The streaming market is ripe for disruption. Can you learn from how the big companies are responding? Are there lessons you can apply in your business?
At the end of last week Netflix announced they are raising subscription prices. With the reason behind it that they need the increase to continue creating great original content. So really because they need the consumer to fund their costs, rather than because they are bringing more value to their customers.
Reading analyst assessments, it’s because they have hit a stall in growth of subscription numbers. To continue a growth path that satisfies investors they need to increase revenues. With no growth in numbers of customers, then they need to get it from current subscribers.
A competitive risk they are willing to take.
The price increase is $1 or $2 dollars depending on your plan. Not a huge amount. They have loyal subscribers.
Still, they have increased it several times the last few years. Eventually, they may hit a price point where they start losing subscribers. Maybe at this point in time they are more concerned about losing subscribers if they can’t compete on a content level.
I’m sure some of their current costs are in evaluating those risks. And time, as the saying goes, will tell.
Is the textbook disruptor ripe for disruption?
Possibly, the disruptor has now grown to the point where it is ripe for disruption.
Recall, the innovation definition of disruption is when a new entry in a market offers something of lower price, and often lower quality, that upends established market leaders. Netflix did that when they are upending video rental stores like Blockbuster, by offering streaming services.
It sounds like they are in the opposite position now. They are one of the established market leaders. Competing by focusing on producing higher and higher quality products.
One of the things they did try in recent years, was to offer different subscription levels. They offer a lower priced subscription, that restricts you from using your subscription from multiple devices at the same time. They didn’t scream it out – but it was heard.
It went with the lower band because I’m the only one using my subscription. I don’t need to two devices at the same time. And unlike my Apple ID account, it’s not restricting me to registering a limited number of devices – so I can watch Netflix on both on my iPad and my TV. I just can’t at the same time.
But I heard about this through another subscriber. Netflix could have noticed that was my usage pattern. They could have offered me that as an option.
An ideal customer is a customer that pays
I am a believer that an ideal customer is a customer that pays. I respect that Netflix doesn’t offer a free service or put ads on content. They are setting a price and people are paying for it. They have built a brand and have a loyal following.
Still with Prime, Disney+ and a proliferation of other streaming services, it will be interesting to see what happens next in the market.
To be honest, I have considered cancelling my Netflix subscription because I don’t watch it every month. Then I looked at what I do watch… like The Crown. And because I can’t watch it anywhere else, I’ve stayed.
I never can find anything on Prime. But then I only have it because of the Amazon Prime next day delivery. It’s not the streaming that has made me a loyal customer.
But I digress.
Lessons from a market at risk for disruption
I believe you can learn tactics for your business by watching what the streaming market does and will do in the next few years. They are a market at risk for disruption
Let the big players take the risks. Can what they do teach us things we could adopt in our business. Albeit with maybe more mitigation, because we have less room to risk.
You can spot a few lessons in this look at Netflix:
- Test the limits of your pricing. Though mitigate risk by tying it to the customer’s perceived value, not current costs.
- Consider different ways to package your offerings. Let customers who would benefit, know about it. Even if there’s a short-term drop it revenue, it creates loyal customers.
- Invest in what you are good at.
- Expand your offerings by bundling with established products.
- Adopt some of the things that make streaming services successful – personalization, ease of use, captivated audiences.
- Watch out for disruption. Learn from other players in the market.
I think it’s a rare person who can predict what shape the next entertainment disruption will take. Though most of us can see that something is coming.
My prediction is that the whatever it is that it will be to the benefit of the consumer. Because the consumer will drive the need for it. The winners will be the ones who listen to them.
Hang onto your hat. It’s going to be a great ride.