Have you heard of the term ‘FAANGs’? And we don’t mean the pair vampires have to deal with. FAANG is an acronym for the five technology giants in the market today: Facebook, Apple, Amazon, Netflix and Google. The quintet have generated impressive returns for their investors (over the last five years in particular), but it appears one tech stock is currently outshining the rest. The Telegraph reports that a £1,000 investment in Netflix half a decade ago would be worth £14,138 today – share prices have risen more than 60% in the year-to-date. In comparison, Facebook is down 7% and Google 1%, whilst Amazon is up 23% and Apple 4%. Today we spill Netflix’s ‘secrets’ – how they have managed to pull ahead of the pack.
A Shaky 2018
All five of the tech giants have come under fire recently but it appears Netflix less so. The 20-year-old site, formally a DVD-by-mail service, chose to increase their subscription prices last year, but this certainly hasn’t deterred individuals from signing up. In March 2018, Netflix announced they had reached 125 million users (up 25m from less than a year ago!) Their level of data collection has however turned a few heads; Netflix were labelled “creepy” back in December (2017) after they tweeted about 53 people who had “…watched A Christmas Prince every day for the past 18 days,” and back in 2012 they paid out $9m to settle a lawsuit after anonymous data exposed users’ viewing habits.
Unlike the remainder of the fab five, (so far) Netflix has managed to avoid being “swept up in the broad tech backlash enveloping the industry,” said the Telegraph. Facebook are caught up in a scandal where Cambridge Analytica harvested the personal data of 50 million Facebook users without their permission to target potential Trump voters during the 2016 presidential election, Amazon has been ‘attacked’ by Trump himself for not paying enough taxes and getting too good a deal from the US postal office, Apple were accused of deliberately slowing down their old iPhones, and Google has been critised for promoting fake articles. It seems these headlines have overshadowed Netflix’s small lawsuit and mere tweet. But is keeping their nose clean (bar the odd snot bubble) the only thing Netflix is doing right?
Collecting Data the Right Way
Unlike Facebook, Netflix do not share their members’ data with others (intentionally or unintentionally). They use it to make the platform more engaging for the user, and therefore they cannot be accused of misusing information, the Telegraph added. The data Netflix collect from their members is used to simply get the right titles in front of the right people and, of course, to capture their attention and keep them coming back for more. When the next episode of Stranger Things starts playing automatically, one less hour of sleep isn’t that big of a deal, is it?
If you have a Netflix account, you will be aware of the constantly evolving home page banner which promotes different titles, but this isn’t the only personalised part of the website. Have you ever noticed the artwork that goes with each movie or show changing from time to time? This is because Netflix have a number of different cover photos for each of their titles. From the data they collect on each user, they can get an idea of what that person enjoys watching. Netflix will then pick the artwork they feel will most attract that user. For example, if you enjoy romantic films, the cover photo you see for a particular film may be of the couple in the movie, whereas the artwork for someone who enjoys comedies may be of the comical character in the film. It’s no surprise then that some 80% of what users watch on Netflix is based on what’s recommended to them. Clever stuff, right?
Laurels Shouldn’t Be Rested On
Netflix may be worth nearly as much as Walt Disney Co – who are seen as the gold standard in the entertainment industry – but they haven’t become lazy; the platform continues to look for ways to better themselves by improving the customer experience.
This year, Netflix is planning to spend $7.5 – 8 billion on content. In comparison, HBO (considered Netflix’s closest rivals) spent just $2bn on content last year. Financial services company The Motley Fool says that “Netflix has the momentum, consumer appeal and value proposition to keep winning the streaming wars,” and that “life will only get more difficult for its competitors,” as they continue to spend more on content.
As we mentioned earlier, Netflix has increased its prices – twice in recent years – but the current costs are still low enough to encourage new people to join and to stop current members from unsubscribing. Netflix’s basic membership option costs just $8 (£5.99 in the UK) per month, but HBO’s cheapest package costs $14.99. The average Netflix member spends roughly an hour on Netflix each day, so really they are only paying $0.27 per hour of entertainment.
Some of the most-loved titles can be found and enjoyed on Netflix for a bargain price, but this wasn’t enough for the entertainment company; in 2013 Netflix moved into original content with the series House of Cards. By the end of 2018, Netflix want to have 700 original titles online, with the long-term goal of eventually having an even split of licensed to original content. But the platform doesn’t just choose any old theme for their original content; they listen to viewer preferences. 29% of Netflix’s upcoming original content falls under fantasy and sci-fi – the current most popular genre on Netflix.
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