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Netflix industry competitive structure
Strategic Analysis Of Netflix
Operations strategy of netflix
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Netflix Inc.
Company Background
Netflix Inc. incorporated in 1997 and made its first public offering in 2002. Netflix is an online movie rental service which provides its 3,000,000 subscribers access to over 40,000 DVD titles. Although Netflix stocks nearly every title available on DVD, it does not stock titles containing adult content. The Netflix program allows subscribers to rent as many DVD’s as they want, and keep them for as long as they want. Three DVD’s can be out at a time, as soon as one is returned the next DVD on the subscriber generated movie list is shipped out. The DVD’s are delivered for free by the United States Postal Service from regional distribution centers located throughout the United States. Netflix can have most titles delivered to 90% of its subscribers within one business day of the shipping date.
The company provides a personalized movie recommendation service that creates customized recommendations for the subscriber. This system is based on customer rental history and the ratings the customers provide to Netflix. The ratings system is a simple 5 star system where 1 star is equal to a bad movie and 5 stars is equal to an excellent movie.
Netflix also provides decision making information to the subscriber about each movie the company provides. This information includes the length, rating, cast and crew, special features, screen formats, and plot synopses. Netflix also provides movie reviews written by Netflix editors, subscribers, and movie critics. In addition Netflix provides the average rating that other subscribers gave the title, and displays other titles that the subscriber might enjoy.
Netflix has revenue sharing agreements with more than 67 studios and distributors, and also purchases titles directly from studios, distributors, and independent producers. The major competitors for Netflix are Movie Gallery, Trans World Entertainment, Blockbuster, and Intermix Media.
Industry Trends
Since 1999 the growth of spending on DVD purchases and rentals has been incredible. According to Alexander & Associates, “Rapidly growing consumer activity and spending has built this industry into a major market phenomenon. The DVD format for enjoying pre-recorded entertainment at home is extraordinarily popular and consumers are changing their behavior to accommodate it.”
• The VHS market totaled nearly $20 billion...
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...ble debt management by having the ability to pay its interest obligations easily. All four of these ratios show us that Netflix is in a good position to service both their long and short term debt obligations, and that they have kept their debt load low and under control.
We have found that the gross, operating, and net profit margins are showing us that the company is beginning to post some gains and are improving their profitability. In addition the ROI has increased nearly 4% and the ROE has increased 7%. We see this as a responsible rate of growth which allows sales and sales revenues to keep pace with the growth of the company. By controlling their growth Netflix has been able to expand its operations and control their debt.
Recommendations
Although Netflix has been extremely efficient about the way they are controlling their debt load we believe that they may be missing some opportunities to expand their services. Netflix could possibly free up some cash to explore the market opportunities for service to the video game enthusiast. Other than that we really think that if Netflix keeps improving at the steady pace its going, the company will have a bright future.
With over 35 distribution centers across the United States, Netflix has the fastest delivery time of any online DVD rental company. Through the use of the United States Postal Service, over 90% of DVDs are received by customers within one day of ordering. ? Netflix?s easy to use website allows customers to browse the video library by category such as action, romance, drama (sixteen total categories) or by using a comprehensive internal search of the library. ? Netflix uses the technology of Cinematch to give customers even better service. Cinematch studies past selections made by members, and begins to recommend titles that would likely be enjoyed by the customer based on previous selections. ?
Netflix is the leading industry in the movie rental business. They originally started out as a mail in movie rental and have expanded greatly. Now you can stream most movies
Netflix Revenue strategy is to charge recurring monthly subscriptions and since Netflix offers great products/services that customers want, people are willing to pay a little extra each month. In addition, Netflix was able to make partnership with companies like Apple to access Apple’s large customer base.
The SWOT matrix of Netflix GO, goes hand in hand with Netflix itself. The strengths of Netflix GO heavily rely on the company itself. Currently Netflix is one of the biggest names in the entertainment industry and has established itself as a credible company. As of the third quarter of 2016, Netflix has very large customer base with 86.74 million worldwide subscribers ("Number of Netflix"). The retention of these customers is based off of two main factors. First, the customers have very large selection of television shows and movies with an amazing 13,000+ titles to select from (“Netflix TV Show”). Second, and most importantly subscription for annual subscribers who will use currently use Netflix and those who will use Netflix GO will being
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
What the found out was that customers wanted to watch shows they wanted to watch, when they wanted to watch them, versus the shows that networks dictated they should watch and what time they should watch them. (Nocera, 2016) Thus, Netflix changed its strategy to create customer value but also constantly provides new content to keep the customer engaged, therefore, maximizing the lifetime value of each acquired customer. (Khan, 2012) (Nocera,
The Netflix Company was founded in August 29,1997, by Reed Hastings and Marc Randolph. It was not until 2007, where Netflix started to expand to new territory by offering media streaming. Since introducing online media streaming they have become a multi-billion-dollar company. They surpass the net worth of Hulu by almost double their amount, showing how popular this video streaming service truly is. Along with any successful business, they must have policies they follow to calculate any revenue or investments.
