Netflix — Top Secrets Unveiled Behind Its Success Story
Today we unveil the top secrets behind Netflix’s success story. Netflix has already changed the way as to how and what we watch throughout day and night. We can learn a lot from Netflix, which is a success story that every company should study.
With around 195 million users in 190 countries (Q3 2020), Netflix is the undisputed market leader in video streaming.
This platform has successfully disrupted the conventional cable TV aspect and has brought great technological innovations such as digital streaming and machine learning.
Netflix has been in a market for twenty years as of now and they keep adding on innovative prospects day by day.
This makes the audience stick to this huge entertainment platform. The only reason customers are attaching with this platform is Netflix knows how to cater their customers’ needs by giving them a remarkable experience.
Starting out as a DVD rental business in the late 90s, Netflix has come a long way to establish itself as the world’s leading streaming entertainment service.
This is a factInnovation, company culture, and stellar stock performance are qualities that have placed Netflix on Fortune’s “World’s Most Admired Top 50 All-Stars” list in 2016. Netflix is not an entertainment company, it is a technology company, much like Amazon, Google or Facebook.
In this article, we’re going to explain the reasons and top secrets that lie behind the business success of Netflix.
How did a small movie rental company turn out to be leading global on demand internet streaming giant? In order to understand the success story of Netflix, we need to study and unveil its top secrets. Let’s find out !
Less Is More
How many ads do you see on a daily basis? Some say the number of ads which we are exposed to is anywhere between 4000 to 10.000 ads each day. Ads are the reason ad-blocking software is more popular than ever with several million people using desktop ad-blocking plugin.
Netflix knows people wish to enjoy watching movies with no interruptions like annoying ads.
It is obvious that people get irritated with ads coming in between their favorite program time. This is what Netflix understands and offers ad-free content. This prevents users from irrelevant ads making sure to give ad-free experience to all its customers.
Netflix’s message has always been straightforward: Watch movies as comfortably as possible and whenever you wish — at a fixed price.
Process and transaction handling are made simple and highly flexible, also when it comes to mail-ordering DVDs online. The Netflix website also is a prime example of focusing on the essential — no unnecessary frills.
Over the course of years, Netflix has kept a modest price policy, which has attracted millions to use their services.
This is a factDue to the low-price, high-revenue philosophy, Netflix turned out to be an affordable and reliable source of fun for the entire family. The key point of this strategy is to keep the price of a single package low, and the high revenues will come as a result of numerous subscribers.
Using the internet as your base can help a great deal in simplifying things.
You can include extensive descriptions and photos of your products online but keep the product and packaging itself simple. This is content marketing performing to its full potential.
Know Your Customers
Which TV shows are watched at what time? How many episodes are watched in succession, and where do people stop watching?
Netflix analyzes the viewing preferences of its customers in every detail.
With up to five personal profiles for one account, it is possible to tailor recommendations and offers to every single household member. Algorithms learn to adapt to any taste and to recommend any content, in order to keep the audience interested long term.
Netflix knows everything we do on their platform. Data is gold.
This is a factThey have a huge amount of data on all 150+ million paying subscribers. It’s impossible for a human analyst to mine through all this data — big data — and extract useful insights.
Netflix uses machine learning to help their algorithms learn without human assistance. Machine learning gives the platform the ability to automate decisions based off of user activities.
Without recommendations, users would spend a lot of time going through thousands of movies and TV shows. That’s why the Netflix recommendation engine is vital to the platform’s success because it automates the search process for users who would otherwise run out of patience and leave the platform.
There are a lot of small details that show the real attention to the users and all over the Netflix success story, this approach pushed the platform forward.
It starts from little things like — custom-created preview videos that automatically play when you scroll over a title card or download-and-go feature but all together they create a cozy and convenient space.
📚 Additional reading
Big Is Never Enough
Randolph and Hastings always saw the bigger potential in Netflix even when they started out as simple DVD rental, they never stopped and thought about new innovative ways. Look at them now — a platform well-known and loved all over the world!
Netflix spent $12 billion on streaming content in 2018 and $14.6 billion in 2019.
To put that in perspective, that’s nearly equivalent to the gross domestic product of Albania and more than the GDP of many countries like Madagascar. Going forward, Netflix plans to spend less on licensing shows and more on original content.
