Netflix unexpectedly announced a split between their two offerings, DVD-by-Mail and their streaming service into two separate services. This is surprising as Netflix has continued to grow in popularity and profits every quarter. Why fix what isn’t broke? After all, the streaming portion of Netflix claims about 20% of North America’s bandwidth during peak hours, which is certainly saying something. Is there something for small businesses to learn from Netflix?
When chief executive Reed Hastings announced the split (after already announcing a large increase in price a couple months back) stocks dropped. Many Netflix subscribers were confused by the announcement, and likely, many unsubscribed. That’s not moving forward, is it?
On the other hand, Netflix (the streaming service) is a widely used portion of the business, and instant movies on demand is very attractive for customers and getting easier and more popular. Infrastructure-wise, it is cheaper to manage and maintain the massive streaming data centers as opposed to facilitating mail centers, and it is better for the environment to boot. Most modern DVD and Blue-Ray devices offer streaming capabilities and many televisions are jumping on board. Video game consoles and mobile devices are very capable of streaming movies as well. It’s so simple and sensible that it makes the snail-mail service seem obsolete.
Is Netflix consciously pushing consumers away from one of their services to eventually only target streaming media? This could be the case. The streaming service is more economical to run for the company and most users alike. It’s likely this is a situation where you are either on the boat or off the boat. Most importantly, Netflix is sweetening the deal by promising to improve their streaming library.
This basic principal can be a valuable one for small businesses, especially when you have legacy products or services that you just can’t quite eliminate due to customer demand. Make it a no-brainer to move over. Yes, you will get some negative feedback, and not everyone will change their ways, but you may have customers on the newer services anyway who would love to see your focus shift completely towards them. Furthermore, embracing technology that streamlines your offering might not pay for itself at first, but in Netflix’s case, the innovation eventually changed the face of the business.
What about your business? Has technology been able to completely change your service offering? What have you done to migrate customers to new services from legacy services?