Monday, April 14, 2014

Netflix, HBO, and now Comcast

The recent emergence of Netflix and online television streaming through other portals like Amazon Instant Video and Hulu Plus have shaken the television industry. An obvious advantage that Netflix and other similar companies have is immediate data on what customers watch. Every Netflix subscriber’s cue gives insight into the preferred shows and genres. The wild success of shows like House of Cards and Orange is the New Black demonstrate that the collected data drives the bus. By setting a reasonable monthly subscription fee and adding customer value by providing the convenience of watching the entire season in one sitting, Netflix applies blue ocean strategies to capture a new market. [1] 

That’s hardly the end of the story though. While companies that create blue oceans have the competitive advantage for about 10-15 years, what is the play by play for companies still in red oceans who are negatively affected by that particular blue ocean company during this time? What happens after companies like Netflix create blue oceans? How do companies in red oceans strike back to limit the growth of these blue ocean companies? Or better yet, how do they create blue oceans for themselves in light of the situation?

[3] Netflix v. HBO
A close red ocean competitor to Netflix would be HBO, who the CEO of Netflix aggressively states as the company’s target goal. [2] While HBO makes more profits currently, HBO should be worried about the future of Netflix. Furthermore, the recent controversial agreement between Comcast, the biggest internet provider, and Netflix increases streaming speeds for Netflix shows. [4] The controversy of the agreement originates from the topic of net-neutrality and what this agreement suggests for future business strategy for both Netflix and Comcast.  HBO should certainly pay attention to the Comcast-Netflix partnership as they prepare their strategy moving forward. Will the Comcast-Netflix agreement mean higher subscription costs for Netflix, thereby curtailing subscription growth to HBO’s favor? Or will this agreement confirm the encroachment of Internet TV on traditional TV? We'll have to wait and see. 


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