Netflix Teaches Product Managers a Lesson

Once upon a time, going to a Blockbuster Video store was a regular part of my weekend. Since I am such and engineer, running back to the store the next day to return the video that I had watched was also part of my weekend. However, I don’t do any of these things any more – now that Netflix has entered my life.

Netflix blew Blockbuster Video out of the water and they did it very quickly. Instead of trying to compete with Blockbuster on their own terms, Netflix redefined the market and did away with all of those video stores. Poof! I’m sure that we can all applaud what Netflix has done so far; however, if you were a Product Manager working at Netflix, what would you be doing now?

Let’s look at the facts: Netflix currently has a very successful product. However, technology keeps moving forward. This product, like so many of our products, has a limited shelf life. Netflix has a lot of existing customers. What do they need to do to retain their existing customers even while they move forward?

Right now it sure looks like the future of at-home movie watching is streaming video via the Internet. Exactly how this is going to work itself out is still just a bit unclear. So what should a Netflix product manager be doing right now? How about laying down the path to the future with the full realization that things may change on the way.

The key is to make delivery of the netflix app free movies to their customers as easy as possible. I’m pretty sure that Netflix believes that the transition from mailed DVDs to watching streaming video will be a gradual process that will happen over time – not a flash cut. Netflix has been offering access to streaming video over the Internet for over a year now. Initially they limited how many hours of video each user could stream each month; however, at the start of 2008 they made this unlimited. The only downside to this service is the selection: it’s pretty much movies and TV shows that have run their course. The new releases are not available here.

What’s next? Allowing end users to stream video not into their laptops, but rather into their existing humongous TVs. In order to do this, Netflix needs some serious partnerships. This appears to be what the Netflix product managers are spending their time doing. Netlfix and LG Electronics have teamed up to offer a $500 Blue-ray DVD player that will also stream Netflix movies. Netflix has announced a partnership with Microsoft to allow users of Xbox live to stream Netflix movies. Finally, Netflix has worked with Roku to develop a standalone player that will allow movies to be streamed to your TV.

Which one of these partnerships is the right one? Who knows? I suspect that a lot of what is going on here is an attempt by Netflix to discover what the correct product pricing is for this new type of product. The bet is that one of these approaches will bear some fruit and will allow Netflix to remain in the lead in their market. In the end, can any Product Manger ask for anything more?

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