Squeezing profit
Remember the password you lent your girlfriend? Or the accounts you share with your college mates? CEO Reed Hastings is about to change the way that content is delivered to multiple account users. According to Netflix, Inc. (NASDAQ:NFLX)’s Terms of Use, every multiple user of an account is a violation.
As a solution to this problem, Netflix, Inc. (NASDAQ:NFLX) is offering a multiple screen streaming service which allows the user to have up to four streams of online content being used at once. This allows the viewer to have more content across the entire household viewing audience, and creates revenue from a service being abused.
Original content
House of Cards was the first original television series produced exclusively for Netflix, Inc. (NASDAQ:NFLX) viewers. The series was designed to drive new membership traffic and create exclusive content for the instant demand audience. The entire series of House of Cards was launched simultaneously, sustaining the branding of Netflix by giving viewers complete control of when and how they want to enjoy their entertainment.
The results of this new content strategy have been overwhelmingly successful. Armed with this new operationally efficient strategy, new television series are going to become the norm for this company that is pushing for new content through innovative methods.
Customer engagement
As the internet TV industry continues to grow, Netflix, Inc. (NASDAQ:NFLX) continues to face competition from multiple competitors including Amazon.com, Inc. (NASDAQ:AMZN) and Coinstar, Inc. (NASDAQ:CSTR)‘s Redbox.
Amazon.com, Inc. (NASDAQ:AMZN) Prime continues to pick up market share, and its streaming service is value priced below Netflix, Inc. (NASDAQ:NFLX). And for a small fee, you can watch movies that are not available on Amazon.com, Inc. (NASDAQ:AMZN)’s streaming network. Unlike Netflix, this allows the user to have content when they want it, and not rely on a mail service delivery. This is becoming an increasing problem for Netflix as they continue to change their business from a DVD rental company to an internet television company.
Redbox combines the user experience of vending DVD rental with online streaming content. The parent company, Coinstar, Inc. (NASDAQ:CSTR), has partnered with Verizon to introduce a streaming option that could hurt Netflix, Inc. (NASDAQ:NFLX)’s profits in the long run. However, as DVD users convert to online viewers, Redbox needs to change it’s business model to continue to grow with market trends.
International viewing
Netflix is well on the way to benefit from consumers watching internet TV as long as they continue to hold market share. With 1 million new international customers in the first quarter, membership grew to 7.1 million globally, with global revenue accounting for 14% of total revenue for the year. Netflix, Inc. (NASDAQ:NFLX) signed a multi-year kids programming agreement with Hasbro, Inc. (NASDAQ:HAS), becoming the leader in streaming content for kids with over 2 billion hours in streaming time in 2012.
Wrap up
Netflix has become a game changer with internet content streaming. However, with increased competition and tight profit margins, the company will have to continue to create original content to drive viewership and retain audiences.
The article House of Cards: Netflix and Game Changing Innovation originally appeared on Fool.com.
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