Monday, January 28, 2008

Netflix - Community driven success?

Steve Jobs and his feared i'Craze' corporation has entered Netflix's arena of competition. With their recently released AppleTV and movies available for streaming directly to your home, Apple will surely be the company that finally stops the success train for Netflix.... or will they? Before Apple, it was Blockbuster, Amazon, and Wal-Mart. With arguably some of the most powerful companies in the US, how has Netflix maintained its growth streak over the years??

Community Input!!

I am a very satisfied Netflix customer, along with 7.5 million others (as of the 2007 4Q financial results). I personally enjoy the ease in which I search, select, receive and return movies on a weekly basis. However, this aspect isn't necessarily unique to the industry anymore with certain companies looking to capture a portion of the online rental market as well. Netflix retains and continues to capture more of the market because of its community driven feedback, as well as the member's 'community' of movie sharing information.

Reed Hastings (CEO) and company made the strategic decision early on to mimic the popularity of a social network without advertising itself as a social network. Even its developers in charge of the community will deny any claim that they are building a social network (see 'About this Blog' -, but I find it hard to believe they fell into this realm by accident. Call it Social Design or Conversational Marketing, I call it seeing the opportunity to stay ahead of major competition. How else could you explain their ability to stave off the likes of Wal-Mart, Blockbuster and in my opinion Apple in 2008?


Javaid said...

What's really interesting about social networking when it comes to Netflix is that there are informal networks of customers that are formed to get around some of Netflix's complex rental algorithms which slow down shipments of new movies. These networks are usually with neighbors or co-workers or both where they decide which movies to put in their queue and share them when they arrive. I wonder how this will effect Netflix's profits in the long run since these members usually pick the lowest tier of membership?

Olu said...

Netflix has a new competitor in town Cables On Demand. On Demand allows you to watch movies on specific cable channels such as HBO, Showtime, Cinemax, and etc. at any time that you want as long as the movie has been shown on that channel. These movies are free as long as you already subscribe to that channel. Cable also allows you to order recently released by using Pay Per View which you order movies through your cable box. I use On Demand all of the time to watch movies late at night when I cant sleep and there is nothing on tv. Using On Demand you dont have to return any rentals. At the touch of a button you can delete the rental and that is how the rental is returned. Only requirement is that you have cable. That is the only thing that will set you back. No cable no access to this product.

Bryan said...

Javaid - Great point. I agree that these networks do exists (as I believe I am a part of one as well). And most often, people probably go for the lowest membership tier. However, I think NetFlix is happy to have as many customers as they can get, and have to assume people will try and cheat the system somehow. I don't think this is a battle that they can win and most likely don't really care to fight it. Still a good point though. I would like to see the estimate numbers on such informal networks.

Olu (IronMan) - Also a good point, but I come back to the fact that NetFlix has been so successful due to the community aspect of their service. No doubt Cables on Demand is probably faster, maybe even cheaper, but its that fad of being a part of a community that keeps customers paying that monthly fee at the moment I think.