E Business Management: Analysis of Netflix's Revenue Model and E-Business Features

The report focuses on the importance of e-business and the features it possess that can help an existing website gain a competitive advantage in the web market. The report focuses on the effectiveness of these features and the relation it has with the revenue model. For the purpose of the report, Netflix has been considered as an information-only website. Analysis of the website is conducted by identifying a suitable revenue model that helps in understanding the manner in which Netflix can generate income. Furthermore, the features of e-business are applied with Netflix and an analysis is done that can help it to improve its business. The report provides strategies that can help Netflix continue with the existing reputation and ensure that e marketing is developed so that the website can reach out to its customers.

Running head: E BUSINESS MANAGEMENT
E business Management
Name of Student
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Executive summary
The report focuses on the importance of e-business and the features it possess that can help an
existing website gain a competitive advantage in the web market. The report focuses on the
effectiveness of these features and the relation it has with the revenue model. For the purpose
of the report, Netflix has been considered as an information-only website. Analysis of the
website is conducted by identifying a suitable revenue model that helps in understanding the
manner in which Netflix can generate income. Furthermore, the features of e-business are
applied with Netflix and an analysis is done that can help it to improve its business. The
report provides strategies that can help Netflix continue with the existing reputation and
ensure that e marketing is developed so that the website can reach out to its customers.

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Table of contents
Introduction................................................................................................................................3
Description of the website..........................................................................................................3
Assessing the current business of the website............................................................................5
Describing suitable e-business features.....................................................................................7
Measures to ensure that the website has an ongoing presence...................................................9
Forms of e-mail marketing to be taken for strategies..............................................................10
Conclusion................................................................................................................................11
Reference..................................................................................................................................13

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Introduction
Netflix is an entertainment company based in USA. The founder of the company is
Reed Hastings and Marc Randolph. The function of this company is to offer streaming media,
online video as per audience demand and mailed DVD. The company was established in
1997 and it was expanded in 2013 to TV and film production along with online distribution.
The company is headquartered in California. It also specializes in rental and sale of DVD. It
had retained its services of DVD and Blu- ray while expanding on an international level. In
2016, Netflix was already operating in 190 countries all over the world (Netflix.com 2018).
This particular report on the business activities will include the recent operations of
Netflix and its customer segment. The revenue model of Netflix will be considered to focus
on their earning. A SWOT analysis will be included to shed light on the current situation of
the company.
Description of the website
In the earlier days, Netflix business model consisted of sale and rental of DVD.
Gradually it started to shift its attention to the rental of DVD via mail. As Netflix started to
expand its business on a global level, it introduced streaming media and at the same time, it
still carried on with its initial DVD and Blu- ray rental service. In the year 2012, Netflix
started content production and the first series was Lillyhammer. It had modified its business
activities by providing Netflix Original through online streaming of films and television. By
2016, Netflix had successfully released approximately 126 TV series and films in their
original form which was not done by any other channel or cable network (Aversa and
Haefliger 2017).

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Netflix has experienced major success in January 2018 when the number of paid
subscribers reached to 117.58 million. Among these paid subscribers. 54.75 million
subscribers belonged to the United States. The unique strategy of the company pertaining to
new content production has paved the way for securing rights for additional content. Its
expansion in around 190 countries resulted in the paying off debt by $21.9 billion in
September 2017. This amount had increased from $16.8 billion in a gap of one year. The
company had long ago introduced the concept of monthly subscription in the year 1999.
However, this specific rental model was not used anymore from 2000 Gomez-Uribe and Hunt
2016). The company had started using flat- fee unrestricted rentals which was not limited to
any date, shipping charges rental or any other fees.
The company provided the offer online movie streaming but in 2000, the customers
could afford to download movies from the internet. The actual idea of the company was to
introduce Netflix box for downloading movies within a night and they had acquired movie
rights for the same. Moreover, Netflix had always organized and maintained an extended
video recommendation system for customer ratings and reviews. In 2007, the company could
successfully launch its billionth DVD, which let them to shift from their original business
activities. They also introduced a new activity of playing video on audience demand over the
internet. The sale of DVD started to deteriorate within 2006 to 2011 and it was the peak time
for the growth of Netflix. The company’s success was also dependent on the wider range of
options available to choose by the audience. In comparison to the blockbuster rental outlets
and the DVDs, which were available earlier, the audience got plenty of options to make their
selection (Massa, Tucci and Afuah 2016).
The remarkable business activities of the company earned them revenue of $945
million with an increase of 8%. Their outstanding role in distributing original content helped
in the growth and development of the company. It was already leading in the market as

