[Part 4] Competitive Strategies: What is next for Netflix?
In this four-part series, we ask the question: “What is next for Netflix?” In the fourth and last blog of the series, we will introduce a new understanding of audience loyalty and discuss new strategies for audience management.
Part IV: Audience Management
Is password ban a good strategy for Netflix for managing its audience base?
What are some audience management strategies to govern the fans with varying levels of engagement?
In late October, the Alliance for Creativity and Entertainment – a coalition of big tech companies like Amazon, big entertainment companies like Warner Bros., Disney, Netflix, Sony, and Paramount, and smaller groups like AMC, Lionsgate, and MGM – announced a working group to reduce unauthorized access to content, specifically mentioning “improper password sharing” as a top concern. Netflix seems to be at the forefront of these discussions. In 2016, Netflix’s CEO Reed Hastings said that “password sharing is something you have to learn to live with,” but apparently intense competition is leading the company to establishing stricter – and in some ways more desperate – controls for its platform. Is password banning a good move for Netflix? A definite and loud “No!” unless every streaming service will stick to it.
Loyalty as a social network
Considering a ban – of password sharing – as a remedy illustrates that Netflix deems loyalty as an individual, consumer-level construct. Netflix expects – or assumes – that if consumers do not share passwords, Netflix could acquire these consumers, retain them, and keep them loyal to the platform. This understanding of consumer loyalty does not completely explain the dynamics of loyalty in a fandom around a specific content. In content management, loyalty should be understood as a social network rather than an individual-level construct. There are different constituencies of viewers around content that relate to content in different ways. There are viewers who find the greatest value in the story behind the content and identify strongly with the brand’s story. But there are also viewers who start watching series because it is popular. When “Game of Thrones” (GoT) first aired, critics claimed that the show only appealed to ‘Dungeons & Dragons types’ and would need to expand its fan base with less violent and less complex storytelling. Proving critics wrong, GoT has not only attracted an average of 32.8M viewers per episode (as of season 7) but also transformed everyone into a “nerd.” More people came on board because the ‘Dungeons & Dragons types’ were watching the show. The intense popularity of the show is deeply founded in, and driven by, the presence and engagement of the ‘Dungeons & Dragons types’ bestowing legitimacy and ‘cool-ness’ onto the series and as a result, attracting different segments with different relations to the content. The later coming segments are not less important than the ‘Dungeons & Dragons types’ as these later joining segments are the cultivators of buzz around the content.
Netflix has to understand how each constituency – hard and soft-core fans for example – relates to a particular content and also to each other on their platform. The popularity of a TV series is not an outcome of the aggregation of individuals consuming or engaging with the content. The value that the individuals – and eventually the masses – find in the series and their loyalty depends on the presence and/or the engagement with the different types of audiences surrounding the series. The success of a TV series hinges on building and also managing these interdependent constituencies. The challenge for any brand with similar interdependent constituencies is managing it tactfully.
Recommended Strategy 11: Strategy for building an audience: “Interdependent constituency model”
Achieving popularity status for a TV series is a process that builds as the show adds layers of different consumer segments/constituencies with varying engagements. It is essential to note that these are interdependent constituencies. These interdependent constituencies together form a social network around the brand. Brand loyalty is held together by the relationship between these different types of fans – hard-core and soft-core- with varying relations to the content. A fandom is as resilient as its hard-core fans; as durable as mid-core fans; and as dynamic and popular as its soft-core fans. The presence and enthusiasm of hard core-fans draws in and motivates the other two constituencies.
Recommended Strategy 12: Managing interdependent constituencies: Banning password sharing will hurt the engagement of the soft-core fans that are in fandom because of its popularity but also have a crucial role in supporting and sustaining the series’ mainstream popularity. It is not clear how many Netflix users share their accounts with friends and family, but banning the passwords will alienate the soft-core fans who are essential in creating the buzz and increasing the visibility of some content on Netflix platform. In other words, banning password sharing will impact the interdependent loyalty among the different constituents in the fandom. Netflix should think about the buzz and the virality as an outcome of “loyalty a social network” and understand how people relate, consume, and help with their content in different ways.