1. Content is expensive
2. Online customers are price sensitive, many watch content for free (i.e. illegally)
3. Market entry barriers for VoD are low. Anyone can buy content rights and distribute them digitally on a website, via apps etc.
4. You’re competing with the likes of Apple or Amazon
Those points hint at how hard it should be to make a profit. But Netflix has 30 Mio subscribers in the US and another 10 Mio internationally.
How did they pull it off?
UX/UI – the interface of the Netflix app is superior to what pay-tv services offer and it encourages viewers to watch more, either via autostart or recommendations.
Original Content – Netflix made their original programming based on what they learned about their subscribers’ tastes and did a great job at marketing House Of Cards.
Read more here.