The main problem facing Netflix is the pending conflict with its content providers. Netflix has low bargaining power both over suppliers and buyers, and this represents an existential threat to the business. Netflix has proven to be a popular service, but despite the successes of its first ten years, there is now evidence that it has not fostered much brand loyalty, and that its customers are quite price sensitive. Combine this with the fact that its content suppliers are becoming direct competitors in the online streaming business and Netflix is in significant danger of having its growth trajectory derailed.
The third issue affecting Netflix is the age of movies that they offer to their customers. Netflix cannot deliver the newest movie titles online because they are not offered through VOD for at least a month after they come out on DVD. This is a huge disadvantage to their customers that exclusively use Netflix’s online service. This is the only advantage that Blockbuster still has over Netflix, because if someone wants to see a movie the day that it comes out on video then
Though Netflix has a huge subscriber base its market share could erode if it is unable to effectively compete with its video selection and price. Netflix is continuing to add to its vast video library at the same time keeping its price point low enough to prevent competitors to expand into the video streaming and video rental market. Netflix believes that the DVD rental market will decline and has shifted its core strategy to grow the video streaming business.
Corporate-level strategies are liable for market definition; they address the entire scope of the business. This strategy helps a business to diversify its service. It gives them direction in which geographic region they should operate and which service markets to strive in. “Thus, an effective corporate-level strategy creates, across all of a firm’s businesses, aggregate returns that exceed what those
Netflix can insulate itself from this threat to existence by staying competitive within the market by making an impact with nearly 23 million U.S. users it is now the largest video service within the country. Most observers expect the company to have more than 30 million subscribers by the end of the physical year. But the animating force of perceived Netflix Paradox is disbelief that when a company does what Netflix does can thrive within the media industry. As long as Netflix primarily focus in the business of aggregating entertainment, the company with prosper Knee (2011).
Netflix does not allow customers to watch all released movie on demand. There are some movie that customer cannot instantly watch. If Netflix developed streaming service and figure out a problem of coexisting between rentals and streaming service, Netflix can create competitive advantage.
Netflix was created by Reed Hastings and Marc Randolph in 1997. In 1999 Netflix offered unlimited rentals a month for one low price. There was 239,000 people who signed up. Hastings was faced with a challenge from Walmart now that has passed there bigger threat is Blockbuster. People loved having unlimited due dates with no late fees, and it delivered right to there houses. Hastings got the idea when Blockbuster charged him $40 dollars in late fees. Subscribers of Netflix are streaming videos and episodes instead of watching it the first time on cable. Netflix is in trouble because Disney and Nickelodeon are thinking about pulling there shows away. If they do that Netflix will lose a lot of subscribers. Cartoons are a lot of the reason most
Netflix could pursue movie studios if it can build up a higher number of customers who are watching their exclusive shows. The con to a movie studio is the fact that there will be various expenses which could result in removing part of their customers who enjoy the low 7.99 rate. Therefore Netflix would become something that it is trying to compete against which is the bigger cable providers. An avenue that Netflix is best suited for is creating original shows, and movies such as House of Cards. For Netflix to take the next step it has to create at least one more show that has a national audience such as the type of numbers that Breaking Bad, or Walking Dead has. This would pave the way for them to create more of a fan-base, and allow them
The video rental industry began with brick and mortar store that rented VSH tape. Enhanced internet commerce and the advent of the DVD provided a opportunity for a new avenue for securing movie rentals. In 1998 Netflix headquartered in Los Gatos California began operations as a regional online movie rental company. While the firm demonstrated that a market for online rentals existed, it was not financially successfully. Netflix lost over $11 million in 1998 and as a result significantly changed the business model in 2000. The new strategy included focusing on becoming a nationally based subscription model and focusing on enhancing the subscribers experience on their website. The change in
Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenue 's.
Netflix holds a contract with movie studios and film producers (such as MGM studios, Warner Bros., Dream Works, etc.) to gain direct distribution and access to first run movie content without the traditional 9 to 12 month delay. This strategy of developing key alliances (Best Buy) with content providers in film and the television sector, and merchandise of DVD hardware has moved Netflix straight to the top of the market, making their brand name recognized and trusted. * Very competitive prices.
The popularity of another video on demand companies are making it challenging for Netflix to continue to license content from television networks and movie studios. Television networks are creating their own video on demand series which eliminates the availability for Netflix to purchase content. Since Netflix debuted in 2007 it has had its annual revenue from 1.2 billion to $6.8 billion (Nocera, 2016).
Netflix has an extremely high growth rate for their revenues as they are doubling every six months. While revenues are doubling in the last year sales and marketing expenses have gone up more than three times. The main objective now is to make sure that after an initial public offering Netflix will continue to create positive cash flows.
This report has been designed to understand where the video market is today, what consumer trends are, and how to stay ahead of competitors. This report will research these three points: