Leveraging the Long Tail – Netflix

1 05 2010

Overview
 
Long tail is a new strategy of doing business in today’s market. It’s a way of adapting to a more radical business approach with the use of the many wonders of the internet. Traditional businesses would concentrate to sell their most popular products and ignore the others, in order to reduce the costs of having an inventory. However, the same case does not apply with the use of the internet because it eliminates the costs of maintaining an inventory and the geography. Furthermore, businesses would really need to understand if the ignored products are a problem to the market. If it’s a big issue in the market and it’s what the customers are looking for, then catering those ignored products would be highly profitable (Kaw, 2009).
 
Netflix is a good example that implements this long tail strategy because of its unique offer to its customers. For instance, there are various popular shows on TV that people would normally catch at a certain time (e.g. Heroes). Unfortunately, through time some of these shows will lose its popularity and might possibly be removed due to the lack of viewers. However, this is where Netflix comes in because loyal viewers would be able to rent shows like Heroes. They would also be able to view previous seasons or episodes that they have missed out. In addition, this allows loyal viewers to watch their shows in their own schedule and without commercials (Gutierrez, 2005).
 
Comparison with other web 2.0 applications
Other than Netflix there are other similar companies, such as, Wal-Mart, LoveFilm, Movielink, and Blockbuster Video. One of Netflix’s biggest competitors is Blockbuster, which is also one of the world’s largest in-store video rentals. Although both of them are very similar in terms of their renting prices, they both still have their own unique features. Blockbuster’s Total Access and Netflix’s Streaming movies (E-consumerguide, 2007).
 
Critical and strategic implications
Netflix has an Application Programming Interface (API) which allows anyone to build their own Netflix-integrated applications for their own website, desktop, mobile devices or TV. Users are able download the application for free with a provided online forum. In addition, the Netflix API has allowed developers to help promote the company by creating mobile applications. There are currently applications that run on an Android platform; a Nokia app was recently released by Netflix. They are basically treating customers as co-developers in order to rapidly improve their application, which is also an effective debugging strategy (Wikipedia, 2010).
 
According to Netflix, this will allow the developer community to:

  • Find new ways for their subscribers to enjoy movies whether or not they’re looking at our site.
  • Encourage innovation, especially around movie choosing and watching.
  • Build Netflix awareness by offering developers a new customer bounty of $16, through our partner Google.
  •  
    Legal and ethical issues
    Netflix has the capability to allow customers to stream TV shows online which is very convenient. However, there are some that abuses the system by using recording applications to capture the streaming video. Furthermore, in a worse case scenario, it will eventually get distributed to other users which will affect the movie industry and Netflix itself. In addition, there have also been complains regarding Netflix movie suggestions to individual customers. They seem to repeat the same movie recommendation even after the customers declare that they have zero interest in seeing the movie. This may seem like Netflix is stuffing customers with their own recommendations instead of analysing the most appropriate movie taste for each individual customers (Freeberg, 2006).
     
    Future directions
    In the near future, Netflix is focusing on expanding its streaming capabilities to a whole range of different devices. This would allow Netflix to not only stream on computers, but it would be able to cater for devices such as, Xbox 360, TiVo HD DVR, Roku Digital Video Player, and on LG and Samsung Blu-Ray players. For instance, the ability to watch Netflix streaming movies on an iPhone will dramatically make it convenient for movie lovers. The key to its growth for the future of video distribution lies on the increasing bandwidth in online access (Begun, 2009).
     
     
    References

  • Begun, D. A. 2009. The Future of Netflix is All About Streaming (accessed April 20, 2010)
  • E-consumerguide. 2007. Blockbuster Online VS Netflix (accessed April 29, 2010)
  • Freeberg, D. 2006. What Netflix Needs To Learn From Pandora (accessed April 30, 2010)
  • Gutierrez, F. 2005. Let the Invisible Hand grab your Long Tail (accessed April 29, 2010)
  • Kaw, P. 2009. 6 Ways to Leverage the Long Tail in Your Marketing (accessed April 29, 2010)
  • Wikipedia. 2010. Netflix API (accessed April 29, 2010)
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    6 responses

    2 05 2010
    rodh257

    thats interesting about the recommendations repeating the same movie, surely that must be a bug? or I wonder if there is some sort of motive behind it? (like perhaps if they keep repeating it you’ll think gee I really have to see this movie)

    On face value though, it seems like it would be very counter productive and damaging to their business, so you think they would have fixed it very quickly.

    Thanks for the informative blog post,

    Rod Howarth
    http://rodsramblings.wordpress.com

    3 05 2010
    amielazim

    I guess that’s one of the downside of the movie recommendation system. It’s never a guarantee that customers would actually fancy a recommended movie by Netflix based on mathematical algorithms. In fact, i see it as a limitation because it’s all base on math. It basically matches your viewing and rating history with people who have similar histories. I mean we can’t really blame the system anyways, it does try very hard to calculate the closest possibility. Obviously, in reality recommending a good movie would require some sort of instinct or emotion.

    How Netflix Works

    2 05 2010
    nataashatorzsa

    This is a very good article about Netflix. You’ve done your research that’s for sure. I’ve never used Netflix but it looks pretty good. It certainly has room to expand on those devices you mentioned; Xbox 360 etc. Looks like it has a promising future.

    3 05 2010
    amielazim

    Thanks Nataasha:) It’s going to be amazing just imagining what the future of movie watching is going to be like. We can be anywhere in this world and with a few clicks on our phone we’ll be able to watch a movie of our own choice (With internet connection obviously).

    3 05 2010
    Krishneil

    Hey Amiel, that was a great post. Good research into the important aspects of such a service and how it is tackling the Long Tail in its industry.

    Good work!

    Krish.

    3 05 2010
    amielazim

    Thanks for your comment Krish. Just the other day i was thinking about what market has a large long tail back home. This could be an opportunity for me to think ahead and possibly opening a business one day 😉 haha..

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