Disney will drive the transformation of Netflix

It wasn’t that long ago that Netflix transformed our expectations of how we access TV series and movies. In the old days, we’d watch TV shows and movies when deals made between studios, cinemas and TV networks allowed it. But today we have access to a vast array of content, new and old, that keeps us entertained anywhere and at any time. But while Netflix led the way, killing the humble video store along the way, it’s now facing its own challenge as old incumbents that looked like like lumbering dinosaurs are about to stomp Netflix.
Back when I studied my management degree (side note: it was a Masters in Information Systems (Management) degree which is officially abbreviated as M.IS Management, or mismanagement) we completed countless SWOT analyses, looking at the strengths weakness, opportunities and threats different companies faced.
I’ll be someone in Netflix’s management did the same. And while they might have anticipated losing the rights to some shows I doubt they really expected what’s happened over at The House of Mouse. Disney’s acquisition of major franchises including Star Wars and the Marvel Cinematic Universe as well as the purchase Fox and others means Disney has access to an unprecedented library of content.
With Disney launching its own streaming service later this year, Disney +, which is expected to not only boast a massive library of content but also undercut Netflix’s pricing, we could see Netflix relegated to the role of Supporting Cast rather than Lead Actor.
When Netflix came to the fore, it was able to attract viewers through a combination of new content – shows like Orange is the New Black, House of Cards and Stranger Things – as well as classic content licensed from other studios. By combining its own productions, which, regardless of whether you like them or not, carry high production values alongside favourites, there was something for everyone.
But the writing is on the wall for Netflix. When its most popular content is a sitcom that stopped airing 15 years ago and that it’s likely to lose the rights of pay a squllion dollars for it, it’s obvious that original content won’t be enough to sustain subscriber numbers.
The situation Netflix finds itself in is significant. Last week, Netflix recorded a drop in subscriber numbers for the first time in eight years. The streaming market is fracturing already with TV networks and other studios lining up their pwn streaming “channels”.
DC Comics has its own channel up and running already, Disney is coming, CBS All Access is a big deal in the US, the WWE has their own streaming solution in place and by the end of the year the Disney juggernaut will roll in.
Netflix may become the Apple of streaming video. Rather than settling on being the biggest or most popular service, they might need to reinvent themselves as a premium service rather than one for the masses.
While many are predicting the slow death of Netflix, I think its future is brighter. But it’s different to what we’ve seen over the last decade. The over-reliance on stock market prices is a mistake that’s made when looking at the future of Netflix. Netflix could be a highly profitable business with fewer subscribers – but it needs to take the millions it would need to invest for the rights to popular series like Friends and The Office and shift them premium content.
Being number two will be a blow to the ego of Netflix’s founders and management. But a bruised ego can be soothed by billions of dollars of revenue coming in second to Disney.