Netflix - Compound Platform Effect Strategy

In my post of the Compound Platform Effect I describe the concept and show several successful examples. You can find that post here. For this next post I’m going to talk about Netflix as an example. I believe Netflix is in the right part of their growth to aggressively switch from their current platform strategy to focus much of their effort on a compound platform effect strategy.

Netflix is the leader in streaming content on a subscription model. They have done a great job building that platform and they are far ahead of other streaming services. Netflix also had the foresight to build a second platform as a content producer which has a strong correlation in driving subscriber growth on their streaming services. Netflix also has a strong platform for categorizing and recommending TV and movies. Netflix should continue to grow and invest in these platforms but they should no longer be the primary focus of the company. Netflix probably views HBO as their primary competition but they need to broaden that view to be about consumer content consumption. Netflix is like Google before Gmail and before Maps. Back in 2005 Google was the leader in search but by having a broad view and going for new platforms they were able to leverage the multiplier effect of a compound platform effect. In 2005 Google didn’t really worry about Yahoo and similarly Netflix shouldn’t be focused on HBO.

So what should Netflix do? Here are some thoughts:

Disrupt Hollywood

Netflix has proven themselves in the content production space. Hollywood makes their money from box office receipts and the movie theaters themselves only get a very minor cut of that revenue. Movie theaters primarily make their money from selling concessions. Netflix should release a full length movie simultaneously in movie theaters and on Netflix where going to the movie in the theater is free for Netflix subscribers. Maybe start with doing two movies a year in the low seasons; maybe one in February and one in September when the theaters would love to have the extra business. The goal is to start to redefine seeing movies in a theater as a free part of a subscription model. Secondly, you are trying to upsell household subscriptions to a more expensive family subscription where you would get 4 movie passes instead of 1. Otherwise to see the movie in the theater you sign up for Netflix where you could cancel the next month but once signed up they would probably see a good retention rate.

Subscription Education

Netflix should jump into the online education market with a monthly subscription model. This would be a separate brand and subscription from Netflix but the subscription accounts would be linked and could provide some interesting synergies especially with a recommendation engine. The goal would be to host a broad range of educational content and eventually expand into certified courses and possibly even degrees where extra revenue could be collected. This would help Netflix create an interactive platform that scales smoothly from mobile, tablets, laptops, and TV’s. The content could be partially non-linear so elements that are well suited for the tool you are using (TV, smartphone) would work well in the context. Even more interesting would be to make the content cross-modal so that a user would be more effective using both their TV and their laptop at the same time or their TV and their smartphone. The recommendation engine could cross into Netflix content where maybe certain shows or documentaries are recommended because of the course you are taking or certain courses are recommended because of your interest in certain topics.

Interactive Children’s Programming

A child watching a show or movie on a tablet can be looked at as a bit of a missed opportunity. The content is produced for the TV, the lowest common denominator of interaction. Imagine what could be done if you focused on the interaction of the tablet or smartphone for children’s programming. Netflix can capitalize here as they are already a trusted brand with parents. As well tablets and smartphones are already a common channel for consumption. This could be an account extension of Netflix or a different service altogether but again there is a lot of value in the link back to the child’s Netflix profile. Instead of Apps you have a subscription based interactive portal with the content having a lot of flexibility but leaning more to interactive stories and interactive video.

Live Sports Broadcasting

Live sports broadcasting is one of the main content types today that keep people from cutting the cord of their cable service. A live sports broadcasting service would be a new service that is separate from the Netflix service that we know. The trick here is to start small with sports that are looking for exposure so there is minimal cost in buying up content rights. Design the service as an experiment to test subscription models and advertising models so that you can figure out what will work. Once a knowledge base is built around knowing what will work and what won’t work then the service can start working toward bidding on rights to popular sports.

Here are some thoughts on possible experiments:

• Subscription model per sport where the sports organization that you are watching gets a cut of the subscription paid. One model might be free to watch one event and a subsequent fee to watch subsequent events that pay towards a season subscription.
• Advertising banners that match the sponsor of a competitor’s individual sponsorship. Imagine a BMX competition where an advertising banner of the competitor’s sponsor is shown while they are competing. As well imagine having the ability to display what real-time competitor’s performance data you are interested in.
• The ability to choose different commentator streams depending on whether you are knowledgeable about the sport or not. As well have the ability to follow and favorite certain sports, teams, and competitors so that you can get notifications and schedules.
• How would you like to watch an event that you missed - just the highlights, with time gaps removed, or the full event?
• Would users binge watch past seasons of a sport, team or competitor they have just started to follow if it was easy to do?

Compound Platform Effect ← previous post

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