Netflix is emerging as one of the biggest online video streaming services. It has more than 80 million subscribers in nearly 200 million countries. It is changing the rules of the entertainment industry globally. It is becoming increasingly feared by Hollywood due to the disruptions it is causing in the business model of Hollywood and the entertainment industry overall. Netflix is creating greater original and award-winning content and offering it to the customers in affordable subscriptions. The article explores the threat which Netflix poses to Hollywood and how it is changing the rules of the game.
Impacts of Netflix
Netflix was launched in 1998 as a world’s first online DVD rental service. It was started with 30 employees and only 925 titles. Currently, it is valued at $45 billion and has more than 80 million subscribers in over 200 countries. This provides an idea about the might and reach of Netflix which it has acquired over the years. In 2017, it released 40 movies which is expected to go up to 80 movies in the year 2018. In the first 6 months of 2018, Netflix has released as many movies as the six major studios of Hollywood combined. It is also planning to spend $7-8 billion on creating original content, television series, and movies.
While the producers and exhibitors keep at least a 12-week gap between releasing the movie in theatres and its ancillary exploitation, Netflix is changing the rules here also. It is increasingly producing movies which are released to the customers on the same day as they hit the movie theatres. The pricing of Netflix is also very aggressive. The average cost of a movie ticket in the US in 2017 was $8.97, which can be much higher in major cities like New York or Los Angeles. Comparatively an entire month of Netflix subscription ranges between $7.99 to $13.99. The movie tickets have been becoming costly over time due to increase in IMAX and 3-D screenings. Netflix has shown here that the size of the screen does not matter to the consumer these days and they prefer quality content and value for money. Instead of pouring money on these premium technology and screenings, Hollywood might want to make movies more affordable. They may also follow the Netflix subscription model in future.
Netflix is redefining the entertainment industry. Traditional TV and home video reached its peak at $110.3 billion. This is expected to shrink to $96.1 billion by 2022. The movie attendance has also plateaued and flatlined. In 2015, one-third of the US population did not go to movie theatre and 10% went only once in the entire year. These changes are largely attributed to Netflix, which has caused large-scale disruptions in the American entertainment industry.
Netflix has caused lots of uproars in Hollywood and the American entertainment industry. It has clearly demonstrated and proved that quality content and reasonable pricing are the key growth drivers. Hollywood not needs to take note of this and come out with appropriate strategies to remain relevant and global leader in the film industry.