How to Create a Video Streaming Service Like Netflix

The video streaming industry is booming, with the market estimated to reach $330 billion by 2028 according to Grand View Research. Industry leader Netflix now serves over 220 million subscribers globally with its mix of licensed shows, original programming, and on-demand access helping fuel impressive growth.

For entrepreneurs interested in entering the streaming video space, understanding what has made Netflix such a dominant force provides a blueprint for success. In this guide, we’ll break down the critical ingredients in Netflix’s secret formula, best practices gleaned from their meteoric rise, and a step-by-step plan for building your own competitive streaming platform.

Why Netflix is King of Streaming

Launched in 1997 as a DVD rental mail service, Netflix successfully pivoted to online streaming in 2007 and subscriptions in the following years. Now offering video content via smart TVs, mobiles, tablets, and computers globally, Netflix enjoys millions of dedicated fans and over $30 billion in market cap.

So what sets Netflix apart in the crowded video streaming market?

• Personalization – Netflix’s vaunted recommendations algorithm serves up new shows and movies based on each viewer’s tastes and watching habits, making discovery frictionless.
• Originals – Funding and distributing exclusive, high-quality original content from Stranger Things to Squid Game gets subscribers hooked and unwilling to cancel.
• Quality Over Quantity – Unlike some competitors stuffing their libraries with filler content, Netflix focuses more on delivering premium programming.
• Downloadables – Users can download select shows and movies to devices to watch offline when internet access is limited, like on planes.
• Device Support – Netflix makes watching possible on thousands of supported devices – one account allows streaming across smartphones, tablets, computers, game consoles, and smart TVs simultaneously.

Building a platform able to compete with Netflix’s outstanding user experience is no simple feat. The rest of this guide will break down how to emulate their formula for success.

Choosing a Video Streaming Niche

The first step in plotting your Netflix competitor is identifying an audience niche that is underserved and developing focused appeal to that subset of viewers.

While it may be tempting to create a general entertainment streaming site targeting all demographics, the resources required to license and produce enough content to satisfy diverse tastes is impractical for all but the largest players.

Some streaming video niches worth evaluating include:

• Kids & Family – Broadcast children’s series, cartoons, and family movies to parents looking for appropriate entertainment options.
• Independent Films – Cater to cinema buffs hungry for festival darlings, small indie flicks and foreign films.
• Classic TV – Stream vintage series and hit shows no longer available on mainstream platforms.
• Anime – Satisfy animated series superfans and connect viewers to new releases.
• British TV – Gain a following broadcasting BBC shows, British soaps, reality programmes and panel games.
• Niche Non-Fiction – Specialize in documentaries on topics like travel, food, science, history or music.

Not only can zeroing in on a specific viewer vertical allow for tailoring content acquisition and production accordingly, it also aids tremendously in marketing. Identifying and engaging your ideal audience is far simpler when you know exactly who they are.

Research Your Target Customer

Once a streaming niche is selected, conduct in-depth research on the target viewer to optimize the experience specifically for them. Important questions to answer:

• What streaming platforms and shows does your audience already watch? This reveals competitors to differentiate from and content preferences to align with.
• What specific need is currently unmet for them in the streaming landscape? Pinpointing frustration areas provides an opening.
• What streaming features and functionality would they find most valualbe? Prioritize must-have technical elements.
• What pricing threshold aligns both with perceived value and ability to pay? Later pricing model decisions depend heavily on income expectations.
• Where does your audience already congregate online? Identifying social sites, forums, publications frequented accelerates marketing.

Gaining a nuanced understanding of your beachhead demographic both ensures building a streaming service perfectly suited for them and allows crafting tailored messaging to resonate and convert potential subscribers.

Evaluating Streaming Revenue Models

While eyes tend to fixate on leading streaming platforms funded by subscriptions like Netflix and Amazon Prime, various monetization formats provide potential paths to profitability:

1. Transactional VOD

The pay-per-view approach allowing one-time on-demand purchases continues thriving. According to Digital TV Research, global revenues reached $8.3 billion in 2021 and further growth projected driven by sports streaming. UFC Fight Pass and WWE Network underscore sporting opportunities, while film rentals via Amazon Video, Google Play and Apple TV also rack up millions in microtransaction spending unlikely to evaporate post-pandemic.

2. Ad-Supported

Hulu, Tubi and other free, ad-based streaming services expand viewership for more cost-conscious cord-cutters. Market researcher eMarketer predicts ad spending on U.S. connected TV platforms will hit nearly $15 billion by 2025, quadrupling from 2019. While ad saturation risks eventual audience irritation, for newer streaming entrants building scale this path warrants consideration.

3. Premium Subscription

From dominant Netflix to upstarts like horror-centric Shudder, subscribers demonstrate their willingness to pay monthly fees for streaming video they enjoy. Taking the premium route does mandate satisfying customers consistently with fresh content additions and solid streaming reliability to prevent churn.

