Image Credit: Brett Taylor
I am willing to bet that just about everyone who is reading this is currently a subscriber to the Netflix video service. Yes, there might be a few of you who don’t currently send the company a check each month, but even you have gone over to friends’ houses and sat around watching Netflix movies or shows at some point in time – we all have. There is no doubt, Netflix is currently the king of online streaming video services. However, the times are changing. There a number of serious new competitors that have shown up on the scene and the Netflix streaming product managers are going to have to make some changes to their product development definition if they want to remain the king of the hill.
The New Competition Arrives
The Netflix product managers are well aware that they currently have a problem on their hands. One of their key metrics, number of new domestic subscribers, has not been performing like they want it to. The past quarter they missed their subscriber growth numbers and this is the second time that this has happened. The traditional media companies are starting to enter into the streaming video space and these missed numbers are starting to get people talking about whether or not Netflix is going to be able to successfully do battle with their new competition.
The good news for the Netflix product managers is that they have been able to post strong international subscriber growth. The challenge that these product managers are going to be facing is that they are going to be up against two major competitors: Apple and Disney. Additionally, these companies’ offerings, even if you combine them, will cost less than Netflix’s most popular plan. In the past quarter, Netflix was able to add 517,000 new domestic subscribers. Globally Netflix added 6.8 million subscribers. That would look good on anyone’s product manager resume. The Netflix product managers are the first ones to admit that their ability to retain customers has been hurt by their decision to raise prices. The result of doing this is that they have experienced slower than expected subscriber growth.
The good news that the Netflix product managers are dealing with is that by raising their subscriber prices, they have been able to boost their average revenue per subscriber. The result of this is that they are going to be able to invest more in order to make their value proposition more valuable. The company’s ability to expand may be hindered as new competition starts to enter the market. The Netflix product managers still believe that they are producing higher quality material than their competition is going to be able to generate.
How Netflix Will Deal With The New Competition
The new Disney+ service is going to cost US$6.99 per month. This will be roughly half of the $12.99 that the most popular Netflix plan costs each month. The new Disney service is seen as being the greatest threat to the Netflix service. Disney comes to the table armed with a big library of both movies and television shows. At the same time the company is investing heavily in new content based both on its Marvel superhero and its Star Wars properties. Apple TV will also be launching. However, they are only expected to bring a dozen new shows when they launch. Apple also does not have any older shows or movies. Their service will cost $4.99 per month. You will also be able to get the Apple TV service free for a year if you purchase a new Apple computer, tablet, or a phone.
The Netflix product managers don’t view the low prices of the new services as limiting what they can charge for their product in the future. The competition is just going to become more intense over time. In the future, NBC and Warner Media are going to be rolling out their Peacock and HBO Max streaming video services. The arrival of so many streaming services is starting to cause the cost of creative talent to get bid up. The end result of this is that the cost of making movies and TV shows is increasing. Netflix is reporting that costs have gone up by 30%.
Even as the Disney and the Apple services roll out, Netflix is expecting their operating profit to decrease as they spend more on additional content and marketing. The Netflix product managers still plan on growing their business. They hope to add 7.6 million subscribers next quarter globally, seven million of these will be overseas. As the competition as increased, Netflix has lost some of their popular older shows such as “The Office” and “Friends”. However, Netflix has been able to land “Seinfeld”. At the same time, Netflix is in the process of spending heavily to create their own movies. Currently Netflix has 60.6 million U.S. subscribers and 97.7 million international subscribers.
What All Of This Means For You
Being a product manager at Netflix has always been a good job to have. The service that Netflix offers appears to be so popular that just about everyone is already a subscriber. However, the market for streaming video services is just about to become a lot more competitive. Disney and Apple are in the process of rolling out new services. The Netflix product managers are going to have to take a look at their product manager job description and react.
Netflix has been struggling lately because they have not been adding domestic subscribers as fast as they would like to be. However, they have been growing quite well internationally. The new services being offered by Disney and Apple will cost roughly half of what the most popular Netflix plan costs. Netflix raised their prices and this has cost them some customers. However, the additional money that they are making can be spent on getting more content. The Disney+ service will have Marvel and Star Wars content while the Apple service will only have a dozen new shows. All of this competition has caused the cost of creating content to rise. Netflix still hopes to add a lot of new subscribers and they are working to get the rights to broadcast popular shows.
The market for streaming video services is about to be changed dramatically. The Netflix product managers are going to have some serious competition for the first time. As the new competitors roll their products out, the Netflix product managers are going to have to watch them carefully and then adjust their product offering in order to deal with the new competitive threat. They’ve done a good job so far. We’re going to have to watch and see how this battle turns out!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Who do you think represents the biggest threat to Netflix: Disney, Apple, NBC, or HBO?
Click here to get automatic updates when
The Accidental Product Manager Blog is updated.P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
As product managers, the one thing that we’d all like to do is to be in charge of a very popular product. However, something that we often don’t consider is that if a product is popular, it’s going to get a lot of scrutiny. This scrutiny can make the life a product manager much more difficult if not downright impossible. A good example of such a product are the e-cigarettes that are made by the company Juul. Their product has exploded in popularity; however, that has caused the U.S. government to take a close look at just exactly who is buying their product. The Juul product managers keep pushing forward with new innovations, but will the scrutiny that they are under cause them problems?