The meteoric rise of Netflix in the entertainment industry has been a major source of worry to other media companies in recent times. It’s all tycoons in the media industry seem to be talking and worrying about has it has affected their business in adverse ways.
This business model refined by Netflix involves direct – to – consumer streaming of videos by Netflix subscribers. This business model has led to a situation where other media companies have been left behind by Netflix as their number of subscribers increases daily. Now, these companies are looking for ways to include the direct – to – consumer business model in their operations so as to meet up with Netflix. This business model thrives well due to the abundance of smartphones and laptops and the ease with which these devices are streaming videos on the internet.
Wholesale business models
Now everyone in the media industry is beginning to move from wholesale business models to the direct – to – consumer model adopted by Netflix as they are afraid that the wholesale business models would be difficult to sustain in the long run. The urgency with which these media companies are responding to this threat can be evidently seen in the address of the Chairman – CEO of Disney where he said the company’s biggest priority in 2019 is the launching of a direct – to – consumer services.
With the widespread of the video streaming culture in the world today, Disney does not have to require the services of distributors to deliver their TV shows and movies. This elimination of middlemen done by Netflix brought about a reduction in the amount customers pay to these middlemen to get access to media content. Also, the elimination of middlemen gave the customers more control over the content they see and when they choose to see it. For Disney to adopt this method they will have to let go of their traditional methods and also revenue they get from these middlemen ( distributors and third party networks). The rise of the direct – to – consumer business model is a very risky one that could lead to a lot of losses at least at the beginning. For instance, Disney will have to forfeit the millions of revenue it generates from Netflix for TV rights they pay to show top movies by Disney. This might, however, be a price to pay as the rate at which customers consume content on their mobile devices keeps rising sporadically and does not seem like it will drop anytime soon. The rate at which this is happening has never been seen before making it a great concern to the media industry.
Many of the companies in the media industry have been trying out the direct – to – consumer business model and they have been recording a lot of success although none of them has matched Netflix’s success.
The management of Netflix has reported being unbothered by this fast-growing interest of other media companies in this business model. They believe they are already at the forefront and will be working hard to satisfy their customers and even attract new ones. Bringing people’s access to all the media content they need at the click of just one or two buttons has made them very successful and they do not plan to stop anytime soon.
This reality has left Hollywood in a state of commotion requiring quick and effective action to get out of. The amount of Netflix subscribers increases by the day with a present figure of about 130 million all over the world. They provide these subscribers with numerous media content at their fingertips and in turn charge them $8 to $14 dollars per month which most of the customers have no problem paying. Although Netflix does not pay any money to distributors they have to pay Disney and other media houses to whom they get content.
Prospering business model
To thrive in this prospering business model, Disney aims to drop their monthly subscription prices below that of Disney and also make some of their content exclusive to them especially marvel movies. To do this Disney will have to spend a lot of money before they can get good results. This can be seen in the $2.6 billion they recently spent on acquiring the majority of a digital streaming firm.
For Hollywood to catch up with Netflix they will have to go into the direct – to – consumer business model and not only going into it, but they will also have to come up with a direct – to – consumer product that consumers won’t find underwhelming as that would be a grave mistake.