For highest monetization flexibility, a streaming service combining options – ad-supported free tiers, low-cost monthly subscriptions, plus high-ticket purchases of new release titles – merits exploration.

Must-Have Streaming Technology

Delivering a competitive on-demand video platform requires assembling a sophisticated technology stack. Key components include:

• Video Encoding – Raw video gets encoded by software like Wirecast into streaming-optimized formats like HLS or MPEG-DASH readying content for subscriber devices.
• Content Delivery Network – A CDN distributed across global data centers reliably serves streaming video at scale. Leaders include Cloudflare Stream, Amazon CloudFront and Akamai.
• Cloud media hosting – Cloud platforms like Amazon S3 durably store streaming video files globally for fast delivery.
• DRM – Digital rights management integration prevents unauthorized access and illegal piracy of licensed streaming content.
• Payment processing – Integrate gateways like Stripe, Square, or Braintree to accept registration payments by cards, mobile wallets and more.
• Mobile SDKs – Software developer kits for iOS and Android enable building custom, brand-consistent mobile apps to accompany web streaming.
• Analytics – Platforms like Google Analytics quantify streaming viewership traffic to inform content decisions and identify popular titles.

While every streaming provider balances unique technology requirements, keeping video quality and reliability top notch is non-negotiable in satisfying subscribers in the Netflix age.

Build an MVP Streaming Service

Rather than attempting to compete head-to-head with leading streaming giants out the gate, nimble startups are wise to take an iterative approach. Beginning with a minimum viable product (MVP) showcasing core functionality for a test group of users, startups can gain real market feedback before major investment.

Some key components to include in an initial MVP streaming launch:

• Content Library – Licenses and hosting for an initial batch of movies and shows allowing playback testing.
• Payments – Subscription sign-up and software-based pay-per-view purchases enabled.
• Streaming – Real-time streaming and progressive download tested across devices.
• UX – Intuitive, appealing interface focused on content discovery and playback.
• Analytics – Instrumentation allowing study of viewer behavior – titles watched, playback times, features used.

Resist overcomplicating or loading down the first streaming product release. The goal is gauging genuine user reaction, not attempting to match Netflix’s maturity out the gate. Maintain perspective that Netflix’s DVD-by-mail origins in 1997 hardly foreshadowed their streaming supremacy just a decade later. Stay nimble to build the right things.

Marketing a Streaming Launch

Generating awareness, excitement and sign-ups for a new streaming brand as competition crowds the space presents daunting challenges. Some proven marketing tactics to bootstrap audience adoption include:

• Influencers – Paying popular YouTubers or prominent bloggers to review and endorse your streaming service introduces it organically to their engaged followers.
• Social & PR – Strategically positioning streaming announcement posts and press releases enables efficiently capitalizing earned media and organic social sharing.
• Funnel Nurturing – Automating post-signup email drip campaigns keeps new users engaged, upsells subscription tiers and reduces churn.
• Referrals – Refer-a-friend programs reward subscribers for sharing your streaming platform and scoring sign-ups among contacts.
• Partners – Bundling streaming access for a set period together with complementary consumer services helps acquisition.
• Retargeting Ads – Sophisticated platforms like AdRoll and Google Ads allow tailoring display ads to prospects who visited but didn’t yet convert to subscribers.

While the streaming giants dominate paid advertising channels, utilizing creative, analytical approaches to spreading the word and strategically touching potential subscribers during their buyer’s journey remains essential.

Get Feedback and Iterate

Perhaps most critically, truly competitive streaming providers never stop listening to data-based signals from their users in obsessing over service improvement.

By continually tracking metrics like:

• New subscriber growth and churn rates
• Viewing duration by title
• Library search queries
• Features utilized

Product priorities and content investment strategies crystalize. Winners detect shifts in audience tastes early and double down on fan-favorites while cutting underperforming shows.

Techniques like in-product surveys, beta focus groups and social listening expand this intel gathering to guide ongoing iteration. Soon, personalized updates like new recommendations and categories tailored specifically to that viewer emerge.

The quest to help fans fall in love with your original series like Stranger Things demands getting to know each one enough build those bonds – and only their streaming data and feedback truly reveals the insights needed.

Go Forth and Stream

While Netflix boasts overwhelming market strength currently, their unprecedented success arose from taking risks, striving to understand evolving consumer needs, and maintaining relentless improvement cycles.

For entrepreneurs undaunted entering the video streaming arena, putting audiences first, obsessing over serving their content needs and building the technical capacity to deliver sets the stage for disruptive outcomes only the boldest in 1997 might have predicted for Netflix then.

The epic rise of Squid Game from South Korean oddity to record-smashing global sensation hints there remains hunger for stories not yet told. By combining strategic niche focus, leveraging technology partners, and most importantly, listening to users, perhaps your streaming underdog might author the next unpredictable breakthrough hit.