary, S. P. (2016). Pipelines, platforms, and the new rules of strategy. Harvard Business Review, 94(4), 54-62.
