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Why Netflix Will Never Get Back On Top

Remember when Netflix first hit the scene and the concept of keeping a movie for as long as you want without suffering late fees was totally foreign, and many of us couldn’t quite grasp it until we finally signed up for Netflix and understood how it all works?

Netflix has come a long way since then, including offering streaming video, mountains of television shows, special-interest content, and Blu-ray movies. They’ve also made some changes to their billing policies that have ticked off a lot of people and have suffered some damage to their otherwise good name as a result.

Here’s a look at some reasons Netflix will never get back to the top of the content-delivery mountain. Some might surprise you.

Separate but Equal

Netflix decided one day to change its pricing and delivery model, even to the point of deciding its home delivery DVD service would be spun out into its own company called Qwikster and the streaming video service would remain as Netflix. Customers and analysts all saw it as Netflix abandoning the DVD business. The public was outraged.

CEO Reed Hastings never saw it coming, which is odd, considering his company probably has more data on customers than any other company in its sector. How could it know every last detail about customer’s viewing habits, but be so oblivious to what they were willing to spend?

This huge mistake cost Netflix dearly, and they’ve never really recovered from the dustup. It has opened the door for Amazon, Verizon, and Redbox to lure away customers with better service and cheaper prices.

Slow Growth into the Future

The last thing any company wants to announce to its shareholders is that its growth has stagnated and the prospect for new customers looks flat into the foreseeable future. That’s exactly what happened at Netflix, and it’s a direct result of the pricing snafu from last summer.

It’s still a head-scratcher that Hastings was really this clueless about his customers, and it’s clearly indicative of a Chief Executive who was enamored with all the sophisticated bells and whistles that made his company purr, but didn’t appreciate the simple fact that it was real people spending their hard earned money faithfully each month that made it successful.

Netflix will forever be a business school case-study on how to lose customers in one easy move.

DVDs versus Streaming

Hastings’ hubris led him to decide, for an entire industry, the DVDs are going the way of the dinosaurs and streaming is the future of content delivery. Of course he’s correct in that assessment, but his error was in thinking that day was today.

People have made large investments in DVD hardware, and aren’t quite ready to abandon it. Think back to the death of the VCR. It was slow and painful, and the ultimate transition away from video cassette tapes to DVDs too the better part of a decade.

 

Netflix customers and investors were incensed at the notion of being forced away from DVDs and voiced their opinion loudly, again opening new doors for competing companies to come in and sweep up customers and market share.

Streaming Video Miscalculations

It’s both amazing and baffling that a company that can be cited as a pioneer within its own industry, and with so much information at its fingertips continues to make rookie mistakes. Its latest error is its thinking that it holds all the cards when it comes to delivering streaming content.

For some reason Hastings thinks the digital delivery game is more challenging than delivering DVDs by mail, when in fact the opposite is true. No startup or existing company is going to pay the huge sums of money required to buy and store DVDs when it can invest that money into a digital content delivery system.

His competitors, including Amazon, know exactly how to deliver content to customers via their computers, tablets, and smartphones and have the money to invest as necessary. As a result in thinking he still holds all the cards in the content delivery game, he’s allowed competitors like startup “NimbleTV” to swoop into a sector Netflix could have easily owned if they weren’t busy misreading their own industry.

Original Content Creator

In an effort to remain competitive, and to once again forget its real and true business model, Netflix actually got into the original-content creation business with a show called “Lilyhammer.” It’s a mobster show that critics essentially mugged and shot to death with its own weapons.

Worse, however, is being in the business of creating content that will compete with your partners. When you’re seeking more content from the likes of USA Network, FX, AMC, and other cable television companies, where’s the incentive for them to license their original productions to you if they’re in direct competition with you?

This is another calculated misread by Hastings that has the industry and its partners shaking their heads and walking away, knowing full well they’ll find better deals.

 

A Takeover Prospect

At one time Netflix was never truly viable as a takeover target by companies like Apple, Amazon, Google, and even some television networks like NBC. They were simply too expensive, and their stock price was through the roof.

Today, however, just the opposite is true and what you have now is a company with slumping sales, flat customer-acquisition, and a great deal of confusing moves by CEO Reed Hastings. What it does have, however, is a lot of customer information and some very sophisticated algorithms.  Content delivery models including recommendations to customers based on content they’ve previously watched is included in the complicated algorithms.

In fact, it is their recommendation system that would be very attractive to the likes of Amazon, Google, and even Verizon, which has announced entrance into this sector through a partnership with Redbox. They’re no longer too big and too expensive to buy, and if Hastings continues to misread a sector he effectively started more than a decade ago, Netflix is ripe for the picking.

Expect one of two things to happen at Netflix, and probably within this calendar year. One, it remembers its business model and gets back to becoming one of the noted companies in customer service and satisfaction, new customer acquisition, and a long list of new deals and relationships with content owners, particularly cable television broadcasters. All that, however, may simply not be enough for it to get back to the pinnacle of its own industry.

Two, it continues to flounder in the shallow waters and a huge buyout is announced by a company who jumped into the game after Netflix buy stayed the course and won the all important game of remember that it’s your customers who keep the lights on.

Author Bio:- If you are like many of us from Cabletv.com we stopped using Netflix and went back to our normal cable service provider.  I would love to know if you have Netflix are you recommending it to your friends or if you don’t have Netflix how you get your movies and TV shows.

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