The innovation of Netflix

The online streaming service Netflix is a great example of a company that continuously innovates. It began in 1997 as a DVD mail rental service with the simple promise of never having late fees and within two years they had innovated the company into a subscription based service that offered unlimited rentals a month.

In 2008 they introduced online streaming that ran parallel to their DVD service, offering both services in one package. In  2011 they split the company between online streaming and DVD rental in order to aggressively cannibalise the company and move forward with online streaming. They effectively made their customers choose between DVD rental and online streaming otherwise they would face a 60% price rise. By doing this they allowed the streaming service to grow whilst allowing the  DVD rental service to slowly shrink away. This in turn gave them the money and subscribers needed to improve their streaming service, which has resulted in them now having the financial capability and confidence to create their own shows and films. Netflix knew they wanted the future of their company to be online, as this is the best platform for them to offer unlimited, easy to access content at a cheap rate.

Netflix products are film and television shows that it supplies now through it online steaming service but they have begun innovating their products as they have moved from simply distributing to creating content as well. An example of this is the Netflix original television show ‘House of Cards’.

They have successfully repositioned their image as an online streaming service as oppose to a DVD rental service. Netflix has also shifted the social paradigm of what should be expected from media distribution services by offering cheap, unlimited entertain that is easily accessible. By focusing on their long-term goals for the company Netflix have been able to grasp the online streaming market through radical innovation and aggressive cannibalisation. 

 

Innovation within the WTF Podcast

Marc Maron's WTF Podcast is a fantastic small scale example of how incremental innovations to a known product can bolster a media company and help to create a media company that is both innovative and familiar.

By adapting traditional value chains for the benefit of his own business, Maron can cover all of the digital bases for his product, ensuring a wide and consistent media reach that hits all platforms with ease and allowing for many feedback networks.

Through the use of various types of innovation (including Horizontal, Long tail, Process, Positioning, Paradigm and Product). Marc Maron has built on a relatively simple product and brand to create something of a media empire. These incremental innovations have slowly built the audience network up from merely fans of Maron, of which there weren't many, to broader fans of comedy and radio in general.

Use of long tail innovation has opened up a number of new revenue streams from older content. Purchasing individual podcasts or subscribing to a premium service allows access to these files which are harder to find elsewhere on the internet. The vast amount of content available as created a desire to listen to interviews from the past and traditional mediums such as DVDs are now being used to release content in a very limited fashion.

Creating a relationship with his sponsors has enabled Maron to innovate and advertise effectively by monitoring which of his adverts are successful and pulling revenue streams from direct sales of advertised products such as justcoffee.coop.

Maron's podcast is now one of the most popular on the internet and commands a loyal group of fans with which he has a great deal of interaction. 

Joshua Hammond 

Case Study: Nosy Crow

Nosy Crow is a publisher that produces books and apps for children. They were chosen as their digital production model is an innovative development of a traditional publisher’s business model. Founded in 2010 by the managing director Kate Wilson, the publisher has gained rising success commercially, and within the publishing industry itself. This is evident in the industry recognition that they have received, having won numerous prizes for their apps and their innovation in publishing (Wilson, 2013).

The four Ps of innovation; paradigm, product, process, and position show that Nosy Crow creates a distinction that is unusual for a publisher, this is the distinction between a book and a ‘reading experience’. This then gives the publisher the opportunity to market another format of reading experiences, apps. The digitally focused view of the publisher could create opportunities for innovation in the company’s processes. As the apps are a new product; they are targeting a new market. Nosy Crow positions itself to the customer as a fresh, quirky indie publisher that is more modern and accessible than its much larger, older, and more established competitors. The value chain analysis corroborates this; there are two outputs, books and apps which enhance and increase Nosy Crow’s market.

To conclude, Nosy crow publishers are innovative as they have filled a gap in the market. Their innovative digital products have been well received by the industry, they are taking steps into an area that many publishers seem reluctant to go towards. They were not the first digital publishers; however, their products are interesting and innovative. Nosy Crow have framed themselves as not just a book business, but a content business. 

Innovation and Stack (Independent Magazines)

In a fast-pasted media environment, organisations have to adopt or develop new business approaches in order to stay current, competitive and retain advertisers and consumers. The recent technology developments and change in the economic climate has caused consumer behaviour to transform and thus created a ripple effect in how advertisers are engaging with them. 

Figure 1. Stack business model

In the case of Stack, they have successfully created and implemented a new business model which eliminates the need for third party advertisers as well as meeting the needs of their target consumers. Through a two-sided business model they rely only on independent magazines who wish to attract a wider readership and consumers who wish to read a different publication each month. This model is cost effective and appealing to small independent publications as they are only have to produce the required number of magazines pre-paid for by Stack subscribers and do not need to consider marketing or distribution as this is also fulfilled by Stack.

The subscription method has been traditionally used by newspapers and magazines for decades. However, while other publications (who adopt the traditional business model) usually offer consumers the choice of single-sale or subscription, Stack only provides the latter. This means while Stack reap the advantages of the traditional model, including; a predictable and constant revenue stream, reduced uncertainty and also higher levels of brand loyalty, it also makes a more financially viable business model as publications are only sourced and purchased from independent publishers based on a predetermined quantity.

The traditional subscription service has also been replaced by in-direct subscriptions, where consumers subscribe to Stack rather than the publication itself. This is the main revenue for the company and also develops brand loyalty.

Stack magazine also have added ‘value’ and innovation to the product through applying expertise in sourcing independent publications as well as their own in-house marketing and distribution process. This process has created an emotive response as the publications change monthly, making it a surprise to readers. The publications are also described as thought provoking and engaging (Stack, 2012) providing the reader with new information and ideas.

References
Aris, A. and Bughin, J. (2009). Rebalancing the Media Value Chain. 2nd ed. Chichester: Wiley pp. 13-81
Blythe, J. (2009). Principles and Practice of Marketing. 2nd ed. South Western: Cengage Learning pp. 629-35
Kolter, P. (2008). Marketing Management: International Version. 13th ed. Pearson. pp. 63
Kolter, P. (2008). Principles of Marketing. 3rd ed.
Kung, L. (2008). Strategic Management in the Media: theory and practice. London: Stage pp. 47

Innovation in ELLE

The UK magazine ELLE, published by Hearst Corporation, has implemented both radical and incremental innovation over the past two years. It’s most radical innovation is the creation of an annual intern initiative, ‘ELLE University’. As an extension of the ELLE brand, this radical product innovation is providing a much-needed platform for young journalists who are struggling to get into the inaccessible magazine industry. The scheme is also innovative in its re-positioning of ELLE’s brand. According to Hearst magazines UK, ELLE’s average reader is aged 28 and successful, with a high disposable income. In contrast the intern initiative is aimed at a younger demographic, possibly recent graduates who are just starting their careers. This product innovation does not affect the traditional value chain of the magazine much, instead ‘ELLE University’ runs alongside the production of the magazine, occasionally feeding into the process of content creation and editing.

ELLE has also implemented incremental process innovations. Over the past two years, readers have seen a shift in the delivery of the magazine; its inclusion of multiple social media and digital platforms has transformed the way it communicates with its reader. While the product and content remains the same, the way in which ELLE provides its service is innovative.

There have been many other recent incremental innovations that affect the value chain of creating ELLE UK. The magazine has assumed the roles of both advertiser and retail outlet in their latest developments. This vertical integration is just another process of innovation that “further reinforces ELLE’s reputation as one of the UK’s most digitally innovative fashion magazine brands.” (Rhiannon Thomas, Hearst Magazines UK, 2013)