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Netflix Group Report Analysis
Netflix has prospered through capitalising on a long tail
strategy
Hinewai Kitchen 18344796
Jack Walton 18844571
Shaquille Stirling 18358030
Shannon Wells 18345061
Ananya Alagh 18697487
Cheyenne Posawen 19151861
Table of Contents
Introduction: History of Netflix 1
Netflix Timeline 1-2
The Netflix Business Model 2-3
Netflix CompetitorAnalysis 3-4
Netflix and the Attention Economy 4-8
- SocialMedia 4-5
- Algorithm 5-8
Netflix and the Network Economy 8-11
- Subscriptions 8-9
- Power and Technology 9-11
Netflix and the Long Tail 11-13
The Future of Netflix 13-14
References 15-17
ProjectDiary 17-18
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Analysis of the Netflix Infographic: Group Report
Introduction: History of Netflix
Netflix is a popular, world leading digital entertainment service which specialises in
movies and television programs in many different genres. From horror to comedy,
Netflix members can enjoy a wide range of online entertainment. Netflix was
established in 2000 and has become a dominant online entertainment platform with
many countries around the world. Other platforms such as Blockbuster have been
completely tarnished because of Netflix’s superiority (Kim 2018). According to Netflix
(2018), it currently has over 130 million subscriptions from 190 different countries. As
it has many different genres of fiction and non-fiction movies, television shows and
documentaries Netflix is seen as as lying at the intersection of both the internet and
storytelling and it is a new invention of internet television (Gomez-Uribe and Hunt
2016). Netlix’s main product of revenue is subscriptions from members all over the
world paying for either a basic plan, standard plan or premium plan. These plans are
from cheapest to most expensive and the user has a choice on which one they want;
whether it is what they can afford or how much streaming videos means to them
personally. The plans one decides to choose will determine the device limit you can
stream Netflix on at the same time (the maximum being four if the premium plan is
chosen). They also make the quality of the TV shows in stronger definition and
easier to view on larger screens.
Netflix Timeline (Paraphrased from “About Netflix”)
1997 – Netflix is founded by Reed Hastings and Marc Randolph.
1998 – Netflix is launched as the very first DVD rental and sales site.
1999 – Netflix releases a subscription service.
2000 – Netflix launches a personalised movie recommendation system.
2002 – Netflix makes its initial public offering
2005 – The Netflix membership subscriptions raise to 4.2 million.
2007 – Streaming within Netflix is introduced.
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2008 – Netflix partners with consumer electronics companies to stream on more
devices.
2009 – Netflix partners with various other consumer electronic companies to stream
further.
2010 – Netflix is now available on hand-held devices such as iPhone, iPad and Wii.
Netflix is available in Canada.
2011 – Netflix is now available in South America.
2012 – present – Netflix is constantly expanded and is now available worldwide.
The Netflix Business Model
Over the last few years, Netflix has grown to become an online media giant. The
term Netflix has become almost synonymous with online streaming. Netflix’s
resounding success has been largely based on its ability to seamlessly transform its
subscription based business model from traditional to digital media.
Netflix began as a company that started out renting DVD’s, which shifted its rental
service online to accommodate changing markets in a digital era. Since then, this
simple online rental business has evolved to become one of the most globally
recognized only streaming platforms (Hosch, 2017). Netflix has capitalized on the
reversal of “broadband era economics,” essentially providing each and every
customer with a highly customized service, rather than a standardized product
(Anderson, 2007, p. 5). This customization, which works off of a variety of
algorithms, allows them to ensure that they deliver this service easily and efficiently
to each individual, to effectively maintain their subscription base.
Netflix offers all new users a single free month to trial their services, before
subscribing the one of their monthly payment plans. The plans increase in price,
depending on the number of devices across which a given subscriber would like
Netflix to be accessible (Netflix, 2018). Apart from licensing popular TV shows and
movies, to attract the attention of a wide audience, Netflix has dedicated a
substantial portion of its budget to producing highly specialized, original content.
These original television shows and films, intended to cater to more niche tastes,
and have had a huge role to play in Netflix’s success. Goel, Broder, Gabrilovich &
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Pang, (2010) estimates that about 25% of Netflix’s sales consist of this type of
eccentric, niche content. Netflix has successfully implemented the appeal of long tail,
niche content, alongside widely popular content, as a part of their business strategy,
and intensified the consumer interest and demand for this kind of niche content by
using the principle of exclusivity – where specific and popular content is only
accessible through Netflix. Since Netflix has virtually no barriers for users to
unsubscribe, it’s evident that their business model relies on the loyalty of subscribers
based solely on the quality of the content and strategic service provided to them. The
network of subscribers can trust that Netflix will continue to provide them a wide
range of popular and unique content that no other platform can, and in turn, Netflix
can trust that these subscribers are willing to continue paying for their service.
Netflix Competitor Analysis
Netflix is still the leader of the online streaming services because of ‘its first-mover
advantage in the increasingly competitive subscription video-on-demand service
market’ (Wang, 2016). Netflix has created a new form of entertainment as it steers
people away from normal TV practices with program schedules, and instead towards
a user-driven platform (Havens, 2018). In 2018, Netflix announced they had more
than 100 million subscribers worldwide (Moskowitz, 2018). Coming in behind Netflix
are the online streaming services Amazon Prime and Hulu Plus (Wang, 2016). What
makes Netflix more attractive than these other streaming services is its commercial
free service, its subscription prices, and its original programs that cater for a
demographic of people that demand niche film and TV content (Wang, 2016). All
factors of which make Netflix very competitive in the film and TV subscription online
market.
When users go to sign up for Hulu Plus, they’re offered a low-price subscription
which comes with advertisements (Josephson, 2016). People usually sign up for
subscription-based services to escape advertisements and pirated content
(Josephson, 2016). So, when people realise they must pay more for ad free content,
they usually decide to look for a better online streaming service such as Netflix and
Amazon Prime who don’t have advertisements (Josephson, 2016).
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Amazon Prime offers a better subscription deal then Netflix or Hulu Plus, and even
offers a discount for students (Waniata, 2018). It also offers 4K Ultra HD Content at
no extra cost, and users don’t have to pay more when they want to share their
account with other people (Waniata, 2018). Netflix increases the subscription price
for users if they want to add both these things (Waniata, 2018). However, although
users pay a little bit more for Netflix, they are getting a wider range of movies,
television shows and original content (Waniata, 2018). This is because Netflix
spends up to $8 billion a year adding to its library (Waniata, 2018). Part of the way
they do so is by investing in projects that cater to a niche audience as to succeed in
efficiently and effectively marketing a product (Arzavi & Moseley, 2015).
Another feature Netflix holds over Amazon Prime and Hulu Plus is its original
programs (Josephson, 2016). Netflix set the market when they released shows like
Orange is the New Black, House of Cards, 13 Reasons Why and Stranger Things
(Josephson, 2016). This is because when House of Cards and Stranger Things
started winning Emmy’s, Netflix’s brand improved as it became much more than a
platform for other people’s video content (Waniata, 2018). It was able to prove that
Netflix knew how to fulfil consumers needs for good television (Waniata, 2018). They
did so by creating content that had effectively constructed provocative, nostalgic and
scandalous themes (Waniata, 2018).
Netflix and the Attention Economy
Social Media
Netflix has, in recent years, made the strategic decision to produce original dramas
(Jenner, 2016). According to Payne (2017), Netflix has grown effectively through
choosing strategic themes pertaining to their content. By capitalising on a long tail
strategy, they have found cultural niches at which they can effectively market to due
to specific demographics niche interests that can be marketed to them collectively
and effectively through social media, causing a reciprocal attention relationship
between Netflix and their consumers. Jenner (2016) asserts that Netflix has steered
its content away from familiar structures of broadcasting, producing and branding
that have been common to television and moved toward more focused, niche
content. An example of Netflix doing so is seen through their show, 13 Reasons
Why. This 2017 drama follows a teenager called Clay Jensen who is struggling to
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find the reason why his classmate and crush, Hannah, made the decision to end her
life. Payne (2017) state that Taboo themes and subjects are very popular with
modern generations, like suicide and mental illness, and is the reason why this show
has garnered much attention on social media. This show has capitalised on the long
tail by producing content that focuses on a niche demographic and a niche subject
that has traditionally been taboo within this demographic. This niche demographic
are those who are between 15 and 29 years old with this age ranges second leading
cause of death being suicide as a result of mental illness (Payne, 2017). This has
therefore caused the show to become widely popular with this age range due to its
unapologizing promotion of the topic. It's popularity has also become compounded
through the main communication mediums that this age range operate on, being in
person and over social media.
