Netflix is an online video streaming platform that has emerged as a competitor in the past few years that uses the connectivity of the Internet to provide video content to the users at very minimal costs. This article will critically analyse how the business of Netflix has transformed the Internet using the web and other digital technologies which have brought a paradigm shift in the video streaming and screening industry. Initially, this article will provide an overview of the business which will include effects on the social, economic, political and cultural worlds. Further, the history of Netflix and the development in its business will be discussed which will be followed by a discussion on its business model. Following that, there will be a discussion on internet ecology and the transformation caused by the use of Netflix. In the end, a summary will be provided.
What is Netflix?
Netflix is a video streaming online platform and where people can watch the latest web-series, movies, documentaries, anime and other videos through their internet-connected devices for a minimal monthly price (Netflix, 2019). The California based business is one of the largest internet revenue-generating company that allows its customers to watch as much video content as the users like with new content getting added on the platform every week with new videos to discover every week (Burroughs, 2018, p.2). The digital platform of Netflix is based on the online video streaming future of the Internet with online video streaming accounting for the most amount of traffic on the Internet with a major focus on entertainment through online videos (Sherman, et al., 2014). Consequently, the statistics on Statista by Watson (2019) have reported that the monthly-subscription of the platform with the sharing economy based on sharing the video entertainment content has become prominent to generate 150 million subscribers in 2019. As a result, the easy access to the video entertainment services has affected the economic, political, social and cultural worlds.
History Behind Netflix
Netflix has become a giant in the Internet world but the business had to struggle in its early stages to reach the current scenario. As reported by (McFadden, 2019), Netflix was started by Marc Randolph and Reed Hastings where the business was purely about renting movies’ CDs and DVDs through the mail services. The customers could post their orders on the website while the Netflix delivered their orders through the mail and the customers posted back the DVDs to Netflix after the rental period got over. The business was named as Netflix because ‘Net’ was a short term for the internet while ‘flix’ was slang for movies. Consequently, with the success of the online movie rental service of Netflix, it switched to a subscription-based platform while offering unlimited DVD rentals for a minimal monthly price. Eventually, streaming services were introduced by Netflix in 2007 which slowly expanded in all the countries to be available to all the people worldwide in 2016. However, the growth of the business in different countries and reaching out to potential customers has been hampered by the government regulations, poor Internet facilities and low cost of the cable services in various countries (Mourdoukoutas, 2018). Also, Netflix has brought a paradigm shift in the TV and Film industry with a change in how people view the content with the traditional movies released in theaters facing competition from movies easily available at the platform of Netflix (Morgan, 2019).
Internet Transforming Business Model of Netflix
As defined by Baden-Fuller & Haefliger (2013, p. 419), a business model is a system that addresses the problems of the customers by engaging with their needs and delivering the satisfaction of the customers while monetizing its values. The business model allows a better understanding of how the business works and the value created by the business for different stakeholders and eventually generating funds for development of the business (Silva & Trkman, 2014, p. 381). Consequently, the use of internet technology has driven whole of business model of Netflix which has allowed to collect large scale data on its customers that have improved the business performance (Adhikari, et al., 2014, p.1985). Also, artificial intelligence technology has been used effectively by Netflix to provide recommendations to the users based on their watch history, preference, demographics, etc. which has led to 80% of the watched content based on the recommendations (Morgan, 2019). As a result, the business model has become profitable by offering unlimited access to prominent web series, movies and documentaries by offering three types of subscription plans ranging between 8 dollars and 14 dollars. Therefore, the business of Netflix is transforming the world in the ways of consumption of media while facilitating binge-watching of videos through an internet connection.
Intelligent Recommendations provided by Netflix. Image Source: (Columbia Spectator, 2016)
The mobile application of Netflix provides a user-friendly interface where the video content can be streamed on four devices simultaneously in 4K and HDR quality. Further, Netflix can be accessed through its website and also through the mobile applications that are available on iOS as well as Android operating systems. Not only that, but Netflix also allows you to watch more at low data consumption by changing the playback setting and video quality of the videos accordingly (Rodriguez, 2019). Moreover, the video streaming application of Netflix allows its users to download the content and watch it whenever they feel like providing a smoother watching experience with no issues of buffering and loading (Woollaston, 2016). Also, the customers can rate different shows and movies available on the platform of Netflix that allows users to know more about the views on the shows and decide accordingly as to what is suitable for watching.
Business Model of Netflix. Source: (Business Models Inc, 2019)
Further, the article of Business Models Inc (2019) states that the rating of the movies and shows is dependent on the number of views, feedback of the users if the movies were watched until the end and the IMDB ratings of shows which builds trust in the ratings of the shows. As a result, a better understanding of the customer preferences and a better recommendation model developed for its users enabled Netflix to gain a competitive advantage which eventually led to developing their own products and shows. Moreover, it has expanded the platform to all internet-connected devices such as Smart TVs, gaming consoles, etc. for a better experience of the movies and shows (Pendlebury, 2019).