The more investment you’re putting in, the more people are finding what they love and the more they have value in the service.
This is a factNetflix VP for original content Cindy Holland has said the average Netflix subscriber streams about two hours of content every day. Given its 150+ million subscribers, that’s over 2 billion hours of content streamed per week on Netflix!
By 2016, Netflix was accessible worldwide, and the company has continued to create more original content, while pressing to grow its membership.
This is a factIf the introduction of streaming was the tipping point, the genius of it all was how Netflix essentially used other content creators to beat them at their own game. By licensing their content to Netflix, networks essentially gave the company the tools it needed to steal their viewership.
Expectation theory states that, in general, what we expect is what we get.
If you want to build a more scalable business, you’ll want to start with your expectations of what you are capable of achieving — and how fast you can achieve them. Once you adjust your thinking to thinking on a larger scale, you’ll be amazed at how much more will get done and at a much faster rate.
High Stakes, Big Mistakes
At the end of 2011, the Netflix management team decided to separate the ever faster-growing streaming business (Netflix) from the decreasing DVD rental business (Quickster) and at the same time to increase prices by 50%.
A mistake with serious consequences: within one quarter, Netflix lost 800,000 subscribers and the share value dropped by 80%.
However, the company did not waste any time and called the separation of the two businesses off immediately. And customers forgave Netflix — despite the higher prices. Since then, the company has always reacted noticeably quickly to customer feedback, even if it is about features like different ways to create a personal profile.
You have to disrupt yourself, before someone disrupts you, whatever it costs.
This is a factWhile companies like Apple pursue a singular vision of one man, Reed Hastings said Netflix does a lot of A/B testing, trying out new concepts on 10,000 users at a time. If something sticks, it eventually gets rolled out to Netflix’s subscribers.
The success of Netflix is a story of massive failures turned into huge wins.
This is a factIn 2008, a collapse of its database shut down shipments for 3 days. But the failure ultimately led Netflix to Amazon cloud computing. Netflix has flourished in the cloud, and at any one time it has a lot of servers processing its data.
People think that failure is bad; it is not true at all. It can be bad; at times, it can be good, but it is inevitable for sure.
The ideal way to treat a failure is to learn from it and simply let it go. Don’t hold on to it, as it is unnecessary and a total waste of time. Reflect upon what went wrong and make sure you avoid repeating the same mistakes.
Stay in Sync With Change
The first time Netflix innovated was when they were shipping DVDs via mail. Then they abolished late fees which lead to Blockbuster’s crush & burn demise. After that they transitioned from mailing content to streaming movies and finally, Netflix began producing its own original content.
Not only did Netflix innovate quickly, but they exuded a form of disruptive innovation by appealing to an audience and providing a service unmatched by its top competitors.
This is a factA disruptive company is one that targets segments of the population that have been overlooked by its competitors, delivering an inferior (but more tailored) alternative, often at a lower price. It was this quick adaptation that ultimately led Netflix to outperform their major competitors and disrupt the entertainment industry for years to come.
When the company got started in 2000, they knew there was no way they could stream movies over a 56k connection.
So they went with DVD distribution first while planning for a future of 14 mbps in home connections by 2012. The turning point happened in 2005 with the rise of YouTube and Netflix hasn’t looked back since. It was this good grasp of the timing of technology improvements that helped the company get started with one model while preparing for the future.
For every company Netflix is the perfect example of how to evolve and adapt but also how to survive digital disruption.
This is a factNetflix constructed very successful business model with its rental service but over the years they have foreseen the changes in the consumer behavior and changed their business model accordingly.
Netflix always thought about more creative and convenient solutions.
And were up to invest their time, effort, and last but not less — money, even if it was risky. They questioned and rethought everything about the industry.
Be careful: don’t make decisions only if they’re creative and unexpected — the best decisions are the ones that help your business grow.
You should take the risks but not all the time in the long run it might come out that you lost everything just to impress the competitors with your ‘creativeness’. Healthy and thought out balance is everything.
📚 Additional reading
Degrees are Useless
You might know Netflix as the home of House of Cards and Orange is the New Black. But among recruiters and employers, the video streaming giant is synonymous with high performance.