Social media enables a safe space for conversation around taboo topics as it not in
person. A show such as 13 Reasons Why has also been a very effective catalyst for
conversation around this topic. Thus a flood of social media sentiment and word of
mouth from peers in protest or admiration have acted as a very powerful marketing
tool due to perceived trust and authenticity as peer word of mouth and social media
sentiment are more likely to stimulate purchase behavior, much more so than a
traditional ad (Chu and Kim, 2015). Netflix has therefore prospered in a digital
economy through the effective reliance on a long tail strategy, capitalising on the
attention economy on social media, through the use of taboo themes in their content.
Algorithm
Imagine you’re settling in to watch some Netflix with a friend. Your friend knows what
genre of shows you like and what you don’t like. Your friend makes suggestions for
what you should watch and then takes notes while you watch. Your friend takes
notes if you watched the whole episode, if you got bored of the programme halfway
through or if you binged the next few episodes. This is essentially what the Netflix
algorithm does.
The Netflix algorithm monitors users’ activity on the platform and suggests content
based on their preferences. Different variables are tracked and fed into the algorithm
to accurately predict users’ behaviour. These variables include watch time, whether
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or not a user has ended their session because of a programme and if they continue
to watch content from the same genre. The aim of the algorithm is the ability to
accurately predict user behavior, leading to the algorithm keeping you on the site for
longer.
The common aim for online streaming services, such as Netflix, Hulu, Amazon and
YouTube, is to keep users on the site for as long as possible. This is encouraged
through the incentive by Netflix to “binge” a programme, wherein long periods of
watch time are devoted to a singular series/television show (Burroughs, 2018).
Through the use of algorithms on these platforms, users’ behaviours are monitored
and predicted in order to keep them on the platform for longer. This also influences
how online streaming services produce content due to the fact, which Bishop (2018)
pointed out; it’s all based on their own consumer data. The algorithm can impact the
content that is produced by the streaming services as it conveys what content is
popular and does well with users.
Improving upon the Netflix algorithm has always been an area of great interest for
the online streaming service. Back in 2006, the first ever “Netflix Prize” was
announced. As Burroughs describes, Netflix offered a prize to anyone that could
improve the performance of their algorithm by 10% (Burroughs, 2018). The
competition ran from 2006-2009 and was awarded to the Pragmatic Chaos team in
October 2009. Interestingly, shortly after the competition, Netflix announced that it
would begin to develop its own content (Burroughs, 2018). Emphasised by the
Netflix Prize is the importance of the high-functioning algorithm in helping with the
launch of Netflix productions as well as the overall function of the online streaming
service thanks to the algorithm.
An issue that has plagued algorithms for a while now is the problem with data
sparsity. This occurs with users that don’t rate content right after they have finished
viewing them. How can the algorithm recommend an item when they don’t
understand what they like? New algorithms need to address the data sparsity issue,
as the research by Saeed & Mansoori has. Saeed et al proposed an algorithm that
manages the data sparsity problem without using any extra information (Saeed et al,
2018). Their algorithm builds a recommender system, which works to predict
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whether a particular user will like a particular item or collection of items. It uses a
technique known as collaborative filtering to create an algorithm that is a simple,
non-trivial item-based collaborative filtering that is based on ratings (Saeed et al,
2018). Their proposed algorithm, VWSO (Virtual Weighted Slope One),
outperformed other baseline algorithms with 100% prediction coverage, emphasising
what makes an effective algorithm and presents a solution to the data sparsity
problem.
When analysing industry trends for algorithms used for online streaming services,
different issues arise and similar performance desires are visible. Comparing the
Netflix algorithm to the YouTube algorithm, different outcomes convey deeper
issues. A main issue experienced on YouTube is the fact that mechanical decision-
making, as explored by Bishop, can create a discriminatory visibility hierarchy.
Moreover content creators feel threatened by the YouTube algorithm to produce a
certain type of content to please the algorithm (Bishop, 2018).
The algorithms for Netflix and YouTube work similarly in the way that they both try to
predict users’ behaviour and by doing so, assess which content is popular with the
larger majority.
An important difference between the two streaming services is that the views and
ratings on Netflix programmes are, for the most part, not visible. However, on
YouTube you can see a video’s views, ratings and comments. When seeing the
views of videos on YouTube, it’s easy to assess which content works and which
doesn’t, as well as which may be advertiser friendly. YouTube creators being
threatened by the algorithm with lack of visibility damages creators and makes them
feel unsecure.
YouTube creators often have to “self-optimise” their content to meet the standards of
advertisers in order to be recommended to users and to not be dismissed by the
YouTube algorithm (Bishop, 2018). Both online streaming services’ algorithms are
described as “black-boxed” wherein little to no insight into the relative influence of
the independent variables in the process is mentioned (Bishop, 2018). Similarly to
Netflix, the two algorithms do show online streaming services which content does
well and what they should produce more of, however on Netflix there is no threat to a
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movie or television show of visibility to drive them to please the algorithm. This is
mainly due to the fact that there are no advertisers to please on Netflix as well as
having no views and ratings shown for content. It’s important to compare different
algorithms from online streaming services in order to assess the functionality of
algorithms for the various services.
Netflix and the Network Economy
Subscriptions
The network economy allows businesses and consumers the opportunity to connect
in the modern economy in an innovative way, which is through the application of
information and communication technology and the Internet (Leibowitz, 2002). Netflix
has used the network economy to its advantage by digitising movies and TV shows
using hypertext transfer protocol and web servers (Waldfogel, 2017). By doing this,
Netflix has given consumers the opportunity to watch their chosen content on several
different devices through its online streaming service (Waldfogel, 2017). Netflix offers
consumers a subscription, which allows consumers to have access to Netflix’s library
for a small fee each month (Summers et al, 2016). Netflix now has over 81 million
global subscribers and is the leading online streaming service for online movies and
TV show (Summers et al, 2016). Netflix has successfully used the internet to connect
with consumers in the modern economy. They have done this by providing
consumers with an online streaming service using a subscription-based payment.
By offering a subscription-based service which gives consumers access to a library
full of movies and TV shows, Netflix is capitalising on a long tail strategy. The online
streaming service is an improvement of traditional DVD stores as it eliminates the
problem of shelf-space (Arzavi & Moseley, 2015). Traditional DVD stores only have
limited space and can only afford popular and mainstream products as they know
that this is what consumers want (Arzavi & Moseley, 2015). These stores make their
money from these popular and mainstream goods, and therefore can’t risk holding
an extensive range of titles as they might not sell (Arzavi & Moseley, 2015). If the
movies and TV shows don’t sell then the owners of the store can’t afford to pay rent,
electricity, and their employees (Arzavi & Moseley, 2015). Whereas Netflix can
provide consumers with a variety of titles and a broad range of categories because
they aren’t limited by shelf-space and by other expenses (Arzavi & Moseley, 2015).
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Netflix is able to provide consumers with content that is not as mainstream and is not
available in the retail market, which opens up the niche market (Arzavi & Moseley,
2015). By opening this niche market, Netflix is capitalising on the long tail strategy
that allows its content to sell in a niche space where Arzavi and Moseley, (2015)
state that there is little competition on theme, style, and quality of the content that a
business is trying to offer in a niche area of a particular market. In this case, this
market is the online film and TV market.
Power and Technology
Technology evolves, yet economic rules tend to remain the same (Shapiro & Varian,
1999). This is the principle that explains Netflix’s massive success within the last
decade; they have managed to perfectly exploit the simple notion of supply and
demand that motivates the average consumer, while manipulating the intense
interconnectedness of the network economy to their advantage. Netflix has
navigated both the digitization of the physical goods that consumers want, as well as
the theoretical framework of a digital utopia, that forms the basis for the idealized
version of the world wide web. Using the appeal of the growing popularity of content
considered to be part of the long tail, Netflix has given its viewers the illusion of
power and control – a key characteristic of the peer-to-peer economy – yet in doing
so, it has essentially monopolized the market in its role as a sole source for
streaming certain niche content.
