What Netflix's content strategy tells us about their leaders
For the past decade, Netflix has pioneered the rise of digital streaming services as millions of consumers move away from traditional cable television. Today, Netflix provides licensed and original content to over 125 million1 in the United States at a base price of $8.99 per month.
More recently, major cable and entertainment companies like CBS, Disney, TimeWarner, and NBCUniversal have announced or launched their own streaming services to compete with Netflix and survive in the new media marketplace. Last week, Disney formally announced the launch of their Disney+ streaming service at $6.99 and will be pulling the majority of their licensed content (including DisneyPixar, ABC, ESPN, Fox) from other streaming services like Netflix2. It is speculated that these other major players may follow suit.
Licensed content presents a major obstacle for Netflix. Currently, nearly 2/3 of all viewing hours on Netflix comes from licensed content such as The Office (NBCUniversal), Friends (WarnerMedia), and Grey’s Anatomy (ABC)3. Studies conducted since the announcement of Disney+ show that 12.3 percent of Netflix subscribers may drop the service in favor of Disney+ and 37.5 percent will try the new service4.
Let’s say you are Reed Hastings, CEO of Netflix. How will you adapt and survive in this new environment?
Good leaders need to consistently monitor their organization’s environment and their position within it. They must be able to anticipate changes to the environment that may directly or indirectly impact their organization’s ability to survive.
Organizational sensemaking is a four-step process – briefly outlined below – that is used to understand how organizations adapt and survive within a changing environment (Weick, 1995)5.
- Step 1: Scan for environmental changes
- Step 2: Choose one to react to
- Step 3: Select the appropriate way to react to it
- Step 4: Retain the solution in organizational memory for next environmental change
In this case, leaders at Netflix recognized licensed content as critical to their operations. They anticipated the shift toward streaming services from major industry players and began rapidly developing their own original content. Last year, Netflix produced over 1,500 hours of original media in an effort to adapt to the environment and become less-reliant on licensed content. Although we do not yet know whether Netflix’s adaptations will prove to be sufficient, this is an evolving case study in organizational sensemaking for leaders.
References:
[1] The Crazy Numbers Behind Netflix's 20 Years of Success
[2] What is Disney Plus: plans, price, and everything else you should know
[3] Loss of Licensed Content Is An Underrated Crisis for Netflix
[4] Survey Shows Netflix Could Lose Over 8 Million Subscribers To Disney+
[5] Weick, K. (1995). Sensemaking in organizations. Thousand Oaks, CA: Sage.
[6] Keeping up with Netflix originals is basically a part-time job now
Disclaimer
Here at Lead Read Today, we endeavor to take an objective (rational, scientific) approach to analyzing leaders and leadership. All opinion pieces will be reviewed for appropriateness, and the opinions shared are solely of the author and not representative of The Ohio State University or any of its affiliates.
