Netflix Background | Assignment

Netflix background
As a pioneer in offering internet-based multimedia streaming and subscription services, Netflix
Inc. is a significant media organization. The company's main line of business is the provision of
DVD postal distribution services and Netflix subscription streaming services for movies,
documentaries, and TV shows available online. Netflix is a streaming service that caters to both
domestic (US-based) and international customers and deals with the delivery of its own
programming content (Netflix Originals). TV series are accessed under agreements from various
film distribution companies and television broadcasting companies in exchange for a monthly
subscription fee that the subscriber is responsible for paying.
Marc Randolph and Reed Hastings established Netflix in California in 1997. They had the
concept while traveling between their Santa Cruz home and Hasting's business, Pure Atria,
where Randolph was the director of marketing. One of the earliest online DVD rental businesses
in the world, Netflix was established in April 1998 with a selection of less than 1,000 films and
booklets. ", a wordplay on "flick," which denotes a motion picture. However, during the
following ten years, Netflix noticed a downturn in the DVD rental industry and quickly modified
its business strategy. They ceased delivering hard copies and created an online library of books
that everyone could access from the comfort of their own homes at any time.
A maximum of 18 hours of free streaming per month, dependent on the user's membership, and
only working on PCs and Internet Explorer, video streaming was introduced in 2007 with just
1,000 titles. Netflix had 7.5 million customers at the year's conclusion.
By 2016, Netflix had reached 190 additional nations and was providing content in 21 different
languages. And the business would go on to win Academy Awards for several of its unique
works in the years that followed. Netflix is altering not only its business strategy but also how
individuals get video content.
Main driver of activities
The majority of Netflix's revenue comes from membership fees for use of their streaming
services. The monthly charge for a membership to a video streaming service is $9.99 for the
entry-level plan, $15.49 for the standard plan, and $19.99 for the premium plan.
For US members that directly sign up for the service, Netflix still offers its incredible selection
of DVDs and BlueRays. The basic plan costs $9.99, the standard plan is $14.99, and the
premium plan is $19.99, according to the business.
Currently, Netflix (NFLX) is a publicly traded business listed on the NASDAQ market. In 202,
the firm went public at a share price of $15. The company's shares were worth roughly $244 in
August 2022. The market capitalization as a result is $108.5 billion.

Competitive advantage
- Differentiating your product from its competitors is one way to beat them.
- Customers’ willingness to pay.
- Unfair treatment by price.
- Prices that are bundled with services.
- Capital as a concept that should be recognized.
SWOT analysis
Strenghts
• Brand: The reputation and brand of Netflix are strong. It ranks as the 26th most valuable brand
in the world in 2020, although its worth increased by the greatest (72%) from 2019 and 2020.
Additionally, it is the fourth-rated brand in 2019;
• Development: Netflix has expanded significantly over the last 10 years, showing that it is
present in 190 nations;
• Customer base: With more than 180 million customers, the corporation has significant
negotiating leverage with studios;
• Content: It has been making high-caliber films and TV series that draw crowds. It also defeated
conventional networks in nominations for awards;
• Adaptability: It changes the service in accordance with the demands of the market and evolving
technology
• Cost: Netflix's plans are reasonably priced and provide excellent value. It offers a greater range
and is more affordable than cable TV or going to the movies.
Weakness
• Copyrights: The business only possesses a small amount of copyright, and the content rights it
licensed from other studios expire after a certain period of time, enabling access to the material
on other platforms;
• Market over-dependence: Although Netflix has a global presence, around 50% of its income
comes from the North American market. Additionally, the absence of original material in a
number of nations reduces demand outside of America;
• Costs: Due to the enormous financial demands of its worldwide presence, its debt grows yearly.
It reported having $14.17 billion in debt as of April 2020;

