3 Things you can Learn from a Netflix Business Model

3 Things you can Learn from a Netflix Business Model

Technology has revolutionized the way things were being done in the past. Today, we are doing the same old school stuff, but through an improved and more penetrating media- The Internet. Broadcasting was a sphere traditionally dominated by the Cable TV and direct to home TV services. However, now it has stretched to a broader audience through live streaming and video-on-demand services.

Any discussion about VOD services cannot close without talking about how Netflix has emerged as an unprecedented supplier of videos from a number of niches. Started with broadcasting popular Hollywood movies and re-broadcasting TV episodes, Netflix ultimately becomes an original content producer and given mankind the awesome content like “Stranger Things” “House of Cards”, “Narcos” and recently the very popular “Mowgli: legend of the jungle”. These are just a glance at how Netflix has nailed the business model of streaming services in 2019.

Is awesome content the only reason for this massive leap by Netflix? I don’t think so. It is one of the reasons but not the sole one for sure. There are numerous other platforms with great content, but not all are as successful like this particular giant. I think the best ingredient in this recipe of success was the business model of Netflix.

How? This article aims at explaining the same. Meanwhile, we would also be explaining other things that video streaming services must learn from the Netflix business model. So let’s first understand the same.

1. Netflix Nailed the SVOD business model | subscription plans

So how Netflix makes money? Netflix makes use of one of the most stressful streaming business models- subscription model (SVOD). No doubt, they chose the trickiest path what others are afraid of doing. When most of the video streaming service is operating on the freemium model, Netflix business plan was to stick strictly to the paid-only access. Its only method of earning from the content consumers is to ask for a monthly membership.

After Netflix, SVOD has become a common streaming business model for every new entrant in the market these days.  

How does it work?

Like Netflix revenue model, a pure subscription-based business plan asks users to subscribe to a membership plan to access the content on the platform. On the other hand, the subscribed users get unlimited access to ad-free content for a monthly, quarterly or yearly period.

But Netflix found a way to sophisticate it further

Netflix business plan was not just to start a yet another subscription-based streaming service. Instead, it found a way to earn more than just usual SVOD services do. It offered the full access to all its videos with a fixed monthly cost. However, a further sophistication was made to enhance the regular SVOD experience –

Netflix classified it membership plans into three different categories, based on two aspects-

  • Different types of video resolution on different plans and,
  • Different number of allowed simultaneous logins in different plans

The two aspects offered three different sophistication on the regular video consumption experience –

  • Access to different streaming Qualities- Standard, HD, and 4K
  • Access to different levels of logins- 2, 3 and 4 users

Users are allowed to subscribe to any of the following three plans and get the corresponding benefits

  • Basic – offered standard video quality for streaming and maximum of one user only.
  • Standard – offered HD video quality streaming with a maximum of two user logins at the same time on different devices.
  • Premium – Offered 4K video streaming with a maximum of four simultaneous logins at a time on different devices.

2. Netflix made costly plans affordably

If you look at the membership plans, they are quite expensive. The base plan comes $7.99/month. This is quite a cost. However, a closer digging would reveal that these plans made Netflix successful without saddling the prices on the subscribers.

For instance, consider the most expensive plan of Netflix, which comes $11.99/month. I seem to like the costliest plan, but in the actual scenario is the cheapest one. It allows a user to add four different user profiles, and let them log in on different devices at the same time. Now, you can ask three of your other friends to share the subscription cost and get the costliest plan at the cheapest rate.

Bottom line: Netflix nailed the trickiest video streaming business model into the most rewarding one.  Other business must learn that adopting a business model is not enough. They would need to consider the scenarios where they can re-shape the existing models into rewarding options for both the parties. In fact, considering your customers’ preferences would help you maximize the earnings without looking like doing so.  

3. Netflix pioneered the cross-platform content delivery

Tell me a video streaming medium where Netflix does not work. Take the popular mediums for instance- TV, Laptop, Desktop, Mobile, and Tablet-

Does Netflix let you watch your favorite movies on each of these platforms?

Does Netflix let you synchronize your user account on each of these platforms?

Does Netflix have an optimized user interface or application for each of these platforms?

Off course yes! This is yet another factor that made Netflix so popular among the content consumers from all the platforms. In fact, its optimized applications for different modern-day televisions were the sole reason why many people today spend most of the time watching Netflix on TV rather than the regular broadcasted content on Cable TV. 

Today, Netflix lets you stream your favorite content from all sort of modern day devices and platforms like –

  • WebRTC for internet browsers
  • iOS Mobile
  • iOS Tablet
  • Android Mobile
  • Android tablet
  • Android TV
  • Apple TV
  • Roku TV and many more

Bottom Line: If you want to launch a successful business like Netflix, it is wise to make it accessible to all the prospects from all the possible platforms. In a world where there is an internet-based alternative available for everything, video streaming service could be a great success by opening every possible entrance to it for the common users.

