Netflix announced last week that they have broken the one million mark in UK subscribers, and announced that they see their main competition going forward as Sky rather than Amazon-backed Lovefilm. Lovefilm do not release subscriber numbers for their online service only, but total subscribers (including postal) is around 2.5 million. The interesting thing about the rapid success and expansion of Netflix is that they have achieved it without particularly impressive content.
Sky obviously have exclusivity in the first pay TV window, but barely a week goes by without Amazon-backed Lovefilm signing another Movie Studio to a second window deal. By comparison, the content on Netflix is simply not that great, and is quite frankly weird in many cases. Nonetheless, a popular, extensive marketing campaign, low price and free trial for the first month seem to have overcome these difficulties. On the subject of Netflix’s marketing strategy, it would be interesting to know how their advertising spend stacks up against the revenues generated by their subscriber numbers. It may well be that Netflix will have to maintain or increase subscriber levels over a substantial period of time, in order order to recoup the money spent on advertising, and the money lost from charging such a low monthly subscription price. On the consumer side, could it be that consumers care far more about price and convenience than they do about content? Given Netflix’s success, it would seem that a hefty chunk most definitely do.
Looking forward, Netflix certainly sees Sky as it’s competition for the hearts and mind of the movie-watching public. But does Netflix have enough to challenge Sky, without evoking the help of the competition commission? We shall see!