Are you worried about Netflix eating your lunch?
There are always some interesting insights gained from the annual refresh of the Internet Minute. Growth, levelling and decline are clearly observed across some of the major offerings as well as highlighting emerging players. In 2016 and 2017, Netflix was averaging 70,000 hours of viewing every minute. In 2018 that grew over 3 times as much and in 2019 it was nearly 3x growth again. As Netflix continues its global growth, many other providers of TV/Movie services are enabling their own on-demand capabilities. What’s interesting is that the majority of Netflix’s customer base are under 35.
This highlights the continuing trend of younger generations preferring on-demand viewing. A recent CNBC survey of the US highlighted that many Netflix users are also cable users but it also highlighted a groundswell of users who only watch streaming services:
If you’re a cable provider then it’s safe to say that Netflix is eating your lunch. Yes, you can take solace in the fact that there are customers who like both. However, how long will it be before Netflix figures out what extra content it should licence or produce, to steal more of those customers? Or does it even need to? Will natural growth and the change in viewing behaviour continue to erode your revenues? This comparison of market cap clearly shows how Netflix is gaining ground on the big players in the market.
Whilst the streaming capability of Netflix is an attractive proposition many users say the customer experience is what they like the most. At the heart of their operations is a data-driven recommender system that analyses your viewing behaviour. Some people complain about receiving irrelevant recommendations but for the majority of customers it’s what they love most about the service. In today’s fast-paced world you don’t have time to seek out new things and we’re bamboozled by the spectacular choice available. We need help and we’re getting it from Netflix, Amazon and Spotify on a daily basis. Many service providers and content providers are copying these services and the recommender systems they provide as they look to take back wallet share from these over-the-top players.
There’s a paradox. If you are a service provider, you are playing catch-up. The revenue ship you’re sailing on is leaking, badly. Bailing out the water will not stop you from sinking.
You know more about your customers than Netflix does, significantly more. You can for example infer the age and the gender of each customer. You can understand their interests and behaviours, compare and contrast this with other customers and generate very personalised recommendations of your own.
This is far more powerful than Netflix because you have access to insights well beyond the capability or reach of Netflix. As a service provider you know your customer watches Netflix because you own the transport, but that’s not all you know. You know that they like particular genres based on their browsing behaviour. You know their interests beyond what they might watch on Netflix. You can observe the whole streaming content market, who is growing, who is declining. This customer insight can drive strategic decisions around partnerships and content acquisitions.
Like Netflix, you could suggest that because I watch one programme I might enjoy another but what if those recommendations were based on a more human-like understanding of me?
Not only could you provide me recommendations based on my viewing behaviour but you could make recommendations based on my interests and passions. For example, I listen to Kerrang radio and grew up with bands like Motley Crue so therefore I would be interested in Motley Crue’s ‘The Dirt’ biopic. You couldn’t get that from my viewing behaviour.
Netflix is good, but service providers could deliver a personalised Customer Experience at a whole new level.
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