Bonus takeaways from Netflix Business strategy

In addition to the above three major takeaways, I would love to mention the following lessons that I learned from the Netflix business plan-

  • Happy customers make happy businesses

Despite offering one of the most expensive membership plans in the streaming industry, Netflix nailed the revenue by emphasizing on building long term relationships. Instead of selling once and forgetting the rest, Netflix subscription model also invests a fortune in their customer service. The free trial without any commitment is one such example of the same. It lets the consumers try out the service for free and then chose to continue or discontinue the same. This trial alone is enough to encourage the consumers in Netflix’s service quality.

  • Content marketing is still the king

Despite receiving a huge word of mouth popularity, Netflix still never fails on the content marketing part. From strategy planning, content development, to content promotion, Netflix content marketing strategies are indeed inspiring. It may sound old-school, but considering the amount of thin content on the internet, it is overwhelming that Netflix still believes in engaging customers with a content marketing strategy. Regular Blog posts, behind the scene leaks, social media posts to YouTube marketing, one can easily find a Netflix content on each of the popular platforms. In fact, the regular social media posts help the company to get many discontinued subscribers back through the popular memes and posts originating from time to time.

Just check out how the recent Netflix movie “Bird Box” broke the records by getting views from more than 45 million user account in just 7 days. Many experts might say that Netflix does not need memes to get views, but memes professionals will never let the opportunities slip from their hands. This is what that happened for this particular movie. Memes started flowing all over the internet, encouraging many others to watch the movie just to know what this fuss is all about.

Subscription-based models are the future

Not just for video streaming, but subscription-based businesses are booming equally in all sort of niches. Today, there are service providers for renting you a range of products like furniture, clothes, electronics, vehicles, and even jewelry. Even economic slowdown cannot force many such businesses to step back. During the economic downturn, people would love to prefer these subscription businesses. It is a wise way to prevent the upfront in buying when people can simply subscribe to one when in need and then discontinue it when not needed. Netflix’s subscribe or unsubscribe anytime approach lets it earns by billing lesser yet recurring amounts instead of asking for the high upfront cost. SVOD is a futuristic idea. No doubt it is expected to capture a gross market of $100 billion by the end of 2020. 

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Learn How to Start a Streaming Service Like Netflix

Learn How to Start a Streaming Service Like Netflix

The media industry today is continually tossing up new variants of over-the-top (OTT) entertainment for technology-savvy netizens. And while we already know that the sector has morphed into a colossal force powering millions of bits of content to all four corners of the globe, it’s worthwhile to dig deeper into the relevance of OTT and how you can start a business in this space. To begin with, let’s look at what OTT really is.

The Fundamentals of OTT Video:

OTT is a broadcasting method that transmits video content over an internet line. The term denotes the delivery of content above and beyond the purview of traditional broadcasting formats such as satellite, cinema, and cable. OTT has undergone an interesting evolution since its inception. Started as a means for users to stream content on-demand, it now exhibits the capability to transmit live content to users, akin to a live telecast on television. It’s likely that you’re more familiar with video streaming services like Netflix, as this model is far more evolved than its live broadcasting counterpart. Having said that, live streaming is gaining traction in several markets across the globe as a means to transmit real-time information to users. OTT is an ideal solution for users who decide to forego a monthly cable subscription or those who prefer to consume entertainment nuggets on the go. With emerging turnkey frameworks available in the market, setting up an OTT video streaming service is affordable, viable and sustainable. StreamView is an option worth considering.

Steps to Create Your Own Video Streaming Service:

 

If you’re already engaged in traditional media and plan to expand your repertoire to include OTT, you may have a whole lot on your plate. Adding OTT to your media portfolio can be a challenge if you don’t have the relevant technology. Plus, acquiring media rights entails a different licensing process to conventional content formats.
Here are some steps you can follow to start a video streaming service:

Step 1. Acquire Content Licenses:Licensed

Here’s the good news: licenses for OTT content follow a very similar path to that of traditional content. Naturally, your first step should be to get your content licenses in place. These include advertising agreements, revenue-sharing ratios with content owners and other relevant approvals and licensing clauses. It’s a good idea to consult a lawyer to get an insight into the legal implications for licensing.

Step 2. Create a Monetisation Model:

Create a Monetisation Model

When it comes to monetizing OTT content, there are three recommended routes you could take. You could use each route independently or in conjunction with one or more others. Have a look to gauge which one you think suits your video streaming service the best:

Subscription Video on Demand:

Like the name suggests, Subscription Video on Demand (SVOD) pivots on a subscription model, requiring users to pay a fixed monthly fee for access to an unlimited library of content. Netflix, Amazon Prime, and Hulu follow this model. SVOD is ideal for users because there is no lock-in period or long-term commitment. At the same time, it serves OTT video streaming services well by garnering more users via word of mouth.

