In this presentation, we will be talking about Netflix and whether or not it threatens traditional

TV.

Origins of Netflix

Netflix is a global provider of streaming movies and television series, currently with over 100
million subscribers. Founded in 1997 in the United States by Marc Randolph and Reed Hatings,
the company emerged as a DVD delivery service by mail, however with the advances of
technology anyone can now watch on cellphones, computers or televisions the series that the
platform distributes. Its first successful original web series was House of Cards, released in
2013.

Traditional TV

Being available in crude experimental forms in the late 1920’s, television is, even today, a major
mass medium for advertising, entertainment and news. However, with the emerge of platforms
like Netflix and even sites to watch series and movies online the traditional form of television
has been losing viewers.

Netflix today

Since 2012, Netflix has taken more of an active role as producer and distributor for both film
and television series, and to that end, it offers a variety of "Netflix Original" content through its
online library. By January 2016, Netflix services operated in more than 190 countries. Netflix
released an estimated 126 original series and films in 2016, more than any other network or
cable channel. Among their originals, stand out Stranger Things, Narcos, The Crown, Riverdale,
Umbrella Academy, Orange is the New Black and others.

Competitors

Netflix's success was followed by the establishment of numerous other DVD rental companies,
both in the United States and abroad.

Walmart began an online rental service in October 2002 but left the market in May 2005.
Blockbuster Video entered the United States online market in August 2004, with a US$19.95
monthly subscription service (equivalent to $26.46 in 2018). This sparked a price war but, by
August 2005, both companies settled at identical rates.

Today, the biggest competitive threat to Netflix is probably Amazon.com.

Effects and Legacy

The rise of Netflix has affected the way that audiences watch televised content. Netflix's CPO
has pointed out that the Internet allows users the freedom to watch shows at their own pace,
so an episode does not need cliffhangers to tease the audience to keep tuning in week after
week because they can just continue into the next episode.
Netflix has also allowed content creators to deviate from traditional formats that force 30
minute or 60 minute time slots once a week, which gives them an advantage over networks.
Their model provides a platform which allows varying run times per episode based on a
storyline, eliminates the need for a week to week recap, and does not have a fixed notion of
what constitutes a "season".
This flexibility also allows Netflix to nurture a show until it finds its audience, unlike traditional
networks which will quickly cancel a show if it is unable to maintain steady ratings.
Traditional networks are unwilling to risk millions of dollars on shows without first seeing a
pilot.
Netflix's subscription fee also eliminates the need for commercials, so they do not need to
appease advertisers to fund their original content.

Does Netflix threaten traditional TV?

Netflix is unquestionably an internet-era success story. The numbers are undeniably

impressive. Millions of subscribers, 192 countries and billions of dollars in revenues. There are
probably few traditional TV executives who haven’t felt scared about the damage the service
might do to their linear TV businesses.

Meanwhile Netflix has talked up the existential threat it sees itself posing to traditional TV. On
its website Netflix says, “People love TV content but they don’t love the linear TV
experience…” It forecasts the certain death of traditional TV, a process in which, Netflix says, it
is the leading player. They say it’s a revolutionary change as significant in historical terms as
the invention of TV itself.

But are consumers really moving decisively away from linear TV to embrace on-demand
instead?

In the US, where pay-tv penetration is perhaps amongst the highest in the world, with many
millions of people signed up to expensive long-term cable TV contracts, millions of people have
switched to this relatively low-cost, unlimited service. But the same is not true in a lot of other
countries.

Netflix offers a great service and original content is eye-catching and a real draw for
subscribers, but the Netflix service is still hugely dependent on movies and TV series that have
to be licensed from the big players in traditional TV. Besides, the more successful Netflix
becomes the more those rights holders will try to make it pay for their content – something
that is already creating a real squeeze on its margins.

In conclusion, it’s hard to see exactly how all this will play out. On-demand viewing is now part
of many people’s TV lives and will doubtless continue to grow. But its impact on traditional
broadcasters may be much more limited than they fear – and almost certainly less than Netflix
hopes.