MBAF-504-TEAM-PROJECT

.odt

School

University Canada West *

*We aren’t endorsed by this school

Course

620

Subject

Economics

Date

Feb 20, 2024

Type

odt

Pages

12

Uploaded by SargentEmu3056

Report
MBAF 504-F29: BUSINESS ECONOMICS University Canada West Professor, Mukhtar Tabari 12 th November 2022 TEAM PROJECT 1: Analysis of Netflix Business Model using Microeconomics Principles Team C Christiana Ilechukwu A (2219747) Kapil Thukral (2211430) Mahagammulle Gamage Piyumi Nisansala Wickramasinghe (2200845) Juan Gutierrez (2205749) Chiazoka Chidubem(2218529) Chiamaka Angel Aja-Eze (2200403) Dimpy Dhamija (2210564)
Analysis of Netflix Business Model using Microeconomics Principles ------------------------------------------------------------------------------------------------------------------------------ Abstract The purpose of this paper is to research and identify how Netflix utilizes components of microeconomics like supply and demand, to help achieve their business goals by increasing subscribers and generating revenue for the company. At the same time, the research paper demonstrates the behaviors of long- and short-run cost curves and their impact on subscriptions by examining recent events that has caused the company’s subscription rise and analyzing how the competing firms have been performing to surpass the market dominance Netflix has acquired over the years. Introduction Netflix, which was once a DVD distributor, has now become the world’s leading streaming entertainment service with about 223 million paid subscribers in more than 190 countries around the globe. The marketing techniques and the user interface of Netflix have revolutionized how people watch TV. Although, their unique advertising strategies like ‘Netflix and Chill’ has brought a great deal of attention to this video streaming platform to attract more consumers. Other similar streaming platforms like Disney Hotstar, Hulu, HBO, Amazon prime video, Showmax, etc. have also been racing to compete and chip away at the subscribers by offering similar services at lower prices (CNBC,2022) . All of these affected the major loss in subscribers, and their stock dropped drastically in April 2022. But now, it looks like the company is bouncing back and is ready to get out of the dark cloud after months as in the recently announced to have added 2.4 million subscribers in the 3 d quarter of the year which may be the result of their aggressive approach towards adding latest hits on the platform for streaming. Which even overshadowed the fact that they had already increased the prices of subscriptions earlier this year. Demand and supply curves to examine Netflix business model Netflix, an American subscription-based streaming service company, provides exclusive content which no other platform or website is legally allowed to post. As a result, people who want to watch this hyped content are inclined to buy a subscription. This indicates that a streaming platform’s market performance is majorly dependent upon the content they accommodate and advertising, which is their supply, in this case, the subscribers that are attracted towards buying their services, generate an increased demand in this market if the platform’s content is desirable Thus, demand and supply play a vital role in determining the market price and quantity through the interaction of buyers and sellers.
According to the article, in the third quarter of 2022, Netflix added 2.4 million subscribers increasing its subscription band from 220 million to 223 million subscribers. This was followed after they lost some subscribers due to an increase in the price. Below is the subscriber’s trend analysis from Q4 2019 to Q3 2022 using the demand and supply curve. CASE1 Due to the increase in covid 19 cases, many restrictions were imposed worldwide. A complete lockdown was implemented in various counties. Effect Due to the lockdown, people were isolated in their homes, disconnected from their social life. So, for many people, the most plausible way to get rid of their boredom is by streaming movies and web shows online. Thus, it impacted Netflix positively as it experienced a hike in subscribers from 167.09 to 192.95 million subscribers (approx. 25.86 Mn subscribers). Before covid, Netflix’s subscription was more like a luxury service, but now, it is a necessity due to safety and security reasons. People prefer to watch movies in their own personal space and time with their family. So, the demand curve shifted to the right, and supply was not affected because all the production houses were also closed during that time. The new equilibrium point moved rightward with both increase in price and quantity. CASE 2 In January, Netflix hiked the prices of their plan in the USA and Canada. Effect:
The increase in the prices of all the plans seems to be a shocking decision by the company as many subscribers started to get double-minded about whether they should continue with the subscription as the competitors have a lower price. So, the demand curve will shift leftward. And the impact was seen in Q1 of 2022 as the subscribers fell by 200,000. At the same time, there was a rise in subscribers of Hotstar by 7,900,000 during that time. In the case of supply, it will remain the same as the price change will not affect it (Caporaso, 2014). CASE 3 In quarter 3 of 2022, Netflix launched new seasons of the most popular web series, Stranger Things, All of us are dead, and the movies such as The Gray man, purple heart, etc. (Whitten,2022) Effects:
Netflix added a bunch of movies and tv shows in Q2 2022, which was highly successful. Thus, the supply curve will shift rightward. They now have a total of 3600 movies and 1800 tv shows. Also, the addition of new shows and films attracted a lot of customers in the market. Hence the number of subscribers increased from 220.6 million in Q2 to 223 million in Q3 with 2.4 million new subscribers. Hence the demand curve shifted rightward as well. CASE 4 Netflix is planning to launch a new ad-supportive basic plan. This plan is $6.99, which is $3 cheaper than the basic plan. The only difference between this and the basic plan is that the viewers would get 4-5 minutes of ad per hour. Although in its first phase it will be launched in only 12 countries. Effects:
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help