MBA1362 3 Things You Can Learn From Netflix as a Business + Free Ride Friday

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Hey, today is Free Ride Friday so make sure you hang on to the end of the episode to hear who won this week's Free ride. Every Friday we give away a lifetime membership to our course Easy Course, how to build your own online course in 30 days. It retails for $500 over at EasyCourse Co, but you can win it for free. All you got to do is leave us an itunes rating and a review and you enter our weekly random draw. Just listen in on Friday to see if you won. It's that simple. It's our way to say thanks for showing us love on itunes. All right, let's jump into today's episode. Hey. Welcome to the Hundred Dollar MBA show where business is pleasure every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar mba, a complete business training and community online. And in today's lesson you will learn three things you can learn from Netflix as a business. Reed Hastings, the founder of Netflix created an incredible business in more ways than one. Most people that you ask say the last thing they would cut out from their expenses is their Netflix account. Some people will cut out their daily coffee even before they cut the Netflix cord. So amazing when you see a company create such a great business, a great product, because, as they say, success leaves clues. In today's lesson, we're going to dissect the three big reasons why Netflix is so successful. It's important for us to take a look at these success stories and, and not just sit in awe, but to break them down and figure out how we can apply some of the things that they did in our own businesses. So let's get into it. Let's get down to business. Netflix was founded 22 years ago, back in 1997, and they started on the scene with a better way to rent movies. They're not the behemoth they are today. Online shows and documentaries and original stuff series. We'll get into all that. But it all started with offering an exceptionally better way to rent movies. And this is lesson number one. Netflix understood that if they're going to compete with Blockbuster and every mom and pop rental store on every corner of every street in the US and beyond, they need to be better. They can't just be another movie rental place. So lesson number one is Netflix recognized that they need to be 10 times, at least 10 times better than the competition. And you need to be able to point to how they're better. So when they first started, the big differentiator between having a Netflix account and going to Blockbuster, for example, to rent a movie was that you pay for a membership fee and you can rent the movies you like with no late fee, and they get delivered straight to your door. So a few things are happening here. How do they make it 10x better? Well, let's break it down. Number one, you're not paying per rental. Back in Blockbuster, remember I used to pay like $3.50 per rental. Netflix had a flat fee for the package. So you'd pay like $8 a month and you can rent up to three DVDs at a time. I believe they had another chair at $12 a month and it was five DVDs at a time. Now, for most people already, even if they just rent three DVDs a month for $8 and they just do it once, not as many times as they like, when they can do that in their plan. So you can rent three at a time, return them, and then get three back. But let's say I just did that once, it's already cheaper than going with Blockbuster and renting three movies. Now, the funny thing is that Netflix was actually more profitable than Blockbuster because, hey, they had no physical stores, they just had warehouses and everything was delivered via mail. That's the other way they actually differentiate. You don't have to go anywhere. It's all done online. You have a queue of movies that you want to watch and they get delivered straight to your door. You can send back the DVDs whenever you like. There are no late fees. There's another differentiator. Don't worry about late fees. One of the most annoying things that you had to worry about when you had to rent a movie from Blockbuster. So no more worrying about late fees. You just can't rent the next movie on your queue until you return the DVDs that you have. Third, they made it super convenient. They paid for postage. So you just put it into the envelope, put it in a mailbox, done deal. So, so they totally created a better offer to the customer. And 10x the value, they're like, hey, you're gonna get to rent as many movies as you like, just three at a time or five at a time, depending on your plan. It's inexpensive. You get the convenience of delivery to your door. Guys, this is the late 90s, early 2000s. This idea of things going and coming by delivery wasn't that common. Now we're so used to with Amazon and ebay and all that kind of stuff, but this is real innovation. So the first lesson we can take is you gotta be 10x better than your competition in your marketplace to compete. And they recognize that from the get go. Lesson number two, at around 2006, 2007 is when Netflix launched their online streaming service. They started moving away from the DVDs and focusing on online. By the way, the DVD service still exists, but it's a fraction of the business and the reason why they have such high revenue growth. But I want to remind you, this is 2006, 2007. Internet speeds are not that fast. And they started working on this years in advance. We're talking about 2004 before they launched it. In fact, here's a fun fact. They actually had a award, a prize of a million dollars to any developer that would come up with the best algorithm to suggest movies and titles to their viewers. The one that they use today. But let's get Back to the second lesson. This is 2006, 2007. Internet speeds are not that fast. Forget mobile, you know, 3G and all that stuff was still very slow. Most people's home Internet was basic DSL and still smart TVs were not on the scene. It was really hard to watch a video at high quality for a long period of time, let alone a movie. And yet years before this, they invested in going with online streaming. Why? Because they have a long term view. Netflix realizes, hey, we can't keep doing what we're doing. This DVD business helped us get us to this point, but we got to innovate, we got to change, we got to grow and look ahead. One of my favorite quotes is by Wayne Gretzky and he says, skate where the puck is going to be, not where it has been. So look forward, look ahead, look in your own business, where is your market going? What innovations will happen that you want to be on top of? Where are the trends taking your marketplace? So they double down on online streaming, knowing that no one's going to watch DVDs in the future, knowing that Internet speeds will get faster and devices will get faster and people will start watching films and TV shows on their phone. And even when they launched, it wasn't that popular. People didn't catch onto it as quickly as they expected because again, the Internet speeds weren't that fast. It wasn't until like 2012, 13 when they started to really get traction. We're talking about six years after Dear.

