NETFLIX

Attention Economy:

 

The primary function of the Internet is to facilitate information exchange. It is an incredibly large network, which provides the information to an attention economy. The attention economy is a significant part of our reality that has developed its own economy (Goldhaber, 1997). In a traditional economy, the scarcest commodity is the one everybody is seeking for. If you transfer this definition to the internet it is like a traditional economy. The Web offers a great amount of information any kind, hence the scarcest commodity is attention for this quantity of information. The goal of every company is to gain revenue, therefore, the businesses that adopt this new reality will be the most successful (Goldhaber, 1997).

 

Cohan (2013) describes that Netflix knows how to utilize this shift, make it work for them and learn how to reinvent itself for the 21st century. Netflix is a digital, networked platform, which means they potentially can create an unlimited library of movies and TV shows. Film watching is embedded into today’s culture, with almost everybody having something they enjoy watching, so it is content in great demand. With this exhibition of content, Netflix can fulfill the wishes of all demographics and psychographics. tIt is virtually impossible for a business to target almost anyone, however, Netflix has managed to do this and more, and generated a great amount of attention, benefitting from the audience fragmentation as a result of digitalizing content (Webster & Ksiazek 2012).

 

Appealing to everyone who has access to the Internet, Netflix offers their users entry to its services whenever they want, (almost) whatever they want and wherever they want. Netflix knows the importance of accessibility nowadays, so they changed their business model from DVDs-by-mail to a digital streaming platform (Netflix,2017). Users can watch their preferred content with Netflix any time, in any order and can pause and go back to whenever they want. It is available on a great variety of devices like smartphones, computers or tablets, so Netflix is accessible almost everywhere we are (Cohan, 2013). Being transportable and suitable for most people of the community, Netflix gains attention in an economy which is fully packed with information.

 

 

Network Economy:

 

In over 10 years, Netflix rented and sold DVDs as their business model. In 2007, they decided to create a streaming platform and changed their whole business structure (Netflix, 2017). The reason is that the internet offers the opportunity to transmit information in a more cost and time efficient manner. The costs for the expansion of their delivery infrastructure would have been too high if Netflix did not make changes to d their business model and kept renting and selling DVDs (Liebowitz, 2002, p.9). Compared to that, the Internet already has the necessary infrastructure due to its use of the same transmission mechanism like telephones and cable television. Only a few minor modifications were needed in order to give a household access to the Internet  (Liebowitz, 2002, p.10). Transmitting movies and series via the Internet instead of delivering DVDs offers two advantages for the customers. Firstly, there would be faster transmission and instant user access to the desired content. If the DVD had to be sent to the target location physically, it would take several days and the customer could already have changed their mind and would watch another movie rather than the one he ordered. Secondly, streaming gives the opportunity to offer users a convenient preview of different content before committing to a selection or change decisions effortlessly.

 

As Liebowitz (2002, p.13) says, a network effect is present “when a product becomes more useful to consumers in proportion to the number of other people using it.” By using the Internet,  Netflix offers more attraction for customers and hence expands their network in a shorter time, achieving a greater result. Since Netflix has got more annual subscribers over the last years and increased its awareness level, the company was able to invest more money into producing and distributing new original movies and series for their streaming platform. This had two effects on the advantages for users. On the one side, customers had the opportunity to choose from a greater variety of content. Netflix could also improve their personalized movie recommendation system, which on the other side affected the customer experience to increase and satisfy their users.  This is how Netflix profits from the internet as their business model and takes part in the network economy nowadays.

 

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How Netflix disrupts the TV-industry

 

The birth of Netflix has created a debate about whether it is becoming the cult of new TV culture. To have a bit of context, here is a brief summarization of the history of television advances in the United States.

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Michael Curtin argued that the significant shift from traditional mediums to digital platforms happened around 2007, the same time Netflix relocated its content online, as well as some other big companies debuted multi-platforms presence (2009, p.12-13). Maintaining the characteristics of “TVIII” as the backbone, not only did it keep the traditional business model of providing TV content, Netflix took the opportunity to open new ventures of original content being streamed exclusively to subscribers. Even though it initially branded itself as the “new HBO” (Hastings and Wells 2013, p. 7), the different branding strategies that do not affiliate with cable networks showcased it standing out.

 

Netflix is considered a “...interface/frame [that] manages the interactions between consumers, products, and producers. [...] In relation to the television channel, the brand is communicated to the viewer through program production and acquisition, scheduling, on-screen advertising and ancillary products related to the channel and/or its programming (Johnson 2012, p.17-18). They realized the niche audience community that was organically created based on the content they put out, and “advertise themselves to subscribers rather than advertisers” (New York Times Business). Advertising is also executed through a variety of traditional channels and partnerships, with the free one month trial encouraging users to have a taste of the content they offer before committing.

Although the business does not offer any extras to compete with DVD renting culture, there are interesting study cases of Netflix remaking notoriously known TV shows or exclusively releasing a continuation of shows on their platform. Mareike Jenner looked at the case of cult-favorite Arrested Development, where the company reproduced and distributed season 4 of the show on their site, bringing about a fresh narrative and plot. This is one of the examples of Netflix utilizing “the textual strategies” to “positions itself within the broader television landscape.” (2013, p. 11).

 

Part of the company’s strategy when marketing to the demographics of young people is releasing content a season at a time. Researchers have shown that this method has driven traffic to the site during that release week. It “inspired widespread marathon-viewing sessions for the eighteen-to-thirty-four age demographic and among the younger audiences of Netflix, many of whom binge-watched and then took to social media to post their (largely positive) reviews of the first steps Netflix had taken to produce original TV content”. (Matrix 2014, p. 119). The video on demand phenomenon undoubtedly affects users’ TV watching habits and on a corporate level, distribution of TV shows by other networks, promotional strategies, and scheduling.

 

In conclusion, Netflix understands its demographic and technological advances of VOD platforms in the digital era and operates in such a way that not only provides more freedom for subscribers to cultivate their TV watching habits but also disrupts traditional mediums. As Sidneyeve Matrix put it, “Bingeing on coffee and continuous-play TV, the Netflix generation enjoys a hyper-personalized yet socially connected media diet, with all the pleasures of on-demand spectatorship and participatory cultural citizenship, supported by new digital media networks, services, and technologies.” (2014, p. 134)