Sustainability: Netflix hasn't yet used renewable energy, unlike other tech businesses like
Amazon, Google, and Apple, which has a detrimental effect on its reputation.
• Strict pricing: With only three plan choices, Netflix does not give much personalization.
Additionally, it has increased its costs while those of competing streaming services have
decreased significantly.
Opportunities
• Expansion: It is still possible to reach many additional nations, including China, where the
service is not yet offered. The business could get into tactical alliances in the neighborhood to
strengthen its footprint in new markets;
• Ad-based business model: Although Netflix has rejected this conventional business model,
many other service providers generate billions of dollars in revenue from advertisements; •
Mobile option: The company can provide a more affordable option with a mobile-only plan in
order to expand internationally and compete more effectively against less expensive rivals;
• Regional content: Many nations have found regionally customized material in native languages
to be beneficial;
• Original Content: Its exclusive content may include other product lines, such as video games or
comic books;
• Annual Subscription: This annual subscription with a discount over the monthly fee can
encourage users to switch to an annual plan, avoiding Netflix subscribers from losing out when
they cancel right after watching their favorite show.
Threats
• Competitors: The number of streaming services has been increasing globally, and these
competitors include well-known brands like Netflix;
• Rules: Strict government laws, such as China's ban on foreign content, may prevent expansion;
• Piracy: Thousands of people continue to discover ways to download illegal content, and several
people simultaneously share one account;
• Market saturation: An excessive reliance on North America, where base growth has already
slowed, might lead to market saturation;
• Hacking: As more Netflix accounts are compromised, users may switch to competitors if this
trend continues.

• Carbon emissions are a significant problem in the modern world, and video streaming has a
significant impact, accounting for over 1% of all emissions globally, more than the aerospace
sector. Countries may then mandate a decrease in usage.
Porter 5 Forces
Competition in the industry (Strong force)
The analysis of a Netflix rival demonstrates the strength of the competition in the content market.
Due of the expenses and limited profitability, there are observable barriers for new entrants. For
businesses who are currently active in the market, like Amazon or HBO, and are attempting to
implement this operating model, it is, nevertheless, quite simple. Competitors who offer more
services and content control pose significant concerns.
The threat of new entrants (strong force)
For new entrants in the consumer food business, there are many obstacles. Only a few
newcomers to the market are successful since it takes time to fully understand what customers
want. The loyalty of customers to the competitors' products has grown over time, and they are
aware of this. Due to Netflix 2000's substantial international distribution network and solid
reputation, there is little threat from new competitors.
The bargaining power of suppliers (strong force)
There aren't many providers because Netflix specializes in expensive to produce content. Due to
the scarcity of providers, they dominate the market. You can see why suppliers want to brand
their material for their company now that even they are entering the consumer or VOD market.
One notable instance is the switch of the Friends sitcom from Netflix to HBO.
The purchasing power of consumers (Strong force)
Customers have a relatively low switching cost because practically all services are provided at
extremely similar prices. Therefore, the content's quality, not price, is the deciding factor in this
case. Additionally, because users pay every month, the five forces model proposed by Netflix
cannot be based on year contracts. Due to all of these elements, customers have tremendous
negotiating power inside Netflix's five forces.
A threat of inferior goods or services (moderate force)
In the market, there aren't many alternatives to the material. In Netflix Porter's five forces, the
danger of replacement services is therefore modest. Companies who produce the same material

