1.
Netflix Introduction & Overview
Netflix is in the business of delivering great movies and it mission is
to transform the way people access and view the movies they love. The Company focused
on three fundamental principles: Value, Convenience, and Selection:
·
By focusing on Value, Netflix attracts “eBay
customers”; those who view Internet commerce as a means of identifying a great
deal.
·
With Convenience and Selection, Netflix attracts
“Amazon customers”; those who view Internet commerce as an alternative to the
in-store shopping experience, where offerings can be limited.
1.1 History
Netflix was launched by Reed Hastings in 1998; after paying a $40 late
fee for a video rental, Hastings thought “there had to be a better way”. Since
1998, they have gained over six million subscribers to their 75,000 movie
inventory. Netflix has an excellent business model and has done quite well
since they started with their online business.
1.2Business Model
This is the way Netflix operate customers set up individual
online accounts, choose their favourite movies, a payment plan, and delivery
options. Instead of heading to the video rental store, DVDs are sent through
the mail in a postage-paid return envelope.
Netflix’s
innovative business model has proven to be a success. They’ve set a new
industry standard, and their way of doing business has had a direct impact on
the way consumers rent their videos.
1.3 Competitors
Although there are a number of DVD mail-rental services in
Ireland, such as from Xtra-vision or An Post and Screen Click, there aren’t
many movie streaming services here to choose from – and Netflix will have to
work hard to draw customers away from illegal downloading.
Having one company like Netflix control 80% of the streaming
movie business, the way Apple owns 80% of the music market, is not in the best
interest of the studios.
2. Netflix
as a Disruptive Technology
Disruptive qualities: A sure sign of disruptive behaviour is having
your company name become a verb, as in ‘I’m going to Google him’. Indeed, the
best review a movie can get these days is a critic’s call to “Netflix it right
away.” Continually improving a model it created has helped Netflix defy
critics.
Netflix is a fulfilment machine. To deliver 1.8 million DVDs
per day, it has eschewed technology gewgaws like RFID in favour of pushcarts,
bar codes and scanners, and a home-brewed customer relationship management system.
The technology is so valuable that the company is offering $1 million to any
programmer who can improve its performance by at least 10 per cent. Team from AT&T took a $50,000 “progress
prize” for bumping Cinematic up 8.4 per cent.
Who they are disrupting:
Netflix is hurting Blockbuster, Xtra Vision, as well as creating a significant
barrier entry for Apple TV.
3.
Netflix in Ireland
The launch of
Netflix into the Irish market is undoubtedly a big deal, and its presence here
will present a direct challenge to the likes of the RTE Player and Xtra Vision.
The service is offering a free one-month trial before signing up to the
€6.99-a-month service.
There was just one
problem, however. The content available to Irish customers was deemed not up to
scratch, prompting a host of complaints from people who had signed up for the
service on spec only to find the selection lacked top-drawer new releases and
other titles.
3.1Netflix
Copyright Issues
Netflix is
said to be facing copyright obstacles before it enters the U.K. and Irish market early in 2012. According to Irish Times,
Netflix could have an issue because large Hollywood film
studios like Paramount (VIA), Universal
(CMCSA) and 20th Century Fox (NWSA) "may not
necessarily be willing to agree terms with another subscription-based service,
as they ideally want a ‘per-transaction' model."
3.2 Netflix
Marketing Strategies
Netflix’s marketing strategy is to provide the average
online customer with the convenience of renting, buying, or viewing movies
online without having to leave their computer. There are three types of Netflix
subscribers: the ones that like the convenience of free home delivery, the ones
that want to watch any movie whether it is a foreign film or an older or newer
film, and the bargain hunters that want to watch about ten movies for less than
twenty bucks a month.
Netflix's strategy was that no one else could have the
breadth of content they have or be on as many platforms and devices. Now,
Netflix is focusing their efforts on exclusive content, with the same strategy
that Blockbuster had, thinking that content exclusivity would save them.
4.
Netflix technologies Review
A key component of their technology is a software
recommendation algorithm that tries to maximize the number of movies rented by
each customer by suggesting movies they might like, mainly based on their
previous ratings and other users ratings. Netflix has been using the Cinematic
system, introduced by Netflix in February 2000, to make recommendations.
4.1 Streaming
Technologies
Streaming technology allows you to transmit audio, video and
other multimedia over the Internet. Streaming media services such as Video Desk
deliver audio and video without making the viewer wait tediously to download
files. As your computer plays the media file, it continues to download and
buffer additional content from the streaming server. Playing and downloading
happen at the same time. This process is almost invisible to the viewer except
for a short period of initial buffering.
Advantages of Streaming Media over conventional media files:
·
View In Real Time
·
Faster Views over the Internet
·
Protection against media piracy
·
See who's watching your videos
·
Control over user's viewing experience
·
Easy to monetize your media content
4.1.1
Netflix Historical Streaming Issues/Solutions
Reed Hastings' decide to split Netflix into two separate
companies, one for streaming and one (to be called Qwikster) for the
"legacy" DVD business. He is a genius in recognizing that future of
video rental lies in streaming.
They might be right, but there are a few huge requirements.
