Current Goods and Services
The company Netflix is known as a storehouse of content. (Investopedia, 2015) The content includes movies, documentaries, TV shows and educational programs. Viewers pay a flat monthly fee to view the videos anytime and on any type of platform. They also offer a mail order DVD rental through DVD.com. This service allows you to list DVD on a queue to be mailed for viewing and consumers are never charged a late fee.
Areas of Operation
The company’s headquarters are located in Los Gatos, California. Today Netflix has over 100 shipping locations throughout the United States. These locations serve globally and throughout the United States. Today Netflix provides services in over 60 countries throughout the world.
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This will determine how Netflix can be the best in services to sustain future growth in the current market. It is also important to evaluate revenue versus current pricing. This will help understand the impact on consumers by utilizing the price of elasticity of demand to guide us. Today, Netflix has over 60 million subscribers in 50 countries. As the demand for video rises, Netflix will expand into over 200 countries by the end of 2017. (Heisler, …show more content…
As the new videos are released or developed the demand rises. As the U.S market and International market rises and strengthens, the company is prepared to continue its expansion to improve the global sales. (Heisler, Y.n.d.).
Price Elasticity of Demand
As the demand for content increases, Netflix’s demand rises as well. Netflix claims that the largest share of their video streams market is from their library of licensed content. (Caporaso, T. 2014) It is believed that providing entire seasons versus episodes it promotes “bing-watching” habits. (Caporaso, T. 2014) To meet and maintain consumer needs, there is ongoing requests for more entertainment options. Netflix is continually expanding and updating its inventory to meet consumers’ needs and to compete with competitors.
During the expansion hike of Netflix, their competitor Amazon announced a multi-year deal with HBO. Amazon announced they were providing their prime members with HBO’s exclusive online access to in addition to the Showtime
Since any other form of entertainment is considered a substitute, Netflix?s industry is in direct competition with all other forms of entertainment, whether it be reading, physical exercise, regular television, etc. If trends in popular culture move away from those related to movies, revenues may be affected.
The average Blockbuster store carries roughly 1,500 movie titles. Netflix carries more than 12,000 titles. It has movies that you can't find anywhere else. And Netflix uses collaborative filtering technology to send you emails that alert you to movies that you might otherwise never consider. Netflix saw the video- and game-rental market moving to DVD and built its business around that trend. Netflix doesn't rent videocassettes, only DVDs (in part because they're lighter and cheaper to mail). Netflix was able to identify and implement a strategy fo...
In 2006, they had established a major presence in the US with 5,194 locations, of which 4,255 were company owned. Overhead for this many locations and payroll represented a major percentage of their total costs. In comparison, Netflix had a mere 44 distribution centers scattered across the US, yet they could deliver to more than 90% of their subscribers within a single business day. Their low overhead costs paired with a superior business model resulted in revenues of nearly $1 billion, generating free cash flow of $64 million by 2006-year-end. Another difference between the two companies involved their video focus. As mentioned before, Blockbuster concentrated on providing hit movies and new releases to their customers since traditionally these would make up over 70% of total rentals. In contrast, Netflix offered an expanded selection of movies where new releases represented less than 30% of their total rentals in 2006. One similarity between these two companies was their elimination of late fees. Netflix was the first to do this in 1999 and Blockbuster followed years later. This benefited Netflix greatly as their customer satisfaction and loyalty increased. However, Blockbuster suffered a loss as 10% of their revenues came from the late fees they charged their customers. Blockbuster was slow to adapt and were stuck in their brick-and-mortar business model. Netflix aggressively worked on improving their business model by implementing useful features, which can be seen to this
As advance technology of fiber-optic developed and is on the rise, everyday there is another story about entertaining movies on demand and streaming online is with ease. Those developments which let movie’s viewers sit in the comfort of their home or anywhere with access to the internet can stream instance movies with a push of a bottom. They no longer need to make a trip to the movie’s stores for movies rental and return, so that is why movie shops fail and filed for bankruptcy bring a symbolic close to the “let’s go rent a movie” era. Blockbuster LLC, formerly Blockbuster Entertainment Inc., both owned and franchised American-based giant provider of home movie and video game rental services through video rental stores, later adding movies by mail, streaming online and video on demand. Due to the peak of fiber-optic and competition from companies such as Netflix, Redbox, and GameFly, Blockbuster became the victim of digital media and filed for bankruptcy on September 23, 2010 due to significant lost in revenue.[3]
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.
