Netflix and the "Long tail" theory

Photo Credits: Netflix

Netflix is a US company providing entertainment services founded by Reed Hastings and Marc Randolph on August 29, 1997. In the early days, Netflix focused on DVD sales and leasing.
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Few people are aware that a few years ago, Netflix was on the verge of bankruptcy as a result of a fierce market competition against its former "Blockbuster" rival. Another cause of financial hardship was also the first month offered free of charge after subscribing to Netflix where along with the high costs of shipping DVDs and inventory that were a major burden to the multi million dollar business. Looking at market competition, Netflix as a video-based platform decided to add the option to watch online movies known as "online streaming," an option that allowed Netflix subscribers to access unlimited accesses. This change not only managed to lower the company's costs, but it was a profitable business moved to Blockbuster. Today, Netflix is one of the leading players in the video-art industry, employing around 3,500 people.

Looking at market developments and the entry of new competitors like Amazon with similar services, the likelihood of watching online movies was not enough to attract new subscribers. Thus, to diversify its services portfolio, Netflix aimed at cable channels, using a variety of content sets to build its subscriber network. Now, Netflix is also in talks to secure the exclusive rights to new movies that appeared on the screens of various world cinemas.

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The Strategy of Netfilx

Netflix's strategy is based on the rules of the so-called Long tail theory, which argues that products with lower market demand or low sales volume may constitute a market share that rival or surpass the bestselling movies and current blockbusters, but only if the movie distribution channel is large enough. The theory developed by Chris Anderson in 2004, which is based on the term "long tail", which means expanding a company's product list, focuses on less popular products that have lower demand from subscribers. Anderson argues that these products can increase the profitability of platforms such as Netflix because consumers in recent years have shifted their attention to unusual markets by distancing themselves from ordinary markets.

Products

In the case of Netflix, these "products" are films and TV shows. In addition to the exclusive rights to TV or movie shows such as "House of Cards" and "Game of Thrones," Netflix also offers its subscribers relatively unknown performances and films targeting small markets. Netflix has launched a large video that contains a large number of videos to target small markets and build its new subscriber base. The idea behind this is by expanding the portfolio of products / services they attract new subscribers who are part of these small markets that together form a large marketplace.

Offering the screenplay of these less-popular films / documentaries, Netflix covers a group of subscribers who may not find their favorite showcase in the portfolio of products on any other platform. With the merger of many small markets involving less popular video, a more specific audience-specific market, which also includes film subscribers focusing on bigger markets with the best-known films / documentaries, Netflix arrives create a large community of subscribers and have evolved to be the largest provider of online streaming services in the world.