Ad-Supported Video on Demand:

By onboarding advertisers, you have the option of keeping your core video streaming service free. However, think twice before you go down this road because Ad-Supported Video on Demand (AVOD) is a rudimentary model for specialized content. If your content is coveted and your portfolio boasts features far superior to your competitors’, consider a subscription model. Where there’s value, there are bound to be customers, even for a price.

Transactional Video on Demand:

Transactional Video on Demand (TVOD) works on a piecemeal basis, requiring a user to pay only for specific content items consumed. You’re likely to reach a wider audience through TVOD, because users may not feel encumbered by a monthly subscription. The problem is, you may undercut yourself using this model. If your content quality is formidable, users may not mind paying a subscription for it.

Step 3. Pick a Technology:

Technology

Okay, so you’ve carved out your monetization model and content licenses and now it’s time to pick out a technology. There are several ways you could do this. If you’re feeling especially adventurous and have the appetite, you could build a framework from the ground up. But this takes time, money and resources and it’s probably wiser to opt for a turnkey streaming technology from a reputed brand. StreamView has become a prominent framework in the technology stack of numerous OTT companies across the world. Given its lightweight interface, customization features, and handy admin console, it’s little surprise.

Step 4. Organize Your Ancillary Tools:

Once you have your technology in place, there are several tools you should organize to make sure that your setup is seamless. Here’s a look at some of them.

Video API:

API

An API is critical in powering an OTT video streaming service and serves as a key that unlocks the elementary components of a content service. StreamView comes with an inbuilt, full-fledged API that serves to provide access to an array of features.

Software Development Kit:

A Software Development Kit (SDK) is an organic off root of an API. Made up of software tools and coding scripts, it works as an enabler to propel long-drawn API routines. StreamView offers select bespoke SDK tools for a variety of streaming capabilities. Make sure you ask to have your SDK integrated when you set up your video streaming service.

Fluidity and Compatibility Tools:

Your users will likely access your content from a range of different devices. While StreamView comes equipped with tools to augment fluidity, it’s a good idea to seek out an HTML5 video player to make sure that your content is digestible on a variety of screen sizes.

Setting up your own version of Netflix doesn’t have to be a cumbersome, long-wound process. With the right technology partner and superior content, you’ve got yourself covered.

 

Netflix VOD Giant Business Model Revealed & Why You Should Create Video Streaming Services

Netflix VOD Giant Business Model Revealed & Why You Should Create Video Streaming Services

Netflix wasn’t started in an arbitrary manner. In its near twenty years, a lot has changed for this Video on Demand (VoD) giant. It started as a DVD and Blu-Ray rental service and in 2007, Netflix made its foray in streaming media market. The year 2013 can be considered a breakthrough year for Netflix because Netflix made two important developments: Apart from adding television and film production, it looked set for online distribution of video content. Today, Netflix stands as an epitome of timeless Video on Demand (VoD) service. Netflix is a venture like no other; its presence in 190 countries with over 85 million paid subscribers speaks volumes about its success. As a matter of fact, Netflix competitors do not consistently record huge revenues. Amazon Prime is a first class exception though. Truth be told, Netflix Business Model and Netflix business plan are perfectly imitable and if anything, imitation is the greatest form of flattery.

Netflix Business Strategy:

Legend says that the CEO of Netflix, Wilmot Reed Hashtings, approached BlockBuster in 2000 for a partnership. BlockBuster denied the offer and as it panned out, BlockBuster was annihilated completely by Netflix in 2005. While it has been a sorry state of affairs for BloackBuster, Netflix has been trumping almost every video streaming and video on demand service with its best of the class business strategy.

Netflix business strategy can be broken down into three simple points:

Produce: Invest in producing awesome content

Purchase: Purchase and acquire licenses of popular TV series and movies

Leverage: Leverage content distribution benefits   

Netflix, being the undisputed kingpin of the Video on Demand market, has the courage to start its own “Netflix Originals”. And guess what, House of Cards and Orange is the new Black have mustered enough audiences and became crowd pullers. As far as its external funding is concerned, Netflix raised approximately $200 million through equity financing. Debt financing is the sister of equity financing and Netflix raised $1.8 billion through debt financing.

Netflix Business Model:

Popular content studios such as Warner Bros, Fox Studios etc., produce very good content and quite obviously, they look for distributors who can distribute the content to massive audiences. Now, Hollywood is a huge industry which hinges predominantly on two distribution partners: Movie theaters/multiplexes and DVD selling companies. Not so long ago, Hollywood industry added another distributor partner- Online paid subscription sites. This is where video on demand sites such as Netflix, Amazon Prime, Hulu etc., come into the picture.

