Netflix's Competitive Environment and the Vectoral Class Analysis

This essay provides an in-depth analysis of Netflix and its competitive landscape, drawing upon McKenzie Wark's concept of the vectoral class to understand how Netflix leverages information and technology to maintain its competitive edge. The analysis covers Netflix's business model, target market, and competitive strategies, including its focus on research and development, relationship management with suppliers, and proprietary recommendation systems. It examines the competitive environment, highlighting major competitors like Amazon Prime, HBO Go, and Hulu Plus, and discusses Netflix's historical competition with Blockbuster. The essay also explores Netflix's future goals, including investments in content and technology to enhance customer experience and maintain market leadership. The document is contributed by a student and is available on Desklib, a platform offering study tools and resources for students.

Analyze Netflix and its competitors in relation to Wark’s concept of the Vectoral class
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Introduction
Netflix is one of the world’s largest Video subscription service businesses that allow its
subscribers to rent DVDs by order mail or by internet streaming. Its disruptive technology drove
out the store based model of DVD rental and made it automated, digitalized, and more efficient.
It offers a variety of options through it on-demand catalogs and prides itself in its propriety smart
systems that recommend similar genre movies to people upon opting for one, generating more
sales (Taylor, 2018). It offers a variety of packages for different people based upon their needs,
frequency of viewership, and volume of orders. Its target market includes all genders ranging
from 15-65 years of age with a household income of more than $30,000 dollars annually. It
caters to a variety of people differing in their ethnic backgrounds by offering several foreign and
international films as well. According to Wark, the vectoral class is driving the world to the brink
of disaster. However, vectoral class firms like Netflix also open up the world to the resources for
overcoming their own destructive tendencies (Wark, 2004).
Due to the technological nature of its business, Netflix invests heavily into its research
and development, almost 6-7% of the total revenues. It faces competition from movie studios and
other similar video streaming services like Vudu, Hulu, Verizon, HBO, etc. and aggressively
aims at maintaining its competitive position by gaining first rights over videos through
sustainable relationship swath the suppliers (Feinberg & Johnson, 2017). It also aims at elevating
the whole customer experience through quick and efficient service and developing a stronger
recommendation system that is a driver of continuous sales. Netflix’s propriety system is
developed in-house and is a trade secret that enables it to safeguard its competitive advantage.
Use of technology to maintain logistics and customer/ supplier relationships have helped Netflix
become the huge brand it is today (Nguyen, 2018). The vectoral class monopolizes information
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and data just like other classes monopolize capital and land. Vectoralists, like Netflix control the
vectors along which information is abstracted (Wark, 2004).
With the increasing threat of technology and more market competition, Netflix focuses of
making it's a business more efficient through the development of newer in-house systems,
maintaining relationships with studios, Initiating collaborations with electronic companies for
devices and plans to grow internationally. It incentivizes creativity for its teams, making it an
exemplary HR policy for market success. In the future, Netflix can maintain and grow its market
share by investing in web marketing through social media content, contests, and trial period
options and consider feedback to cater to the customer needs better (Dupont, 2017).
How Netflix uses information technology to maintain its competitive edge
Netflix offers an online service that allows video streaming as well as DVD rental
system. However, their operations are all managed by systems that help them manage inventory,
logistics, and customer relationships. Netflix is able to generate more order due to its smart
recommendation system that suggests movies according to the likes of the subscriber on the basis
of their trends and comparing them with those who have previously watched such movies. The
operations at Netflix are so automated that the employees seldom interact with any subscribers
directly (Mohammed, 2018). The whole process of viewing the catalog to ordering and
delivering is maintained by their smart in-house propriety system. Their supply chain
management system identifies the closest route to the subscriber’s location, making the delivery
faster and more efficient. Netflix does anticipate the future competition that may emerge as a
result of the endless opportunities that the internet offers. “Nothing protects the vectoralist
business from its competitors other than its capacity to qualitatively transform the information it
possesses and extract new value from it.” (Wark, 2004).
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Netflix works towards continuously developing its technology, and a recent example is
that of their 1 million prize contest for the in-house team to develop a system that shows a 10%
improvement for 5 years. Incentivizing innovation for their technology teams has played a major
role in their business development. With a faster and more efficient system, Netflix aims at
making its recommendation system even stronger and allowing multiple buying options. Netflix
also aims at partnering with electronic companies to come up with devices that instantly stream
videos onto the subscriber’s TVs (Nocera, 2016).
Netflix competitive environment
Competitive strategies are one of the many factors that signify a healthy market
environment. With a number of brands competing with each other in the same category to win
over the highest share of a consumer’s pocket, competitive strategies are designed to enable a
brand to stand out amongst the clutter by generating and maintaining a consumer base. Netflix
market can be defined using three different parameters (Nocera, 2016). First of all, the value of
chain perspective gets consideration. Here, it depends on the way one chooses to define Netflix.
Some consider Netflix as a distributor, giving it comparison with a rental, theatres, and retail
video stores. In a real sense, Netflix market value gets well distinction from distributors and gets
direct competition from Hollywood Entertainment, Blockbuster, Family Video, and Movie
Gallery (Bariso, 2015). Secondly, the release window of Netflix Market gets into consideration.
If one takes a shallow view of the release window as a feature in expounding the market of
Netflix, then its direct competitors will include premium and basic cable, video renters, video
retailers, and satellite. If a broader perspective gets taken, movie theatres, airlines, and hotels
might be taken into account. If the online feature of Netflix business got taken into consideration,
Netflix would not be in the same line of business with Hollywood Entertainment and
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Blockbuster. Learning about client wants and needs is a vital part of competitive analysis
(Bariso, 2015).
With more than 10 million subscribers today, Netflix has managed to successfully drive
out the DVD rental services that existed in the market at that time like Wal-Mart and Amazon.