In order to be successful at an online market, Netflix must have an efficient distribution network that allows fast delivery of DVDs. The future of content delivery is through streaming. According to Netflix CEO Reed Hastings, “Over the coming decades and across the world, Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear, and screens will proliferate. As Internet TV grows from millions to billions, Netflix, HBO, and ESPN are going to lead the way”. (Hastings 2013)
When Netflix first began, in 1997, they quickly branded themselves as a DVD by mail Service Company. Netflix set this platform, and the barriers to enter this industry were high. The industry wasn’t saturated and had room to make profit; many companies began to emerge (Newman, Rick). Nonetheless, there’s not a lot of infrastructure to building a video on demand business, the barrier to entry was low. The threats to new entrants would face is the actual business model itself with R&D, patents, and cost being a factor. Also, the capital that is required to attain a license to a movie is considerably high. The threat of new entrants includes HBO GO, Amazon Prime and On Demand TV, and most of the companies’ desire to venture into the movie rental business, and it has proven to be successful (Kopytoff, Verne). The industry is still young, and many of the businesses are still experimenting with their business models.
Vertical integration inquires a business to have control over the steps within their supply chain (Lin, Parlaturk & Swaminathan, 2014). To remain competitive with other entertainment subscription services, Netflix is developing original programming material to maintain current subscribers and attract new ones (Ferrell & Hartline, 2014). Developing their own programming gives Netflix control over the content, licensing rights and marketing opportunities within. As of 2012, Netflix had designated $75 to $100 million of its budget to attracting new subscribers based on original programming that they had created (Ferrell & Hartline, 2014). Netflix has been highly successful with their original programming being nominated for many awards and
Social media activities are known to be effective tools to building program engagement as well as becoming a promotional net to attract more viewers. This would in turn build loyalty among viewers and increasing ratings growth. Netflix has spent little in advertising in relative to other companies and has always relied on word of mouth as our main marketing tool. Studies have shown that the power of word of mouth can be amplified and intensified through online and social media engagement.
The company that will be analyzed in this critique is Netflix. Netflix is a provider of on-demand internet streaming media available to viewers in all America and parts of Europe. Netflix allows a wide range of ages to watch a variety of different movies and TV shows. Before making a long term commitment to Netflix, people have the chance to use a Free Trial. The Free Trial for Netflix is available for 1 month. People are able to watch unlimited movies and TV episodes over the Internet on a Netflix-enabled device. After the month is up, people will then decide if they want to continue to use Netflix as a member, or decide to cancel the membership. Netflix is a month to month subscription which is $7.99 (Netflix, 2014). Netflix was introduced
Netflix’s marketing strategy came to life because Reed Hastings, the CEO of Netflix, had the problem of keeping a rented movie too long and then getting charged excessive late fees. The company’s initial marketing strategy was to allow a customer to order a DVD in the mail and keep it as long as they want. Netflix later developed a process for customers to be able to go to the company’s website from the comfort of their homes and watch anything they wanted, as many times as they wanted (Marketing). The variety of subscription options for customers attracts more subscriptions than normal to Netflix. Customers can
Netflix was the first and largest digital movie source available to the home consumer. However, competition amongst new providers has changed the amount of content available to them as well as how they proceed in acquiring new material. With new providers on the rise, studios can choose whether to source their material to Netflix. Starz choose to no longer provide their programming license to Netflix beginning in 2012 (Ferrell & Hartline, 2014). Competitors like Amazon and Hulu are working to obtain studio content rights to bring some of the same content to their service as Netflix has (Ferrell & Hartline, 2014). Facing strong competition from other services to obtain licensing rights, it has become ever more important for Netflix to develop
Previous Next Comcast, the largest cable company in the United States, already provides an extensive library of on-demand movies. On Wednesday it announced it would provide an additional 250 movies every month to its digital cable customers at no extra charge. In total, Comcast customers will be able to select from about 800 movies each month.