Netflix teams up with Microsoft and moves away from traditional business model

in LeoFinance8 months ago


Netflix has probably been feeling a bit desperate ever since their Q1 earnings report caused their stock to fall off a cliff. To be more exact, it was not their earnings that caused the stock to plummet. It was the fact that they lost subscribers for the first time.

The streaming prediction model has for the longest been based on the assumption that there are 1 billion customers. And with Netflix's continued growth they seemed to have been backing up this assumption. But then all of a sudden Netflix is losing subscribers.

This caused a major ruckus among stockholders who saw a much higher speculative value in the stock. They now had to reevaluate their 1 Billion models. And this is what leads to the plummet in Netflix stocks value.

This probably put immense pressure on the board of Netflix. So much pressure that they now announced a partnership with Microsoft. Let me rephrase that, it is not the fact that they partnered with Microsoft that is interesting here. But the way they have done it.

They have announced that they now will start to offer a cheaper tire subscription, this tire will feature ads. Something that Netflix from its inception has been firmly against. In fact so against that their whole business model is based on it. You the customer should be able to view your content whenever you want without any ads to interrupt it.

So for them to make such a drastic shift must mean they are under immense pressure to show new revenue streams. And this basically means we have almost come full circle. The only thing missing now is that Netflix should move over to a staggering release date, meaning one episode a week. Just like a good old TV, and now with ads as well.

Personally, I see this as Netflix capitulating on its initial business model. A better move I think would instead be what I eluded to above as the missing piece in order to come full circle. And that is to stagger their series, moving them to a weekly release schedule.

If you look at other streaming platforms that use this model they are able to keep their shows on people's minds for so much longer. Would Game of Thrones has been such a massive success if it dropped all its episodes at once, personally, I doubt it. There would have been non of that festering longing, waiting for the next episode. People talking online about the episode of the week. Instead, people would have talked about the entire season. And the hype would probably have died down after about a month.

So in my book, I think Netflix made the wrong choice in how to address the situation. But what are your thoughts on this, do you agree with me or do you think Netflix made the right choice?

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