Netflix: The Future Of TV

By Julia Bianco on April 7, 2014

Photo by Kelly Nash on Flickr.com

With 44 million subscribers worldwide, Netflix is clearly on the up and up. The online streaming service managed to pull itself out of a dangerous dip in sales following the failure of their DVD-to-mail service, and now, with their original programming starting to garner more and more critical acclaim, they have been able to report huge growth for the last few quarters. The company is becoming increasingly attractive to shareholders, and, as television starts to move to the Internet, Netflix just might take over the business.

When Netflix was first launched in 1997, it seemed like a horrible business model. DVD players weren’t popularized yet, and so the idea of a service entirely dedicated to delivering rental DVD’s by mail was ridiculous. In just a few years, though, Netflix exploded into the business, providing all of the things that its major competition, Blockbuster, couldn’t: direct delivery to mailboxes and no late fees.

Blockbuster’s success plummeted, and even though they did eventually try to introduce “all you can eat” subscriptions without late fees, it was too late. Netflix’s services were just too convenient, and the increasing number of subscribers meant that they had the money to invest in improving themselves.

One of the first innovations that Netflix introduced was a recommendations algorithm. Although websites providing personalized movie and television recommendations is a popular service today, Netflix was the first to truly popularize it. The recommendations, which are based on an algorithm that takes into account films watched, customers’ ratings, rented movies and current queue, and the combined ratings of all Netflix users, provided the first real computerized system to tell people what they should watch.

However, Netflix wasn’t entirely solid with just their DVD-to-mail service. People weren’t satisfied, and there was more and more demand for videos that were available immediately online. To remedy this, Netflix tried to make a risky switch, splitting its service into two parts: DVD by mail and online streaming.

Photo by kristiprs on Flickr.com

This move, which resulted in a price increase for subscribers, was not well received, with many in media and business accusing Netflix of making a rash move that would eventually lead to their downfall. Another failed business decision to move the DVD by mail to a separate website called Qwikster resulted in even more backlash, and soon CEO Reed Hastings decided to reverse the decision and keep the two services together.

Today, the majority of Netflix’s subscribers are there for the instant streaming only. In recent years, the instant streaming service has changed drastically. Initially, it focused mostly on movies, but it has found increasing success with streaming TV shows. Its unique service was one of the first to allow for binge watching without needing to invest in expensive DVD box sets, which was a huge step forward for the business.

Netflix relies a lot on the binge watching market, both in the TV shows it provides and in its original programming. Netflix’s decision to move into original programming, which they release in season long blocks all on a single day, was another huge step forward for the business, and it is what will really catapult them forward as leaders in the future of the television industry.

Moving towards original programming is something that many online streaming services have been doing, with both Hulu and Amazon Prime releasing their own original series. However, what sets Netflix apart is how popular their shows are. They have managed to grab high profile actors, directors, and producers, creating series that are critically acclaimed. So much so, that they have even been nominated for Emmy’s, something that the other streaming services have come nowhere close to.

Photo by Brian Cantoni on Flickr.com

Netflix’s original programming isn’t just surpassing that of other streaming services, though. Soon, it may even become more popular than cable programming. Cable services, which are limited by the typical 168-hour programming week, can’t compete with the flexibility that Netflix allows.

Releasing entire seasons of their shows at once was a controversial decision, but it was definitely a good one. The increase in binge watching makes it really clear that viewers are tired of being told when to watch TV. We live in a world where the Internet is increasingly lowering our tolerance for waiting, and the once a week time slot model isn’t pulling in viewers in the same way it used to.

“We believe we have a major advantage over our linear competitors when it comes to launching a show. The networks need to attract an audience on a given night at a given time,” said Netflix in a recent report. “We can be much more flexible. Because each show on Netflix is not competing for scarce prime-time slots like on linear TV, a show that is taking a long time to find its audience is one we can keep nurturing.”

Netflix’s model represents the future of TV— it just may take a while for us to get there. Netflix is leading the way, and soon, the rest of the major networks will follow.

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