Is Netflix on the Verge of Collapse?
Over the past decade, Netflix has exponentially exploded into one of the largest broadcasting networks on the planet, and much of this growth can largely be attributed to network effects. Not unlike the rich-get-richer model discussed in class, as new content is added to the platform, it draws in new subscribers, which in turn motivates companies to add more content. It’s this model that has made Netflix the success it’s been so far, but could very well play into it’s downfall. Recently, subscriber growth has been at an all-time-low, with only 1.54 million new subscribers reported in their second quarter (roughly l million less than their projected goal). There are two major reasons for the sudden, rapid drop-off. Both recent price increases as well as increased competition in both local and foreign markets has caused to the company to shed its users to other, similar services, most notably Amazon Prime.
While it’s likely too early to declare that Netflix is “dying”, the company does nonetheless demonstrate the limits of utilizing network effects for growth. Exponential growth, as great as it may be, is difficult to sustain, and Netflix will need to address this problem one way or the other. Two potential options would be to find newer niche markets to sustain themselves (foreign markets are a potential target), or to adapt a business model that can better thrive under smaller growth. As it currently stands however, Netflix is in danger of losing more and more subscribers, which in turn will cost them more and more content. It’s that downward spiral that must be stopped if Netflix expects to stay afloat in the long term.
http://www.forbes.com/sites/jonmarkman/2016/07/27/netflix-has-a-network-effects-problem/#4ffa1e1563fd
A bit unrelated, but I noticed the article linked to a post from this very weblog, which I thought was kinda nifty.