Efficiency of Netflix's Strategies to Survive Amazon Prime Turbulence

Running head: BUSINESS MANAGEMENT
The efficiency of strategies Netflix put in place to survive the turbulence by Amazon Prime
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Topic: The efficiency of strategies Netflix put in place to survive the turbulence by Amazon
Prime
Introduction
In the entertainment industry, online streaming has emerged as the new big thing. Netflix
was a pioneer in subscription based online video streaming. For quite a few years, Netflix was
dominating the online entertainment industry by providing video on demand services. Easy
accessibility of internet and smartphones have contributed in the growth of these subscription
based online video streaming services and along with Netflix, there are two other companies that
have captured the market, such as, Amazon Prime and Hulu (Spangler 2018). It has been found
that, Amazon Prime has been experiencing the growth quite rapidly, and it has emerged as one of
the biggest competitors of Netflix. Both of these companies are not only delivering video content
on demand services, but they are also investing in producing original series for the consumers.
Amazon already had a loyal market share in e-commerce and as they ventured into this online
streaming business for the Prime members, the market was easily captured. Both of these are
very close competitors as they both operate in many countries and provide regional contents as
well against a fixed monthly or annual subscription charge. The increasing popularity of these
streaming platforms is also creating competitions between them and the companies are putting in
continuous efforts to improve their quality of content and services and to dominate the market.
This research paper will reflect the competition between the two major online video streaming
services and will explore the strategies of Netflix. Secondary data will be collected and evaluated
to get an insight about the research topic and based on the findings, recommendations and
conclusion will be provided.

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Research aim and objectives
The aim of this research report is to explore strategies of Netflix undertaken to dominate
the world of subscription based, online video on demand services and to evaluate how it can take
on the challenge thrown by another rapidly growing video on demand service, Amazon Prime.
The objectives of the study are:
 To explore and understand the strategies of both Netflix and Amazon Prime
 To evaluate the customer segmentation system of both the companies
 To examine the nature of market competition and market position of both Netflix and
Amazon Prime
 To provide recommendations to Netflix to improve its market share against the tough
competition from Amazon Prime
Research questions
1) What are the strategies implemented by Netflix to remain competitive in the online video
on demand entertainment industry?
2) What are market positions of both Netflix and Amazon Prime?
3) What are the success factors of Amazon Prime to become one of the major competitors of
Netflix?
4) How can Netflix improve its market share?
Netflix and Amazon Prime video: Company overview
Netflix Inc. is a US based online video streaming company, founded in 1997. The
primary business of Netflix is that it provides subscription based video on demand services for a
variety of contents, such as, films, TV shows, documentaries and its in-house productions

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(Netflix.com 2019). Netflix has more than 139 million paid subscription accounts across the
world as of January 2019. Including the free trials, the subscription number is more than 148
million. Currently it serves in 190 countries. The company has also opened its offices in many
other countries to pay attention to the regional contents. In 2018, Netflix earned the revenue of
around USD 15.794 billion (Iqbal 2019).
Similar to Netflix, Amazon Prime is another online video on demand streaming service,
developed, owned and operated by Amazon. It is available for the members, who have taken the
prime subscriptions, except in the US, UK, Austria and Germany, where the viewers do no need
full Prime subscriptions for accessing the videos (Spangler 2018). It is available in all the
countries where Amazon operates. Amazon Prime also provides TV contents, films and its own
productions much like its rival Netflix. The subscription charge for Amazon Prime is quite
affordable and currently it is serving in more than 200 countries, which makes it a large
competitor of Netflix. It has more than 100 million subscribers only in the USA (Reisinger
2019). One of the major benefits of Amazon Prime is that Prime services include multiple
segments, that is, speedy delivery for the items purchased through Amazon e-commerce site,
video services and audio services. While Netflix is a service only for subscription based video
streaming services, Amazon Prime is a service that gives more value to the customers by
providing access to variety of other services and entertainments.
Literature review
In the entertainment industry, the battle between Netflix and Amazon Prime video has
emerged as a major one. Both are subscription based video on demand services that offer a wide
variety of programs to the customers worldwide. As stated by Varadarajan, Yadav and Shankar

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(2014), in the golden age of media streaming, the convenience of watching numerous videos
containing films, documentaries and variety types of video contents, has increased significantly
due to the streaming channels like Netflix, Hulu, Amazon Prime etc. In the past few years,
Netflix clearly dominated the market for subscription based video on demand service market,
while Amazon was successful in catching up fast.
Business strategy of Netflix
Samson (2018) highlighted that Netflix enjoyed the first mover advantage in the market
for online video streaming. Netflix started as online enabled video or DVD rental service with a
monthly subscription model and it used to provide unlimited rentals at a fixed price with
extended due dates. Thus, it had a unique business model. The online streaming was started by
Netflix in 2007 and with the advancement of internet, its speed and bandwidth, and advanced
devices, Netflix captured a large market share and moved away from its core DVD rental
business. The main business strategies of Netflix are the internationalization and localization
strategy, diversification through content production, marketing, and capacity building through
technology (Adhikari et al. 2012). Firstly, Netflix operates on a global level, that is, in more than
190 countries. By using the cloud computing technology, Netflix is able to reach its customers
across the globe (Berman et al. 2012). However, to reach a wider audience, Netflix has started to
stream regional video content also. This has increased the number subscribers of Netflix in
almost every country that it operates in.
Secondly, Netflix has diversified its business of only streaming online contents. It has
started its own production house and currently owns three studios, the US-based Netflix Studios,
Singapore based Netflix Pte Ltd and the Germany based Netflix Services Germany Gmbh
(Samson 2018). Thus, Netflix is making original contents of variety of budgets under its own

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production house. Apart from these, Netflix mainly focuses on digital platform marketing
activities, such as, the social media platforms, internet advertising, and as part of promotional
offers, they provide option for 1 month free trial (Shuen 2018). The prices of Netflix are quite
flexible too with three different pricing that also determines the streaming options, number of
accounts and quality. Lastly, the company is continuously increasing its library size by applying
modern cloud technology.
However, Netflix does not have a good relationship with the movie theatres, and hence, it
does not enjoy larger share of the releases. Netflix often picks up TV programs that suffered a
setback in the television viewership and license the show rights for themselves. On the other
hand, Netflix has been successful for streaming the regional contents in all the respective regions
(Daidj and Egert 2018).
Business strategy of Amazon Prime video
Amazon made entry into the entertainment industry with Fire TV. With the success of
Netflix and easy accessibility of cheaper internet and smartphones, the entry of Amazon Prime
video was one of the major moves by Amazon. The Prime of Amazon has been one of the largest
drivers of the e-commerce growth and after associating the video and audio streaming services
with it, the company has encouraged millions of users to take up prime subscriptions. This has
been a big boost in its revenue. Thus, the business strategy of Amazon was to club e-commerce
with video and audio on-demand services, which acted as huge value additions for the customers
(Jenner 2017). Apart from that, Amazon Prime video also has its own production house and
produces not only international contents, but regional contents as well. Due to the presence of
Amazon e-commerce in more than 200 countries, Amazon already had access to a large market
share and with the prime subscriptions and regional contents, the market share of Amazon Prime