Vertical Integration At Netflix

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

very popular amongst viewers. Continuing to develop their own programming to include original series, movies, and documentaries is a great way for Netflix to ensure their own future success without having to rely solely on licensed material from other media outlets. Offering their own material would allow Netflix the liberty of only financing the production of the material instead of having to pay licensing fees upon renewal.

Netflix programming and other subscription services take up a great amount of internet usage globally (Randhawa & Kumar, 2008). If Netflix were to acquire their own piece of the internet infrastructure, they could maintain their traffic without added fees on the internet usage (Weber, 2010). As services continuously increase in prices, Netflix would no longer be at a disadvantage when it came to negotiating with the infrastructure providers and would have their own access dedicated to their media service. Eliminating external fees that Netflix has no control over and bringing these internally, will help to reduce the cost of operating the services and allow them to bring more services and original programming to the customer.