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Cable Technology Feature Article

October 16, 2014

Where is Netflix in Product Life Cycle?

By Gary Kim, Contributing Editor

How much more growth can Netflix expect in its most-mature markets? Extrapolating from recent comments by Reed Hastings, Netflix CEO, about double the number of subscribers it already has gotten, ultimately.

If Netflix has about 50.65 million subscribers, with 72 percent of that in the U.S. market, then Netflix has about 36.47 million subscribers.

If Netflix really is in the middle of the product life cycle “S curve,” then Netflix might expect to add another 36.5 million U.S. subscriptions until it reaches market saturation.

But it seems likely rates of subscriber growth now are key issues for Netflix, as U.S. growth runs into potential slower growth, international markets have to be cultivated and more streaming alternatives come to market.  

Asked about slowing rates of subscriber growth in its most recent quarter, Netflix CEO Reed Hastings essentially suggested that although Netflix works hard at driving new subscriber growth, the precise quarterly net adds will be a bit imprecise.

The bigger question is unknowable, but deals with where Netflix is in the product life cycle.

“And if you think about the general society, all moving to Internet TV like HBO’s announcement today, there’s a lot of feeling of just everyone is going there, not exactly sure the rate of transfer but Internet TV is going to be everything in a couple of years,” said Hastings.

Hastings reference to HBO was about HBO offering a stand-alone streaming service in the United States in 2015.

“Everything that we’re seeing is completely consistent with the whole society, not only the U.S., but around the world is moving to Internet video and Internet television,” Hastings added.

“We saw Starz a week ago announced that they are doing an Internet video service; we saw HBO; perhaps all the other providers over the coming weeks,” Hastings said. “And so think of all the big networks are moving to Internet video and it’s just becoming a very large opportunity.”

Netflix thinks that is an international trend. “And think of basic consumer behavior as they want control and they want Internet video, because they get to watch on any screen, they get to watch any time they want, they get to binge-watch,” said Hastings.

As far as adoption rates, Hastings noted that “it took in the U.S. seven years to get to about one-third of broadband households.”

And while it might take longer in some new international markets, Netflix does currently expect to see the 33 percent of broadband household adoption level in seven years after launch. Under almost any conceivable scenario, that would make Netflix the market leader in the streaming video subscription business. 

Edited by Maurice Nagle

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