Dow Jones hits 23,000 as melt up continues >>> READ MORE

‘Netflix for Kids’ Signals Next Big Evolution

Streaming video giant can gain from audience specialization


Netflix for kidsThe Netflix (NASDAQ:NFLX) march of evolution continues. Last year, Netflix began its full transition to a purely streaming video service rather than a by-mail DVD rental company, a move that helped the company expand dramatically in just a few short months. Now Netflix is evolving and diversifying its successful business model.

Earlier this summer, it drastically realigned its subscription pricing, a move that enraged consumers but will help the company do away with its DVD and Blu-ray business entirely on a long enough timeline. Consumers will get over the perceived price hike, especially now that Netflix is finally finding ways to cater to specific audiences, starting with your kids.

A Friday report at GigaOM said that Netflix has started testing a brand-new version of its website that includes a “Just for Kids” item in its main menu. Users that have access to that option can then activate an entirely new menu system at — one that replaces rows of movie posters with a selection of popular children’s characters to lead to different video sections. Clicking on Big Bird leads to the Sesame Street videos, and the same works for Strawberry Shortcake. Netflix hasn’t announced when it will make the new interface available for all users.

Of course, Netflix likely won’t make the interface available for all users. The new user interface is the first component in larger plans Netflix has been hinting at for months, namely the introduction of family plans to its current subscription structure. Family plans will let Netflix subscribers with a big family watch multiple streaming videos on different devices using the same login information.

Put another way, while Dad is watching The Bourne Ultimatum, Mom can be upstairs watching Buffy the Vampire Slayer, little Mamie can be watching Blue’s Clues on the family computer, and little Ike can be watching Iron Man on the Xbox 360 in the basement. Essentially, kids will be able to use their own version of the service simultaneously as the parents, and it’s a guarantee that Netflix will charge additional fees for the service and increase its bottom line.

Eventually, at least. Netflix won’t altering its pricing again this year. To do so would be disastrous, causing an outcry from consumers that will cause lasting damage to the company’s subscription base where the recent changes merely rankled. In 2012 and beyond, though, family plans and audience specialization like the new “Just for Kids” interface will be how Netflix continues to grow. It’s a strategy that will see niche audiences paying larger subscription fees for premium programming or even smaller fees for a more limited range of programming. Netflix could introduce a “TV Only” subscription model, and it could significantly broaden its base of users by charging a smaller fee for that access.

Investors worried that Netflix is in trouble with consumers because of the subscription price changes should stop stressing. Everything is going according to plan.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC