Not Netflix: How to Avoid Boom-Bust Business

October 14, 2019

Ian Ray

Senior Consultant, Director of Quanitative Research

My spouse and I are two of those damned millennials. We graduated from college at the height of the Great Recession, both worked in the service industry, and lived well below the poverty line for many years. There were many bills that went unpaid (or were paid late), but there were three that always were covered, even if groceries weren't.

Phone.

Internet.

Netflix.

We each signed up for Netflix in 2008, just before the worst of the crash. We couldn't afford to see movies in theaters or watch series on cable, let alone buy either on DVD. Netflix allowed us to keep in touch with the media we loved at an affordable price without restoring to pirate Bay (and risking our outdated and underpowered computers).

When we first started dating, we found that the almighty algorithms had serendipitously provided us with very similar suggestions and screen, even after the loss of Disney and Fox content and ever dwindling options. When we first moved in together, we noticed we both kept getting the same Netflix Original suggestion. We eventually accepted the algorithm's wisdom and started watching this first season.

One week later, we had finished all three seasons and were anxiously awaiting the fourth. Season Three's cliffhanger ending left us on the edge of our seats and, based on a 100% positive rating on Rotten Tomatoes, we were certain Season Four would be out soon.

We waited,

And waited.

Last night, we learned that Netflix had cancelled the series in spite of near universal acclaim and had no plans to let other studios pick it up. The reason cited for the cancellation was vague at best. Continuing the series didn't fit with their business model, it was too expensive, and it wasn't bringing in enough investors.

We both plan on cancelling our subscriptions this weekend.

Why, after a combined 20 years of total subscription, at times even prioritizing the service above food, would we cancel now?!

The simple answer is that Netflix is no longer concerned with the customer. Instead the shareholder is the focus of their business model. Netflix has based their entire existence on recruiting new subscribers. You could say it's reminiscent of the pyramid schemes-er-"multi-level marketing" models. Don't worry about the customer - just provide statistics on subscribers to the shareholders, because that's where the real money is.

Until you make decisions that alienate those subscribers.

Netflix has, for the first time, released statements that show a loss of subscribers in the US. They're trying to make up for this by recruiting new subscribers from overseas (hence the increase in international content). Their original content is becoming more and more limited, with cancellations and speculated cancellations abounding. Their access to third party content isn't doing much better with the launch of Disney's own streaming and merger with Fox. The almighty algorithms that govern what content even shows on my home screen is another issue, drastically reducing my perception of my options down to just a few "hit" series and things it "thinks" I'll like, all without letting me peruse the digital aisles to pick out whatever random crap I happen to feel like in the moment.

This loss of customer-focused business is what I hope to help you avoid, dear reader. Your business may be doing extremely well, with the launch of public trading on the horizon. Or, perhaps it's struggling, failing to grow at even your most conservative projections. In either case, never forget that you are working with people.

Irrational, sentimental, emotional people.

The people buying your goods or services can and will seek out your competition if you slight them. Maybe not today. Maybe not tomorrow. But eventually they will figure out how to get your product elsewhere, legally or not. THAT is, unless you give them a reason to stay.

Netflix lost sight of this. They are focused on functioning as a publicly traded corporation, not on fulfilling the needs and wants of their customers. They want statistics, not satisfaction. They want investment dollars, not subscription money. The algorithm's what matters, not the allure of unparalleled access.

In short, they lost everything that initially drew us in. My prediction is, as of the writing of this article, that Netflix has at most two or three years remaining before they are in serious trouble. Entitled Millennials expect the company to listen to our wants and desires. We don't expect every whim to be catered to. We do expect change when we call out companies on their BS. One of the several Change.org petition to save the series that started this post has 219,372 signatures so far. If each of those subscribers left Netflix, that's over $2,630,270 that Netflix will miss out on.

Over $2.5 million.

Per.

Month.

As we say, you do you, Netflix.

Just don't be surprised when those damned entitled Millennials take their millions to a business that actually consults and considers its customers.