Netflix quickly grew into empire it has today, within 5 years it has grown from 26 million to over 100 million subscribers (source). With a simple monthly subscription based user model, they do not rely on advertising income, providing viewers solely with what they want to see whenever they want to see it. Especially, as their app is compatible with many screens beyond television. All that is needed is an internet connection. With supply side economies of scales, they are able to provide to an almost unlimited customer base with marginal costs close to zero.
Their most important asset however has not yet been mentioned. Data. Like many other internet companies, they are able to track every single move viewers make. Not only does this allow them to use it in a similar way as Amazon does by creating recommendation based on complicated algorithms and big data analytics. It also allows them to formulate predictions of which shows will be successful based on aggregated data from the behaviour of over 100 million viewers. Not only do they track what genre those viewers watch, but also what actors, colours, when pause was pressed and the device on which is watched to name a few. This information also provides critical insights when deciding on new titles, especially s they do not focus on the long tail. When deciding on House of Cards, they made many comparisons with Macbeth based on quantifiable data to create predictions and increase the likelihood their viewers would like it. With all this knowledge, Netflix is one of the most interesting and innovative companies in the film-industry. Finally, to provide an insight in the secret of Netflix, Jeff Magnusson, serving as data platform architecture manager at the company, provides three key point of Netflix’s data philosophy used during all their analysis:
1. “Data should be accessible, easy to discover, and easy to process for everyone.”
2. “Whether your dataset is large or small, being able to visualize it makes it easier to explain.”
3. “The longer you take to find the data, the less valuable it becomes.”
Sources:
https://www.fool.com/investing/general/2015/09/30/how-netflix-inc-really-creates-value.aspx