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Netflix article

Netflix’s dominance on the Dutch video on demand market

Tom Urbaschek
Tom Urbaschek is currently studying for his Economics and Business economics bachelor’s degree. Writing for Asset's Blog Committee is one of his extra activities alongside his study. Subject of his interests are the fields of macroeconomics, behavioural economics and marketing.

“Sleep is my greatest enemy.” – Reed Hastings, CEO Netflix


The greatest enemy of the biggest video on demand service in the world, is sleep. This battle seems to be going well for Netflix. In the beginning of 2015, 11 minutes a day in the Netherlands were being spend watching videos from video on demand (VOD) services. In the second quarter of this year, that number has significantly risen to 23 minutes a day (RTLZ, 2017). The question remains, whether with this statement Hastings consciously negates VOD competitors, or is stating something being close to the truth.

The major competitors of Netflix in the Netherlands are respectively Videoland,  RTL XL and NLziet.  With RTL being part of NLziet, and owner of the other two streaming services mentioned above, RTL wants to compete with Netflix in order to fight for every viewer. In 2013 Videoland was rolled out with the intention to focus on Dutch productions and series. RTL chose this strategy of specialisation to differentiate itself, since Netflix became available in the Netherlands the same year. RTL XL and NLziet are also examples of this strategy, although these are merely focused on ‘rewatching’ television programmes and series. With a current user count of approximately 350,000 for Videoland and 340,000 for RTL XL, the strategy did pay off (RTLZ, 2017).

The success of Netflix can for a major part be explained by so-called ‘Netflix original series’. These series come out on Netflix, and more importantly, are exclusively available to watch. This exclusive content is currently worth 2.5 billion dollars (Netflix, 2017). A couple of examples which are characteristic for Netflix’s success, are House of Cards and Narcos. For the upcoming years, deals with a total value of approximately 8 billion dollars (RTLZ, 2017) have already been made with series and movie producers. Producers in the Netherlands simply cannot compete with these kind of numbers, and therefore shouldn’t.

Netlfix’s strategy in the future however, is uncertain. The expenditures on adopting series are unprecedentedly high. A loan of 1.5 billion dollars in 2016 was needed and presumably  one  of 2 billion dollars in 2017, in order to finance new content (Trouw, 2017). The popularity around the globe requires increasingly more expenditures, because of different kind of preferences.  A lot of viewers are locally oriented, and therefore mainly watch local content. If Netflix decides to invest more in local content, then the VOD market in the Netherlands will also be affected. Since focussing on Dutch series and productions is the main reason for success for Dutch VOD services, this development could pose a real threat in the future.

Furthermore, it is interesting to look at Amazon Prime, which has become available in the Netherlands on November 8th of this year. The VOD service ‘Prime video’ was already introduced, but with this decision Amazon shows it seriously wants to compete with Netflix.  The price of this service is significantly lower, and therefore is a cheaper alternative for Netflix. Amazon also adopted the idea of exclusives, with for example a new ‘the Lord of the Rings series’.  In addition Amazon is already talking with Dutch producers to create exclusives. Regarding the fact that Amazon is much bigger than the Dutch market players, it could become a serious competitor and eventually a success.

The conclusion may be drawn that Hastings was being realistic, but did not tell the whole story. Although the number of users of Dutch VOD services does not come close to the amount of users Netflix has in the Netherlands (i.e. 2.35 million), there does appear to be some room for competition. The most effective way of competing with a giant like Netflix, is focussing on differentiating content.

 

Reference list

Bright (2017, Aug. 18). Netlflix eenzaam aan de top in Nederland. Retrieved from RTLZ:
https://www.rtlz.nl/tech/netflix-eenzaam-aan-de-top-in-nederland

Netflix (2017, Oct. 17). Letter to shareholders. Retrieved from Netflix:
http://files.shareholder.com/downloads/NFLX/5404071147x0x959841/8E7F87AB-2E5C-41DB-862B-E872EF39B039/Q3_17_Shareholder_Letter_COMBINED.pdf

Goossens, R. (2017, Nov. 8). Amazon lanceert Prime in Nederland. Retrieved from De Telegraaf:
https://www.telegraaf.nl/financieel/1079752/amazon-lanceert-prime-in-nederland

Diekman, A. (2017, Jul. 18). Netflix ongekend populair. Retrieved from Trouw:
https://www.trouw.nl/home/netflix-ongekend-populair~a9748628/

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