Demand is down but this service continues to dominate the streaming industry. Here are the secrets to its success.
For those of you who are not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses achieve high levels of performance. Let’s apply this framework in the context of a particular business. Keep reading below to know how this company has maintained its dominance in a market that has seen lots of changes and competition.
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Demand is down but this service continues to dominate the streaming industry. Here are the secrets to its success. Ever since the COVID-19 pandemic boosted demand for on-demand streaming, the streaming sector has experienced a massive uptick in investment and competition. It is because during this period of rapid growth, companies saw an opportunity to rake in massive profits due to surging demand. Most, if not all of them, expected years of high growth and returns. As a result, companies like Amazon, Disney, HBO, and Apple invested billions of dollars in marketing, infrastructure, and content creation to catch up to Netflix and acquire a bigger slice of the streaming pie. Unfortunately, once the lockdown restrictions eased and the pandemic ended, consumers gave up binge-watching their favorite shows and finally stepped outdoors after years of staying at home. The consequence? The streaming industry is currently saturated with service providers competing for subscribers who aren’t entirely keen on maintaining multiple subscriptions. Yet, despite this turmoil, Netflix entered 2024 as the leader in the battle for eyeballs and ad dollars.
According to Bank of America media analyst Jessica Ehrlich, “it has become increasingly clear that Netflix has won the ‘streaming wars.’” This statement comes as large media companies are reevaluating the money they’ve spent on their own streaming services. Furthermore, according to the latest data from Antenna, a platform that tracks paid subscribers for advertisers, Netflix is the fastest-growing streaming service of the year, with an addition of over 2.6 million subscribers from the end of December 2023 to the end of May 2024. According to the latest data from Statista, the streaming giant currently has nearly 270 million paying subscribers. Netflix’s position as a market leader has never been clearer; however, this success didn’t happen overnight. Leveraging Customer Data Founded in 1997, Netflix’s primary strategy was to rent out DVDs by mail for nearly a decade. By 2007, the company offered its streaming service to users who wanted to watch movies and TV shows online. Due to this decision, Netflix was able to reach USD 1 billion in annual revenue. Fast forward to 2011, the company grew its revenue to over USD 3 billion, and increased it tenfold by 2017. Anyone who saw Netflix’s massive growth might have attributed it to being in the right place at the right time. However, it wasn’t luck that propelled the company to success. Instead, Netflix studied its customers’ preferences since it began renting DVDs in 1993. That’s why when the firm launched its streaming service, it had years of data to fall back on when choosing which content to offer. Aside from this, Netflix experimented with different business models for years, including changing its delivery methods to offering multiple types of subscriptions. The company even opened its own production studio in 2009, which enabled it to thrive when companies like Disney and NBC slowly began to pull their intellectual properties (IPs) from the streaming platform. Leveraging “Optionality” These days, Netflix continues to leverage the data it gets from its subscribers to find out not only content that would interest them, but also the genres and talents that the target audience demands. Netflix enjoys the success it has today because of its “keep your options open” approach, which is guided primarily by the data it’s able to collect. In other words, this type of approach to business is what’s called “optionality.” The competitive landscape changes instantly, not only across streaming but also in other industries. That’s why it is important for companies to have options they can lean on to ensure they remain competitive and profitable in both the short- and long-term. Netflix’s Success as Seen Through the Lens of RDS According to Joel Litman and Dr. Mark L. Frigo in the book, “Driven”: “The key to long-term wealth-creation is the fulfillment of great unmet needs of a great many people.” In the case of Netflix, it was able to remain profitable for so long and despite stiff competition, because of the fact that it is constantly able to fulfill the unmet needs of its customers. By leveraging consumer data and having “optionality,” Netflix is able to maintain the dominance it has in the streaming industry despite changes in demand and competition. The bottom line? In this day and age, knowing what consumers want and being able to have options to lean on are two factors to long-term success. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful. IN CASE YOU MISSED IT: AI has ushered in the biggest tech mania since the 1990s and has created 500,000 new millionaires—roughly 587 per day—since the launch of ChatGPT in late 2022. In fact, Nvidia is already up more than 783% in the past two years and recently, the S&P 500 made a new all-time high, driven mostly by AI stocks. While this may sound like good news, the world elite are already preparing for an AI crisis that could trigger a major catastrophe in the stock market. When this crisis happens, it could impact your money—whether you own AI stocks or not. If you want to protect yourself from this impending crisis, watch the replay of Professor Joel Litman’s most recent AI Panic Summit. During the summit, Professor Litman discussed everything you need to know about the impending turmoil on AI stocks and what you can do to avoid massive losses and seize huge gains. Click this link to watch the replay. This is completely free of charge. Hope you’ll take the time to check it out! Stay tuned for next Tuesday’s Return Driven Strategy! American actress Mary Lou Cook once said: “Creativity is inventing, experimenting, growing, taking risks, breaking rules, making mistakes, and having fun.” Learn more about how this eyewear brand successfully combined functionality and fashion in next week’s article! |
