What’s a Netflix Product Manager to do?

Netflix has come to dominate the world of on-demand streaming.

Go talk to anyone about Netflix and they’ll tell you the stories.

  • “Oh, we binge watched all of show x over the weekend, it was awesome!”
  • “OMG I just spent the entire weekend eating ice creaming and watching Netflix”.
  • “New season of House of Cards is out? I know what I’m doing this weekend!”

Netflix, founded in 1997, has seen an incredible amount of growth in its customer base and its profits. It has changed the way that we view content.

Netflix had a head start in the market space of on-demand streaming.

Now, competitors are popping up left and right, from Amazon to networks like CBS who are launching their own on-demand services.

The stats on Netflix

Stats pulled from here –

  • 83 million subscribers. 47 million come from America.
  • 70% of watchers binge-watch shows.
  • Average number of Netflix viewers/subscriber: 2.5 viewers
  • 160 hours of ads avoided a year by Netflix users

However, the growth rate has slowed recently. In Q2 of 2016, Netflix added 1.7 million subscribers, down from about 3.3 million added subscribers from the same period in 2015.

What’s happening with competitors in the streaming space?

Amazon Prime Video has seen rapid growth in its market share. In Q4 of 2014, Amazon Prime video was now in 13% of American households, up from just 3% the year before.

Amazon is a formidable opponent for Netflix

HBO Now has about 800 000 subscribers, as of early 2016.

So, what’s a Netflix Product Manager to do? What would you do?

They have the greatest level of market share currently, but they are seeing numbers slow as other services like Amazon Prime Video have started to establish a larger market share. What can Netflix do?

Continue Producing original content series.

From original content like House of Cards, which was helped made by data analytics, Netflix has made a large push into creating original series. To differentiate itself from other services, it will continue to pump out original content, a move that can be seen as beneficial in the long run.

Netflix scored a major hit with Stranger Things, which was rejected by 15 to 20 networks prior to landing with Netflix.

That said, Amazon Prime Video now has its own original programming.

Keep buying rights to shows.

In the long run, I see Netflix moving away from buying rights to shows as opposed to making their own content. Let’s look at some numbers, found from this article:

  • Netflix spent nearly $200 million in 2011 for access to Disney films and TV programming for a one-year period.
  • “Lost” cost the company $45 million, for a single year.
  • In a statement to shareholders in early 2015, Netflix revealed that its budget for obtaining new licensing deals and renewing expiring arrangements for exclusive and nonexclusive content would exceed $6 billion through 2018.

With the constantly increasing costs of obtaining rights to shows, no wonder why Netflix has shifted more towards producing its own content.

Making Original content for films.

While Netflix has an increasingly hefty catalogue of original content series, they’ve slowly been pushing into the world of producing their own films. Here’s a list of some of the content that Netflix will be releasing that’s their own film content.

Dealing with the film business is a different beast compared to competing the Television business, and there are many other factors, like box office and awards that companies like Netflix have to deal with in regards to films.

Original content is the best move forward, and it is what Netflix is doing.

At the end of the day, Netflix is a data company. The decisions they are making is through the incredible levels of data that they are collecting and creating context from it. However, now they’re facing increasing pressure from other sources.

Netflix helped disrupt the brick and mortar service of video rentals, ironic as Blockbuster at one time could have purchased them for 50 million.

Now, with the rise of services like Amazon Prime video, which are doing their own original content, Netflix needs to differentiate itself from its other competitors.

Netflix has said they plan to release 31 new and returning original series this year, along with two-dozen films and documentaries, stand-up comedy specials, and 30 original kids series.

Why such a strong push to original content? One of the benefits of producing its own content is that Netflix can distribute it globally. When buying rights to shows, studios will sell regionally. As a Canadian, it’s common to hear the complaints that “there’s nothing on Netflix!” compared to what’s offered in America. By producing its own content, Netflix can avoid this issue and distribute its content globally.

While producing its own content, Netflix does have to now deal with bidding wars with competitors.

No doubt Amazon and Netflix have had bidding wars to produce original content, and this will only increase over time. As it continues to put out original content, or win the rights to produce original content, Netflix will have to deal with Hollywood on a different playing field.

The Hollywood system is a tough nut to crack, but it’s looking more and more that Netflix is looking to disrupt it. Will they be putting out their own films into theatres? Will they constantly acquire rights to films to be put out on the Netflix service as opposed to theatres? Time will tell if Netflix will be successful in causing a dent in the theatre system, which still continues to draw in high levels at the box office.

In conclusion…

Netflix is pushing forward with its original content, a move that looks to be the best moving forward, and one for the long haul. While the company has done well for years buying rights to other shows, with increasing competition, Netflix has begun to produce original content, largely determined by data, to differentiate itself and keep its share of the market.

As a product manager, Netflix is an excellent example of a company that makes informed decisions through data.

The success of Netflix cannot be denied, and its proven time and time again to be skating to where the puck is going, even if there have been a few missteps along the way (see the 2011 pricing debacle, which the company eventually recovered from). Netflix’s push into increasing its original content as its main selling point is a carefully deliberated decision produced by customer habits.

Originally published at www.pmpaul.com on August 17, 2016.