Net­flix poses no threat to DStv(yet)

The Mercury - - OPINION & ANALYSIS - Wes­ley Diphoko is the founder of Kaya Labs. He is chair­per­son of the IEEE Open Data Ini­tia­tive (In­dus­try Con­nec­tions pro­gramme) in South Africa. Fol­low him on Twit­ter for more in­sights on the In­for­ma­tion Econ­omy: @Wes­leyDiphoko.

MUL­TI­CHOICE (DStv) bor­rowed the taxi in­dus­try script when they com­plained about Net­flix. In the same way that the taxi in­dus­try com­plains about Uber, Mul­ti­Choice is claim­ing that Net­flix has an un­fair ad­van­tage.

They ar­gued in Par­lia­ment re­cently that since ser­vices such as Net­flix are not reg­u­lated they, there­fore, have an un­fair ad­van­tage and should also be reg­u­lated.

While it is true that Net­flix is not reg­u­lated in the same man­ner that Mul­ti­Choice is, it is disin­gen­u­ous to ar­gue that Net­flix has an un­fair ad­van­tage.

DStv is based on a dif­fer­ent plat­form, as the Net­flix plat­form is built on the in­ter­net and is there­fore sub­jected to the reg­u­la­tions that reg­u­late the in­ter­net as well as chal­lenges as­so­ci­ated with in­ter­net-based ser­vices.

A care­ful study of the his­tory of Net­flix shows that it was not easy to cre­ate the stream­ing video ser­vice. The com­pany faced numer­ous chal­lenges to get to where it is.

It started as an on­line DVD rental com­pany in 1998. In 1999 Net­flix be­gan of­fer­ing an on­line sub­scrip­tion ser­vice through the in­ter­net. Net­flix mem­bers chose movie and tele­vi­sion ti­tles from Net­flix’s web­site; they would then be mailed to mem­bers in the form of DVDs, along with pre­paid re­turn en­velopes. This process must have pre­sented Net­flix with chal­lenges which then led to the cre­ation and of­fer­ing of the stream­ing op­tion ser­vice in 2007.

Even in the early days of stream­ing, Net­flix must have en­coun­tered chal­lenges in the process of seek­ing part­ner­ships with man­u­fac­tur­ers of var­i­ous con­sumer elec­tron­ics, in­clud­ing video game con­soles and Blu-ray disc play­ers to en­able its videos to be streamed over an In­ter­net con­nec­tion to those de­vices. Later, Net­flix must have re­alised that the DVDs were pre­sent­ing a chal­lenge and there­fore, in 2010, they in­tro­duced the stream­ing-only ser­vice that of­fered un­lim­ited stream­ing.

Even dur­ing the ex­pan­sion years in mov­ing be­yond the US the com­pany must have ex­pe­ri­enced chal­lenges re­lated to con­tent in dif­fer­ent ter­ri­to­ries. Net­flix also faced many com­peti­tors along the way, and one com­peti­tor posed a unique chal­lenge. Amazon be­came a com­peti­tor to Net­flix even though they were a ser­vice provider (host­ing ser­vice) to Net­flix. This must have been a pain point as Amazon repli­cated the ser­vice for Amazon sub­scribers.

Now that Net­flix is op­er­at­ing on the African con­ti­nent there are def­i­nitely chal­lenges. One is in­ter­net qual­ity and pen­e­tra­tion. Al­though this will im­prove, it is cur­rently a ma­jor rea­son why some users may pre­fer to stay with DStv. The com­pany has also faced dif­fi­cul­ties in en­ter­ing the China mar­ket.

The Net­flix his­tory of­fers many lessons for tra­di­tional com­pa­nies, gov­ern­ments and pol­icy mak­ers. South African tra­di­tional com­pa­nies should learn a lot from the de­vel­op­ments around Mul­ti­Choice (DStv) and Net­flix, in the same way that lessons should be drawn from taxis and Uber.

Ma­jor shift

The ma­jor les­son here is to un­der­stand that there’s a ma­jor shift that is tak­ing place in the world. Old econ­omy (big) com­pa­nies are be­ing chal­lenged by new (small, start-up) com­pa­nies. The means with which they chal­lenge, how­ever, is not based on the same re­sources and in­fra­struc­ture upon which old com­pa­nies are built. The new com­pa­nies tend to use ef­fi­cient, eco­nom­i­cal and scal­able means that presents old econ­omy com­pa­nies with a dif­fi­culty to adapt.

The reg­u­la­tory area is one area that serves as the weapon for new econ­omy com­pa­nies. The old com­pa­nies were built to ad­here to old eco­nomic rules and reg­u­la­tions. The new econ­omy com­pa­nies work around these reg­u­la­tions and they present a so­lu­tion en­abled by tech­nol­ogy.

To ad­dress this, new reg­u­la­tions and rules of the game would have to be cre­ated for the new econ­omy com­pa­nies.

Rules are be­ing de­vel­oped for new econ­omy com­pa­nies, such as pri­vacy and data laws, which will prove to be a stum­bling block and have an equal­is­ing ef­fect for old econ­omy com­pa­nies.

It would be a mis­take to ap­ply old econ­omy rules to new econ­omy com­pa­nies.

Gov­ern­ments should not en­ter­tain calls by threat­ened par­ties for rules to be changed in or­der to neu­tralise their com­peti­tors.

Pol­icy mak­ers should move with speed to make rules that fo­cus on new econ­omy com­pa­nies and those rules need not be the same as those for old econ­omy com­pa­nies.

Com­pa­nies such as Mul­ti­Choice as well as the taxi in­dus­try should un­der­stand that com­pe­ti­tion will come from any­where (small play­ers and any part of the world).

When they are con­fronted with such chal­lenges they should not re­spond un­kindly in the same way that the taxi in­dus­try has re­sponded to Uber. As for Mul­ti­Choice, they should re­spond by in­no­vat­ing and not by lob­by­ing pol­icy mak­ers to make rules that suit their agenda.

To­day the chal­lenger is Net­flix in the video en­ter­tain­ment in­dus­try, to­mor­row it will be ra­dio sta­tions com­plain­ing about a sim­i­lar en­trant or even banks com­plain­ing about new bank­ing in­no­va­tions. The re­sponse to these de­vel­op­ments should be in­no­va­tion, in­no­va­tion and in­no­va­tion.

The Net­flix his­tory of­fers many lessons for tra­di­tional com­pa­nies.

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