Thursday, 26 April 2012

Netflix. The greatest change in Broadcasting since the birth of TV.

Netflix. You've heard of them, you might be using them, you certainly know all about them.

It's a streaming video service (VOD) on the web which allows unlimited access, on demand, to a large variety of movies and TV series, at a flat rate monthly fee (7 euro a month). 

They're only streamed on all smart devices (Online, Ipad, Iphone, online TV connectors, soon Apple TV and so on) although also with a DVD home business and launched in Ireland late 2011. So you can't watch Netflix obviously, through your normal TV Channels. And that is the real breakthrough.

I think it's fair to say that Netflix's offering is not exactly top line movies but rather old, frankly "second rate" films at the moment. But for kids, a world of Peppa Pig and Dora the Explorer - Ideal for young kids. So it's a low cost family brand. 

Isn't it interesting to note that established brands here such as 'Xtravision' , one-time dominant, have let this business past them. Their response is to re-shape and have now tried to move into more of an "entertainment" offering (buy a DVD, get a Coke, get Popcorn and so on). 

It's another example of web brands killing offline brands because they got there first. I have blogged that a hundred times before and no doubt will do so again.

Watch the way old huge grocery retailers will be swept aside and big telcos lose their shirts. As they pooh-pooh the web, it eats them alive.

I think it's also fair to say that Netflix have achieved their growth with probably owning the worst corporate identity in the world backed by some shockingly poor advertising. Cringeville stuff.

And lastly it's absolutely fair to say, that Netflix will take viewers from TV broadcasters, consequently reducing audiences and de facto, reducing traditional TV advertising. 

Isn't it amazing that no big terrestrial traditional TV broadcaster (except possibly SKY) have even attempted to enter this market when they already have the premium content bought and the production skills? Shocking. 

One response of course, as usual, is a ham-fisted attempt to curtail Netflix through data caps. Ah well, nothing unusual there then.

This week Netflix announced its results and depending on whom you read, they were either received by so-called analysts, "favourably" or "terribly". One highlight however, was the substantial growth achieved in Ireland and the UK following recent launches. Netflix also elaborated on a strategy to improve their library content and generally, supply better movies. To do that, they'll have to compete in a bidding war with traditional broadcasters and particularly the cable networks.

If Netflix get the cash, and they will, it's going to make life harder for TV broadcasters without premium content. As they scratch their backsides.

Equally, and this important, Netflix will focus on generating their own content. In other words, investing in programme making for live streamers like Streamabout (!).

Whilst they added close to 3 million streaming subscribers, they lost 1m of their former DVD users. Not much of a surprise here as people switch to online viewing. Unless you're an analyst. A net loss of 5m in the first quarter is less than was expected but the stock fell.

Netflix estimates an additional 7m subscribers this year (bringing it to 30m) 

When you look at it, this is a business only going one way - up.

A loss of 5m (less than 1%) on revenues of 870m usd in Q1 is incidental and a ridiculous metric to look at for such a new company in growth - and a loss that'll be easily fixed.

Netflix is establishing itself as a brand although content will be king and especially when Amazon's 'Love Film' ratchets up. The product needs to improve but they know that (and that's Step 1).
What's the most important lesson here is not the numbers but the huge shift in customer viewing.

It's rumoured that Netflix already have 200,000 Irish subscribers.

That's 200,000 Irish people who find it acceptable and are prepared to pay, to watch movies on a smart device and not through their dvd player nor on their telly.

That is the greatest sea change in 20 years.

And an Irish audience, although savvy, are conservative, so this is going to go huge globally. 30 million viewers alone this year and think, when you own that amount of viewers with long dwell times on your site, what else can you sell into them? A lot of products and services. It's not just about video, it's about eyeballs.

It mirrors the dramatic growth in streaming too.
Analysts talking about "sell" or "hold" recommendations, should do that and let intelligent people access to the stock. The donkeys of Wall Street.

Because, Ladies and Gentlemen, this is the greatest change in media consumption I've seen since the birth of Television.

End of.