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Anna Karamazina

26.11.2022 15:00

How Netflix is Transforming the TV Business

With 167 million paying customers worldwide, Netflix (NFLX) is the market leader in the on-demand video sector.

Netflix upended the television market and pushed cable providers to alter the way they conduct business by producing appealing original content, employing user data analysis to better serve customers, and, most importantly, letting users experience content as they wish.

The trend toward cord-cutting has undoubtedly intensified as a result. More than 35.5 million American families, or about 27% of all households, intended to discontinue paying for cable service in 2021, and it is anticipated that this trend would continue in the future.

The rise of Netflix might eventually result in the detachment of cable. That is, rather than paying for a large number of channels, cable subscribers may be able to pick and choose the channels they want.

Undervaluing the competition

Netflix is primarily a repository for media, including both original and pre-existing films, documentaries, and television shows. Subscribers have unlimited access to any program at any time on any device for a fixed monthly charge.

Early in 2020, Netflix had three tiers of monthly membership fees: $8.99 for the entry-level plan, $12.99 for its most popular HD service, and $15.99 for the top tier option.

For a basic cable television package, the average household spends $156.71 per month. However, with taxes and add-on fees, their monthly cost rises to $217.42.

How Netflix was founded

From the business's modest origins, it has come a long way. In 1997, Netflix launched as a website that let users rent DVDs online, have them sent by mail, and send them back in the same manner.

It has always battled for viewers' leisure time with cable and the networks. The existing brick and mortar video rental industry, however, was at that time its real competitor.

Starting streaming

Before personal computers and internet capabilities could keep up, it took until 2007 for streaming services to become widely used in the marketplace. A streaming service from Netflix was launched in that year.

Customers might then view TV shows or movies for the first time on a computer, TV, tablet, phone, or gaming console. Furthermore, customers could watch what they wanted, when they wanted, and how they wanted without being constrained by a schedule, interrupted by advertising, or even having to leave their homes.

That latter development almost eliminated the DVD rental industry. Soon, TV networks and cable providers started providing their own on-demand entertainment.

Switching to original content

Taking a risky and expensive step, Netflix started creating original content in 2013.  When networks often accepted shows based on pilots that fit specific criteria, Netflix offered series producers and showrunners upfront contracts to produce a whole season or two.

Soon, several of the most well-received and widely discussed new shows, including "House of Cards," "Orange Is the New Black," and "The Crown," appeared on Netflix rather than on the major broadcast networks.

Original content has played a significant role in Netflix's success and the rise in the value of its stock by cultivating a devoted fan base.

Creating the phenomenon of binge-watching

The binge-watching trend was practically initiated around the same time when Netflix began releasing full seasons of well-known TV shows all at once, as opposed to broadcast and cable TV's once-a-week installment approach.

TV networks now have to be more adaptable and active in their pursuit of top talent due to Netflix's production practices.

Innovation to preserve leadership

Netflix has also made a point of actively collecting user data. It was originally intended to assist consumers identify material that would interest them. However, Netflix now uses this data to analyze what genres and talents it should focus on in order to meet actual demand.

Amazon, Google, Disney, and other companies are now Netflix's fiercest rivals for both viewers and programming. That is the cost of breaking the traditional mold of television production and consumption.

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