Lilyhammer

• Netflix announced plans to limit sharing earlier this year after experiencing its first subscriber loss in a decade in 2022.
• Its recent decision to offer cheaper, ad-supported tiers has also played a role in this increase in account numbers.
• But as the video streaming industry has become more competitive over the years, Netflix has had to keep changing its business model to survive.

Network effects

• This subscription-based service came with a US$19.95 (£15.42) price tag and no due dates or late fees.
• The relatively low price helped build an initial critical mass of users, triggering a network effect.
• Since then, Netflix’s business model has continued to be strengthened by network effects.

Conquering content

• Netflix’s large base of users means it can spread the cost of a show over a large number of users, providing content creators with indirect network effects.
• It also triggers a virtuous cycle for users, who return to the platform thanks to the growing amount and variety of content.
• Netflix’s own content creation has built on this.
• This feeds back into the creation of content that is tailored to what the audience wants to see.

Growing competition

• No longer able to count on large flows of new users, Netflix must increase revenues from existing users.
• It started by creating a basic subscription, which includes advertising and cannot be shared, as well as standard and premium subscriptions.
• The latter do not have advertising and allow subscribers to add other people at reduced rates.