Netflix and Networks Effects
Founded in 1997, Netflix has became an Internet giant through its media streaming service. The growth of Netflix obeys the richer get richer phenomenon, which is largely caused by networks effect. The article analyzes Netflix’s success and how it is going continue dominate media streaming, even with strong competitors like Amazon and Time Warner.
It is apparent to viewers and content creators what to do under networks effect: viewers sign up for service with high amount of contents and content creators sell their products to service with high amount of viewers. Both sides reinforce each other, making Netflix stronger. Its power can be shown in Time Warner’s move to sell the licensing deal of streaming of “Gotham” to Netflix. Rivalry cannot defeat the benefit of having its show on the largest media streaming site. As more and more content creators follow the same foot step, Netflix can hold on to its crown in the field, even with increases in membership fees.
Netflix’s success is a great example of networks effects. As the site gets more popular and has more viewers, more content creators and new members would join. Like the article suggests, Netflix’s growth will continue for a long while. However, I can’t help but to think about Myspace, which dominated social media before Facebook came along. How long will networks effect continue to benefit Netflix? And will there be another “Facebook” that takes over? Only time will tell.
http://www.dailyfinance.com/on/netflix-and-the-network-effect-its-now-too-big-to-beat/