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compared to other websites. The company had excelled in mailing 190,000 discs every day to
670,000 monthly subscribers. This is a noteworthy feature of the company to show concern
about their customers. It helped in increasing the number of their monthly subscribers. The
affordability of DVD players by every household resulted in the growth of Netflix DVD sale.
Their operational activities on online affiliated program helped in the establishment of their
online DVD rentals. They also take care about employee satisfaction by providing them with
a long vacation with salary and permit them to withdraw any amount on their paycheck stock.
Assessing the current business of the website
At present, Netflix is the world’s largest internet television network that consists of
original series, documentaries and feature films. To know about the current business activities
of this company a SWOT analysis is provided below-
Strength
 It has a strong brand reputation which
differentiates it from the competitors.
 It has a large catalogue.
 The customers get original content.
 There is a function of fast forwarding.
 Customers can get the pleasure of
viewing in HD quality.
 There is a provision of watching the
content on several devices at the same
time.
Weakness
 They have not been able to make any
profit in the international market.
 It might be risky for them to invest a
large amount of the revenue on the
original visual content.
Opportunity
 The company has the opportunity to
Threats
 The operational activities are rapidly

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expand its market share in the
international market.
 They can increase the options for
video recommendations in order to
get hold of more subscribers.
changing due to the advancement in
technology.
 Black market is a highly risky zone
for the company’s activities.
Table: SWOT analysis
(Source: Created by author)
As per the contemporary scenario of the company, the target market of the company
is any individual who can afford an internet connection. The customers get attracted to the
company because of their unique value through original content distribution, varied options
in viewing and the reasonable price. The channels through which customers are able to view
the video content are the website Netflix.com and the mobile app. They have modified their
business model in order to meet the market demand.
A revenue model is a structure responsible for creating revenues. This model helps in
identifying the definite type of revenue source, which will be useful for the business activity,
the value offered against that model, pricing on the value and the individual who will pay for
the value. A revenue model forms the base of a company’s business model. There are
different types of revenue models such as markup, arbitrage, licensing, commission, rent or
lease, subscription, advertising, fee- for – service, interest and donation. For the business
activity of Netflix, subscription is the suitable revenue model. This is because the online
video streaming of Netflix operates on a model based on subscription. The subscribers of the
company pay a certain amount and they get the opportunity to watch shows, movies,
documentaries and feature films (Voigt, Buliga and Michl 2017).

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This leading internet television network has 100 million members in 190 countries all
over the world where the customers can enjoy 125 million hours of entertainment shows on a
daily basis. The target market of the company is both male and female in the age group of 17-
60 and possess an income range of $30,000 (Wayne 2017). The wider range of target group
of Netflix business gives a clear idea that they segment their customers based on
psychographic rather than demographic. Based on psychographic, the target group was
segmented on three categories- the busy group of people who cannot go outside for buying
movie DVDs, people who are addicted to movies and entertainment shows and the third
group of people who want to utilize the full amount of money. Subscription is the key source
of revenue for Netflix. The monthly subscribers pay an amount to get access to the website
content and get the DVDs mailed to them.
Describing suitable e-business features
According to McCoy et al. (2017), e-business disrupts the boundaries of that aid in
the exchange of information. The information transacted is based on the interactions that exist
between the customers and suppliers. The main aim of e-business is to transfer information
between people that apply in-house system along with remote users and public. The e-
business owners aim at growing the business with the application of information and
technology. The features of e-business can be analysed below:
Seamless integration with the accounting management: One of the main features
that e-business can provide to Netflix is the fact that accounting can be possible with the
application of information and technological resources. Relevant information such as the
products, pricing and the type of customers can be obtained with the application of
accounting. King et al. (2016) stated that in the case of Netflix, these three factors are
important for conducting the business in a proper manner. The television shows that are

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offered by Netflix come at a monthly subscription for people that enjoy good entertainment.
This can help the network to maintain its customer base and ensure that the revenue model
selected by the company generates proper finances.
Effective display of product with information: One of the main features of e-business
that is applied by Netflix in an appropriate manner is the effective display of products along
with relevant information. The shows offered by Netflix are properly detailed so that
customers can understand the details of the show and subscribe based on the preview. This
can help in attracting the customers, as they can be aware of the things to expect from
Netflix. Such categorising can help customers gain an easy access to the website and select
the best entertainment television show (Laterman, Arlitt and Williamson 2017).
Business to consumer: In the modern world, it is important to appeal to the customers
as they form the main stakeholders of a company. For a website like Netflix, developing a
business to consumer relationship is important for the success of the website. This can help
the website to continue its business and attract customers. The customers need to login with
the subscription i.d that is provided and then select from the products that are available for
viewing. This helps in maintaining the business to consumer transaction and the website
charges regular prices for viewing the shows that are selected by the customers.
Thus, Netflix can use these e-business features to enhance the website and ensure that
proper business is maintained. According to Gomez-Uribe and Hunt (2016), each of the
feature of the e-business can help the business to continue to grow and ensure that more
subscriptions are available. The application of the business to consumer feature can help the
company maintain proper relationship with the customers by collecting feedback from them
as well. The effective display of the products can also contribute to understand the feedback
of the customers about the shows that are aired by the company. Thus, the feedback of the