The foundation of the network economy is the virtually non-existent barriers for
connection and communication with other individuals or facets of the network (Kelly,
2017). This communication can take place of regardless of spatial or temporal
boundaries. This being said, it makes sense that the network economy, also dubbed
the peer-to-peer economy because of the ease with which average consumers can
connect with each other, gives these consumers a sense of power. They can unite
with like-minded consumers, share relevant content with one another, and can even
serve as the providers of goods and services that might otherwise be supplied by
major corporations. The connectedness of the network economy and the digitization
of vast media libraries give consumers the ability to tailor their browsing experience
to their exact tastes (Anderson, 2007). Especially within the context of streaming
platforms like Netflix, there are algorithms that work to present these web users with
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content that appeals to them, with the purpose of securing their loyalty, but users still
feel as though they are in power. They can view the content at their convenience,
and even provide responses to get rid of content they don’t like – essentially
providing more feedback for the algorithm to function most effectively (Van Letht,
2016). Yet this ability to personalize and customize selections of content is what
makes Netflix so successful in the digital age. When traditional broadcast media was
created, the ability to deliver a single piece of content to masses of people was
revolutionary. Now, the network economy thrives off the ability to deliver select,
personalized content to millions of individuals that make up the masses (Anderson,
2007, p. 5.), thanks to the immense infrastructure and technology that has made the
network economy possible. This is encapsulated by Vann-Adibé (cited in Anderson,
2007, p. 8) saying that’ “in a world of almost zero packaging cost and instant access
to almost all content in this format, consumers exhibit consistent behaviour: they look
at everything.”
With reference to this idea, it is clear Netflix has gone further than simply capitalizing
on the ability to create a highly customized service as a result of technology that has
created the network economy. Netflix has managed to take advantage of the concept
of consumers that “look at everything” capitalizing on the long tail strategy, by
weaving a selection of unique content into the mainstream series and film that might
lure an average consumer in.
Streaming platforms like Netflix or Spotify demonstrate a concept dubbed the
“infinite-inventory” model (Goel, Broder, Gabrilovich, & Pang, 2010, p. 201) within
which users have the ability to choose from a seemingly endless array of content.
However, woven within this content, are niche movies and television series catered
to more eccentric interests. According to, rather than a population of mainstream
versus niche, evidence suggests that all of us as individuals are interested in a mix
of both popular and eccentric content (Goel et al, 2010). This means that Netflix is a
genuine example of the infinite inventory model, because it provides both
mainstream and highly unique media through its platform. In addition, the mix of
mainstream and unique is customized, and differs from user to user, reinforcing the
illusion of individual control and power within the expansive network.
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This also demonstrates the way in which Netflix is effectively able to capitalize on the
long tail strategy while presenting enough popular titles to draw users in.
A key point to note is that a lot of this niche content is also unavailable through any
platform other than Netflix, which gives it an edge over competitors in the highly
networked world in which almost everything is accessible (Van Letht, 2016). Netflix is
so successful because it is able to exploit this principle of exclusivity in the context of
networking and interconnectedness. That is to say, because of the fact that a great
deal of this niche content is available through Netflix alone, subscribers that want to
share their experience or reactions to the given shows or films, can only genuinely
do this with other Netflix subscribers (Van Letht, 2016). Netflix has created its own
network within a network, exploiting the ease with which consumers can, and want to
connect with like-minded consumers. Their carefully orchestrated use of the long tail
strategy to maintain consumer loyalty, and enforce this sense of exclusivity within
their network of subscribers has ensured their success within the network economy.
Netflix has successfully maneuvered the economic and philosophical aspects of this
economy within the digital age.
Netflix and the Long Tail
What is the Long Tail?
The theory of the “Long Tail” originated from a 2004 Wired Magazine article by its
editor-in-chief Chris Anderson. In a changing technological environment in which the
economy operates, the Internet has transformed many markets of different products
such as books, films, and music (Hjorth-Andersen, 2007). Anderson uses the Long
Tail to compare Internet-based e-commerce and physical retailing; noting how the
former offers more in terms of niche marketing (‘tail’) and diverse inventories, in
contrast to the latter being dominated by, or limited to, best-sellers and mainstream
products (‘head’). Online retail and distribution allows for the exploration of
alternatives and preferences, which encourage consumers to indulge in personal
taste and interest rather than instilling them with a “hit-driven mindset” that restrict
choice (Anderson, 2004). Traditional stores rely on selling fewer units than what they
actually possess, aiming to bring out hit products that capture the mass market and
increase profit. This followed the traditional economic models as it focused on profit-
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making along with the need to sufficiently cover any business expenses and
constraints. Brick-and-mortar stores, for instance, only place 20 percent of the
products available for purchase on the shelves, while the rest can be found in online
niche markets (Mossman, 2006). The Internet’s unlimited shelf space is capable of
carrying and maintaining product inventories that cater to the consumers’ demand for
niche products and content via specialised markets (Kornfeld, 2018). Virtual and e-
commerce sites further extend the Long Tail, challenging and changing conventional
economics, also influencing strategies in business operations (Kornfeld, 2018). The
Long Tail not only emphasises the profitability of niche markets but also the vastness
of what the Internet can offer, encompassing the rise and success of online retail and
relative sites.
Netflix and the Long Tail
To gain a further understanding about this phenomenon, the Long Tail strategy can
be analysed with regards to Netflix, which is deemed an “infinite-inventory” retailer
(Goel et al., 2010). Netflix has evolved from being an internet delivery of TV shows
and movies to a renowned streaming service of increasing amounts of curated
content (Netflix, 2017). This subscription-based online streaming service is a notable
example of how the Internet allows online businesses to provide access to both
mainstream and niche content, specifically offering a wide selection of films that
match and cater to viewers’ personal tastes (Wayne, 2018). It carries a greater
inventory of films compared to traditional video or blockbuster stores, thus
representing a market that is more than 20 percent of what is physically sold
(Mossman, 2006). With past physical Netflix retail stores, it was found that 25% of
sales were for niche items that were unavailable in stores, but rather online (Goel et
al., 2010). Anderson (2004) inferred that a majority of rentals consisted of various
titles from underserved ‘tail’ markets like foreign films and documentaries, which
were genres that were overlooked by traditional video stores. This is demonstrative
of how capitalising on the Long Tail, or the encouraged consumption of ‘tail’
inventory online, is lucrative and opens up many profit-making opportunities.
Netflix aggregates the Long Tail in its process of embracing niche content and
efficiently dispersing it among its audience. Producing and cultivating this niche
market of films does not mean it aims to substitute traditional mainstream media, but
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rather to share this online platform in expanding cultural and economic landscapes
(Anderson, 2007). However, there is an argument deducing consumers’ appreciation
of niche content (‘tail’) over the mainstream (‘head’) as a way of diminishing the
significance of the latter, or of large dominant inventories (Goel et al., 2010). Netflix
effectively highlights both aspects by recommending a selection of trending titles
featuring an inventory spectrum that is not exclusive to popular films, but also
includes eccentric or specialty items. According to the Long Tail model, best sellers
can direct attention and demand towards specialty items (Mossman, 2006). The
recommendation system and search tools within Netflix helps users identify and
discover titles that are suited to their tastes and it can promote, or even bring certain
films and underserved film genres into the mainstream. Tools pertaining to consumer
demand broaden the cultural landscape via exposure and access to various products
(Brynjolfsson et al., 2006). Netflix is able to satisfy consumer demand for niche
items, in turn cultivating the Long Tail distribution in the market, while also serving
customer interest regarding best sellers.
The infinite-inventory retailer lives up to its name with its abundance of films; popular
items and especially ‘hidden gems’, or obscure titles, and Netflix exclusives alike,
that make up an extensive entertainment variety driving new subscribers to Netflix.
More subscribers generate more profit and is beneficial in establishing an influential,
active presence in the industry and the media. The increasing amount of Netflix
users contribute to the business’ exponential growth and success, both domestically
and internationally, and has caused a continuing influx of content for members, as
they strive to maintain their position as a leading video provider and internet-based
outlet (Netflix, 2017).
The Future of Netflix
Internet-based outlets have cultivated the impact of Long Tail markets by giving
online retailers profit-making opportunities through niche products, simultaneously
allowing consumers access to such products (Brynjolfsson et al., 2006). As the
Internet and technologies continuously evolve, the Long Tail must be sustained by
adapting to its respective technological environment. With social media and
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streaming dominating contemporary society, the Long Tail is extended and
diversified by the widespread distribution of niche markets (Kornfeld, 2018).
Anderson’s definition of the Long Tail has come a long way since 2004, as it has
become streaming and social-fuelled, requiring strategies to have a focus on active
engagement with online communities and catering to the audience’s needs. The
Long Tail remains an aggregation of Internet businesses that embrace and celebrate
niche content. It is further defined by digital and social media marketing that
emphasise value and monetisation, targeting consumers or niche audiences with
content corresponding with their online data, and the role they have regarding
campaigns and online engagements (Kornfeld, 2018). Challenges ensue, yet new
possibilities are introduced and explored through this influential phenomenon.
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https://www.wired.com/1997/09/newrules/
Kornfeld, L. (2018). The Long Tail in 2018: Niches Meet Streaming and Social Media.
Retrieved from https://trends.cmf-fmc.ca/the-long-tail-in-2018-niches-
meet-streaming-and-social-media/
Leibowitz, S. (2002). Basic economics of the internet. In S. Leibowitz, Re-Thinking the
Network Economy: The True Forces that Drive the Digital Marketplace
(pp. 9-24). New York: Amacom.
