What does Netflix view as its biggest competition?
- Television
- Other online streaming services
- Video games
- Sleep
If you answered ‘a’ or ‘b’, you’d be mistaken. In the most recent Netflix quarterly result, CEO Reed Hastings wrote about competing for “consumer screen time, both mobile and television” against a “very broad set of competitors”. In particular, he highlighted how Netflix competes with (and loses to) the popular video game, Fortnite, more than US cable TV provider, HBO. And in 2017, Hastings famously said “You get a show or a movie you’re really dying to watch, and you end up staying up late at night, so we actually compete with sleep. And we’re winning!” Deloitte’s 12th edition of the “Digital Media Trends Survey” found that more than 40% of Millennials binge watch weekly, and they watch an average of seven episodes and six hours in a single setting.
With increasingly diverse entertainment options, and a limited number of hours per day, the battle for our attention and time is intensifying. We can now choose to whittle our time away with Netflix, cable TV, alternative streaming services, YouTube, cinemas, video games, social media, podcasts…the list goes on. Tech giants, Amazon, Facebook and Apple have also entered or announced their intention to enter original video content.
Entertainment isn’t the only area where competition has broadened. As technological change has picked up speed, companies are forced to look outside their typical sectors for up and coming competitors. UPS and FedEx are now forced to consider Amazon as a logistics heavyweight and traditional banks are ever-conscious of the latest fintech start-ups.
So how can companies stay ahead of the pack? Two of Netflix’s strategies have become evident in the recent releases, Bandersnatch and Bird Box.
The first defence is innovation. Netflix released its first major venture into the choose-your-own adventure genre, with Bandersnatch, allowing viewers to make decisions on behalf of the lead character. There are thousands of different pathways to make it through the story, and 5 unique endings. Incorporating interactive elements from gaming, such as taking ownership of crucial decisions that build and shape a character, enable viewers to ‘play’ as opposed to passively ‘watch’, mimicking the immersive experience of video games that have led to the category’s success. It could be argued that Bandersnatch is the first step towards bridging the gap between games and films, helping Netflix fend off competition from the likes of Fortnite.
Image: Screenshot from Netflix’s, Bandersnatch.
The second advantage Netflix has is in utilising the power of its network, via social media. Bird Box, the Netflix original film starring Sandra Bullock, was viewed by over 80 million households in the first four weeks post release, despite having lukewarm reviews.
The movie didn’t gain traction until a few days after its release, when people began to make fun of the film and user-generated memes[1] of Bullock’s blindfolded character flooded on to Twitter, Instagram, Facebook and more. Netflix also had to warn people against trying the “Bird Box Challenge”, a craze that involved participants videoing themselves attempting various daily tasks blindfolded like the characters in the movie and uploading them to social media.
Image: Netflix tweet, warning people against attempting the “Bird Box Challenge”.
As conversation became more prominent online – positive or negative – more people became curious and turned on Netflix, if only to make sense of the memes and inside jokes they were seeing online and not ‘miss out’. They, in turn, added to the conversation, creating more digital hype, resulting in a viral internet phenomenon. Netflix’s large base of subscribers combined with ease of access (a couple of clicks away from a meme) and the power of social media (now a competitor in the entertainment space in and of itself), enabled the success of Bird Box, an otherwise lacking film. This recipe will no doubt be in the Netflix toolbox for future use to capture our attention and time.
Image: A meme depicting the large number of memes circulating about Bird Box.
As the competitive environments of today become increasingly intertwined and complex, we believe being generalist investors and looking across a wide range of sectors, geographies and companies can help us better understand and navigate the dynamic landscape, so that we don’t miss the forest for the trees.