Video Streaming Services

The interplay of licensing deals and rights purchase is often much talked about. Here is a brief on how licensing works:

  1. Assume that I am a content producer. Naturally, I invest a substantial amount to produce super fine quality content.
  2. I strike deals with movie theaters and multiplexes and subsequently sell premiering rights.
  3. A clause on commission i.e., the percentage of box office revenue to be collected should be clearly detailed out.
  4. I also make money by striking deals with DVD selling companies. Of course, my earnings are in the form percentage cuts.

According to The Wall Street Journal, Netflix is the single largest purchaser of licensing rights. It is followed by Amazon.com and Hulu.

Netflix’s Subscription Business Model:

Netflix Subscription Model

Netflix business model entails its subscription based business model. Here is a brief on the same:

  1. To begin with, Netflix buys content from content publishing and content producing studios.
  2. Netflix streams content. Users who wish to view the content should purchase a monthly subscription plan. There is another alternative available to users- Pay per Use
  3. Netflix tries to increase its subscriber base through cautious and enchanting marketing efforts.
  4. Money received from subscribers is used to buy more and more content.
  5. After gaining immense popularity and stardom, start producing own content. Strike licensing partnerships with other media channels such as Colors Infinity. For your information, House of Cards and Orange is the New Black is being aired on Colors Infinity.
  6. To tap the non-subscriber market, rent out DVDs. Rental money is a source of income not only from non-subscribers but also from one-time users.
  7. Streaming formats are not uniform. Netflix is known for converting one streaming format into multiple commercial streaming formats. And interestingly, Netflix makes BIG money through this model.
  8. Another inherent element of Netflix’s revenue model is strategic product placement. For instance, season 1 of House of Cards had a plenty of product placements featuring Play Station 4, car rental ads etc.

Thanks to its superior video streaming services, Netflix has an estimated revenue of $8 billion and not astonishingly, the video on demand giant spends a significant chunk on content acquisition.

Why You Should Create Video Streaming Services:

In the earlier paragraphs, I have quantified the earnings of Netflix. I would like to substantiate my point with yet another interesting estimation – the market for subscription based economy tools is touted to touch $100 billion. When I mean subscription based services, many things such as subscription based auto insurance, car rental services etc., come under its umbrella. For all intents and purposes, subscription based video streaming business model is recession free. This is because people do not buy the complete package in one single payment. If anything, they enjoy the flexibility of turning off and on a service.

Remember, it is not possible to get instant brand recognition. You should be sure that you have a significant chunk of audiences ready to consume your content. Also, you should procure rights to all the content you wish to stream. After ticking these two checkboxes, you should definitely then think of starting a Netflix clone.

So, what do you require to start a massive Video on Demand (VoD) site like Netflix?

  • Content Distribution Network: A content distribution network stores all your video content on servers spread across various geographical points. CDNs are scalable. In other words, if traffic to your website is high, CDNs will be capable of handling it with ease.

  • Payment Gateways: Popular payment gateways such as PayPal, Stripe, Braintree etc., should be incorporated to handle billing and subscription based payments

  • Data Analytics: Presence of this module is incredibly imperative. This module throws insights on who is watching what, how often and how long are audiences watching, etc. Such insights help you plan and promote your programs. You should take all the insights into consideration before producing or purchasing new content

  • AdManager: Proper ad positioning is important. This module categories ad based on their performance- high performing, non-performing and medium performing.

  • Data Hosting: If you are embarking on a video streaming service business, it is important to have a place to host content.

  • Admin Panel: You cannot do away with this module. This module helps you grant and revoke viewing permissions to paid and unpaid subscribers.

  • Multiple Monetization Channels: The very purpose of running a Netflix-like business venture will be defeated if there aren’t any monetization channels. Apart from having an avenue for subscription based viewing, there should also be an avenue to facilitate pay-per-view schemes. Another monetization feature is the presence of banner ads. If viewers click ads, you make decent money.

  • Encoder: This module is required to convert information or data into one format to another format.

  • Search Engine Optimization: To get ranked in search engines, digital marketing efforts should be exemplary. A built-in SEO module will ideally help admin control and set SEO setting for keywords.

StreamView

Well, the list goes on. The job of building a Netflix clone site from scratch is tedious. Most importantly, it is extremely difficult and to be upfront, very expensive. It therefore makes a lot of sense to go with a turnkey software solution like StreamView. StreamView is equipped with the following three channels that let you upload videos in bulk:

  • Amazon S3 bucket
  • YouTube Links
  • Normal Uploads
  • Website Links

Yes, there are several other options available in the market. But not every option is known to minimize your content distribution efforts like how StreamView does. Please visit StreamView for further details.

We can help you reach the pantheons of glory and success. If there is anything troubling you and your venture, do not hesitate to drop a line or two in the comments section. We shall help reply in a day or two. Subscribe to our newsletter. Keep watching this space for insights on video streaming business. Cheers!