Wednesday, March 16, 2011
Whether it is in our personal life or professional one, a differentiation strategy is often useful to attain ones' goals. For a network desiring to grow its ratings, low cost often evolves into a differentiation strategy involving unique original programming. There are many examples to illustrate. In pay TV, HBO was first to dive into original series to differentiate itself from other pay networks. It's first was Oz, followed of course by The Sopranos. Since then, Showtime, Starz, and yes even start up Epix have followed with their own original shows. For basic TV, who would ever expect that TV Land, the place for rerun TV would dive into originals as well. And others like AMC went from classic movies to original miniseries like Broken Trail and their first original series, Mad Men. Original is differentiation; it builds loyalty and hopefully for networks, ratings.
So it must come as no surprise that a movie service like Netflix could follow a similar pattern. "Netflix may be on the verge of acquiring its first original television series, “House of Cards,” a drama to be directed by David Fincher." The platform may be different, but the strategy is the same. Differentiation using original series improves loyalty to the service. Do it well and customers will stay and hopefully bring their friends, too.
The fact that this strategy is being used in this new space adds another wrinkle. "Picking up the exclusive rights to a television show would effectively make Netflix a network similar to ABC or HBO and would underscore just how disruptive the company has become to the media business." As opposed to being another window for films to be available for viewership, Netflix is redefining itself as the online, on demand place for new and old content. Given the costs to produce original content, Netflix will most likely need to raise its subscription rates to finance these new projects. They may also need to build an ad model as a second revenue stream. For now, Netflix remains a low cost alternative to pay as it further slides into the competitive path of the current cable model.
Posted by Andy Hunn