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So having that long term view and understanding, hey, we gotta build for the future, not just for today. Huge lesson now. This leads me to lesson number three. Around 2012, 2013, Netflix starts to double down on something totally different again. They're looking forward. And this is a tactic that Reid talks about that he learned from Steve Jobs. And it's called cannibalizing your own products. What does that mean? That means instead of Letting your competition and time and technology take over your business. You replace your products, your services with better ones before you get replaced by the competition. Let me give you an example, and I'll show you what Netflix did around 2012, 2013. They start creating their own original content, their own shows, shows they don't have to license to anybody else up to this point. They're just, you know, getting the license to show friends on Netflix or, you know, blockbuster movies or hit movies from different genres, comedy and action. But they realize, hey, these production houses, whether it's Fox or Disney or Universal, they're going to start realizing that what we're doing is working. And they're going to want to build their own platforms and sell their own content, and they won't license their content to us anymore. So we got to be ready for winter. We got to be ready for that. And they actually saw this really ahead of the game. This is actually happening right now. All these companies, Disney, Apple, hbo, Universal, NBC, they're all coming out with their own streaming service and they want to use their own content. They're not going to allow Netflix to use their content in the future. But luckily, Netflix saw this coming and understood that, hey, we have a good thing going here. How do we future proof ourselves and cannibalize our own products so we're ready for the future. So they started creating their own shows. One of the biggest hits they had was House of Cards. They started producing their own movies. In fact, recently they released a film called Rome, which streamed on Netflix while being in the movie theaters. And now subscribers actually watch Netflix for the Netflix shows and not for the licensed content. People are on there because they want to watch Patriot act or Stranger Things or Netflix comedy specials. This is a huge thing they doubled down on. Or documentary series like Chef's Table or Hip Hop Evolution. If I look at all the shows I've watched on Netflix for the last couple years, I would say 80% of them are Netflix originals. So you could say, mission accomplished, Netflix. So let me solidify lesson three. Prepare for winter. Understand that if you have something good going, it's not gonna last forever. You gotta innovate, you gotta change, you gotta move, you gotta one up yourself and create things that will cannibalize your current products. Because, hey, it's better. Your Netflix original stuff, it's better than the licensed movies and shows that you have on now. Not everything you create is gonna be better, but for the most part, if you're dedicated to it and consistent, it will be. And they totally changed the game. And in fact, Apple's new streaming service, Apple TV plus, it's all original content, no licensed content. They don't have much content on there yet and it launches, I believe in November. But they understand that, hey, Netflix had something good going. Let's jump on this gravy train. All right, let's wrap up today's lesson. What are the three key lessons you can learn from Netflix? Number one, and give 10x value to your customers. You gotta be 10 times better than the competition if you want to compete. If you want to dominate the market, that's what Netflix did. Their offering was a no brainer. Number two, have a long term view, understand where your market's going and be there first. And number three, understand what works now is not going to work forever. You got to create products that are better than the ones you just created. Just like Apple knew that when the iPhone comes out, it's going to cannibalize the ipods because people can put music on their phone but that's okay because they knew the ipod is better and it's better for them to come out with a more competitive product than opposed to having the competition do that. Huge lessons I love learning from great companies like Netflix that have totally changed the game when it comes to our own personal entertainment. Look at what you can do in your own business that can change the game in your marketplace. Thank you so much for listening. Today's lesson's over, but today's episode's not because it's Free Ride Friday. I gotta give away a lifetime membership to Easy Course. Let's see who won this week's Free Ride. And the winner is ocmlr. Ocmlr says podcasting. Yeah, five stars. Love the podcasting topic you covered on the show. I'm an up and coming host myself and loved the info. I'll be seeking it out with my show for you to show my listeners I'm serious too. Love it. Ocmlr, you are a winner. And here she is referencing an episode we've had on podcasting and how it's a long term game and you gotta be consistent and show your commitment to your audience. Your mission is to email me at omar@100mba net so I can hook you up with the Free ride to Easy Course, a 500 value over at EasyCourse co. If you want to win a free ride, just leave us an iTunes rating and review and you enter our weekly random draw. Thank you in advance for participating and showing us love on itunes. Before I go, I want to leave you with this. A lot of people think that customers don't like change. But the truth is is if you can give them something different that will improve their life, improve their experience and is better than what they're used to, they will change. Netflix is an example of this. Spotify is an example of this. There's a reason why it's really hard to buy a CD these days. No one offers them anymore because Spotify offered something better. So don't be afraid to offer something new to your customer if it gives them a better experience and you show them how it's better. Thank you so much for listening. I'll check you in Monday's episode. I'll see you then. Take care.

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