Introduction to Netflix:
Netflix is an American media service provided where headquarters are based in Los Gatos, California. The company was founded in 1997 by two gentleman named Reed Hastings and Marc Randolph in Scotts Valley, California. Since then the company has expanded rapidly all over the globe. The company’s main objective is providing subscriptions based streaming all content media services across the world. This means they stream all type of television daily soaps, series and dramas. Since it has taken over the globe. Netflix enlargement and success has accumulated millions of subscribers paying to watch series, in the third quarter of 2018 Netflix has over 137 million streaming subscribers worldwide (statsitica.com). it streams videos in 21 languages. According to a 2014 report by Nielsen, roughly 36% of households in the United States have a Netflix subscription, compared to just 13% for Amazon Prime and 6.5% for Hulu.( Investopedia.com).
Netflix mainly makes revenue through subscriptions which means per subscriptions would cost roughly around $7.99 and $13.99 per month. which results in a total of $950 million a month. They also provide another sub service that is DVD rentals making approximately $30 million per month. Which results in a lot of money per month. According to Mihir Pathkar who wrote an article for makeuseof.com said that “the company earned $8.83 billion in total revenue in 2016, and is on track to make over $11 billion in total revenue in 2017. Netflix does not make any money through advertisements or commercials in its streaming service” (makeuseof.com)
Furthermore learning from our academics side we have analyzed how certain business factors can affect the environment this could be macro factors, these factors have a major impact on the well being of the business. Some of the mac factors that have an impact are political, economic, socio-cultural, technological, environmental and legal. Marco environment influences the entire business level.
Industrial analysis :
Netflix being a multinational entertainment company which provides online streaming, the company has grown rapidly due to its different services provided. Yet there are some factors that could affect the company.
Netflix is a large company, having its membership available in 190 countries across the world. There are 130 million active users. the world population is 7.53 billion, this gives Netflix a great opportunity to boost the business, the users of Netflix are mainly millennials both male and female. China mainly contributing the highest population of 1.42 billion, Netflix nest motive should be to
In the united states and Europe, a lot of clients have stepped away from television due to the wide selections of shows that are available online by companies like Netflix. It is believed that big telecom companies like AT&T have moved forward towards the federal communications commission to have more firm regulations for their users, as this could decrease their user level and also could eventually lower their business.
Within Europe, United Kingdom users could possibly be affected by Brexit as said by the European website on the internet.in one of the articles published online by Richard, Porrit said how using Netflix outside the EU whilst on holiday could be banned according to the new papers released by the government. This means that users will lessen due to this regulation. The company might have to implement its membership to countries that do not have Netflix streaming yet as this could somehow help them to get more revenue.
As of 2018, Netflix has 137 million subscribers that have been subscribed throughout the world. Which means a lot of clients are enjoying the service provided by Netflix due to its competitive less pricing strategy. These days people are very concerned about the price quoted in the market due to the recession which makes budgeting very tight for every household. Traditional Television subscription like SKY and Virgin media would cost a lot more compared to Netflix
Another factor that would affect the economic growth is the exchange rate depending on the country’s currency rates and VAT. For example The price quoted is £7.99, however, due to the market, the price could go up to £15 due to the exchange rate.
Netflix users are mainly the younger generation who prefer watching the latest new series that have been just launched.
It is believed that 4K television market is increasing rapidly. Due to this a lot of clients have been setting up 4K televisions at their homes. Streaming Netflix will consume a lot of data on their internet broadband which in return will make the service really slow. Furthermore in the future, if any company creates a new technology that would suppress the large data used to stream these videos will be a great factor for Netflix.
According to business teacher website, one of the online articles mentioned on how Netflix’s R&D labs have developed a really cool software called “Hermes” which would instinctively grade the show's translation. (business teacher, 2017)
Online streaming services like Netflix has a major impact on the environment due to its wind power. However, there are initiatives taken for cloud storage to reduce its increasing carbon footprints. The government has also regulated that companies such as Netflix might have to pay the environmental bill which sums up of $11 trillion by 2025. ( Lewis, 2016)
Two years back, a lawsuit was filed against Netflix in the united states by their customer George kertsis as he was promised a lifetime service at only $7.99 pm as long as he did not suspend his account, however the standard price increased to $9.99 pm resulting Netflix to breach their policy and rules which not only upset George but this also lost many potential customers.
Drivers of profitability in Netflix:
There are different drivers of profitability that help Netflix to increase its profit and also become a leading online streaming company. these are some factors that have a major influence on the business as a whole. When identified these profit drivers, the company can focus on them and also help them to achieve the best results. There are different types of profitability drivers such as:
Financial profit drivers:
Financial profit drivers are something that can be directly linked to the finical side of the business this means they have a direct relationship with :
The starting subscription price set up by Netflix For example to join Netflix the starting fee is £7.99. Netflix should keep the standard fee the same as this could attract a lot of clients and also help them to increase their brand value.
Percentage of clients:
This is a factor that calculates customer retention. At the moment Netflix is considered the top competitor to beat its rivals when it comes to customer retention. This is due to an excellent service of different episodes and other services provided to its users. Even though YouTube is free, Netflix is still more popular.
