Bolder Thinking Blog

[Part 1] Competitive Strategies: What is next for Netflix?

December 16th, 2019 | Behice Ilhan

“Attack is the secret of defense; defense is the planning of an attack.” 

–Sun Tzu, Art of War

We are witnessing a clash of colossal competitors and strategic joust of big brands in the streaming content category what is often referred to as the “streaming wars.” Especially after the grandiose entrance of Disney+ onto the scene, everybody is looking at Netflix and wondering how or how long Netflix will survive in this very demanding and competitive environment. In this four-part series, we ask the question: “What is next for Netflix?” Analyzing the current competitive landscape, we identify 12 possible strategies – in no particular order – that might help Netflix navigate this difficult and very dynamic competitive landscape.  In the first blog of the series, we will discuss why it is essential for Netflix to be proactive in designing competitive strategies and why Disney is a different type of competitor for Netflix.

Part 1: Competitive Landscape

Is price cut a good strategy for Netflix? Why not?

Why is Disney a different type of competitor?

Will existing competitive strategies of Netflix be effective against this colossal competitor?

Netflix is playing against a set of tech giants who have multi-billion dollar revenues and access to the best technology talent. Just looking at the names of its competitors – Apple TV+, Disney+, Amazon Prime – should tell Netflix the scope and dynamics of the situation. Yet, this new competitive dynamic offers a potent opportunity for Netflix to really strengthen its positioning in the streaming wars for the long haul. That’s why my answer to the question of whether or not price cutting is an option for Netflix is, “Oh puh–lease!” But, rather than these short-term fixes, Netflix has to carefully analyze the very dynamic and continuously-evolving competitive landscape.

Recommended strategy 1: Don’t fight anybody’s fight. Identify and execute your own competitive strategy. If Netflix prefers a defensive move – like a price cut – rather than proactively carving out and executing a well-designed competitive strategy, they will find themselves in a very difficult situation in the coming months/years.

For Netflix, Disney is a unique competitor

Until Disney joined the streaming wars, Netflix’s competitive strategies were rooted mainly in content innovation and revolved around perfecting their recommendation and personalization engine. As the first mover in the category, Netflix has a sea of data about consumers’ preferences, ratings, watch habits, watch lists, and taste regimes. For many consumers, Netflix recommendations were probably their first encounter with a consumer-facing AI-solution. Netflix’s customization through recommendation engine works well because consumers are overwhelmed with the massive amount of content available to them on a multitude of platforms and sources. They are tired and lethargic about going through all the elaborate stages of assessing whether content is worth their time. Many long-time Netflix users have trained their Netflix account by diligently rating the content they view. And, based on this initial investment, they get good recommendations about new content available on the platform. That level of personalization and subsequent satisfaction make these consumers hesitant to switch to another service. They do not want to invest that foundational effort again and start from zero in a “new” platform that does not know them at all. This overtime investment perpetuates the engagement, thus creating routinized behavior (or habit) for the Netflix consumer. The shift to, and engagement with, alternative streaming services is costly – money, time, effort – for these consumers. Serial engagements and watch lists are some other tactics Netflix uses to thicken the cocoon, wrapping around the existing consumers to facilitate that habit and escalate the commitment. That cocooning strategy worked well for Netflix against platforms like Hulu; yet, it might not suffice to compete against Disney. Disney is a different type of competitor.

Disney is not a content provider but a consumer culture

Disney is a special type of competitor. Their content is known across generations. Consumers already have preferences and tastes built around Disney’s content. They come to the Disney+ platform with favorites, memories, and expectations. Consumers have built rituals around Disney movies (like watching certain movies on Christmas Eve). Disney is a thread that binds generations and plays a prominent part in the collective memory of consumers, communities, and nations. Consumers make sure their kids watch certain canons like “Cinderella,” “The Lion King,” “Winnie the Pooh,” etc. [Note: That’s also why some of these streaming brands are relying on the familiar and iconic content that is known across generations; familiar content acts as an anchor for the streaming audience.] So, Disney is not only about content; it has a consumer culture around its brand that has deep meanings, rituals, and visibility in consumers’ lives across generations, among communities, and around the globe.

Recommended strategy 2: Adopt a consumer culture lens to assess this new rival. The competitive strategies that Netflix has used against Hulu or HBO will not necessarily be effective against this colossal competitor that has shaped the form and direction of what entertainment means in the US and around the globe. Netflix has to understand the peculiarity of this new competitor and assess this rival from a consumer culture perspective, i.e., at the intersection of consumer practices, the marketplace, and cultural meanings. Disney is not “another brand” in the streaming wars, but it is an established and prominent agent in shaping the media and media consumption culture across the globe.

Read part two of the series here

Behice Ilhan

Behice Ilhan

Dr. Behice Ece Ilhan is the Senior Trend Strategist at Mintel. Behice provides futuristic perspectives and opinions on trends and their impact on the brand landscape, which she utilizes to strengthen engagement with CPG and agency clients on storytelling and positioning strategies.