Part one of a five-part series on the effects of some of the biggest U.S. tech companies on the app economy.
On this blog, we’ve written about how software platforms make it easier for developers to reach their intended audience. As theories of harm and general suspicion of platforms abound, now is the time to examine how they both altered and, in many ways, benefited the markets they’ve entered. In the case of Netflix, it helps to examine how Netflix revolutionized video distribution along with consumers’ expectations of video content. For example, think about the last time you went to a movie theater. Did you reserve your seat in advance? Did they recline back, were they plush and comfortable, and could you order food to them? With nearly half of all AMC theaters featuring their new “premium” seating and viewing options, it’s likely that they did. Movie theaters have changed in the past five years, moving from dingy, nostalgia and popcorn-ridden packed rooms to the comfortable, collective viewing experience it is today. For that, you can thank Netflix.
Netflix launched in 1998 as one of the world’s first online DVD rental services, taking inspiration from a fledgling marketplace startup called Amazon. For its first nine years, Netflix functioned solely through snail-mail, sending billions of red envelopes through the postal service each year. Inspired by another small startup, YouTube, Netflix pivoted and launched its online streaming service in 2007. The rest is history.
The movie and television entertainment market has seen plenty of innovation and turnover (remember recording shows through VHS?), but perhaps none revolutionized the industry more than Netflix. Almost single-handedly boxing out home-entertainment kings Blockbuster and Redbox, Netflix’s vast popularity even steered audiences away from the century-old cinema experience and into their homes. The appeal of relaxing on a couch instead of a cramped chair, watching what you pleased while saving the costs of travel, snacks, and a movie ticket was too much. As their popularity faded, theaters realized that while customers are drawn to the comfortable surroundings of their home, surrounding oneself with other movie-goers amplifies the experience – thus the movement towards the premium entertainment experience of the 21st-century cinema.
Providing competition and innovation in a bloated industry, the effects of Netflix benefited consumers massively. One of the first services to start releasing TV show seasons all at once, rather than the traditional once-a-week model, Netflix created the “binge-watching” culture that has defined entertainment in the last few years. As one of the first adopters of internet streaming technology (unique in its use of professional content, differing from platforms like YouTube), the popularity and success of Netflix inspired other companies to follow. Beyond the new and improved movie theater experience, competing streaming services like Hulu and Prime Video have cropped up over the years, with both Disney and Apple announcing plans for their own subscription-based platforms. Both will likely create original content for their services (much like Netflix, which in part credits their market success to the popularity of their original content), bringing more possible entertainment to consumers.
Through the widespread adoption of streaming services into the market, customers have been given the choice between various services (either virtually or physically) that provide both original content and various popular media. These services give a home to content that had no place in a previously uptight and limited market. With Americans spending more than 11 hours a day staring at screens for work and media consumption, and a U.S. entertainment industry worth over $700 billion, how we spend that time is a hugely profitable and contested market.
As of 2018, Netflix comprises 15 percent of all internet traffic with 51 percent of Americans having access to the service, and it doesn’t show strong signals of slowing down. But perhaps most importantly, Netflix’s entry into the market illustrates what platforms can do to change the character and diversity of a marketplace. Just as app developers have benefited from the expanded distribution and built-in trust software platforms provide, content creators also benefited from the new distribution opportunities Netflix offers. Likewise, consumers benefit from a greater variety of video content, software options, and more avenues than ever to access them.