Moskowitz, D. (2018). Who Are Netflix's Main Competitors? (NFLX). Retrieved from
https://www.investopedia.com/articles/markets/051215/who-are-netflixs-main-
competitors-nflx.asp
Mossman, K. (2006). SERVING THE NICHE. Library Journal, 131(12), 38-40. Retrieved
from https://search-proquest-
com.dbgw.lis.curtin.edu.au/docview/196834840?accountid=10382
Netflix, Inc. (2017). 2016 annual report of Netflix, Inc. Retrieved from
http://files.shareholder.com/downloads/NFLX/5231844565x0x938338/FB0485BA-
48EF-4457-ABED-CF26A5B21523/10K_Final.PDF
Netflix. (2018). What is Netflix? https://help.netflix.com/en/node/412?ui_action=kb-article-
popular-categories
Payne, S., C.A.(S.A.). (2017). 13 REASONS TO LIVE.
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com.dbgw.lis.curtin.edu.au/docview/1949558788?accountid=10382
Saeed, M. & Mansoori, E.G. (2018). A New Slope One Based Recommendation Algorithm
Using Virtual Predictive Items. Journal of Intelligent Information
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Shaprio, C., & Varian, H. (1999) Information Rules: A Strategic Guide to the Network
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streaming-services-still-choose-netflix.html
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Retrieved from
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18
Project Diary
Weeks
Available
Hinewai Jack Shaquille Shannon Ananya Cheyenne
Week 4
Organise w ithin the
group w hich members
are doing w hat
section of the
assignment.
Organised the
group and sorted
out w hat each
group members
w ere doing. We
also sorted out the
project plan. We
decided w e w ould
do an infographic to
compile all the
information.
Meeting on the 21st
August to discuss
w hich internet
business w e were
going to do our
essay on and
discussed the
overallargument
w e would structure
our project plan
around. We also
created a google
doc so w e had a
shared space for
our project plan.
Meeting on the 21st
August to discuss
w hich internet
business w e were
going to do and
discussed the
questions on the
project plan.
Created a google
doc so w e had a
shared space for
our project plan.
Initial meeting to
finalize our
selected internet
platform, during
w hich we shared
details to create
our main channels
for collaboration:
Facebook group
chat and Google
Doc.
The group had its
first meeting w here
Netflix w as chosen
to be the Internet
business that w e
can w orkon. Roles
w ere allocated for
each member. We
also w ent through
the project plan and
collectively
answ ered some
questions. This w as
done via Google
Docs as our
collaboration
platform, along w ith
Facebook
Messenger.
Week 5
Finalise the project
plan and submit.
We sorted out the
project plan and
made sure it w as
all good to submit.
We submitted the
plan later on in the
day (before the
deadline).
We had a meeting
on the 30th
of
August to go over
the project plan one
last time before w e
submitted it.
Meeting on the 30th
August to go over
the project plan one
last time before w e
submitted it.
Library meeting to
finalize our project
plan for submission
during w hich I
entered responses
related to our group
schedule/plan and
my individual
responsibilities,
focusing mainly on
the Netw ork
economy material
fromthe unit text.
Group meeting to
finish our project
plan for submission,
and individually
answ ered the
question regarding
our responsibilities
and main parts. My
topic focused on the
sharing economy.
18
Week 6
Research into Netflix
algorithms, gather
resources forthe
report and have a
meeting.
Whilst everyone
w as doing their
research, Ibegan
my part and started
putting the
infographic
together and laying
everything out. I
w as originally doing
the sharing
economy but w e
decided not to do
that anymore as
Netflix does not
really fit into it.
Instead, I took
charge of the
infographic as w ell
as formatting of the
w hole assignment.
We decided to
collectively being
thinking about how
w e could all relate
the Netw ork
Economy to Netflix.
I began to think that
the long tail
strategy seemed to
correlate w ith much
of Netflix’s success.
Started thinking
about how Icould
relate the netw ork
economy to Netflix.
I uploaded relevant
notes from
recommended
texts w ithin the unit
to our Google Doc
for everyone to
look over.
I w ent through my
notes on sharing
economy to gain
understanding and
to have a rough
outline of w hat I w ill
talk about on my
individual w ork.
Week 7
Continue research
into Netflix algorithms
and meet w ith the
group.
Continued to
compile information
and w orkon the
infographic.
Did some reading
on Netflix’s overall
business model.
Came up w ith ideas
to present to the
group at our next
meeting.
I read through, and
uploaded notes
fromexternal
readings to the
Google Doc that I
thought might help
everyone w ith
background for the
report.
Had my ideas on
sharing economy
and how it relates to
Netflix but I w as
informed that
sharing economy
did not apply to
Netflix, so I had to
change to a more
relevant and
appropriate topic.
Week 8
Meet in class to
discuss the report and
being to w rite up
about the algorithms.
Meeting in class
w here we further
discussed our
findings. We knew
exactly w hat
everyone w as
doing at this stage
and everyone was
w ellinto their parts.
Meeting on the 18th
September w here
w e came up w ith
our argument and
assigned/went over
everyone’s parts,
so w e knew exactly
w hat everyone is
doing. We had to
discuss our
question w ith our
tutor in order to
refine it and came
to a viable option.
Meeting on the 18th
September w here
w e came up w ith
our argument and
assigned/went over
everyone’s parts,
so w e knew exactly
w hat everyone is
doing.
Unable to attend
the group meeting I
collaborated w ith
the rest of the
group online as w e
delegated sections
of the report, and
agreed to w orkon
researching the
business model
and key aspects of
Netflix related to
the netw ork
economy.
I w as unable to go
to the group
meeting, but I w as
updated via
Facebook
Messenger about
role changes and
the direction of our
report. My part w as
changed to the
Long Tail, how it
applies to Netflix
and the future of the
Long Tail.
Week 9
Continue w riting up
my section of the
report and stay in
contact w ith my group
over the Tuition Free
w eek.
Continued the
infographic and
constantly sending
screenshots to the
group of how it w as
looking.
Did all the reading
for the assignment
that w ould bolster
my part, the
attention economy.
I argued that Netflix
w as veryeffective
at gaining attention
on socialmedia in
order to propeltheir
long tail strategy.
Found all the
research Ineeded
for my parts on
Netflix’s
competitors and
subscription in the
netw orkeconomy.
Fine tuned my
research and made
a focused outline
for my sections
over the tuition free
w eekafter relaying
info w ith everyone
over the chat.
Confirmed w ith the
group about my
topic and
researched Netflix
w ith regards to the
Long Tail theory.
Bookmarked all of
my references and
outlined the
sections of my
report.
Week 10
Compile all the group
w orkand submit the
report and project
diary on time.
Finish formatting all
of the assignment,
finalizing the
infographic and
submitting it on
time.
By the third of
October I finished
my part and
submitted it to the
group.
Finished my part on
the 2nd
October so
there w as enough
time to edit it and
put it in the report
by the 5th
.
Uploaded all of my
w orkto the Google
Doc at the
beginning of the
w eekso w e could
proofread and
compile into a
report by Friday.
Finalised my part
(Oct. 4) before the
submission date
(Oct. 5). Allgroup
w orkis compiled on
Google Docs.

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Netflix Infographic and Group Report Analysis NETS2003 Kitchen, Walton, Stirling, Wells, Alagh, Posawen

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  • 8. Netflix Group Report Analysis Netflix has prospered through capitalising on a long tail strategy Hinewai Kitchen 18344796 Jack Walton 18844571 Shaquille Stirling 18358030 Shannon Wells 18345061 Ananya Alagh 18697487 Cheyenne Posawen 19151861 Table of Contents Introduction: History of Netflix 1 Netflix Timeline 1-2 The Netflix Business Model 2-3 Netflix CompetitorAnalysis 3-4 Netflix and the Attention Economy 4-8 - SocialMedia 4-5 - Algorithm 5-8 Netflix and the Network Economy 8-11 - Subscriptions 8-9 - Power and Technology 9-11 Netflix and the Long Tail 11-13 The Future of Netflix 13-14 References 15-17 ProjectDiary 17-18
  • 9. 1 Analysis of the Netflix Infographic: Group Report Introduction: History of Netflix Netflix is a popular, world leading digital entertainment service which specialises in movies and television programs in many different genres. From horror to comedy, Netflix members can enjoy a wide range of online entertainment. Netflix was established in 2000 and has become a dominant online entertainment platform with many countries around the world. Other platforms such as Blockbuster have been completely tarnished because of Netflix’s superiority (Kim 2018). According to Netflix (2018), it currently has over 130 million subscriptions from 190 different countries. As it has many different genres of fiction and non-fiction movies, television shows and documentaries Netflix is seen as as lying at the intersection of both the internet and storytelling and it is a new invention of internet television (Gomez-Uribe and Hunt 2016). Netlix’s main product of revenue is subscriptions from members all over the world paying for either a basic plan, standard plan or premium plan. These plans are from cheapest to most expensive and the user has a choice on which one they want; whether it is what they can afford or how much streaming videos means to them personally. The plans one decides to choose will determine the device limit you can stream Netflix on at the same time (the maximum being four if the premium plan is chosen). They also make the quality of the TV shows in stronger definition and easier to view on larger screens. Netflix Timeline (Paraphrased from “About Netflix”) 1997 – Netflix is founded by Reed Hastings and Marc Randolph. 1998 – Netflix is launched as the very first DVD rental and sales site. 1999 – Netflix releases a subscription service. 2000 – Netflix launches a personalised movie recommendation system. 2002 – Netflix makes its initial public offering 2005 – The Netflix membership subscriptions raise to 4.2 million. 2007 – Streaming within Netflix is introduced.
