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The rapid changes and adaptations of Netflix in:
The Video Streaming Services Market
With the rapid pace of technological development, the way we
consume media has changed drastically. Not too long ago, the very
idea of never watching TV in the sense of broadcasted TV channels
was absurd. Nowadays more and more people spend most if not all
their media consumption time on streaming services like Netflix and
Viaplay.
Introduction
If someone heard the phrase “video streaming service” 10 years ago,
they likely thought of Netflix. If that person heard the same phrase
today, they might think of Hulu, Amazon Prime Video, HBO NOW,
Disney+, or others. These are just a few of the over-the-top services
that have emerged in the last decade. Over-the-top, commonly
referred to as OTT, is on-demand, non-broadcast, Internet-streamed
video content viewed on a digital display (Seel & Dupagne, 2010).
Across these services, viewers can watch television, film, sports, and
other special content.
The video streaming industry is booming. According to a report by
the Motion Picture Association of America, there were 613.3 million
online video service subscriptions in 2018, which was a 27% increase
from 2017. This increased number of online subscriptions surpassed
the number of cable customers for the first time, which was at 556
million in 2018 (Liptak, 2019). More recent data from 2019 validates
the strong viewership in streaming and OTT. Forbes states that as of
2019, 61% of Americans owned a Smart TV and 52% used OTT
services. OTT usage was 65% for viewers aged 18 to 34. On average,
an OTT customer owns three devices they can watch content and
subscribe to three different services (Salkowitz, 2019).
The first three pioneers of OTT are typically recognized as Netflix,
Hulu, and Amazon. Although these companies are still prominent,
they are struggling more than before because all of the growing
competition. This competition, aside from the few services mentioned
above, includes Sling TV, Watch TV, Apple TV+, CBS All Access, and
many more. It is important to note that the growth of OTT would not
be possible without the growth of fast, reliable internet connection.
Additionally, the growth of smartphones and other devices was a key
factor in streaming.
Overview of Video Streaming Services
Video streaming services allow users to watch movies, television
shows, and other media content over the internet. The providers of
these services are known as online video distributors (OVDs).
Video streaming services can be accessed on websites or apps on
computers and mobile devices. They can also be viewed on
televisions using digital media players, which include televisions with
built-in apps and internet connectivity (Smart TVs), gaming
consoles, and streaming devices that plug into televisions.
Video streaming services can offer video-on-demand, which allows
users to watch movies and shows at a time of their choosing. Some
offer live TV, streaming programs that are being broadcast at that
moment; they are also known as virtual MVPDs. Some streaming
services that provide live TV offer a digital video recorder on which
users may record a live program for later viewing.
Competition Among Video Streaming Services
Video streaming services allow users to watch movies and television
shows over the internet. Some offer video-on-demand, which can be
watched at any time, as well as live TV programs being broadcast at
that moment. Streaming services can be accessed on websites and
apps on computers and mobile devices. They can also be viewed on
televisions using digital media players, which include internet-
connected televisions with built-in apps (Smart TVs), gaming
consoles, and streaming devices that plug into the television.
Companies that offer video streaming services can attract new users
by offering popular movies
and TV shows. Although some of these companies compete with one
another and with other video providers using prices, differences in
prices across streaming services can be fairly small, particularly
among those that offer only video-on-demand. Thus, some streaming
services also compete with video content, as particular movies and
television shows may be available exclusively on one streaming
service. Some companies that own studios or television networks
have started offering their own streaming services as well. These
companies hold the rights to certain movies and television shows,
meaning they are able to make this content exclusively available on
their own streaming service or license it to other services for a fee.
The challenge of obtaining content may raise costs for competing
streaming services and create a barrier for potential entrants into the
video streaming services market.