Reviews of Netflix on Google Play Store. Source: Google Play (All Rights Reserved)
Internet ecology of Netflix
The internet ecologies include the social and industrial organised system of the information technologies which support each other in facilitating the operations of the business. Netflix is a stock-listed business in the United States with a part of NASDAQ and has become a market leader in the social management of people through its video streaming services having 250 million subscribers of the video-on-demand services and annual revenue of 15.79 billion dollars in 2018 (Watson, 2019). The wide range of on-demand videos offered by Netflix which includes web series, movies, documentaries of a variety of genre has made the business a market competitor in the video streaming industry as well as the TV and Film Industry.
The video streaming industry is a highly competitive industry and the business of Netflix faces high competition from other video streaming platforms such as Amazon Prime Video, Hulu and Disney+ (Foldman, 2019). Amazon Prime is a well-established business and competing well with the business of Netflix with the similar use of technologies while Hulu has a significantly lesser subscription base, whereas Disney+ is one of the hyped digital streaming services that will affect the business of Netflix. Besides the loss of market share from other video streaming platforms, pay-TV services have also been a competition for the business of Netflix (Foldman, 2019).
The suppliers of the business of Netflix are the production houses of all the web shows, movies and documentaries who lend their videos to Netflix that facilitates binge-watching of video entertainment through the platform of Netflix. Further, the article by (Marshall, 2019) in Business Standards state that movies, web shows and other videos on the Netflix have violent and inappropriate content that requires regulations from the government of various countries according to the censorship board of different countries. Whereas, the video content on the platform of Netflix is suitable for people of all ages ranging from kids to teenagers and adults to aged people. Therefore, the suppliers of the business of Netflix is its own production house and the licenses of the movies and web shows being streamed on the platform and the censoring bodies of different countries regulate the content of videos on the platform.
Internet Ecology of Netflix
Netflix and Innovation
The business of video streaming services of Netflix has brought a change as to how the people relate socially as ‘going out for movies’ has slowly changed to ‘Netflix and chill at home’. The research study of Nair, et al. (2019, p. 394) has asserted that the shift towards movie streaming rather than movie disc media mitigates the environmental impacts as the digital distribution involves environmental emissions. However, the easy accessibility of movies and web shows for young people has potential negative impacts of the fictional melodrama, violence or sex shown in the videos on Netflix. Also, it has concerns about young people becoming inactive while becoming a TV couch potato that has various adverse health risks such as obesity (Matrix, 2014). Moreover, the teenagers are spending more time in front of the screen with movie or web series marathon becoming common among them.
Binge watching Netflix with increased screen time. Source: (RojakDaily, 2018)
Furthermore, Netflix was among the first ones to start the online culture of video streaming and making use of the latest advanced technologies such as artificial intelligence for enhancing the customer experience (Zanker, et al., 2019, p. 162). As a result, with its innovative business model, Netflix has targeted the customer segment of fans of blockbuster movies and keen TV show watches while streaming it on various internet-connected devices such as smart TVs, smartphones, gaming consoles, etc.
Video: Effects of Binge-Watching
Eventually, Netflix has brought a social change in the society as the people can use the internet services to watch their favorite shows or movies from anywhere in the world eliminating the need to wait for renting the DVDs and paying a large amount of money for watching the movies in the theaters. Moreover, Netflix has managed to create thousands of jobs in various countries for producing movies and shows for the interests of the corresponding countries (Rudgard, 2019).
However, the content on Netflix can be violent and have potential negative impacts on the people watching the video content available on Netflix. The research study of Arendt, et al (2019, p. 490) has shown the Netflix show of 13 Reasons Why which had graphical content of an adolescent girl’s suicide has had negative impacts on the young people. Also, the monthly suicide rates among the youth of the US increased after the release of the web series of 13 Reasons Why (Bridge et al., 2019). This shows that the video content streamed on Netflix can have negative impacts on the people watching it. As a result, the content of Netflix is being regulated and censored accordingly to mitigate the negative impacts of the video content in different countries such as Turkey, India, etc. (Marshall, 2019).
Netflix is one of the leading business operating in the entity of online video streaming services that started as DVD rental services and then eventually developed as subscription-based streaming service. The business of Netflix has made use of Internet in their business model while using Artificial Intelligence for enhancing the experience of the customers. Further, it has brought a paradigm shift in the TV and film industry while competing with other video streaming services such as Amazon Prime, Hulu, Disney+ and other Pay TV services. The video content provided by Netflix can be unsuitable for some people which in turn requires censorship of the videos which are targeted towards fans of web shows and blockbuster movies.
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