A number of sales:
Netflix has made 3,999.37 million dollars in their 3rd quarter in 2018. Which is a lot of money. This clearly tells that customers enjoy watching Netflix. Since the development and increase of online service provided by Netflix have doubled in their 3rd quarter, this will gradually increase the number of the subscriber’s in the future.
Non-financial profit drivers:
Nonfinancial profit drivers can impact the bottom line of the business. These factors are not expressed financial yet play an important role in the profitability of the business. Some of the key facts in this cluster are :
Even though Netflix is a subscription-based online service yet the customers that have been subscribed are still happy with the brand. According to statista.com, there was a comparison made among Netflix and its competitors and the overall results were very positive as Netflix topped the chart.
Business culture and values:
Netflix culture is mainly based on friendship entertainment and fundamental needs. It is a brand that keeps every aspect and protects the rights of their employees and customers. Netflix culture encouraged by independent decision making.
Netflix values are based on nine important aspects that are judgment, communication, curiosity, courage, passion, selflessness, innovation, inclusion, integrity, and impact.
Employee satisfaction and safety:
Employee satisfaction is considered a crucial subject happening in any workplace. This will encourage the employees to work dedicatedly and create a happy environment for all. Netflix is believed to keep all their employees happy. A recent report said how Netflix employees are happier to those at Google and Facebook, this is probably due to a safe environment, good working hours and a complete supportive human resource department that looks after all the colleagues.
Like all other brands, Netflix still has many competitors in the market like Amazon Prime, Youtube, Google, Facebook. We can sum up all the different opportunities and threats by doing a SWOT analysis for Netflix.
• Netflix has a strong brand name, which makes the brand a trusted one, after almost 10 years Netflix has acquired the top sole brand position for streaming online videos.
• Netflix has a strong customer base which serves 190 countries, which has over 137 million subscribers globally.
• All the content produced on Netflix is original which has increased a lot of subscribers in their 3rd quarter 2018.
• They have a wide selection of content to choose as compared to Amazon and Hulu.
• Netflix has a big gap between time from when a certain show is released as the content would appear after 28 days of release, this means other competitors like amazon prime and Hulu would make it available soon.
• Lost some potential clients after Netflix tried to increase their standard fees in the united states and being sued by a customer.
• DVD by mail has dropped due to online streaming becoming immensely popular.
• Netflix has been ranked D in environmental awareness. This is something they should keep in mind as competitors Facebook and Amazon have been performing better.
• Netflix which is yet not available in China is due to its licensing, this gives Netflix a great opportunity for the future to take control of online streaming in a country with a very high population.
• Due to increasing technology like 4K and VR, this gives Netflix an opportunity to think ahead and bring new updates.
• Netflix could also be try to introduce live sports and online games which they currently do not offer.
• Increased competition with Facebook which has a new update called Facebook Watch where viewers can watch different series. This could affect Netflix in a long run as the service provided by Facebook is free.
• Amazon is another main threat because it provides online streaming and also free shipping on all their products with their annual membership fee.
• Piracy is another major issue for streaming online videos. This could affect the business.
To encounter all the above threats and weakness Netflix will have to build strong profit drivers that will accumulate revenue for the business in spite of all the competitors and weakness that are present in the market. Netflix needs to constantly keep their website updated this could be bug fixes and other necessities needed. Another key important factor is introducing some special schemes for holiday season or summer as this could attract potential clients.
As Netflix has a wide choice of episodes and movies to watch online and there is a lot to select from, on something they could change is the layout of the channel, Netflix could add a mood to the genre of the movie for example if you like something romantic, sad, happy etc. another thing that could be taken into consideration is the star rating for the movies, the new system on Netflix allows you to “thumbs up and thumbs down” which users find it a bit hard due to previously having a complete 5 star rating, as movies that seem average do not fall in between anything.
Netflix is one of the top online streaming websites, it has managed to position and also build a strong image in today’s world. The company was able to load themselves with numerous wide range of movies and other series. A small firm that started off in 1997 today is recognized and recommended by all. Netflix has not only managed to stay ahead of its competitors but also taken power over the whole online streaming industry. There are many brands that are trying to imitate Netflix, however, have failed to do so due to the strong image.
Netflix soon will take over the globe and be available in places that do not have Netflix still. This will make them the top brands in the world. Not forgetting the brand culture and vision that doesn’t only provide the best content to its users but also a happy place for their colleagues. Netflix has been successful in their online streaming videos alongside DVD by mail business with big competitors like blockbuster despite providing similar content. They have a strong vision consists of encouraging independent decision made by all individuals. To share any information widely and openly to all their users and members. It is believed that Netflix core philosophy is “ people over process this means that they have a strong work ethic among themselves that helps to succeed in their goals for making the company prosperous. All these real values contribute to building a strong image for the brand.
In spite of the fast and moving technology, Netflix is keeping up with the phase to conquer the online streaming world with their excellent service. They have been introducing new series every time which keep the customer retention high. Furthermore, we can conclude by saying that in the coming years Netflix won’t be a people’s choice but a must for all the people in the world. And as the Netflix founder Reed Hastings says “If the Starbucks secret is a smile when you get your latte… ours is that the Web site adapts to the individual's taste.” (Reed Hastings)
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