Some companies that own video streaming services have integrated
vertically. Some sell digital media players used to access streaming
services on televisions. Others provide internet and mobile services
or information technology services that can be used to store and
distribute video content, such as cloud computing and content
delivery networks. These vertically integrated companies may have
advantages over competing streaming services, as their own services
do not need to pay to be included on their digital media player or to
use their information technology services. A streaming service that
shares common ownership with a content delivery network or
internet service provider may be able to improve the experience of its
users by prioritizing its own video content when internet traffic is
congested in order to minimize latency. Companies that own digital
media players may be able to limit consumers’ access to competing
streaming services by refusing to include them on their players.
Netflix's innovation strategy, a force in the streaming service
industry, reflects a commitment to relentless and strategic
innovation. It began as a DVD rental service and evolved into a
leading producer of original content.
Key aspects of this strategy include:
1. Cultivating a Creative Culture: Netflix fosters a culture of
creativity and non-conformity. Their work environment attracts
diverse talents, encouraging freedom and innovation. Policies
like flexible vacations and the 'keeper test' ensure a highly
effective team. This culture embraces failure as a learning
opportunity, fostering risk-taking and agility in decision-making.
2. Balancing Innovations: Netflix focuses on both incremental
(refining technologies and processes) and radical innovations
(industry redefining changes). Incremental innovations include
patenting their business model and enhancing streaming quality.
Radically, they shifted to streaming services and started
producing original content, reducing reliance on licensed content
and diversifying revenue streams.
3. Global Expansion: Recognizing the international future of
streaming, Netflix produces region-specific content, balancing
universal appeal with local customization. This strategy involves
navigating diverse regulations and preferences, supported by a
robust content delivery network.
4. Technology and Market Expansion: Netflix invests in AI and
machine learning to enhance content creation and delivery,
indicating a focus on technology-driven innovation. Expanding
into gaming and interactive media, they cater to varied
consumer preferences and adapt to media consumption trends.
In summary, Netflix's strategy demonstrates the power of disruptive
thinking and strategic execution. By fostering a progressive work
culture, embracing technology, and expanding content, Netflix
navigates the future of entertainment.
The Video Streaming Services Market
With the rapid pace of technological development, the way we
consume media has changed drastically. Not too long ago, the very
idea of never watching TV in the sense of broadcasted TV channels
was absurd. Nowadays more and more people spend most if not all
their media consumption time on streaming services like Netflix and
Viaplay.
Introduction
If someone heard the phrase “video streaming service” 10 years ago,
they likely thought of Netflix. If that person heard the same phrase
today, they might think of Hulu, Amazon Prime Video, HBO NOW,
Disney+, or others. These are just a few of the over-the-top services
that have emerged in the last decade. Over-the-top, commonly
referred to as OTT, is on-demand, non-broadcast, Internet-streamed
video content viewed on a digital display (Seel & Dupagne, 2010).
Across these services, viewers can watch television, film, sports, and
other special content.
The video streaming industry is booming. According to a report by
the Motion Picture Association of America, there were 613.3 million
online video service subscriptions in 2018, which was a 27% increase
from 2017. This increased number of online subscriptions surpassed
the number of cable customers for the first time, which was at 556
million in 2018 (Liptak, 2019). More recent data from 2019 validates
the strong viewership in streaming and OTT. Forbes states that as of
2019, 61% of Americans owned a Smart TV and 52% used OTT
services. OTT usage was 65% for viewers aged 18 to 34. On average,
an OTT customer owns three devices they can watch content and
subscribe to three different services (Salkowitz, 2019).
The first three pioneers of OTT are typically recognized as Netflix,
Hulu, and Amazon. Although these companies are still prominent,
they are struggling more than before because all of the growing
competition. This competition, aside from the few services mentioned
above, includes Sling TV, Watch TV, Apple TV+, CBS All Access, and
many more. It is important to note that the growth of OTT would not
be possible without the growth of fast, reliable internet connection.
Additionally, the growth of smartphones and other devices was a key
factor in streaming.