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customers can help in the growth of the business. It can also ensure that Netflix gain a proper
recognition in terms of the shows that they project and the manner in which these shows can
be provided for the betterment of the audiences.
Measures to ensure that the website has an ongoing presence
According to Bryman and Bell (2015), popular websites may lose its presence in the
market due to lack of proper maintenance of resources. Apart from this, competitors may also
be present that can threaten the existence of the market. To understand the manner in which a
popular website can be made to cease existence, the example of Orkut can be taken into
consideration. Orkut was one of the most popular social networking sites in the early part of
the 20th century but slowly faded due to the emergence of Facebook. The options provided by
Facebook and the innovative manner by which the company had developed itself led to the
loss of customers of Orkut and consequently to the stoppage of its existence. Thus,
developers need to keep in mind such competition and mismanagement factors to ensure
longevity of the websites.
In the case of Netflix, the website needs to continue its innovative nature so that it can
provide customers with the entertainment. Cavusgil et al. (2014) was of the opinion that
Netflix need to ensure that the popularity with the customers is maintained by proper hosting
of the websites. Hosting of websites signify the manner in which websites manage to
maintain one or more files. Usually this is done by the websites that borrow files or products
from another website. However, in the case of Netflix, the website needs to ensure that the
shows provided by them are categorised in a manner that makes it convenient for the
customers to search and view it. The fact that such hosting can help in arranging the shows is
one of the manner in which the website can beat its competitors. In this regard, some of the

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competitors of Netflix can be analysed to understand the strategy that they obtain to ensure
longevity in the live streaming industry.
Websites like NBC, Amazon Prime and Fox are some of the main competitors of
Netflix. These websites may pose the appropriate hardware and software tools that are
necessary for conducting the business and prolong its existence. The development of the
software of a particular website can help it to gain necessary feedback from the customers.
According to Veit et al. (2014), running server software can help companies like Netflix to
maintain its hold on the audiences. This can help Netflix to share files with the customers and
provide an opportunity to mail any type of concerns that may arise. Thus, these measures can
help Netflix to continue with the effective serving of the customers and maintain
collaboration with the entertainment industry. As stated by Soto-Acosta, Popa and Palacios-
Marqués (2016) for Netflix to continue in the entertainment market it is necessary for the
website to develop these features. This can ensure that the business features and the relevant
business model help in the existence of the website for a lengthier period.
Forms of e-mail marketing to be taken for strategies
In the modern day, e-mail marketing is used to maintain communication with the
customers via the use of mails. According to McElheran (2015), every email that is sent to
the customers is considered as email marketing. In this regard, it can be said that for a
website like Netflix that provides information and allows audiences to continue live
streaming of shows, the email marketing can help it to maintain its customer base. The
customers that subscribe to the website need to be made aware of the type of services that is
provided by the company. In the case of Netflix, the company need to ensure that relevant
information is provided to the customers about the type of shows that are made available to

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them. This can help Netflix organise its customers and the shows by ensuring that the
interests of the customers rises.
According to Strauss (2016), sending email about updating a product or service is
another form of email marketing. This can help customers remain aware of the manner in
which the products and services that they use are innovated and updated. In the case of
Netflix, updating the products usually consists of introducing new seasons of the favourite
television shows of the customers. For example, last month Netflix launched the new season
of Jessica Jones that allowed the website to update its database and sent mails to the
customers about the shows. Thus, followers of the show and the Marvel Universe can be
made into an important stakeholder for the success of the network. The strategy used by
Netflix in this regard is that monthly sending of email to the customers so that they remain
aware of the upcoming shows (Chaffey and Ellis-Chadwick 2016). Thus, the development of
the new features and new series can help Netflix to maintain an effective e-marketing
strategy.
Another important form of e marketing that Netflix can adopt is the co-marketing
email strategy. According to Mata and Quesada (2014), co-marketing email is beneficial at
the time when two companies sent emails to the customers for the mutual benefit. The main
aim of co-marketing is for one company to leverage the customers while the other expands its
reach. In the case of Netflix, the website can adopt this particular e marketing strategy while
collaborating with Marvel. This can provide Marvel and Netflix with an opportunity to gain
popularity among the customers. Such a tactics is required for Netflix so that it can help in
promoting the Marvel Cinematic Universe in television (West, Ford and Ibrahim 2015).
Thus, the co-marketing of the two networks can help Marvel to continue with the promotion
of the shows that they have and hope to gain an advantage in the market. At the same time,
Netflix can also benefit by this and ensure that the competitors do not get to replicate the

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strategy. Thus, it can be said that e marketing can help Netflix in a number of ways to
understand the possibilities of gaining customer satisfaction.
Conclusion
Thus, it can be concluded that e-business is one of the major strategies that
organisations need to develop in the current market. Without proper analysis of the business,
managers cannot implement the e-business models to its advantage. In the case of Netflix, the
company need to ensure that the application of subscription model can help the website
develop the required finances. The reputation that the website has in the live streaming video
industry need to be protected by the application of certain strategies. These strategies can
help Netflix gain more customers and at the same time collaborate with other studios to gain
more television shows. E marketing is one of the innovative ways by which the website can
gain information about the customers and use it for its advantages. The recommendation
provided in the case of the application of the e-business features can provide Netflix with an
opportunity to be the number one and most popular live streaming media for a long time in
the business.

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