Innovative strategies in the streaming industry: vertical integration of streaming production. A case study of Netflix

This research analyzes the innovative strategy of vertical integration of the production process within the streaming (TV shows/movies) industry by investigating the pioneer Netflix. This recent development has increased the number of players on this market and affected the business model of other media industries such as videogames and music. The strategic choice to vertically integrate the streaming production (‘original’ production) is a consequence of traditional streaming rights increasing in price. This paper determines, by means of multivariate OLS regressions, whether there is a significant break after the release of original content ‘Netflix Originals’ on the content value and the revenues. In addition, the effects of the number of original productions per year and the content library expansion on the number of Netflix customers in the United States (domestic market) and in total are analyzed. The study finds that the implementation positively statistically significantly affected the total number of customers, but showed insignificant effects on the number of U.S. customers, content value and revenues. Further research is recommended to examine the implementation of this strategy by for example adding other players and major strategy changes.