Companies like Amazon and Netflix are very effective in predicting what customers normally buy and watch. Knowing what your customers are or are not buying will allow you to position products that they are statistically likely to purchase based on recent transactions and activity. This is a powerful tool for Netflix because it keeps users engaged and actively using the service but also allows them to tailor their investments in content towards items that are more likely to keep users active on their site.
Reed Hastings, co-founder of Netflix headquartered in Los Gatos, CA, began the company’s operations in 1997 after receiving an enormous late charge from a movie rental he returned long overdue. However, Hastings had the desire to be different than traditional movie outlets; whereas, customers had to drive to the location, pay a certain amount for each movie they rented, and were given a deadline in which to return the movie. Instead of using a method established by other video markets “to attract customers to a retail location, Netflix offered home delivery of DVDs through the mail” which eventually led to a booming business towards streaming forms of entertainment (Shih, Kaufman, & Spinola, 2009, p. 3). Today, Netflix exists along with several competitors; however, offers the most streaming content available for viewing, and continues to grow its subscriber base both domestically and globally. Although, direct and indirect competitors, acquisition costs, and several barriers present a financial threat for Netflix, the company has managed to grow with the acclamation of partnerships, expand to international territories, and vastly increase its price in shares of stock.
As the firm moves forward, top managers must pay attention to staying unique to sustain a competitive advantage. Netflix does not own their content, nor do they have any tangible assets. Netflix is a part of a broad range of network users. As technology continues to grow exponentially, Netflix will have to be readily adaptive to change and innovation. Technology never stops growing and evolving, therefore, Netflix’s business platform should never stop growing and evolving. At the same time, they must be careful to remain user friendly and customer centric by keeping the technology at a level where users will not have to obtain a certain set of technological skill sets.
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.
As of 2015, Netflix is in 1/3 of American households, whereas Amazon Prime is only used by 13% of American Households. Moreover, when looking at market shares, Netflix has a 37% market share. In contrast, services such as Youtube have only 17% and Amazon has 4% market share (Fortune).
The outlook for Netflix has developed a trend of continuous growth with subscribers and providing products with a substantial cost advantage by distributing a wide variety of titles that appeal to different customer groups (Anthony, 2005). The success of Netflix was simply listening to consumer’s feedback regard...
Netflix is a great website/app. Netflix has over three thousand movies and TV shows, and a variety to choose from. The organization is a site or an app, where people can watch movies and TV shows for as low as eight-dollars a month. Netflix has many genres. They even have a section just for kids.
1) Netflix’s currently does not have a user-friendly method for customers to stream videos onto television sets. Netflix is entering agreements with the manufacturers of game systems, Blu-ray disc players, and televisions to include software capable of streaming Netflix videos. 2) There is strong competition with other companies that offer video streaming at no extra charge. Additionally, Netflix and its competitors are attempting to enter the digital world.
Compared to a Netflix customer who can easily view rent a movie or video content through his or her computer or gaming console. In addition, their services are offered around the world from Latin America to Canada all the way to the Caribbean. This way Netflix is able to connect to its customers in the foreign market where as, their competitors are not as strong in these markets. Therefore, giving a competitive edge for Netflix to dominate the market.
Before Netflix can fully determine the market impact of its decisions on productions and expand services, it is important to observe the competition further. HBO, for example, was the first to discover the value of the original series with the programming OZ, The Wire and the Sopranos as an exclusive service through the Internet if the customer has a cable provider (Tamariz, 2013). Thus, making it easier for HBO to have more customers due to the validity of A-list stars keeping long term customers that subscribe to cable networks. The result of HBO's extensive client base Time Warner quarterly reported in 2016 that Home Box Office or HBO generated a total subscription revenue of $5,964,000,000 (Time Warner Inc. Reports Fourth-Quarter and Full-Year 2016 Results, 2016).