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Between satellite and cable TV, sites like YouTube, and video streaming, Americans have no shortage of video entertainment options. In popular culture, one service has become synonymous with video streaming, and that’s Netflix. There are signs, though, that Netflix dominance may soon become a thing of the past, at least according to some.
Netflix began in 1996, when for most, the internet was in its infancy. At first, its relationship with the internet was casual. The World Wide Web was a portal for ordering borrowed videos on DVD, but little else. Much of Netflix’s business was conducted via the US Post Office.
Now, more people know Netflix for video streaming than for DVD borrowing. Its name has become so ubiquitous that it’s even entered our sexicon. Just ask any Millennial what “Netflix and chill” means.
The problem, though, when a name becomes ubiquitous, is that it loses all meaning. Just as a Kleenex can be any old tissue, and Googling can mean any type of internet search, Netflix is getting lumped in with all kinds of video streaming services, like Hulu and Amazon Prime. While Netflix is still winning the name game, they are watching their rear view mirror and struggling to stay ahead of trends.
A recent article in Forbes paints a less than rosy picture for Netflix. Let’s examine it:
Naturally, the article mentions the competition. Amazon, the author speculates, would be the winner, simply because they offer so many other choices. While that may be true, Americans aren’t known for skimping on home entertainment. Even during the depths of the recession, home entertainment was a priority.
Will the Competition Kill Netflix Dominance?
Amazon may be the most logical choice for video streaming, since the cost of video streaming is bundled into its annual Prime membership which also saves on shipping costs. Netflix, though, along with their competitors, offers unique and original offerings, and as long as social media buzzes about Orange is the New Black or Grace and Frankie there will be enough peer pressure to pay the roughly $10.00 a month.
During the depths of the recession, people didn’t stop spending money. They simply changed where they spent their money. As budgets tightened, consumers stayed inside and the amount of money they spent on home entertainment increased. It’s impossible to say that any industry is recession-proof, but Netflix’s business model is about as close as it gets.
What About Millennials?
Conventional wisdom says that Millennials aren’t watching TV, and it’s true, but that doesn’t mean TV is on its way out. As people get older they start spending more time at home, in front of their TVs.
While it is true that Millennials (and younger) tend to shun scripted shows for lower production videos on YouTube, Facebook and Snapchat, streaming services are banking on the fact that they’ll grow into scripted programs.
Netflix Around the World
Globalization is the key to Netflix’s future success. The consumer base in the United States is growing, but no where near as fast as in countries like India and China. Netflix’s worldwide market is growing at an exponential rate. While Forbes expressed concern that there may be a backlash to globalization, it’s not happening yet. The United States still dominates in scripted productions.
What Are Netflix’s Future Obstacles?
Despite Netflix’s popularity (more than 100 million subscribers across the world), they aren’t making much money. Their stocks are doing well. Investors are making a lot of money, and the profits are good but the company has had a negative cash flow for years. If interest rates rise (which is almost a certainty), Netflix could see trouble.
The end of net neutrality adds another uncertainty to Netflix dominance. Internet service providers could penalize Netflix by slowing their content down while they speed up the content for larger companies like Amazon or in the case of Comcast, their own content.
Featured image: Promotional image via Netflix.