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Netflix and the Age of the Platform

Recently, Netflix launched a new app for the iPad. Good news, I suppose, but does that ultimately change the future of the company? I think that a year from now, Netflix as we know it will be no more.
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Recently, Netflix launched a new app for the iPad. Good news, I suppose, but does that ultimately change the future of the company?

I for one think that, come a year from now, Netflix as we know it will be no more.

Why the pessimism?

There are several reasons -- some internal and some external. First, let's review some recent history. Over the last few months, Netflix bumbled an attempt to effectively chop its business into two, creating multiple queues and bills in the process. A Qwikster-Netflix split would have represented the antithesis of one-stop shopping. Hence the strong reaction against it. CEO Reed Hastings followed that up with a distinct non-apology. Adding fuel to the fire, the company's content acquisition and marketing costs are staggeringly high.

All that would have been tough enough for Netflix to overcome if the world stood still. It hasn't. The market for streaming video recently got much more crowded, as Amazon, Apple, Facebook, and Google have all entered the game, increasing their presences and offerings -- or making plans to do so.

Today, rumors persist that Verizon might buy Netflix. While those rumors may or may not be true, one thing is certain: the massive drop in Netflix's stock price certainly makes a takeover (voluntary or otherwise) much more palatable.

A More Fundamental Problem

Irritating its customers was arguably the least of Netflix's problems. The company faces its most significant hurdles for one simple reason: It never built its own true platform. As a service, Netflix remains contingent upon other platforms and devices such as:
  • Tablets in the form of iPads, Fires, and the like.
  • PCs
  • TVsSmartphones

Brass tacks: Netflix has either implicitly or explicitly rejected external innovation and crowdsourcing. It hasn't allowed others to develop "on top of it," potentially taking its service in new and interesting directions. In this way, it's the antithesis of true platforms such as Google (Android) and Apple (iOS).

Today's Consumer and the Age of the Platform

What changed for Netflix? First, when it was the only video streaming game in town, its customers could justify a separate, standalone service. That's no longer the case.

Second and more important, we have entered the Age of the Platform. Today, customers use fewer standalone products and services, a trend that will intensify as more content becomes available on other platforms. Harried consumers above all value three things: ease, convenience, and convergence. iTunes is not the cheapest (legal) destination for downloading music, but I challenge you to find an easier, more user-friendly, and more integrated service. New products, services, and technologies can and should make things easier for customers, not more difficult (read: Qwikster).

Contrast what Netflix has done (or, more accurately, hasn't done) with the moves of Amazon, Apple, Facebook, and Google (aka, The Gang of Four). These are perhaps the best examples of companies that have built robust platforms, planks, and ecosystems. They have added integrated features and products. Is it any wonder that they are so valuable, so successful?

It's not too late for Netflix, but continuing on its current path is unlikely to revive its stock -- or save the company from its ultimate demise.

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