Page 64 - AC/E Digital Culture Annual Report

64
Introduction
Founded just 20 years ago, the Netflix brand
has had an impact around the world and has changed our understanding of modern entertain- ment. The company made the move from analog to digital media in 2007, after 10 years in which its business had consisted of offering customers a flat rate for DVD rental by mail. The business model has not substantially changed (bringing films and television series into the home) but
has now gone 100% digital, with a monthly subscription for streaming contents instead of downloading them to a playback device. Betting on the Internet seemed risky at the time given what was happening with home entertainment, which had been weakened by piracy and declin- ing sales and rentals of content on a physical format. “Nobody is going to pay for something they can get for free” was often heard, especially among the traditional players in the industry, who were (and are still) mired in the dilemma
of how to continue their analog business while exploiting the demand generated by the new digital ecosystem.
Betting on the Internet was the driving force behind a new concept: personalized versus traditional home entertainment.
Netflix proved that it was possible. It has been true to its philosophy of providing its product on demand with total access, including its original content. It is currently the leader by a wide margin in Internet television with nearly 110 million subscribers worldwide, and is available in more than 190 countries (according to statistics from the third quarter of 20171. This journey
has not been without setbacks and mistakes. The company made the right adjustments to its business model when necessary, adapting its product to a world engulfed by the accelerated pace of innovation and constantly changing consumer habits. It also proved that providing digital content services could be profitable, offering an added value for which users would
be willing to pay. In the process, it also radically transformed cultural consumption patterns in television viewing.
The Netflix model
Netflix’s popularity did not just lead to wide- spread subscriptions to the service. It was also the driving force behind a new concept: person- alized versus traditional home entertainment. The triple A service (accessible, affordable and appealing) that Netflix offers is based on several key elements that are found on the connected devices of most of the providers representing this new consumer culture.
• A subscription-based economic model. When Netflix launched its streaming ser- vice, the formula it used was SVOD (sub- scription video on demand). The contents consisted almost exclusively of third-party products made available many months after they were shown in the cinema or broad- cast on television. This has drastically changed. It is not necessary to wait so long anymore to view recent content. Nor is the content limited to licenses for the contents of others. The number of Netflix Originals, produced or co-produced by the company, has been increasing exponentially. This is to say, there has been a notable improvement in the quality of the product, but the model continues to be the same. Compared to commercially available alternatives that are based on a single transaction per product (the customer pays to rent or own a specific product), Netflix continues to offer total access for a single monthly payment. This elimination of individual business transac- tions has caused a change in the perception of the value that the customer is receiving. This has gone from an individual product (I am paying for one, and just one, item, formalizing my decision to view it before renting or purchasing it) to a collective
THE NETFLIX MODEL’S IMPACT ON CULTURAL CONSUMPTION ON THE SCREEN · ELENA NEIRA
Digital Trends in Culture