What’s the secret to Netflix’s recruiting success? The answer lies in two words: stunning colleagues.
This is a factMore important than technical proficiency is culture fit — how well you identify with Netflix’s famous culture deck. The culture memo includes principles like “farming for dissent” (asking your coworkers to point out what’s wrong with your idea) and “sunshining” (airing a mistake you’ve made in front of tens or even hundreds of your coworkers).
Netflix’s hands-off management style and emphasis on employee autonomy means staff members typically receive very little direction from their superiors.
Beyond setting big-picture goals for your role, you are responsible for coming up with problems to solve and ways you can contribute. This is why Netflix has a policy of sharing internal documents with all employees so that staffers gain insight into the business and its challenges.
Netflix promotes creativity with its own culture, summed up in the company’s culture guide. The guide provides workers with no tracking of vacations and increasing freedom for good work.
This culture allows Netflix to create a platform for innovation, rather than a stifling one that ultimately engenders bitterness. That can mean the difference between a company that comes up with one innovative breakthrough and one that can repeat its success over time, Hastings said.
Netflix goes out of its way to look for candidates who share the values that the organization associates with and not take what their resume says on the face value.
This is a factValues are the building blocks of a brand, and Netflix understands this very well. Since resumes don’t often tell enough about someone’s personality, the recruiters at Netflix try to observe the interviewees carefully and ask questions that can reveal more about their behaviors and judgment.
📚 Additional reading
Netflix explains that there’s no room for ‘brilliant jerks’ — the cost to effective teamwork is too high. Being part of a dream team means that employees are always expected to be on their A-game, caring about each other and knowing that they might not be part of the dream team forever.
The speed of delivery was a major factor in customer acquisition and loyalty early on. That’s why Netflix switched to streaming as soon as it became digitally available.
Streaming was the fastest way for customers to access their product.
Especially now, when people have much quicker access to just about everything, customers expect and demand speedy product delivery and customer service. Other giant online retailers such as Amazon are doing well using this same strategy.
When Netflix decided to produce its own content, instead of starting from scratch they bought the licenses of cancelled TV shows.
Reviving a cancelled TV show with a huge fan base was a great strategy. Unlike traditional TV networks Netflix do not rely on ad revenue therefore it has an advantage for producing its own content.
Then, Netflix invented binge-watching. In 2016 Netflix started to put a show’s entire season online at once.
This is a factThis way the subscribers were not limited and could watch the show when they wanted and that much as they wanted. It differed them from the competitors that tried to tie viewers to the time and amount of the series they wanted.
The company thought about launching live video streaming but saw no point in streaming events like the President’s address when CNN can do the same thing.
It goes back to the core principal of Netflix’s identity, which is as a personalization and user choice company, not as a streaming company. That has helped the company focus on what the user wants, not just pushing out features because it’s possible.
📚 Additional reading
Traditional and new players are ramping up to compete head to head and the landscape looks more crowded every day. Netflix definitely changed the way the industry operates and is winning the battle against both incumbents and new players.
Netflix is successful because it keeps its subscribers’ needs at heart. Its co-founders were courageous enough to steer the ship in a different direction than the industry and teach their teams to live by the business strategy of ‘Adapt and adopt’.
With all the great and overwhelming features, Netflix is marked as successful as it prioritizes subscribers’ needs.
This is a factThe regular transformation is bringing innovations and creating ease for all its subscribers. Their business strategy to adapt and adopt is making customers glued to this platform.
With over 150 million subscribers around the world, it is safe to say that the future looks bright for Netflix.
Netflix went from being a novel and crazy-sounding idea to a movie rental company and then morphed into a streaming and production giant that churns out award-winning content month after month.
Since the original Netflix production is on the rise, people get high value for money.
This has been the philosophy of this streaming service from the very beginning. As such, it contains all the reasons behind Netflix’s success.
As the company is growing, their services are getting even better. How Netflix will evolve next? Will see. But it’s an excellent example to follow!
Netflix’s journey is an inspiring story to learn from. Their success wasn’t luck but rather a keen understanding of its market and taking balanced risks. Where will Netflix go next? Share your thoughts in the comments below!