However, with time, it is not unlikely that competition will emerge and offer better services than
Netflix or the same one at lower prices by replicating the business model (Hallinan & Striphas,
2016). Companies like Hulu and Vudu pose the biggest threats. Hulu is a free service that is
supported by advertising, and it offers a greater variety of options as compared to Netflix. Vudu
offers high definition streaming through the specific broadband connection that enables them to
be fast and more efficient. Their positive relationships with supplier and studios enable them to
cut costs and have a wider span of operations internationally. TimeWarner, Verizon, Amazon,
and HBO are also serious threats to Netflix’s business due to their long term relationships with
suppliers and better geographic spread (Hallinan & Striphas, 2016). These competitors also have
a history of business strength and can afford to invest in large scale promotion activities and
advertising. These competitors also strive to offer the greatest variety of content and are willing
to bid aggressively for that. “Vectoralists like Netflix try to break capitalist's monopoly in the
process of production and subordinate the production of goods to the circulation of information.”
(Wark, 2004).
Thus, Netflix faces severe competition currently and in the future. Its initial disruptive
technology managed to challenge DVD rentals, television viewership, and theaters, to name a
few. With many already established businesses also venturing into identical businesses, Netflix
aims at keeping up its proprietary system strategy and develop in-house systems that can be
made as efficient as possible (Raba, 2014). App streaming is also seen as a step towards tackling
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competition and keeping afloat in the long run. Netflix constantly aims at providing superior
customer value and subscriber experience by developing efficient technology. It also works
towards maintaining sustainable business relationships with television and movie studios that can
prove mutually beneficial for both the parties (Raba, 2014). Limited geographical penetration
could be seen as an opportunity to focus on huge profitable markets in the best way possible.
Vectoralists class like Netflix have replaced capitalist as the dominating exploiting class and rely
on competing mass of capitalists for the manufacture of their products (Wark, 2004).
“Netflix power lies in monopolizing intellectual property—patents, copyrights and
trademarks—and the means of reproducing their value—the vectors of communication. The
privatization of information becomes the dominant, rather than a subsidiary, aspect of
commodified life.” (Wark, 2004). Netflix’s own website gives an insight into the organizational
goals for the future. The website states that linear TV viewership is declining at a rapid speed;
this is an age of tablets and smart TV and internet. Thus, the focus is shifting towards
development for faster internet data transmission (Lycett, 2013).
However, it expresses its focus on catering to all demands, whether it is for linear
television subscriber or a mobile app one. Since it differentiates itself on the basis of ease,
convenience, and quality content, the aim for 2014 is an investment of $3 billion of content. This
mirrors the business’s aggressive stance to stay in the market and maintain its leadership
position. Their simple approach which highlights humbleness and acceptance of limited
resources but a strong focus on meeting the demand of the consumers in the best way possible is
wrapped up in an ending note that says it all, that they are willing to embrace the challenge of
emerging strong competition (Lycett, 2013).
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Examples of major Netflix competitors
Amazon Prime
It is a famous American-commerce company with approximately 117,300 employees.
The organization is headquartered in Seattle and has a revenue of US$ 74,452.0 million and net
income of US$ 274.0 million. Apart from instant video streaming, Amazon Prime comes with
free two-day shipping on different items. The organization is giving significant importance to the
catalog of titles.
HBO Go
It is a 4-year-old company and has smaller services than other competitors in the industry
and is headquartered in New York. The organization is planning to expand its global presence.
Their services are streamed in HD. So the quality of pictures is very high and very fewer
interruptions from buffering.
HULU Plus
The company was founded in 2007 and is headquartered in Los Angeles. It has a revenue
of $695.43 million. Hulu Plus is a monthly service and has a large stock of TV shows, original
content, and movies. New TV shows and movies are added on a daily basis.
Netflix vs. Blockbuster
Jordan (2011) provides a good comparison of Netflix to Blockbuster. The author states
that Blockbuster’s share price collapsed at the same time that Netflix’ share price soared. The
author looked at a variety of factors as to why this would be and found that promotional activity
was one reason why Netflix increased its market share. Since Blockbuster’s was already a
household name and had been for some time, promotional activity did not have as much effect
on share prices as it did on Netflix (Jordan, 2011). The author also notes that Netflix rolling out
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its instant watch streaming service was initially a high cost, which resulted in the loss of firm
value, but that it proved, in the long run, to be an excellent investment, as it became the primary
driver of Netflix’ increased market share. They also note that service improvements also helped
Netflix, but that service improvement did not affect Blockbusters.
Since Jordan (2011) found that the factors he studied did not explain why Netflix gained
so much market share, while Blockbuster’s essentially collapsed, they concluded that
Blockbuster’s collapse began before Netflix even originated. Jordan states that Blockbuster has a
subscriber base which is too small to compete with Netflix. Therefore, it cannot pay the same for
content as does Netflix. Also, Jordan states that video rentals are soon going to be obsolete, as
video streaming completely takes over. Since Blockbuster is apparently not going to enter the
video streaming market, it stands to reason that it does not have a business model which is
expected to survive. Therefore, since Netflix not only has more content, but more subscribers
than Blockbusters, and it can stream video, where Blockbuster’s cannot (Jordan, 2011).
Conclusion
In conclusion, the vectoral class emerge out of competitive rather than bureaucratic states
and creates a dynamic world. Netflix, in contrast to the previous market dictating Blockbuster
Inc, followed a relatively different supply chain mechanism with regard to customers reach out.
Netflix ensured overcoming the physical constraints, which were one of the reasons why Netflix
competitors suffered market sweep and overall costs. Netflix ensured timely delivery, which in
turn led to increased customers trust and earning their loyalties. Cine match was another move
aimed at bringing about more customers interaction.
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References
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