Applying the Netflix Business Model

When you think about Internet companies that really hit it big, some very common names immediately come to mind. Google has come to dominate the search engine space. Amazon is at the top of the online shopping game. Facebook has become synonymous with social networking and social media. And then there is Netflix.

Even though alternatives like Amazon Prime Instant Video and Hulu Plus have made some serious dents in the space, Netflix is the brand name that everyone associates with what the company does, just like how we talk about Q-Tips, Kleenex and Post-it notes. What can you learn from Netflix to apply to your own online business? For that, we’ll need a very brief history lesson.

Media in the Mail

The early days of Netflix consisted of signing up for an account, loading up your queue with a bunch of movies you wanted to watch, and waiting for a physical DVD to arrive in the mail. You’d watch your movie and then you’d send it back in order to get the next flick on your list.

Image credit: Alan Levine (CC BY 2.0)

This is akin to “old” media or “traditional” media, except even then, Netflix was being wildly innovative. It used to be that people would have to go to a physical store, like Blockbuster, in order to rent a movie. And even then, they’d pay each time they rented something.

Netflix was different. It offered a subscription service for a set monthly price and it delivered the discs directly to your door. Similarly, you might be thinking about launching a membership based site. With a subscription model, you can have much more predictability about how much money you’ll earn every month. The same can be said about affiliate marketing, residuals, and the long-term income potential of blogs, YouTube videos and other online content.

Netflix Original Programming

To my knowledge, Netflix still offers the DVD service, but only in the United States. Everywhere else, they’ve switched over completely to the the online streaming model. That’s more convenient for customers and it completely changed the game at the time. You don’t have to wait for your favorite show to come on TV; you just stream it on Netflix any time you want.

That’s value. That’s choice. And that’s how you need to think about the products and services that you want to offer your own customers for your own online business. What problem are you solving for them? How are you making their lives better? Why would they choose you over possible alternatives?

More recently, Netflix has once again shifted its focus. It used to license existing TV shows and movies from the various studios, and it continues to do this, but it has doubled down on its dedication to Netflix Original Programming. Indeed, estimates indicate that Netflix spent somewhere around $6 billion in 2016 on creating its own original content. Why?

Licensing is complicated. If Netflix wants to offer a show in 10 different countries, it needs to license that show in 10 different countries, dealing with 10 different regulatory boards and jumping through at least 10 different sets of hoops. Netflix was selling someone else’s product.

By creating its own programming, Netflix solves two of its biggest problems. First, it doesn’t have to deal with licensing in multiple countries. Second, the shows become a part of its unique selling proposition. Want to watch Orange Is the New Black or Narcos? You can only see them on Netflix.

As great as affiliate marketing may be, you are effectively competing against every other affiliate who is promoting the exact same offer. When you have your own product or service, no one else can offer it but you. And you can sell customers on your own unique selling proposition.

The Online Is Offline Too

Making money online means figuring out how to make money offline too. In addition to streaming video, Netflix now allows users to download movies and TV shows for offline viewing too. Netflix is once again shifting its business model to adapt to the needs and demands of its customers.

People change. The market changes. And you need to be willing and able to change with it. If Netflix stuck to its old ways, it would have gone out of business right alongside Blockbuster. But it didn’t. It adapted and it’s more successful than ever.

Just like what happens when you become a new parent or when you consider your most effective SEO strategies, you have to be prepared to shift, adapt or even start all over and reinvent yourself. That’s how you succeed. That’s how you can be the next Netflix.

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