Tuesday, September 29, 2009

The Future of Netflix

Netflix Everywhere: Sorry, Cable, You're History

The article starts with a story about Reed Hastings canceling a product just before launch (it was spun off and became the Roku player) and rapidly reinventing Netflix's strategy:

Rather than design its own product, it would embed its streaming-video service into existing devices: TVs, DVD players, game consoles, laptops, even smartphones. Netflix wouldn't be a hardware company; it would be a services firm.

The dream of routing around cable companies just may be in sight.

You'll never hear Hastings point that out, however. Unlike many in the tech world, he's a quiet disrupter, sabotaging business models silently and irretrievably.

So far, Hastings has avoided the wrath of the giants by building his Netflix service surreptitiously, slowly amassing his library of streaming content and giving viewers new ways to access it. And now, even if the cable and content companies do take him on, it may be too late. Hastings' Trojan horse—Netflix's software, embedded on myriad consumer devices—is already in place.

Data mining to the rescue! I love stories of how companies use existing data to generate new revenue or information for the company.

Sarandos asked his team to use their data-mining skills to help him find deals. While other video providers might ask studios for a sack full of sure things—new releases by big-name stars—Netflix's engineers could dig through their queue and review databases to find sleeper hits that its users actually wanted to watch but that studios might be willing to license for a pittance.

Still, the deal kicked off what Hastings hopes will be an unstoppable virtuous cycle. If Netflix can use the Starz offerings to sign up more subscribers, those subscription fees will generate more revenue. And with more revenue, Netflix can afford to pay more studios for rights to more films—which will draw in still more subscribers. And so on.

And this is a great mission statement from Reed Hastings:

"Today you love one out of three movies that you watch. If we can raise that to two out of three, we can completely transform the market and increase human happiness."

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