7 September 1927,
Inside San Francisco City, America:
The world's first black and white electric television is
powered...after which many technological advances took place. We Shifted From
Black And White TV To Colored TV then digital TV, and doing so, we are using
Smart TV today. The irony is, that today our smart phones have replaced even
TVs.
In the year 2000 when
evaluation of yahoo crossed $125 billion did anyone at that time thought that
google will one day swallow yahoo. Kodak, at one time people thought that
camera meant Kodak camera means camera with reel. But in today's date there is
neither reel camera, and nor is the name of Kodak anywhere.
Netflix, the company that once ruled Ott's world. Today that
company has lost 2 lakh subscribers in just 3 months. What mistake did nextflix
do that today people are running away from that company. Today Netflix is
spreading badly, neither new people want to subscribe to Netflix and those
who are already sitting subscribed they are also leaving the platform
The company that gave birth to Ott, people are not even
asking that company today. But why is it so?
After all what is the fault of netflix?
Most importantly, what are the powerful business lessons
Learn from this case study and implement it on your business
So this story starts in 1997, when Rational Software acquires a corporation called Atria for $700 million which was the biggest acquisition of that time.
In the year 1991,
Reed Hastings, along with Raymond pak and Mark Bauks starts a new company Pure software. Reed became the
CEO and Mark became the Marketing Vice President of the company. And by the
year 1996, Atria acquires the entire
Pure software company. Due to which Reed Hastings gets $2.5 million
There are a lot of stories about Netflix's early ideas, but
no one knows which of them is the truth.
Reed Hastings says that he once rented a movie called Apollo
13 from Blockbuster but due to late return 6 weeks he was fined $40. That time
when he was returning from Gym, he got the idea of Netflix, that they should
start a subscription based movie rental website where people send their DVD's
requirements and get those DVD's delivered to their home.
But the co-founder of Netflix calls the story a marketing gimmick.He
says that when he was returning from Antria's office, he got the idea of
netflix. This thing can also be true because Mark, before working in the pure
software company he was the Co-founder of a company called Micro Warehouse that
used to sell branded pc products. That's why he was also made the CEO of
Netflix in the early days because he had a good knowledge of marketing and
online mail order servicing.
But even then this world only believes in the story told by
Reed Hastings because within the year 2003 Mark left Netflix
Pseudo inspiring
story
There are stories of global marketing that big companies
sell us so that we can connect more with these companies. Google, Amazon and
Apple, and do not know how many companies of United States started from a
garage which is also true, but people especially motivational speakers and
people from mlm portray it in this way that companies started from the garage
because the founders of all these companies were very poor which is not at all
true.
Most of us do not even know that more and more middle class
people homes in America are designed in this way where there is a wooden house
has a garage and a nice garden. The reality is that all these founders didn't
come from very poor family but just had to start small
So they started from their garage, and most importantly, in Indian
and American middle class people, there is a difference of land and sky.
In the United States, if your idea is thoroughly tested, you
get access to funding which Is not In India And This Marketing Game Is Called
Pseudo Inspiring Story
Many people in India portray the story of Netflix in this
way “What fine was imposed on a person and he created a company worth $170
billion”
And interestingly you can do this work too, come-on, you can
do it, but no one tells that Reed Hasting is already a computer scientist and
he was a very strong mathematisation. And along with this he was also the founder
of a million dollar company. And he already had $2.5 million when he started
Netflix which is very good money according to 1997.
Same goes for Elon Musk People say that they work 8200 hours
and to save that time, he only sleeps in his office. But no one ever asks such
a question that if so, then how he have time to make new girlfriends, where
does it come from?
There is a very high chance that the stories these companies
sell you those are not real.
That company was none other than Amazon. Amazon Owner Jeff
Bezos initially offered $16 Million To Acquire Netflix, Mark Rudolph thinks
this idea is very powerful.
But Reed Hastings owned 70% of Netflix's stakes that's why
Reed Hastings refused to sell Netflix and this was where the fate of Netflix
was about to change forever.
Have you ever thought that Netflix, Amazon Prime, Zee5, Sony
Liv all these platforms become everyone's choice today?
Well this has two reasons,
· 1. Options
· 2. Comfort
Due to which we do not give up the habit of these platforms.
Before 2000, Netflix used to work on DVD rental services that is, you get the
DVD, watch the DVD, then return it via mail.
But since 1997, Netflix was getting a lot of competition
from blockbusters. Blockbuster was an existing player with $3.91 billion in
revenue and with more than 6000 stores in whole world. But there was a major
flaw in the revenue model of blockbusters. Blockbuster's 16% revenue only used
to come only because of late fee.
Because of this, most people were very upset with the
blockbuster. Whenever they took the DVD,
they were afraid that if it got delayed by mistake they will be charged late
fees.
