Netflix has hit a milestone in its Winter 2011 results (specific information available as a read-only PDF in your browser) as it is now tied with Comcast to become the largest subscription service in the US. The movie rental and streaming corporation added a groundbreaking total of 3.3 million new customers between January and March to reach 22.8 million users, which is exactly the same amount of customers as Comcast, the cable TV giant. Its expansion gave it a 63 percent leap in total subscribers just over the same period last year and nearly double the growth rate.
The customer-service oriented company attributed its success to the “virtuous cycle” in focusing on video streaming via the Internet. By gaining multiple content deals for massive amounts of Internet video and increasing the number of streaming-supported devices available to subscribing customers, Netflix created a strong rapport with viewers, who in turn gave the service more money to roll into content deals, the company’s report said.
It also stated that its deal with CBS gave it a rare position as the only subscription service to have all four major US TV networks providing video, outrunning even the network-backed Hulu Plus instant streaming service.
The company’s more recent deals were major components in cementing and expanding its strategy. Purchasing a major exclusive series – House of Cards – was enacted in order to “test a new licensing model” with a relatively small amount of money to more easily predict if it could build an audience for serial shows, which are already popular on Netflix, without having it first appear on a traditional network. Netflix added that there could be “two or three” smaller-scale deals like the one they sealed with House of Cards to see if that particular strategy can experience any repeat success.
Although it didn’t refer to Comcast by name in the report, Netflix chooses to see its tie with the television provider as “complementary” rather than as evidence it was contributing to dropping traditional network TV in favor of online video, or “cord cutting”. The service instead is viewed as “cord mending” by spurring interest in current seasons and season DVDs after viewers are able to see earlier episodes on Netflix first. The goal is not to get timely shows but to gain more vast catalogs.
“Recently, the CEO of [a traditional network] characterized Netflix as ‘rerun TV,'” Netflix said. “While we don’t plan to use that line in our next marketing campaign, he is fundamentally correct. Our focus for TV shows is on prior season TV and completeness of series, because this class of content enables us to license content broadly and provide consumers a differentiated experience.”
Real competition to Netflix’s service comes from the brand-new Amazon Prime instant video streaming service, Hulu Plus, and other services that allot online video as a bonus.
The move could nonetheless be seen as a threat by Comcast, amongst other providers. Several direct TV comapnies have often tried to minimize Netflix, but now find themselves in the face of a giant of a company with as much potential market as themselves, along with lower prices. Netflix is currently the largest digital video provider in the US by a wide margin with at least 61 percent of the market where even Apple Inc.’s iTunes boasts a measly 4 percent.
If you live anywhere in Orange County, the US, or Canda, this Examiner wants YOU – to tell me what your favorite video rental or subscription service is! Are you a huge fan of Netflix, like myself? Or are you more satisfied with a cable TV provider or other online subscription service that offers video on demand (VOD)?
Tell me what you think and leave your thoughts in the comments section below.