Overview of Video Streaming Services
Video streaming services allow users to watch movies, television
shows, and other media content over the internet. The providers of
these services are known as online video distributors (OVDs).
Video streaming services can be accessed on websites or apps on
computers and mobile devices. They can also be viewed on
televisions using digital media players, which include televisions with
built-in apps and internet connectivity (Smart TVs), gaming
consoles, and streaming devices that plug into televisions.
Video streaming services can offer video-on-demand, which allows
users to watch movies and shows at a time of their choosing. Some
offer live TV, streaming programs that are being broadcast at that
moment; they are also known as virtual MVPDs. Some streaming
services that provide live TV offer a digital video recorder on which
users may record a live program for later viewing.
Competition Among Video Streaming Services
Video streaming services allow users to watch movies and television
shows over the internet. Some offer video-on-demand, which can be
watched at any time, as well as live TV programs being broadcast at
that moment. Streaming services can be accessed on websites and
apps on computers and mobile devices. They can also be viewed on
televisions using digital media players, which include internet-
connected televisions with built-in apps (Smart TVs), gaming
consoles, and streaming devices that plug into the television.
Companies that offer video streaming services can attract new users
by offering popular movies
and TV shows. Although some of these companies compete with one
another and with other video providers using prices, differences in
prices across streaming services can be fairly small, particularly
among those that offer only video-on-demand. Thus, some streaming
services also compete with video content, as particular movies and
television shows may be available exclusively on one streaming
service. Some companies that own studios or television networks
have started offering their own streaming services as well. These
companies hold the rights to certain movies and television shows,
meaning they are able to make this content exclusively available on
their own streaming service or license it to other services for a fee.
The challenge of obtaining content may raise costs for competing
streaming services and create a barrier for potential entrants into the
video streaming services market.
Some companies that own video streaming services have integrated
vertically. Some sell digital media players used to access streaming
services on televisions. Others provide internet and mobile services
or information technology services that can be used to store and
distribute video content, such as cloud computing and content
delivery networks. These vertically integrated companies may have
advantages over competing streaming services, as their own services
do not need to pay to be included on their digital media player or to
use their information technology services. A streaming service that
shares common ownership with a content delivery network or
internet service provider may be able to improve the experience of its
users by prioritizing its own video content when internet traffic is
congested in order to minimize latency. Companies that own digital
media players may be able to limit consumers’ access to competing
streaming services by refusing to include them on their players.
Netflix's innovation strategy, a force in the streaming service
industry, reflects a commitment to relentless and strategic
innovation. It began as a DVD rental service and evolved into a
leading producer of original content.
Key aspects of this strategy include:
1. Cultivating a Creative Culture: Netflix fosters a culture of
creativity and non-conformity. Their work environment attracts
diverse talents, encouraging freedom and innovation. Policies
like flexible vacations and the 'keeper test' ensure a highly
effective team. This culture embraces failure as a learning
opportunity, fostering risk-taking and agility in decision-making.
2. Balancing Innovations: Netflix focuses on both incremental
(refining technologies and processes) and radical innovations
(industry redefining changes). Incremental innovations include
patenting their business model and enhancing streaming quality.
Radically, they shifted to streaming services and started
producing original content, reducing reliance on licensed content
and diversifying revenue streams.
3. Global Expansion: Recognizing the international future of
streaming, Netflix produces region-specific content, balancing
universal appeal with local customization. This strategy involves
navigating diverse regulations and preferences, supported by a
robust content delivery network.
4. Technology and Market Expansion: Netflix invests in AI and
machine learning to enhance content creation and delivery,
indicating a focus on technology-driven innovation. Expanding
into gaming and interactive media, they cater to varied
consumer preferences and adapt to media consumption trends.
In summary, Netflix's strategy demonstrates the power of disruptive
thinking and strategic execution. By fostering a progressive work
culture, embracing technology, and expanding content, Netflix
navigates the future of entertainment.