The most immediate one being that people sitting at home trying to rent and
watch videos probably aren't thinking much about disruptive technologies and
innovators' dilemmas. They just want to watch a movie, as cheaply and
conveniently as possible.
Furthermore, Netflix until now had the option of giving customer’s
access to DVDs if the company couldn't get streaming rights to a particular
video. That gave media companies a further incentive to allow Netflix to stream
their videos. That incentive is now mostly gone, because if Netflix can't get
streaming rights, it will have to shunt customers off to a completely different
company to get the DVD.
4.1.2
Video/Audio Codecs
PS3 owners, your Netflix streaming experience just got
vastly better than anything else on the market. Netflix on the PS3 will no
longer require a disc, and it'll stream some content with 1080i 1080p
resolution and / or 5.1-channel surround audio, while everyone else will be
stuck with a max of 720p stereo for the time being.
4.1.3
Hardware
Several hardware devices will allow Netflix members to
access the streaming content including the Xbox 360 and some DVD players.
They’re not the first to go down this path, but they are the most recent.
The
hardware requirements for Netflix movie viewings are relatively low, and most
modern machines should easily meet or exceed the specifications. Windows
machines need a processor running at 1.2 gigahertz or faster, and 512 megabytes
of RAM. Netflix also works on Macs with Intel processors and at least 1
gigabyte of RAM.
4.1.4
Client Side
4.2 Netflix Cloud
IT Infrastructure
Netflix has generally moved so forcefully into the cloud and explained
why it has built its own software development platform there, too. In a word,
the cloud gives Netflix great agility, which has been vital to its success in
fighting off would-be rivals such as Xtra Vision etc.
Netflix currently stores more than 1 petabyte of movie data at Amazon, To
keep up with the steady stream of new devices appearing in users' hands and to
continuously add to its analytic and other capabilities, Netflix runs a
sizeable software development operation, and it has now equipped its coders
with a home-grown development platform that also runs atop the Amazon cloud.
4.2.1
Overview of Netflix IT Infrastructure
Netflix which has been using the e-commerce giant’s Web
services for a year has expanded its usage and migrate more of its
infrastructure to the cloud.
Netflix’s movie lists, search, movie Trans-coding and
recommendation system will be powered by Amazon Web Services (AWS). By
offloading infrastructure to AWS, Netflix’s tech team will focus more on the
user experience.
Netflix now uses Elastic Compute Cloud (EC2) and Simple
Storage Service (S3) to deliver its movie subscription service to new platforms
like the Wii, PlayStation and i-Pads. Content Delivery Networks
4.3 Content
Syndication/Delivery
Hastings has already talked about how the streaming strategy
will differ from Netflix’s past, emphasizing a narrower selection of exclusive
and original content rather than the more comprehensive selection that the
service had with DVDs. He elaborated on that idea, once again comparing Netflix
to cable: “It’s a natural outcome of us been a network like any other cable
network.” He says it’s normal for a network to start out with “low-end,
nonexclusive content,” then, as it tries to bid for more premium content like
Mad Men (Hastings described it as moving up in “the content-buying economic
strata”), it’s essentially competing with other cable networks for exclusive
syndication rights. You can expect to see that trend continue, Hastings said,
but there will always be “a broad range of nonexclusive content.”
4.4 Network Effects
on Broadband in Ireland
The
potential economic impact of broadband in Ireland is substantial. The role of
broadband technology in boosting competitiveness and economic activity has been
emphasised by many State bodies.
Despite
flat-rate narrowband internet access services becoming available in Ireland
only relatively recently, more than 90% of businesses and about 40% of Irish
homes use the internet today. Given this fact, it might affect effect on
Netflix in Ireland.
5.
Future of Netflix in Ireland
The launch of Netflix in Ireland is a good example. However, Netflix is
just one affordable, unlimited video content provider in one of the most
competitive sectors of the digital age TV industry.
The days of channel surfing and TV guides are coming to an end. The ability to
search and stream TV shows and films anytime is here, but this is only the
beginning. What this means for the advertising industry is the ability to deliver
more personalised and targeted content.
6 Conclusions
Netflix will continue to remain on top of their market share
as long as they hold the competitive advantage over the other companies that it
is up against.
Netflix has peeved some of its faithful in the past year
with poor customer service, sluggish deliveries and off-target recommendations.
The company’s own user forums are filled with threats to abandon the service in
favour of Xtra Vision, Blockbuster or Apple. It’s time to sharpen up the
algorithms.
There is no doubt
the Netflix
set-up is beautiful to look at while the picture quality is excellent as long
as you have a strong internet connection, but without the content, will the
customers come?
That may not be the
case but if Netflix doesn't have the shows and films people really want to see,
the number of platforms the service is available on and its ease of use won't
matter a jot.
Like in any media
business, content will remain king, and without the content the service will
struggle.
Netflix relies heavily on its proprietary technology to
process deliveries and returns of DVDs and to manage streaming of movies and TV
episodes; any failure of this technology or adverse developments, such as a
strong increase in delivery cost or strong decrease in DVD retail prices, could
adversely affect its business. Netflix says it wants to continue to implement
its strategy by providing value for subscribers, develop technology to enhance
the subscriber experience and operate efficiently, and build mutually
beneficial relationships with movie and TV studios.
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