Technology of the week: Netflix vs. iTunes
The rise of the internet has had a huge impact on the world and an information good that is currently undergoing an important change, is television. Customers are developing the need to watch what they want, when they want to, instead of the traditional way of watching television. This has led to the rise of on demand TV-services.
Netflix is a company which offers a video-on-demand streaming service to its customers. With a monthly subscription, the customers can stream unlimited content on their device, given a few limitations based on the kind of subscription that was chosen. Their big database of content of different parts of the world and accessible for various countries is one of their driving success factors. Furthermore, the added value Netflix delivers to its customers is that their services are available on multiple platforms.
Apple introduced iTunes in 2003 and it was a success right from the beginning and has dominated the music downloading market ever since. They expanded their product line to podcasts, movies and tv-series soon, but the rise in popularity of online streaming services has been threatening the position of iTunes. iTunes also satisfies the need of customers by offering movies and TV series offline through rental or purchase.
A comparison of different aspects between Netflix and iTunes has led to the following conclusions:
Netflix and Apple iTunes both offer media services and their value propositions are similar, because they both allow users to access media content on a platform that is connected to various devices. Netflix however focuses on video-streaming on-demand while Apple offers content for download or rental. A second difference between the two is that Netflix’ strategy is to branch out internationally and make slight profit with their core business concept, while Apple makes high profit by offering extra services beside their core business to enhance the user experience. This is reflected in their organizational structure, as Netflix opts for one with transparency in decision-making and freedom for employees, while Apple values secrecy and maintains a more controlling approach to ensure their innovation process. Thirdly, when it comes to the market strategy, Netflix entered a market that already existed while Apple created a new market. When it comes to the external environment, it can be said that both compete in a similar environment.
The future of the industry looks in favor of streaming services. We think as streaming services get cheaper and easier to use cross-platform, that new start-ups as well as existing companies will innovate business models. This will result in having more alternatives to choose from in the future.