And Netflix made this lack of Blockbuster its biggest
strength. In 1999, Netflix DVD rental
service, shifted over to subscription model. Netflix Offers Unlimited DVD
Rental Services to Its Customers for Just $10 Per Month and that too without
any late fee
Infact, Netflix kept its tagline while targeting Blockbuster
no late fee
Now in year 2000, .com bubble bursted the condition of all the
companies becomes very bad. The moment Reed Hastings agrees to sell Netflix for
$50 million. But even at that time the management of Blockbuster was so poor
that it didn't understand the power of Netflix and they declined. Luckily
Netflix survives until 2001
In the year 2002, Netflix comes out with its IPO. Through
which those people raise 82 million dollars. Things could have been a lot
stronger from here but only one year after IPO came out Mark Rudolf quits Netflix. He used to say to sell the company in 1998
itself because he never trusted this company enough. To the director of the
indebted blockbusters one thing was clear that if he wanted to compete Netflix he
also have to move on online dvd rental services too and finally blockbuster
also starts an online dvd rental business. Because Blockbusters had a network
of more than 9000 retail stores
That's why he acquired more than 2 million users within 2
years. Blockbuster starts a program in 2006 which was named as total access
program, in which all the people who are using online DVD rental services can
give their old DVD and take a new DVD in exchange for it. And that too for
free, to increase there subscribers. Blockbusters this program was very
successful. Due to this plan of Blockbuster, Netflix lost its 55000 subscribers
in the first quarter of 2007.
On the other hand, the growth of Blockbuster was not even
taking the name of stopping. Very few people know that in 2005. Walmart also
entered online DVD rentals. Walmart Used Loss Leading Strategy at that time. He
believed that we can offer dvd’s cheaply and this will attract and earn money
by selling their expensive products to them. But unfortunately this plan of
Walmart never worked.
In year 2007, when everything was going to be changed this
year Netflix started their online streaming services
And you know what weared thing happened
Netflix Exploded, No One Heard Online Streaming in those
days and no one even heard about it. And this masterstroke from Netflix changed
his destiny. Netflix Invested Millions of Dollars in Data Analytics in order to
create a powerful algorithm which referred people to the content of their
choice.
An algorithm that understands you better than you . To whom
you tell what you like which will recommend you things of your choice and keeps
you on the platform for long.
In the initial days, the company tapped with several
companies to get the top of Netflix's platform, so that content can be
distributed cost-effectively as quickly as possible
And finally in 2013, Netflix sets up its production house but
in the meantime the popularity of Netflix was skyrocketing. There was someone
somewhere far away whose breathing was becoming difficult that company was
blockbuster. At the time when Netflix was rocking the market at that time
blockbuster had to face a loan of $1 billion and unfortunately blockbuster went
bankrupt, but this was an opportunity because Netflix didn't have any
competitor market was increasing day by day and Netflix was simply killing it.
Netflix with its high quality content and through powerful
algorithm recommendation won the best online streaming platform for next 14
years and guess what ? Investors were
having a rave party those who invested in Netflix they got 70,000% more returns
And now Netflix has become one of the world's most powerful
performing stocks.
March 2022, more
than 190 countries more than 221.6 million users, where people consume more
than 40 languages. But now everything is changing with a great speed and this
company has to face a lot of competition in these 6 months, share price of
netflix has been reduced by 370%
Even in 2007, companies share price were reduced by 15% when
morgan stanley stated that Netflix is facing tough competition.
And today Netflix has two threats in front of it
- Distribution Network
In 2007 blockbuster had a very huge content distribution
network and the very same network today Disney and HBO has too. Disney has its
personal production house through which regularly it delivers a high quality
content but the thing is before launching it to ott platforms it gets released
in theatres
This means before coming to ott Disney already books its
profit and this is the reason that Disney always has more surplus cash than Netflix
and the same thing HBO does with the television before releasing it to ott it
recovers the cast.
I know what you are thinking, after all these things what
threats does Netflix has, threat is this that Disney has Disney+ and HBO has HBO
max through which they enter in the ott business and gives tough competition to
Netflix. Where all these companies give their exclusive right to their ott
companies
Now these companies bring their own ott platforms and gives
a sideline to Netflix due to which now Netflix has lack of high quality content.
Because of which Netflix neither has the experience to make more movies than
this nor more in hand cash than these companies and these things bring us to
second threat which is,
- One source
If you watch closely, in 2005 through loss leader strategy the
thing Walmart tried to do with blockbuster and Netflix the same thing amazon
prime is doing it with Netflix.
Because where prime source of income of Netflix is just
subscription fee whereas amazon prime doesn't even earn more than its
subscription fee where you watch video in amazon prime account there are highly
chances that you buy your things from there itself and if you have alexa, you use
amazon music to listen songs a very big loophole is that even if it is amazon
prime or Netflix both the services can be used in many devices through one
subscription only but amazon won't be bothered by it because amazon streaming
service is only a grabber which brings people into its amazon ecosystem.
Amazon doesn't earn though amazon prime but it brings you to
its ecosystem and provides other services and earns money so if you are a prime
user you'll obviously purchase from amazon prime to beat the competition of Netflix.
It has to obviously produce more high quality content but the biggest problem
is that it doesn't have enough cash and as a result share price of Netflix is reducing rapidly and that day isn't far
away when Netflix turns into another blockbuster. And the most important, what
are those important powerful lessons which can be learnt from this case study
and implemented in our business
- Kill or at least renovate the USP to make the company safe
In the starting USP of Netflix was online dvd rental service
which was further changed into subscription based model and finally in 2007
they started an online streaming service due to which till today they are still
dominating the industry but now there is a big challenge of changing the USP in
front of Netflix because the time has changed now things are not like before now
there is lot of competition in the market
- Always keep more than one stream of income
From the very starting Netflix is dependent on only one
source of income from 2007 to 2019 they have only earned from subscription but
till 2019 there wasn't much competition in the market but now there are
competitors. Netflix had much more time to create different modes of income so
why didn't this company did so there are highly chances that the downfall
reason of this company will be the same.
0 Comments