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After reading a blog post from my classmate, Peter, about declining growth from Netflix as a result of a higher monthly subscription rate, something that immediately came to mind was Netflix becoming more vulnerable to disruptive innovation.
Often times, Netflix is portrayed as a disruptive innovator in the video rental industry. Netflix was a key pioneer of subscription-based online streaming services, which ultimately contributed to the closure of video rental stores such as Blockbuster and Rogers Plus. Netflix was able to offer a similar service that was far more convenient, as customers were able to access the content they wanted without having to leave the comfort of their own home.
I agree with Peter, who said that customers are more likely to jump ship following an unexpected increase in price. However, I believe Netflix should re-evaluate its subscription rate because popular TV networks, such as CBS and HBO, are planning to launch their own streaming services. Unlike Netflix, these networks can distinguish their service with popular television series they have distribution rights to, such as Game of Thrones. For Netflix, this might be a warning sign for things to come, as the television industry’s interest in online streaming can impact Netflix’s long term success. By making exclusive television programming available on-demand, streaming platforms for these TV networks can be tailored to viewers that only want access to a specific selection or genre of shows. If these services are priced competitively, Netflix might eventually become a victim of disruptive innovation, as customers have less incentive to switch back to a service that is generic and relatively more expensive in comparison. It seems that Netflix may now be in the same position that Blockbuster and Rogers Plus was in several years ago.
Sources:
http://www.dailyfinance.com/2014/10/16/netflix-earnings-monthly-rate-hike-cuts-subscriptions/
http://www.hollywoodreporter.com/news/michael-wolff-hbo-cbs-streaming-742721