It is summer now in the Northern Hemisphere and at least in my part of the world it has been a very, very hot summer so far (climate change taking full swing here). I like hot summers and enjoy warmer weather anyways. Hence, I am happy with it. In another hemisphere, which I like to refer to as the “#Streaming Universe” a rather freezing cold spell has been witnessed lately: it seems everyone is falling out of love with the stock market’s darling #Netflix and the whole of streaming as a growth business is now coming under scrutiny.
Yet, streaming is still cool – actually, it is still hot. Let’s put the whole situation into perspective. Streaming has seen tremendous growth over the past couple of years. The ‘pandemic effect’ moved massive numbers of subscribers into the streaming universe. Essentially we leap-frogged to a stage in the market size that was forecasted before the pandemic to be reached in 2025 at the earliest. So, evidentially we saw a growth of what was said to take 5-6 years within a couple of months. And that set high expectations for everyone in the streaming business.
But you must be utterly naive to expect that such a high level of growth can be sustained forever. I still cannot believe that the stock market and all the smart analysts have not taken this into consideration. Hence, I find it rather unfair to punish Netflix now for its slow growth and even more: to actually cry ‘disaster’ when they seem to lose some subscribers. Given the large number of their subscriber base the little churn they incurred is absolutely tolerable and in the light of the circumstances (Russian market withdrawal, fight on account sharing, etc) actually rather small.
Here is the issue though with Netflix: if you are the stock market’s darling and if you – as the subject of that love – actually fall in love with that admiration for yourself, you become a pawn of your own love. You do everything to keep that love and recognition… and you forget who you are. That is what is happening to Netflix, if you asked me. They lost their mojo, they sold their soul to the stock market and shareholders.
Yes, of course, as a company the main objective is to satisfy your shareholders. But that it s not a means in itself. You become successful when you concentrate on your main stakeholder first: your customers. Netflix got out of touch with its core subscriber base and forgot how to please them. All the moves it undertakes now, are to pacify the stock market rather than to revive the love with the users. Talk about using advertising or about a merger is nothing that a user of Netflix wants but that are gullible buzzwords for analysts and investors.
Another important aspect in the streaming universe that some people overlook: as said above we leapfrogged half a decade of development and growth. That means we are in a more mature market now. Naturally, that requires different perspectives on the market, competition and most of all – how you act strategically in such a market environment.
Lets take Netflix as an example again: when they started their streaming service they were more or less the only one doing this – especially in their very user-centric approach. They created what is sometimes referred to in strategy talk a ‘blue ocean’. They defined what streaming is and everyone had to follow their example. Netflix was leagues apart from the competition.
But the market environment changed: there are tons of other players now available for the consumer to choose from. Services like Disney+ and Amazon Prime have come very close to Netflix in both size of its customer base and type of service offerings. When Netflix was a first mover they did not bother about competition and what they offer – Netflix could purely address the wider need of its customers to be entertained. The competition was sleep, as Reed Hastings said so famously a few years ago. Now the competition is about form, function and most of all about resources. Consumers think about whom they spend their ever smaller budgets – and how they want to be entertained best.
With the end of the pandemic, the consumer has not only more choice when it comes to streaming services but in entertainment options at large. While we were all limited to being entertained at home during the COVID measure, we can now go out, spend time at movie theatres (ok, seems nobody does that anymore), travel, and visit restaurants, concerts, and events. So, essentially, Netflix fights on multiple competitive fronts now: other streamers and other entertainment options.
What options does Netflix have now? Naturally, the immediate strategic moves are all around the product itself. Enhancing the actual product to fight effectively churn and competition. Acquiring sports rights is one measure, offering better service experiences another. Certainly, the content is a key distinguisher and here Netflix needs to up the game again.
But the real killer move – the one that excels Netflix into another league again – would require creating a new ‘blue ocean’. I argued a few months ago already that Netflix needs to reinvent entertainment and merge with a physical business. While movie theatres might be the obvious choice for this, I suggested buying a chain of fitness studios and remodeling them as ‘Netflix Club Houses’ with a variety of entertainment options such as sports, games, watch parties, events and even learning offers (seminars around some of the content: cooking, DIY, movie making, etc) and top it off with travel options.
I wonder and I also wish for Netflix to get back its mojo. If they focus mainly on what the customers’ needs are and how they can contribute valuable benefits to satisfy these needs, Netflix can maintain the leader status in streaming.
Actually, this learning applies to any streaming business: be very clear about the needs and motives of your customers. Define your market niche extremely well and understand to the tiniest level who your customers are and how you can best bring them value. Make sure they have a smooth, perfect experience with your service. Address core needs because in entertainment it is about emotions: having fun, being uplifted, informed and inspired; having a feeling of belonging.
The streaming universe has not reached its full level of expansion yet. I do strongly believe that the pie gets bigger and that there is still lots of room for various services in this market. Namely niche and thematic offers are having tremendous opportunities in their segments. I would also encourage brands and organizations to look closely at the idea of launching their own streaming service. With the right strategy, you can really make an impact.
Are you ready to advance your streaming product? Then talk to us at Global Media Consult and have us guide you in your journey. We can assist you in developing your next strategic move and maybe create your own ‘blue ocean’.
Make the jump: If you are interested, contact me for a product or business strategy audit. Let us do a deep dive into your strategic options. Using some common strategic concepts for modern digital businesses and products, we walk you step by step through different perspectives and ideas on how to advance your growth.