Global expansion will keep new subscribers flowing but multi-faceted rivals loom large.
Netflix CEO Reed Hastings:
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Netflix made big news at the Consumer Electronics Show in Las Vegas a few weeks ago with the announcement that it was expanding to 130 countries. With nearly 200 countries total under its belt, that’s just about the whole world – with the notable exception of China.
If it wasn’t before, Netflix is now definitely a global streaming giant. The company is set for growth for the next few years at least, with the only question now being how many times can it double its existing base of 70 million subscribers. It’s hard not to see it as a business with a ton of upside.
But what happens in the long term? What happens when Netflix gets as many subscribers as it’s going to? And a related question: What happens when competitors catch up?
In the United States, Netflix’s main rival Amazon sells a whole host of products including, ironically, the server service on which Netflix runs. In Canada, the company’s competitors are telecom companies that also sell cellphones, internet access, phones, broadcast television and even banking services.
Netflix does one thing – video streaming – very well, but many of its competitors are multi-faceted companies. Can a single-minded operation compete against rivals that can leverage other products and services to lure in customers?
Over in music streaming, there’s mounting evidence that standalone services aren’t able to make a go of it. They’re either shutting down, as Rdio did late last year, or they’re diversifying into other businesses, as Pandora is doing. The future of music streaming increasingly looks like it’ll belong to multi-pronged beasts, like Apple and Google.
How will Netflix fare against these same forces? How long can the company continue to do just one thing, or will it eventually have to do something else too?
These were questions I put to chief executive Reed Hastings during a chat at CES. Here’s how it went.
Is there a future for standalone internet services?
Well, there’s Uber, AirBNB…
We’re talking about streaming. A lot of your competitors sell a lot of other products, whether it’s Amazon in the U.S….
It’s true of Amazon, but not true of Hulu.
Companies that have great propositions sell those propositions independently. But companies that have weak propositions, or maybe they just have other strengths, they just try to combine them.
You often see in the market a range of approaches.
Do you ever see Netflix expanding outside of video streaming?
Not in the near term. In the near term we’re so focused on TV shows and movies, that’s a big bite. We have to work on that for the next five or 10 years.
If we can sign up the world’s citizens for that, well that might take a while. We’re still a pretty small fraction of all TV show and movie viewing.
What about zero rating, where some internet providers are offering certain applications without them counting against data caps. Where do you fall on the spectrum of that debate?
We want consumers to be able to have no caps. The perfect thing is that nobody cares because there’s no caps, so we’re supportive of things that don’t have caps.
In T-Mobile’s case, it’s an open program [with the cellphone company’s Binge On offer, which exempts video services such as Netflix from usage caps].
HBO is in, Hulu is in, we’re in and there’s no cost to any of us, so it feels like an expansion of no caps versus the typical buy-your-way-in and it’s only you or HBO.
So zero rating isn’t just a black-and-white issue?
If you think about unlimited, everybody is zero-rated and everybody is happy with it. So it’s a little more nuanced.
In Canada, the telcos that own your rival Shomi are throwing the service in for their cellphone and internet subscribers for free. Is that a form of stealth zero rating, or an unfair advantage for them?
It’s great for consumers. If you look at it from a lens of what protects Netflix, it’s a very narrow lens. But if you look at it as what’s part of the competitive battle, when we entered Australia there was all this new competition and services. It was tough for us, but great for consumers.
If we embrace that, we’ll do fine. We’ll get part of the market. We’re not going to get the whole market, and that’s okay.