© Netflix
© Netflix

Supply audit: Netflix

17 April 2020

​In times of stress, many of us choose to watch tailored escapism at the touch of a button. With demand escalating, can Netflix weather the viral storm?

$157bn in 23 years. That’s a lot of chill time.

Yes, with over 167m ‘members’ watching almost 4,000 movies, Netflix has come a long way. Back in 1998, when co-founders Reed Hastings and Marc Randolph launched the world’s first online DVD rental store, customers had just 925 titles to choose from, which equated to almost the entire catalogue available at the time.

That’s a long way from streaming...

While Netflix’s original subscription model got them noticed, a system reliant on the postal service didn’t scream success. So the company thought outside the box, hitting the big time when it diversified into streaming content. Hastings met with home entertainment giant Blockbuster in 2000, pitching the idea that Netflix could become Blockbuster’s streaming service. Unconvinced that digital posed a threat – and with streaming tech still in its infancy – Blockbuster declined the offer.

But how did Netflix get so all-powerful?

Having diversified once, the company was not afraid to do it again. In 2013, having premiered ‘exclusive’ content with ​Lilyhammer,​ Netflix premiered its first ‘original’ content, ​House of Cards​. By 2018, it had produced 850 original titles. With 57% of customers citing this as their primary reason for subscribing, Netflix spent $15bn in 2019 on original content.

So, it has its finger on the pulse?

Definitely, with a little help from some big data. Back in the DVD days, subscriber data was fed into a recommendation engine that managed the company’s limited portfolio by guiding subscribers to movies already in stock, rather than new releases. Netflix now uses subscriber data to manage its supply chain by predicting the shows and movies customers want and buying or creating them accordingly.

Does the company create its own demand?

Building upon its flexible business model, Netflix runs an agile procurement process for buying distribution rights, continuously assessing viewing data to inform renegotiations, drop underperforming shows and retain the most popular.

But, vitally, can it cope with Covid-19?

Don’t panic. With the world experiencing enforced time at home in front of screens, the company has made assurances that its adaptive streaming tech will ease the weight of increased traffic with only a minimal impact on image quality.

Built for success

In 2020, Netflix notched up 24 Oscar nominations, more than any other studio, but ultimately only walked away with two gongs – Best Supporting Actress for Laura Dern in M​arriage Story​ and Best Feature Documentary for​ American Factory​.

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