Introduction

The internet has allowed for a rapid growth in e-commerce, which has proved advantageous for both business and consumers. It has become important for companies to adapt and develop internet strategies to remain competitive in the changing market (Flew, 2008). There have been many benefits from the development of e-commerce, such as the reduction of geographical barriers, the ability to target the “niche” market, 24 hour transactions and ease of price comparisons (Flew, 2008). The internet provided not just a platform for businesses to perform at a higher level, but also the opportunity for new businesses to form (Lumpkin & Dess, 2004). It has also allowed for more direct relationships between producers and consumers (Flew, 2008). Netflix is an example of an internet business that has significantly matured and developed over time.

Netflix began by renting out DVDs via mail, for a monthly subscription fee, which was cheaper and more convenient for consumers (Cohan, 2013). It was quickly able to have a large market share over their main competitor, Blockbuster, who couldn’t adapt to the new DVD-by-mail service (Cohan, 2013). While the development of this service was extremely successful for Netflix, they had to change and mature to meet new demands. The rise of internet streaming meant customers found it more convenient to watch movies and TV shows on devices like laptops and smart phones, rather than needing to use a TV and DVD player (Cohan, 2013). Netflix was in a weaker bargaining position to gain the rights to digital videos, as opposed to the physical DVDs where they could cheaply buy large amounts (Cohan, 2013). Creating their own original content (such as House of Cards and Orange is the New Black) was a major step in their development as an internet business, as well as pricing that allowed up to four simultaneous streams to encourage password-sharing (Cohan, 2013). Both of these strategies were significant steps to help increase their number of subscribers in the transition to being an online video streaming service.

According to Flew (2008, p.202), digitisation has removed the constraints of “distributional bottlenecks such as theatres, radio, and television channels, and shelf space in bookstores and record outlets”. It is no longer just the mass appeal but also the niche content that now increases online sales. Netflix has a large library of niche content which contributed to the fact that by 2014, Netflix had a consumer base of 48 million subscribers and reached a revenue of $1 billion (Dusto, 2014). With this, it can be argued that Netflix secures their place in the attention economy by uniquely optimising network effects through the Long Tail and a subscription service.

Continue reading: Attention economy