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Old September 16 2011, 11:56 PM   #242
Temis the Vorta
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Location: Tatoinne
Re: Netflix shoots itself in the foot... aka no more free streaming

If Starz wanted their content to be valued differently, Netflix could easily mark it as such on their site. And they'd be smart to make sure everyone knows it's branded Starz and not just Netflix, so when the snarky, "this crap isn't worth a premium, they should pay ME to watch it" comments start, everyone knows who's to blame. No content producer should dare stick out from the crowd by demanding a premium unless their content is super-premium. Whoever might have the guts to pioneer this approach, Starz ain't it.

Netflix could have turned this whole thing on its ear and used consumer ire to slap the content producers in line. Hey, we tried it your way, but look at the customer backlash! With the economy, folks are getting surly. Too bad Netflix isn't smart enough to make the surliness work for them. Still, I'm betting on them or at least their business model for the long run.

Why Netflix will win in the end anyway.

People are bailing on Netflix for not being a good enough bargain but they're bailing on the cable companies too for the same reason.

Here is the solution to both Netflix and cable/satellites woes: realize that being in the digital content business, your content value is headed for zero. This is inevitable. Start planning for it now.

The way to survive as the content heads for zero is:

1. Aggregate customers in one place for volume. This is how digital pennies become worth more than analog dollars. Splitting the market into Netflix, hulu, cable companies' proprietary systems, etc is working at odds with this approach. The idea here is that if you have a large enough audience, you can still fund your content production even if only a minority of your audience is buying anything, and the rest pay something through online ad views, which are very puny when the population is small (to which I'm sure the owners of TrekBBS can attest) but can really add up when your audience is in the millions, or, why not, billions.

2. Sell something other than content; use the content as a loss leader. This is akin to my idea to use a new Star Trek series as a loss leader to attract a mammoth population of Trekkies - millions of them globally - to a single site, where they can be monetized through ad views and selling memorabilia, videos, etc to just a small percentage.

3. Make your customers work for you. What do you sell if you're not selling content? You're selling the work that your customers are doing for you, for free. There are examples of this all over the internet. YouTube is selling the work people do making, rating and publicizing videos. Facebook is selling socializing.

Netflix has already got a start on what they could sell - the community. Their opinions, their content (reviews of movies with scenes of the movies for example), their help in organizing data (the ratings system). Netflix needs to concentrate on giving the community greater ways to create content and organize themselves into subgroups of fans.

People who rent Game of Thrones from Netflix should be monetized by herding them over to the Game of Thrones group, where the advocates for the book series are hanging out and telling everyone why they should buy the books. Netflix gets a percentage of sales from the books. There will be ads targetted at fantasy fans in general. Game of Thrones is bringing in a lot of first-time fantasy fans, who would not previously have had much exposure to that entire industry. There's all sorts of stuff you can sell them, once they've been sucked into that culture.

This can be replicated for all kinds of interest groups. Silent film buffs, Sergio Leone fans, Elmore Leonard groupies, the list is enormous. And remember, I'm talking a global audience. How many people in Jakarta have ever heard of Elmore Leonard or Game of Thrones? Or even Star Trek? The middle class is burgeoning worldwide, and suddenly they're easy to reach! Go get them!!!

But Netflix must realize that their community, not the content, is what their business will be based on in the future. They cannot afford to lose the community, and not just because of their subscriptions. The bottom line here is that what Netflix, or a Netflix successor who makes this work, is going to sell, is the free labor of their customers. The actual content - movies, TV shows - is going to continue to drop in price until much of it is literally free. But when you have a billion or two people creating content of their own, sorting info in useful ways and doing free PR, you can afford to give away content for free, just to keep them working for you.

That's the future. May as well start implementing it now. (The smart companies are.)
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