  • 10. 2 2008 – Netflix partners with consumer electronics companies to stream on more devices. 2009 – Netflix partners with various other consumer electronic companies to stream further. 2010 – Netflix is now available on hand-held devices such as iPhone, iPad and Wii. Netflix is available in Canada. 2011 – Netflix is now available in South America. 2012 – present – Netflix is constantly expanded and is now available worldwide. The Netflix Business Model Over the last few years, Netflix has grown to become an online media giant. The term Netflix has become almost synonymous with online streaming. Netflix’s resounding success has been largely based on its ability to seamlessly transform its subscription based business model from traditional to digital media. Netflix began as a company that started out renting DVD’s, which shifted its rental service online to accommodate changing markets in a digital era. Since then, this simple online rental business has evolved to become one of the most globally recognized only streaming platforms (Hosch, 2017). Netflix has capitalized on the reversal of “broadband era economics,” essentially providing each and every customer with a highly customized service, rather than a standardized product (Anderson, 2007, p. 5). This customization, which works off of a variety of algorithms, allows them to ensure that they deliver this service easily and efficiently to each individual, to effectively maintain their subscription base. Netflix offers all new users a single free month to trial their services, before subscribing the one of their monthly payment plans. The plans increase in price, depending on the number of devices across which a given subscriber would like Netflix to be accessible (Netflix, 2018). Apart from licensing popular TV shows and movies, to attract the attention of a wide audience, Netflix has dedicated a substantial portion of its budget to producing highly specialized, original content. These original television shows and films, intended to cater to more niche tastes, and have had a huge role to play in Netflix’s success. Goel, Broder, Gabrilovich &
  • 11. 3 Pang, (2010) estimates that about 25% of Netflix’s sales consist of this type of eccentric, niche content. Netflix has successfully implemented the appeal of long tail, niche content, alongside widely popular content, as a part of their business strategy, and intensified the consumer interest and demand for this kind of niche content by using the principle of exclusivity – where specific and popular content is only accessible through Netflix. Since Netflix has virtually no barriers for users to unsubscribe, it’s evident that their business model relies on the loyalty of subscribers based solely on the quality of the content and strategic service provided to them. The network of subscribers can trust that Netflix will continue to provide them a wide range of popular and unique content that no other platform can, and in turn, Netflix can trust that these subscribers are willing to continue paying for their service. Netflix Competitor Analysis Netflix is still the leader of the online streaming services because of ‘its first-mover advantage in the increasingly competitive subscription video-on-demand service market’ (Wang, 2016). Netflix has created a new form of entertainment as it steers people away from normal TV practices with program schedules, and instead towards a user-driven platform (Havens, 2018). In 2018, Netflix announced they had more than 100 million subscribers worldwide (Moskowitz, 2018). Coming in behind Netflix are the online streaming services Amazon Prime and Hulu Plus (Wang, 2016). What makes Netflix more attractive than these other streaming services is its commercial free service, its subscription prices, and its original programs that cater for a demographic of people that demand niche film and TV content (Wang, 2016). All factors of which make Netflix very competitive in the film and TV subscription online market. When users go to sign up for Hulu Plus, they’re offered a low-price subscription which comes with advertisements (Josephson, 2016). People usually sign up for subscription-based services to escape advertisements and pirated content (Josephson, 2016). So, when people realise they must pay more for ad free content, they usually decide to look for a better online streaming service such as Netflix and Amazon Prime who don’t have advertisements (Josephson, 2016).
  • 12. 4 Amazon Prime offers a better subscription deal then Netflix or Hulu Plus, and even offers a discount for students (Waniata, 2018). It also offers 4K Ultra HD Content at no extra cost, and users don’t have to pay more when they want to share their account with other people (Waniata, 2018). Netflix increases the subscription price for users if they want to add both these things (Waniata, 2018). However, although users pay a little bit more for Netflix, they are getting a wider range of movies, television shows and original content (Waniata, 2018). This is because Netflix spends up to $8 billion a year adding to its library (Waniata, 2018). Part of the way they do so is by investing in projects that cater to a niche audience as to succeed in efficiently and effectively marketing a product (Arzavi & Moseley, 2015). Another feature Netflix holds over Amazon Prime and Hulu Plus is its original programs (Josephson, 2016). Netflix set the market when they released shows like Orange is the New Black, House of Cards, 13 Reasons Why and Stranger Things (Josephson, 2016). This is because when House of Cards and Stranger Things started winning Emmy’s, Netflix’s brand improved as it became much more than a platform for other people’s video content (Waniata, 2018). It was able to prove that Netflix knew how to fulfil consumers needs for good television (Waniata, 2018). They did so by creating content that had effectively constructed provocative, nostalgic and scandalous themes (Waniata, 2018). Netflix and the Attention Economy Social Media Netflix has, in recent years, made the strategic decision to produce original dramas (Jenner, 2016). According to Payne (2017), Netflix has grown effectively through choosing strategic themes pertaining to their content. By capitalising on a long tail strategy, they have found cultural niches at which they can effectively market to due to specific demographics niche interests that can be marketed to them collectively and effectively through social media, causing a reciprocal attention relationship between Netflix and their consumers. Jenner (2016) asserts that Netflix has steered its content away from familiar structures of broadcasting, producing and branding that have been common to television and moved toward more focused, niche content. An example of Netflix doing so is seen through their show, 13 Reasons Why. This 2017 drama follows a teenager called Clay Jensen who is struggling to
  • 13. 5 find the reason why his classmate and crush, Hannah, made the decision to end her life. Payne (2017) state that Taboo themes and subjects are very popular with modern generations, like suicide and mental illness, and is the reason why this show has garnered much attention on social media. This show has capitalised on the long tail by producing content that focuses on a niche demographic and a niche subject that has traditionally been taboo within this demographic. This niche demographic are those who are between 15 and 29 years old with this age ranges second leading cause of death being suicide as a result of mental illness (Payne, 2017). This has therefore caused the show to become widely popular with this age range due to its unapologizing promotion of the topic. It's popularity has also become compounded through the main communication mediums that this age range operate on, being in person and over social media. Social media enables a safe space for conversation around taboo topics as it not in person. A show such as 13 Reasons Why has also been a very effective catalyst for conversation around this topic. Thus a flood of social media sentiment and word of mouth from peers in protest or admiration have acted as a very powerful marketing tool due to perceived trust and authenticity as peer word of mouth and social media sentiment are more likely to stimulate purchase behavior, much more so than a traditional ad (Chu and Kim, 2015). Netflix has therefore prospered in a digital economy through the effective reliance on a long tail strategy, capitalising on the attention economy on social media, through the use of taboo themes in their content. Algorithm Imagine you’re settling in to watch some Netflix with a friend. Your friend knows what genre of shows you like and what you don’t like. Your friend makes suggestions for what you should watch and then takes notes while you watch. Your friend takes notes if you watched the whole episode, if you got bored of the programme halfway through or if you binged the next few episodes. This is essentially what the Netflix algorithm does. The Netflix algorithm monitors users’ activity on the platform and suggests content based on their preferences. Different variables are tracked and fed into the algorithm to accurately predict users’ behaviour. These variables include watch time, whether
  • 14. 6 or not a user has ended their session because of a programme and if they continue to watch content from the same genre. The aim of the algorithm is the ability to accurately predict user behavior, leading to the algorithm keeping you on the site for longer. The common aim for online streaming services, such as Netflix, Hulu, Amazon and YouTube, is to keep users on the site for as long as possible. This is encouraged through the incentive by Netflix to “binge” a programme, wherein long periods of watch time are devoted to a singular series/television show (Burroughs, 2018). Through the use of algorithms on these platforms, users’ behaviours are monitored and predicted in order to keep them on the platform for longer. This also influences how online streaming services produce content due to the fact, which Bishop (2018) pointed out; it’s all based on their own consumer data. The algorithm can impact the content that is produced by the streaming services as it conveys what content is popular and does well with users. Improving upon the Netflix algorithm has always been an area of great interest for the online streaming service. Back in 2006, the first ever “Netflix Prize” was announced. As Burroughs describes, Netflix offered a prize to anyone that could improve the performance of their algorithm by 10% (Burroughs, 2018). The competition ran from 2006-2009 and was awarded to the Pragmatic Chaos team in October 2009. Interestingly, shortly after the competition, Netflix announced that it would begin to develop its own content (Burroughs, 2018). Emphasised by the Netflix Prize is the importance of the high-functioning algorithm in helping with the launch of Netflix productions as well as the overall function of the online streaming service thanks to the algorithm. An issue that has plagued algorithms for a while now is the problem with data sparsity. This occurs with users that don’t rate content right after they have finished viewing them. How can the algorithm recommend an item when they don’t understand what they like? New algorithms need to address the data sparsity issue, as the research by Saeed & Mansoori has. Saeed et al proposed an algorithm that manages the data sparsity problem without using any extra information (Saeed et al, 2018). Their algorithm builds a recommender system, which works to predict
