Many people know Netflix as the company that put Blockbuster
out of business and the company that delivers DVDs to your home and even more recently as the content streamer of choice. Most people nowadays stream Netflix
on nearly every single electronic device they have. For example, all new TVs feature Netflix streaming, as do DVD players, as do media players, as do computers, and tablets, and smartphones. The only things left that don’t stream Netflix yet are your coffee machine or toaster. Of course, unless you own one of these
As it stands, Netflix has more than a lion’s share of the content streaming at around 60% marketshare. When you consider how many internet connected media devices are already capable of running Netflix, you begin to realize the overall power that Netflix has yet to tap into. With their market penetration they have the potential to compete with existing distribution models to deliver original content. Currently, Netflix serves as a secondary content distributor meaning that they are delivering content that has technically already been delivered in the past by some other distribution company. This is what Netflix is attempting to change with their "House of Cards"
. In 2012, Netflix will have exclusive rights to distributing the series, House of Cards
starring Kevin Spacey, and will make 26 episodes available to Netflix subscribers.
What this does is that it enables Netflix to not only directly make money from this series, but it allows it to repeat the same thing again and again if this initial pilot works out. If Netflix can successfully repeat this again and again, inevitably they will gain subscribers if their content is good enough. They can repeat the same shift that premium channels, like HBO, have successfully achieved when they started drawing viewers away from the main networks. The more subscribers Netflix has, the better their economies of scale and the more money they can make. Ultimately, Netflix has a the right idea and they know that physical media is already on its way out and its only a matter of time until all content delivery is digital anyways. They are simply trying to prepare for that by beginning to become an original content deliverer.
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