How Netflix Transformed The Entertainment Management Industry

Birgit Davis

Keeping up is different from catching up when it comes to digital technology. A company keeps up with change when it visualizes the beneficial potential of a new technology and adopts it. In contrast, a slow watch-and-see approach to digital change may lead to a frantic scurry to catch up with technologies that have already proven their value.

Trying to catch up with digital transformation may cause a company to feel like a ghost of business past — like a Blockbuster instead of a Netflix. It may make you empathize with the White Rabbit in Alice’s Adventures in Wonderland:Oh dear! I shall be late!” the White Rabbit cried before hurtling down a hole.

Customer needs and wants are driving digital change. Sales and rentals of movie DVDs began a swift decline as digital streaming of entertainment became available. Ownership was no longer necessary to enjoy a film over and over. Brick-and-mortar video stores also were unnecessary, so they started disappearing.

Streaming is a good fit for the experience economy versus the old ownership economy, in which customers accumulated goods. It’s also a good fit for people who want to spend their entertainment hours watching videos instead of driving to rental stores to browse shelves.

Turning the entertainment industry upside down

Digital streaming is a technology that turned the entertainment industry upside down in the 2000s. It changed customer payment for video into small monthly subscription fees. The video company Netflix is an example of an early adopter of digital streaming. Its content library is stored in cloud platforms such as Amazon Web Services (AWS). Cloud storage helped transform it into an industry power.

In 2006, Netflix was an online, mail-order DVD rental service with about 6,300 subscribers. It competed with brick-and-mortar video stores such as Blockbuster.

A year later it adopted video-streaming technology. This set the company on a high-velocity course toward dominating its industry and wiping out video stores. By January 2016, Netflix had 75 million subscribers.

Netflix completed a 7-year migration of all its streaming, storage, and data management to the cloud in January 2016, with AWS as its main cloud services provider.

Saving money and pleasing customers

Cloud storage saves money for streaming corporations and other digital business companies by limiting the need for hardware and in-house data centers. Fortune magazine reports that Netflix now has no data centers except for one that runs its DVD business.

Customers like content streaming because it cuts their costs for consuming and storing entertainment. Their preference for personalized content is also driving digital transformation of the entertainment industry.

Many kinds of corporate customers use the AWS cloud because it supports a broad range of digital platforms and applications. Real-time analytics make it possible for digital streaming companies to respond at once to customer requests for movies, television shows, and video games. Customers these days expect easy, quick access to all kinds of purchases.

Personalizing entertainment

Historic and real-time data about a customer’s searches and decisions give streaming companies a picture of the customer’s unique interests.

Netflix provides access to vast entertainment choices. To make that wealth of content less overwhelming, they personalize each customer’s homepage based on data about the customer’s tastes.

For example, one way that Netflix organizes homepages is based on a formula that predicts how a customer will rate a video. Another formula organizes potential choices of movies and TV shows into rows of what Netflix calls “meaningful groupings.”

Customers love choice. Personalization of their user experience is a key characteristic of digital transformation in many industries. To quote the White Rabbit: “Oh dear!” Don’t be late to adopt this important change.

Learn more about the impact of digitization on the media industry.

Birgit Davis

About Birgit Davis

Birgit Davis is a solution manager for Media and Entertainment for the Industry Cloud Solutions organization at SAP. She is responsible for SAP’s solution portfolio for the media and entertainment sector, including co-innovations with customers and partners on topics of digital paid content and media industry software solutions.