  • 15. 7 whether a particular user will like a particular item or collection of items. It uses a technique known as collaborative filtering to create an algorithm that is a simple, non-trivial item-based collaborative filtering that is based on ratings (Saeed et al, 2018). Their proposed algorithm, VWSO (Virtual Weighted Slope One), outperformed other baseline algorithms with 100% prediction coverage, emphasising what makes an effective algorithm and presents a solution to the data sparsity problem. When analysing industry trends for algorithms used for online streaming services, different issues arise and similar performance desires are visible. Comparing the Netflix algorithm to the YouTube algorithm, different outcomes convey deeper issues. A main issue experienced on YouTube is the fact that mechanical decision- making, as explored by Bishop, can create a discriminatory visibility hierarchy. Moreover content creators feel threatened by the YouTube algorithm to produce a certain type of content to please the algorithm (Bishop, 2018). The algorithms for Netflix and YouTube work similarly in the way that they both try to predict users’ behaviour and by doing so, assess which content is popular with the larger majority. An important difference between the two streaming services is that the views and ratings on Netflix programmes are, for the most part, not visible. However, on YouTube you can see a video’s views, ratings and comments. When seeing the views of videos on YouTube, it’s easy to assess which content works and which doesn’t, as well as which may be advertiser friendly. YouTube creators being threatened by the algorithm with lack of visibility damages creators and makes them feel unsecure. YouTube creators often have to “self-optimise” their content to meet the standards of advertisers in order to be recommended to users and to not be dismissed by the YouTube algorithm (Bishop, 2018). Both online streaming services’ algorithms are described as “black-boxed” wherein little to no insight into the relative influence of the independent variables in the process is mentioned (Bishop, 2018). Similarly to Netflix, the two algorithms do show online streaming services which content does well and what they should produce more of, however on Netflix there is no threat to a
  • 16. 8 movie or television show of visibility to drive them to please the algorithm. This is mainly due to the fact that there are no advertisers to please on Netflix as well as having no views and ratings shown for content. It’s important to compare different algorithms from online streaming services in order to assess the functionality of algorithms for the various services. Netflix and the Network Economy Subscriptions The network economy allows businesses and consumers the opportunity to connect in the modern economy in an innovative way, which is through the application of information and communication technology and the Internet (Leibowitz, 2002). Netflix has used the network economy to its advantage by digitising movies and TV shows using hypertext transfer protocol and web servers (Waldfogel, 2017). By doing this, Netflix has given consumers the opportunity to watch their chosen content on several different devices through its online streaming service (Waldfogel, 2017). Netflix offers consumers a subscription, which allows consumers to have access to Netflix’s library for a small fee each month (Summers et al, 2016). Netflix now has over 81 million global subscribers and is the leading online streaming service for online movies and TV show (Summers et al, 2016). Netflix has successfully used the internet to connect with consumers in the modern economy. They have done this by providing consumers with an online streaming service using a subscription-based payment. By offering a subscription-based service which gives consumers access to a library full of movies and TV shows, Netflix is capitalising on a long tail strategy. The online streaming service is an improvement of traditional DVD stores as it eliminates the problem of shelf-space (Arzavi & Moseley, 2015). Traditional DVD stores only have limited space and can only afford popular and mainstream products as they know that this is what consumers want (Arzavi & Moseley, 2015). These stores make their money from these popular and mainstream goods, and therefore can’t risk holding an extensive range of titles as they might not sell (Arzavi & Moseley, 2015). If the movies and TV shows don’t sell then the owners of the store can’t afford to pay rent, electricity, and their employees (Arzavi & Moseley, 2015). Whereas Netflix can provide consumers with a variety of titles and a broad range of categories because they aren’t limited by shelf-space and by other expenses (Arzavi & Moseley, 2015).
  • 17. 9 Netflix is able to provide consumers with content that is not as mainstream and is not available in the retail market, which opens up the niche market (Arzavi & Moseley, 2015). By opening this niche market, Netflix is capitalising on the long tail strategy that allows its content to sell in a niche space where Arzavi and Moseley, (2015) state that there is little competition on theme, style, and quality of the content that a business is trying to offer in a niche area of a particular market. In this case, this market is the online film and TV market. Power and Technology Technology evolves, yet economic rules tend to remain the same (Shapiro & Varian, 1999). This is the principle that explains Netflix’s massive success within the last decade; they have managed to perfectly exploit the simple notion of supply and demand that motivates the average consumer, while manipulating the intense interconnectedness of the network economy to their advantage. Netflix has navigated both the digitization of the physical goods that consumers want, as well as the theoretical framework of a digital utopia, that forms the basis for the idealized version of the world wide web. Using the appeal of the growing popularity of content considered to be part of the long tail, Netflix has given its viewers the illusion of power and control – a key characteristic of the peer-to-peer economy – yet in doing so, it has essentially monopolized the market in its role as a sole source for streaming certain niche content. The foundation of the network economy is the virtually non-existent barriers for connection and communication with other individuals or facets of the network (Kelly, 2017). This communication can take place of regardless of spatial or temporal boundaries. This being said, it makes sense that the network economy, also dubbed the peer-to-peer economy because of the ease with which average consumers can connect with each other, gives these consumers a sense of power. They can unite with like-minded consumers, share relevant content with one another, and can even serve as the providers of goods and services that might otherwise be supplied by major corporations. The connectedness of the network economy and the digitization of vast media libraries give consumers the ability to tailor their browsing experience to their exact tastes (Anderson, 2007). Especially within the context of streaming platforms like Netflix, there are algorithms that work to present these web users with
  • 18. 10 content that appeals to them, with the purpose of securing their loyalty, but users still feel as though they are in power. They can view the content at their convenience, and even provide responses to get rid of content they don’t like – essentially providing more feedback for the algorithm to function most effectively (Van Letht, 2016). Yet this ability to personalize and customize selections of content is what makes Netflix so successful in the digital age. When traditional broadcast media was created, the ability to deliver a single piece of content to masses of people was revolutionary. Now, the network economy thrives off the ability to deliver select, personalized content to millions of individuals that make up the masses (Anderson, 2007, p. 5.), thanks to the immense infrastructure and technology that has made the network economy possible. This is encapsulated by Vann-AdibĂ© (cited in Anderson, 2007, p. 8) saying that’ “in a world of almost zero packaging cost and instant access to almost all content in this format, consumers exhibit consistent behaviour: they look at everything.” With reference to this idea, it is clear Netflix has gone further than simply capitalizing on the ability to create a highly customized service as a result of technology that has created the network economy. Netflix has managed to take advantage of the concept of consumers that “look at everything” capitalizing on the long tail strategy, by weaving a selection of unique content into the mainstream series and film that might lure an average consumer in. Streaming platforms like Netflix or Spotify demonstrate a concept dubbed the “infinite-inventory” model (Goel, Broder, Gabrilovich, & Pang, 2010, p. 201) within which users have the ability to choose from a seemingly endless array of content. However, woven within this content, are niche movies and television series catered to more eccentric interests. According to, rather than a population of mainstream versus niche, evidence suggests that all of us as individuals are interested in a mix of both popular and eccentric content (Goel et al, 2010). This means that Netflix is a genuine example of the infinite inventory model, because it provides both mainstream and highly unique media through its platform. In addition, the mix of mainstream and unique is customized, and differs from user to user, reinforcing the illusion of individual control and power within the expansive network.
