Thursday, July 21, 2011

Netflix and the Inevitable

I'll admit it.  I'm a Netflix user.  Multiple price hikes and a selection that is less-than-stellar (but still better than the video stores in Eureka, CA now that VX is gone) have not kept me away.  I get the DVDs in the mail, and I enjoy movies like Pervert via streaming.  Well, enjoy may be too kind, but you get the idea.

Netflix, as most people know, recently announced another price hike.  The second in eight months.  People were upset.  I was upset.  I'm too much of a movie junkie to let my service lapse, however, and that is the remarkable thing about this.  Netflix not only knew this would cause a backlash (any company that is thinking of the long term will conduct studies before it does something like this) and didn't care, it publicized the fact that it knew and didn't care.  Most companies will do no such thing for fear of angering its customers beyond a price hike.  Netflix, it seems, is pretty confident in its abilities as company to survive such a thing ... and it's correct in thinking that way.

There are problems with Netflix.  Over time it has gone more of the route of television shows and mainstream hits, whereas in the past you could find a lot of independent movies on there, too.  They still exist, but the stable is getting smaller.  What Netflix does right, however, is be all things to everyone.  It's not tied down by regional variations that plague video rental brick and mortar stores.  That all-encompassing scope works to its benefit, while it does in your standard place of business.

Video rental stores and interesting beasts.  They have to know the people they serve, and those people are usually the folks in the neighborhood.  In that population there are really two sorts of viewers.  There are those who look at movies as pure entertainment, and those who appreciate it as an art form.

The viewer who looks at movies as pure entertainment will primarily stick to new releases and old favorites that were popular three months ago.  This audience will keep a video store business in business as it is huge.  They can be counted on to rent whatever is new as soon as it is out.  This crowd is the store's bread and butter.  They usually live close to the store, too.

The group that looks at movies as art will rent popular and new releases, but it is also after stuff off the beaten path. The film with subtitles?  These folks rent it.  The one from 1973?  Same thing.  If a store has a good selection of these artistic/independent/foreign films, this audience will be customers for life, and they will travel to the store, passing several other video stores along the way.

The group that looks at movies as pure entertainment are fickle.  If a new store pops up that is closer, they will go to it.  If another store offers great deals, they will go there.  It may be a video store's largest audience, but it is also the group most easily swayed.  The video store, therefore, has to find some sort of balance.  If it caters to the artistic crowd, it risks not being able to pay its bills.  If it caters to the entertainment group, it risks losing them to something better.  Most video stores will err on the side of caution and cater to the entertainment group as that is far more easily predictable.  A store knows it needs thirty copies of Transformers on hand the day it comes out.  It doesn't even know if it needs one copy of House of the Devil.

Netflix erased that problem.  It became, essentially, all things to everyone, and streaming only sweetened the deal.  As the mainstream embraced the company, the company had to start dealing with more mainstream hits.  It had to start catering more to that audience.  It hasn't forgotten the viewer who demands more from a film (not yet, at least), but that is no longer its primary concern.  As long as it still has enough to draw that audience in, which it does, it has them ... myself included.

Netflix took a chance, and it will lose some customers.  It will retain more than it loses, though, and the company was correct in taking that gamble.  I'm sure it knows another price hike soon will cause it to have a serious disruption and open the door for something better, and I don't think that's a risk Netflix is willing to take.  It hasn't established itself as a thoroughly dominant force quite yet ... but it's getting there.  One crappy Hollywood film at a time.

Mandatory FTC Disclaimer: Clicking on a link may earn me a small commission.

No comments:

Post a Comment