Digital Media Network Analysis and Lessons Learned

Network Analysis

Please enjoy the following presentation on our network analysis of the Digital Media and Entertainment industry. We manipulated the network diagrams to better demonstrate the ties between layers in our stack model, which we found to deliver some great insights into the complexity of this industry.

A class assignment in Networks

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Lessons Learned

Given that the Digital Media industry stack has changed significantly over the last five years, with new players in OTT services, new avenues of distribution (digital v. physical), and a new platform layer that is ever evolving, the landscape and subsequent industry stack is sure to change again in the next five years.

Here are some lessons that we learned throughout the semester:

• The digital media industry is in constant flux. With each new innovation or change, the entire industry shifts (Hulu is a great example of this). Firms in the industry must always be looking forward and be willing to take calculated risks in order to keep up.
• Networks and studios are developing both vertically and horizontally to cover all bases as the industry transforms. We anticipate a move to extradite themselves from the ventures that do not prove to be effective and over the next few years shift back down to their core capabilities. Tech giants Amazon, Apple, and Google may have an advantage, as their core capabilities tend to naturally span horizontally across multiple layers.
• Incorporation of analytics and customization of content to mobile devices will certainly continue to shape this industry.
• Content producers are joining the online streaming game, and will likely stop licensing (or increase license fees) with 3rd party OTT services once they have built the requisite capabilities (and/or user base) to offer content directly to consumers.
• The network for the industry is still missing a few links between hardware and content producers. Networks and studios should develop their own streaming capabilities in order to protect and improve margins on their original and library content.
• Defining capabilities, industry networks, and stack models is more of an art (design) than a science, since different choices must be made depending on the level from which it is viewed (such as the firm or industry)

A Network View of Netflix

Well, That Was Qwik!

Interesting move by Netflix, deciding to cancel its split into separate DVD (Qwikster) and Streaming (Netflix) companies (TechCrunch Article on Topic). I think that there are a bunch of lessons to be learned out of this one.

It seems as though Netflix failed big time in one of two areas: either it didn't do sufficient market research to know that its clientele would hate going to two different sites to watch movies, or the company does not trust the market research it conducted. Either way, this is a massive misstep and makes the once business case-worthy company seem pedestrian. The initial move to split DVD rental revenues from streaming revenues makes some sense, and the company was probably right to ignore the outcry from penny-pinching customers who didn't want to pay more for the same service. But this time, the customer has challenged one of Netflix's fundamental strategies moving forward and CEO Reed Hastings apologetically folded. Not a great sign of power.

So what's the next move? Does Netflix simply maintain its current infrastructure, with DVD rentals and streaming on the same site under different subscription plans? Will the DVD rental business fizzle out over the next few years as consumers turn more toward streaming and digital copies? What happens to Netflix's massive inventory of DVDs if rentals go by the wayside? And why hasn't anything been mentioned about the video game rental plan (a la GameFly) since that notorious letter over the summer?

It's going to be interesting to see where Netflix goes from here, but there is definitely a huge chink in the armor now.