  • 19. 11 This also demonstrates the way in which Netflix is effectively able to capitalize on the long tail strategy while presenting enough popular titles to draw users in. A key point to note is that a lot of this niche content is also unavailable through any platform other than Netflix, which gives it an edge over competitors in the highly networked world in which almost everything is accessible (Van Letht, 2016). Netflix is so successful because it is able to exploit this principle of exclusivity in the context of networking and interconnectedness. That is to say, because of the fact that a great deal of this niche content is available through Netflix alone, subscribers that want to share their experience or reactions to the given shows or films, can only genuinely do this with other Netflix subscribers (Van Letht, 2016). Netflix has created its own network within a network, exploiting the ease with which consumers can, and want to connect with like-minded consumers. Their carefully orchestrated use of the long tail strategy to maintain consumer loyalty, and enforce this sense of exclusivity within their network of subscribers has ensured their success within the network economy. Netflix has successfully maneuvered the economic and philosophical aspects of this economy within the digital age. Netflix and the Long Tail What is the Long Tail? The theory of the “Long Tail” originated from a 2004 Wired Magazine article by its editor-in-chief Chris Anderson. In a changing technological environment in which the economy operates, the Internet has transformed many markets of different products such as books, films, and music (Hjorth-Andersen, 2007). Anderson uses the Long Tail to compare Internet-based e-commerce and physical retailing; noting how the former offers more in terms of niche marketing (‘tail’) and diverse inventories, in contrast to the latter being dominated by, or limited to, best-sellers and mainstream products (‘head’). Online retail and distribution allows for the exploration of alternatives and preferences, which encourage consumers to indulge in personal taste and interest rather than instilling them with a “hit-driven mindset” that restrict choice (Anderson, 2004). Traditional stores rely on selling fewer units than what they actually possess, aiming to bring out hit products that capture the mass market and increase profit. This followed the traditional economic models as it focused on profit-
  • 20. 12 making along with the need to sufficiently cover any business expenses and constraints. Brick-and-mortar stores, for instance, only place 20 percent of the products available for purchase on the shelves, while the rest can be found in online niche markets (Mossman, 2006). The Internet’s unlimited shelf space is capable of carrying and maintaining product inventories that cater to the consumers’ demand for niche products and content via specialised markets (Kornfeld, 2018). Virtual and e- commerce sites further extend the Long Tail, challenging and changing conventional economics, also influencing strategies in business operations (Kornfeld, 2018). The Long Tail not only emphasises the profitability of niche markets but also the vastness of what the Internet can offer, encompassing the rise and success of online retail and relative sites. Netflix and the Long Tail To gain a further understanding about this phenomenon, the Long Tail strategy can be analysed with regards to Netflix, which is deemed an “infinite-inventory” retailer (Goel et al., 2010). Netflix has evolved from being an internet delivery of TV shows and movies to a renowned streaming service of increasing amounts of curated content (Netflix, 2017). This subscription-based online streaming service is a notable example of how the Internet allows online businesses to provide access to both mainstream and niche content, specifically offering a wide selection of films that match and cater to viewers’ personal tastes (Wayne, 2018). It carries a greater inventory of films compared to traditional video or blockbuster stores, thus representing a market that is more than 20 percent of what is physically sold (Mossman, 2006). With past physical Netflix retail stores, it was found that 25% of sales were for niche items that were unavailable in stores, but rather online (Goel et al., 2010). Anderson (2004) inferred that a majority of rentals consisted of various titles from underserved ‘tail’ markets like foreign films and documentaries, which were genres that were overlooked by traditional video stores. This is demonstrative of how capitalising on the Long Tail, or the encouraged consumption of ‘tail’ inventory online, is lucrative and opens up many profit-making opportunities. Netflix aggregates the Long Tail in its process of embracing niche content and efficiently dispersing it among its audience. Producing and cultivating this niche market of films does not mean it aims to substitute traditional mainstream media, but
  • 21. 13 rather to share this online platform in expanding cultural and economic landscapes (Anderson, 2007). However, there is an argument deducing consumers’ appreciation of niche content (‘tail’) over the mainstream (‘head’) as a way of diminishing the significance of the latter, or of large dominant inventories (Goel et al., 2010). Netflix effectively highlights both aspects by recommending a selection of trending titles featuring an inventory spectrum that is not exclusive to popular films, but also includes eccentric or specialty items. According to the Long Tail model, best sellers can direct attention and demand towards specialty items (Mossman, 2006). The recommendation system and search tools within Netflix helps users identify and discover titles that are suited to their tastes and it can promote, or even bring certain films and underserved film genres into the mainstream. Tools pertaining to consumer demand broaden the cultural landscape via exposure and access to various products (Brynjolfsson et al., 2006). Netflix is able to satisfy consumer demand for niche items, in turn cultivating the Long Tail distribution in the market, while also serving customer interest regarding best sellers. The infinite-inventory retailer lives up to its name with its abundance of films; popular items and especially ‘hidden gems’, or obscure titles, and Netflix exclusives alike, that make up an extensive entertainment variety driving new subscribers to Netflix. More subscribers generate more profit and is beneficial in establishing an influential, active presence in the industry and the media. The increasing amount of Netflix users contribute to the business’ exponential growth and success, both domestically and internationally, and has caused a continuing influx of content for members, as they strive to maintain their position as a leading video provider and internet-based outlet (Netflix, 2017). The Future of Netflix Internet-based outlets have cultivated the impact of Long Tail markets by giving online retailers profit-making opportunities through niche products, simultaneously allowing consumers access to such products (Brynjolfsson et al., 2006). As the Internet and technologies continuously evolve, the Long Tail must be sustained by adapting to its respective technological environment. With social media and
  • 22. 14 streaming dominating contemporary society, the Long Tail is extended and diversified by the widespread distribution of niche markets (Kornfeld, 2018). Anderson’s definition of the Long Tail has come a long way since 2004, as it has become streaming and social-fuelled, requiring strategies to have a focus on active engagement with online communities and catering to the audience’s needs. The Long Tail remains an aggregation of Internet businesses that embrace and celebrate niche content. It is further defined by digital and social media marketing that emphasise value and monetisation, targeting consumers or niche audiences with content corresponding with their online data, and the role they have regarding campaigns and online engagements (Kornfeld, 2018). Challenges ensue, yet new possibilities are introduced and explored through this influential phenomenon.
