Is the emergence of video streaming and Video-On-Demand (VOD) technologies posing a threat to the sustainability of Netflix’s business model?
Video-on-Demand (VOD) is the current video streaming technology that combines pay-per-view programming with internet downloading (Donghyeok, Yongseok & Hwangjun, 2013 p.1295). Netflix, a DVD rental company which isa subscription based, ventured the video industry with disconcerting technology of providing online video rental. Its competitors like Blockbuster offered retail rentals. With time Netflix competitors followed the company’s direction when their main competencies were incapacitated by Netflix’s strategy. Zink (2005) notes that Netflix became a technology leader and invested of up-to-date technologies like the Video on Demand. Internet Service Providers (ISPs) demand money from Netflix, to help this service provider to sustain the demand (Michael, Paul & Walter 2010 p.49).
Zink (2005) explains that VOD is a service that allows its users to select and watch clips of video content over a network. Video streaming and Video-On-Demand (VOD) has produced an interactive television system and has created an immense impact on the internet. Donghyeok et al. (2013) indicates that VOD is turning to be the norm in this industry and among clients. VOD has also turned to be a threat to Netflix business model, DVD rental services that are based on online subscriptions. These services highly depend on the internet in sending out physical DVD to customers. Any resolution on how Netflix would scheme to online video market would affect both Netflix business model, and its ability to maintain its place as a market leader in the media industry (John 2014).
According to Michael et al. (2010) has spent time, effort and money in getting a solution to development of a large infrastructure capital expenditure to avail video content to online subscribers. Integrating the VOD service into Netflix portal mean that Video-on-Demand content acquisition cost must be met by Netflix alone. At present, there are very few online content available since major studios have become reluctant to partake due to piracy concerns. Incase the video streaming and VOD is ineffective; Netflix losses would be immense (John, 2014).Marriott (2007) in New York Times affirms that the company’s reputation would be compromised. Notably, increasing its features at no additional cost will translate to no additional revenue gain. Resultantly, without added revenue it is hard for Netflix to justify costs that are associated with programming support and content acquisition. Michael et al. (2010) affirms that technology improvement can adjust Netflix business model, and therefore, the company must pay close attention to the developments of online content connectivity and availability. The company has also made provision for ultimate adjustment to connectivity technologies as they become available (Cut your cable bill Sports edition NETFLIX HTPC cable-less, 2012).
Arguably, when such great technologies emerge, Netflix can decide to integrate with video streaming and VOD services into it major portal ones the contract with the cable provider has ended. Netflix should consider the following customer-grabbing and customer strategy. A part from offering a month free subscription to all existing DVD rental customers, the Company can also offer customers who wish to view video from Netflix portal. With this strategy, the customers would primarily choose Netflix services over those of other providers. Arguably, by providing a free subscription, the customers have enticement to use Netflix and familiarize with the features of the Netflix portal. By the time the free duration is over, they can continue to use Netflix or turn to other providers. Many would opt to remain in the web portal and pay for Netflix’s services.
References
Donghyeok H, Yongseok P and Hwangjun S. (2013). Enhanced Link based Congestion Control (ELCC) in Peer-to-Peer (P2P) based Video on Demand (VoD) System. Research Article. Journal of Visual Communication and Image Representation, Volume 24, Issue 8, Pages 1293-1302 Doi. 10.5120/4455-6238
Michael A., Paul D., Walter (2010). Head’s Broadcasting in America: A Survey of Electronic Media. Boston, Massachusetts: Allyn & Bacon p. 47-48
Book
Zink, M. (2005). Scalable video on demand adaptive Internet-based distribution. Hoboken, NJ: J. Wiley & Sons.
Internet
John D. (2014). Why Your Netflix Has Been Slow Lately. Retrieved from: http://chicago.cbslocal.com/2014/02/20/why-your-netflix-has-been-slow-lately/
Newspaper
Marriott, M. (2007-08-06). Nothing to Watch on TV? Streaming Video Appeals to Niche Audiences. The New York Times. Retrieved from http://www.nytimes.com
Vedio and video blog online
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