for DVDs or streaming pose a threat to Netflix. The availability of other pastimes and
entertainment options, though, poses a greater danger.
External influences
Governance forces
In terms of political powers, both domestically and internationally, they control Netflix's
performance. Our place in the system of sociopolitical interactions is defined by the
governmental policy of each nation. Additionally, it has an impact on how independent of the
government our business may be. Each state has its own tools for regulating the market, and we
should monitor these (Takane, 2016). For instance, Netflix must abide with anti-monopoly laws'
criteria and the conditions for consummating deals, which vary by nation. Additionally, each
state has a distinct system for regulating the operations of media companies (as well as varied
penalties), or it allocates a portion of its capital to the holding.
We have to comply with antitrust laws in some of the nations where we do business, and this
costs us up to 30% of our revenue. To be able to provide our consumers internet video streaming
services, we must overcome this stringent restriction (Ulin, 2013). In addition, several countries
impose onerous tax laws on the movie business. The implementation of this legislation assures
that foreign businesses invest money in preserving the local way of life. Netflix must thus be
aware of these criteria in order to enter foreign markets without difficulty and without violating
the stringent laws that each nation has in place.
Competitor
As new competitors like Disney+, Apple TV+, HBO Max, and Peacock enter the streaming
market, many investors are concerned about the escalating competition. Indeed, each of these
rivals has a good chance of taking a sizable chunk of the streaming industry, which will have
some impact on Netflix's trajectory of expansion. It is crucial to remember that the streaming
industry is still too tiny in comparison to linear TV. Furthermore, compared to all of its rivals,
Netflix offers a significantly wider variety of higher-quality original material. As a result, even if
Netflix is more costly than the majority of its rivals, it is unlikely to be significantly harmed by
them, especially considering that the majority of users can easily afford its products. The entry of
new rivals into the market is undoubtedly a barrier, mainly because of the pressure it will put on
prices. Netflix won't be allowed to increase its rates without restriction any more. Additionally,
the new rivals will unavoidably hurt Netflix's services.
Concentration concern
Problems with original material
Making original content has been one of Netflix's most important undertakings in recent years.
Although a substantial portion of Netflix's material is still obtained through third-party licensing
and frequently is not unique to Netflix, the firm is investing an increasing sum of money to

support the production of original content for its members. Three times as much original
programming is anticipated to be released by Netflix in 2015—320 hours—than it did in 2014.
Expand resources by taking on debt.
Netflix's U.S. operations do not generate enough revenue to properly support both its plans for
original programming and its brisk global development. Despite having $900 million in debt as
of the end of 2014, Netflix raised an additional $1.5 billion in long-term debt in February of this
year, with a weighted average interest rate of 5.7%. This would result in an increase in yearly
interest payments for Netflix of nearly $86 million, or roughly one-fifth of operational earnings
for the business in 2014.
International or domestic focus
With its upcoming launch in the Netherlands this quarter, Netflix will continue to invest all of its
local revenues on global growth. Netflix reports that it concluded the second quarter with 29.81
million domestic and 7.75 million foreign members in a statement that is included with the most
recent set of financial data. Meanwhile, streaming revenues increased by 26% and 155% over the
same time last year, totaling $671 million (€509.5 million) domestically and $166 million
worldwide.
Netflix didn't aim to break into every market all at once. Instead, it carefully chose its initial
nearby markets based on their geographic proximity and perceived distinctions. For instance, in
2010, it began expanding internationally to Canada, a country that is geographically near to and
has many parallels to the United States. With the new markets it has entered, Netflix has
collaborated and reacted. In order to establish mutually beneficial partnerships, the firm has done
so. It has collaborated with cable and phone companies in some instances to add its programming
to their already-existing video-on-demand selections. For instance, Vodafone included a specific
Netflix button to its remote controls when it introduced a TV service for its clients in Ireland.

Changes in its operational landscape, such is driven by technology, changing demographics
or consumer preferences
When Netflix first entered the media landscape, VHS cassettes were just starting to lose ground
to the brand-new technology of the DVD. Since that time, technology has developed quickly and
undergone significant transformation. Netflix has repeatedly shown that adapting to new
technological developments is essential to retaining customers and brand loyalty. Netflix shifted
its focus from the DVD market to internet streaming as a result of changing movie consumption
patterns. The business soon rose to the top of the market for both size and popularity among
internet services. Because management recognized a chance to keep current and took action,
Netflix has continued to dominate the video streaming industry.
Content marketing is one of the key ways Netflix demonstrates that it is paying attention to its
customers. Netflix has developed sophisticated algorithms to suggest shows from a collection of
80,000 distinct watching categories to each individual client. As broad as "Romantic Comedies"
or as narrow as "Argentinian Dramas Featuring a Strong Female Lead," these categories are
possible. More customer involvement and personalization are made possible as a result.
Another show or movie to watch is suggested, but enticing the audience to watch that show is a
very different difficulty. Netflix has discovered that airing complete seasons of a certain show
rather than simply weekly portions is the key to keeping people interested.
.
.