  • 23. 15 References Anderson, C. (2007). The Long Tail, (pp 1-13). London: Random House. https://books.google.com.au/books?hl=en&lr=&id=gc4e1uC5pScC&oi=fnd&pg=PR1 &dq=netflix+and+the+long+tail&ots=bnNhTXdpcZ&sig=00xhSqF4PdGpN9E3ceFW6 2jlU1o#v=onepage&q&f=false Arzavi, H. & Moseley, L. (2015). The Long Tail. Retrieved from http://netflixcasestudy.blogspot.com/p/the-long-tail.html Bishop, S. (2018). Anxiety, Panic and Self-Optimization: Inequalities and the YouTube Algorithm. The International Journal of Research into New Media Technologies, 24(1), 69-84. Brynjolfsson, E., Hu, Y., & Smith, M. D. (2006). From Niches to Riches: Anatomy of the Long Tail. Sloan Management Review 47(4), 67-71. Retrieved fromhttps://poseidon01.ssrn.com/delivery.php?ID=13006900601311400011807712 706500603103401805302003004909700310112512410900206908912202001803 404501803209708910203011412210707604401605600908400412209600402710 610003702303211702402606600407908512506807307609500211210110307110 7083020074021083069078117&EXT=pdf Burroughs, B. (2018). House of Netflix: Streaming Media and Digital Lore. Popular Communication, 1-17. Chu, S., & Kim, Y. (2011). Determinants of consumer engagement in electronic word-of- mouth (eWOM) in social networking sites. International Journal Of Advertising, 30(1), 47-75. doi: 10.2501/ija-30-1-047-075 Goel, S., Broder, A., Gabrilovich, E., & Pang, B. (2010). Anatomy of the long tail. Proceedings Of The Third ACM International Conference On Web Search And Data Mining - WSDM '10. doi: 10.1145/1718487.1718513 Havens, T. (2018). Netflix: Streaming channel brands as global meaning systems. In Johnson, D (Ed) From Networks to Netflix (pp. 321-331). New York: Routledge Hjorth-Andersen, C. (2007). Chris Anderson, The Long Tail: How Endless Choice is Creating Unlimited Demand. The New Economics of Culture and Commerce. J Cult Econ 31, 235-237. Retrieved from https://doi- org.dbgw.lis.curtin.edu.au/10.1007/s10824-007-9038-7 Jenner, M. (2014). Is this TVIV? On Netflix, TVIII and binge-watching. New Media & Society, 18(2), 257-273. doi: 10.1177/1461444814541523 Josephson, A. (2016). The Economics of Video Streaming Services. Retrieved from https://smartasset.com/personal-finance/the-economics-of-video- streaming-services
  • 24. 16 Kelly, K. (1997). New Rules for the New Economy. Retrieved from https://www.wired.com/1997/09/newrules/ Kornfeld, L. (2018). The Long Tail in 2018: Niches Meet Streaming and Social Media. Retrieved from https://trends.cmf-fmc.ca/the-long-tail-in-2018-niches- meet-streaming-and-social-media/ Leibowitz, S. (2002). Basic economics of the internet. In S. Leibowitz, Re-Thinking the Network Economy: The True Forces that Drive the Digital Marketplace (pp. 9-24). New York: Amacom. Moskowitz, D. (2018). Who Are Netflix's Main Competitors? (NFLX). Retrieved from https://www.investopedia.com/articles/markets/051215/who-are-netflixs-main- competitors-nflx.asp Mossman, K. (2006). SERVING THE NICHE. Library Journal, 131(12), 38-40. Retrieved from https://search-proquest- com.dbgw.lis.curtin.edu.au/docview/196834840?accountid=10382 Netflix, Inc. (2017). 2016 annual report of Netflix, Inc. Retrieved from http://files.shareholder.com/downloads/NFLX/5231844565x0x938338/FB0485BA- 48EF-4457-ABED-CF26A5B21523/10K_Final.PDF Netflix. (2018). What is Netflix? https://help.netflix.com/en/node/412?ui_action=kb-article- popular-categories Payne, S., C.A.(S.A.). (2017). 13 REASONS TO LIVE. Accountancy SA, , 41. Retrieved from https://search-proquest- com.dbgw.lis.curtin.edu.au/docview/1949558788?accountid=10382 Saeed, M. & Mansoori, E.G. (2018). A New Slope One Based Recommendation Algorithm Using Virtual Predictive Items. Journal of Intelligent Information Systems, 50(3), 527-547. Shaprio, C., & Varian, H. (1999) Information Rules: A Strategic Guide to the Network Economy (pp. 1- x). Boston: Harvard Business School Press. https://books.google.co.uk/books?hl=en&lr=&id=aE_J4Iv_PVEC&oi=fnd&pg=PR9&d q=what+is+the+network+economy&ots=o2Gp_XreMX&sig=lLh_NzuBRoyFWSyBJM yMdBeL-RY#v=onepage&q=what%20is%20the%20network%20economy&f=false Summers, J., Brecht, E., Eager, D. & Gutarin, Alex. (2016). Characterising the workload of a Netflix streaming video server. IEEE International Symposium on Workload Characterization (IISWC). DOI: 10.1109/IISWC.2016.7581265 Waldfogel, J. (2017). How digitisation has created a golden age of music, movies, books, and television. Journal of Economic Perspectives, 31(3), 195-214. DOI: https://doi.org/10.1257/jep.31.3.195 Wang, C. (2016). Overwhelming majority of people watching streaming services still choose Netflix. Retrieved from
  • 25. 17 https://www.cnbc.com/2016/07/21/overwhelming-majority-of-people-watching- streaming-services-still-choose-netflix.html Waniata, R. (2018). Netflix vs. Hulu vs. Amazon Prime: Battle of the streaming giants. Retrieved from https://www.digitaltrends.com/home-theater/best-on- demand-streaming-services/ Wayne, M. L. (2018). Netflix, Amazon, and branded television content in subscription video on-demand portals. Media, Culture & Society 40(5), 725-741. Retrieved from http://journals.sagepub.com.dbgw.lis.curtin.edu.au/doi/pdf/10.1177/01634437177361 18 Project Diary Weeks Available Hinewai Jack Shaquille Shannon Ananya Cheyenne Week 4 Organise w ithin the group w hich members are doing w hat section of the assignment. Organised the group and sorted out w hat each group members w ere doing. We also sorted out the project plan. We decided w e w ould do an infographic to compile all the information. Meeting on the 21st August to discuss w hich internet business w e were going to do our essay on and discussed the overallargument w e would structure our project plan around. We also created a google doc so w e had a shared space for our project plan. Meeting on the 21st August to discuss w hich internet business w e were going to do and discussed the questions on the project plan. Created a google doc so w e had a shared space for our project plan. Initial meeting to finalize our selected internet platform, during w hich we shared details to create our main channels for collaboration: Facebook group chat and Google Doc. The group had its first meeting w here Netflix w as chosen to be the Internet business that w e can w orkon. Roles w ere allocated for each member. We also w ent through the project plan and collectively answ ered some questions. This w as done via Google Docs as our collaboration platform, along w ith Facebook Messenger. Week 5 Finalise the project plan and submit. We sorted out the project plan and made sure it w as all good to submit. We submitted the plan later on in the day (before the deadline). We had a meeting on the 30th of August to go over the project plan one last time before w e submitted it. Meeting on the 30th August to go over the project plan one last time before w e submitted it. Library meeting to finalize our project plan for submission during w hich I entered responses related to our group schedule/plan and my individual responsibilities, focusing mainly on the Netw ork economy material fromthe unit text. Group meeting to finish our project plan for submission, and individually answ ered the question regarding our responsibilities and main parts. My topic focused on the sharing economy.
  • 26. 18 Week 6 Research into Netflix algorithms, gather resources forthe report and have a meeting. Whilst everyone w as doing their research, Ibegan my part and started putting the infographic together and laying everything out. I w as originally doing the sharing economy but w e decided not to do that anymore as Netflix does not really fit into it. Instead, I took charge of the infographic as w ell as formatting of the w hole assignment. We decided to collectively being thinking about how w e could all relate the Netw ork Economy to Netflix. I began to think that the long tail strategy seemed to correlate w ith much of Netflix’s success. Started thinking about how Icould relate the netw ork economy to Netflix. I uploaded relevant notes from recommended texts w ithin the unit to our Google Doc for everyone to look over. I w ent through my notes on sharing economy to gain understanding and to have a rough outline of w hat I w ill talk about on my individual w ork. Week 7 Continue research into Netflix algorithms and meet w ith the group. Continued to compile information and w orkon the infographic. Did some reading on Netflix’s overall business model. Came up w ith ideas to present to the group at our next meeting. I read through, and uploaded notes fromexternal readings to the Google Doc that I thought might help everyone w ith background for the report. Had my ideas on sharing economy and how it relates to Netflix but I w as informed that sharing economy did not apply to Netflix, so I had to change to a more relevant and appropriate topic. Week 8 Meet in class to discuss the report and being to w rite up about the algorithms. Meeting in class w here we further discussed our findings. We knew exactly w hat everyone w as doing at this stage and everyone was w ellinto their parts. Meeting on the 18th September w here w e came up w ith our argument and assigned/went over everyone’s parts, so w e knew exactly w hat everyone is doing. We had to discuss our question w ith our tutor in order to refine it and came to a viable option. Meeting on the 18th September w here w e came up w ith our argument and assigned/went over everyone’s parts, so w e knew exactly w hat everyone is doing. Unable to attend the group meeting I collaborated w ith the rest of the group online as w e delegated sections of the report, and agreed to w orkon researching the business model and key aspects of Netflix related to the netw ork economy. I w as unable to go to the group meeting, but I w as updated via Facebook Messenger about role changes and the direction of our report. My part w as changed to the Long Tail, how it applies to Netflix and the future of the Long Tail. Week 9 Continue w riting up my section of the report and stay in contact w ith my group over the Tuition Free w eek. Continued the infographic and constantly sending screenshots to the group of how it w as looking. Did all the reading for the assignment that w ould bolster my part, the attention economy. I argued that Netflix w as veryeffective at gaining attention on socialmedia in order to propeltheir long tail strategy. Found all the research Ineeded for my parts on Netflix’s competitors and subscription in the netw orkeconomy. Fine tuned my research and made a focused outline for my sections over the tuition free w eekafter relaying info w ith everyone over the chat. Confirmed w ith the group about my topic and researched Netflix w ith regards to the Long Tail theory. Bookmarked all of my references and outlined the sections of my report. Week 10 Compile all the group w orkand submit the report and project diary on time. Finish formatting all of the assignment, finalizing the infographic and submitting it on time. By the third of October I finished my part and submitted it to the group. Finished my part on the 2nd October so there w as enough time to edit it and put it in the report by the 5th . Uploaded all of my w orkto the Google Doc at the beginning of the w eekso w e could proofread and compile into a report by Friday. Finalised my part (Oct. 4) before the submission date (Oct. 5). Allgroup w orkis compiled on Google Docs.