Netflix Financial Analysis Essay

1. Netflix’s original marketing strategy offered several flat-rate monthly subscription options; in which, members could stream movies and shows via the Internet or have disks sent to their homes in a pre-paid and pre-addressed envelope. Free from the despair of due dates and late fees, members could keep, up to, eight movies at a time. Upon the return of a disk, Netflix would automatically mail out the next movie from the customer’s video queue. Members were able to change and update their queues as frequently as they liked. The sheer innovation of Netflix’s strategy encouraged several competitors to enter the market to compete directly,

Comcast has been dominating the cable industry into a suspected monopoly that has about 296.6 million customers and has spent $586 billion to do so. With the discovery of online streaming companies like Netflix were born and offer hope in ending Comcast’s rein on the cable industry as their business become obsolete. By understanding that customers are frustrated by cable and what satisfies them about cable we can restructure a company like Netflix in order to achieve this goal. By maximizing on this information in conjunction with their recent re-branding and superb customer service this new, improved, and imaginary Netflix will capitalize and become a larger competitor to Comcast.

Online streaming is seeing the biggest growth in sales, showing quarterly subscriber a growth of 8% share in the global market in 2016 (CNBC, 2016). As a consultant, it is important that the company gets all

Netflix is an entertainment company that specializes in streaming media and online video-on-demand. Over the years, it has grown to include film and television production and other distribution services. Its business model has changed, and so has its overall production cost grown to keep up with the increased market share. As a result, its current position in the market has made it more exposed to competition from other firms, which is why it needs to develop new strategies to remain profitable. Netflix has grown over the past years despite competition and its unprofitability (Helft, 2007). Therefore, to understand its success, it is important provide a microeconomic analysis of Netflix, its history, its products, and the market.

Entering and transforming the video rental industry was a large undertaking for the start-up company. The first marketing objective the company undertook was the process of building a brand. Netflix’s identity was crucial to future growth and success. Without a strong brand, competitors with deep pockets could have easily duplicated the company’s business model. Secondly, leveraging technology was critical to establishing the business and infrastructure growth. The consumer base was the final objective Netflix sought to achieve. Retaining and growing subscribers were fundamental to revenue and marketing goals.

Growing competition as a challenge represents the various companies that are now entering the market of online media-streaming. Companies such as HBO, Amazon, Google, and Hulu Plus have all began to offer media-streaming on the same electronic devices as Netflix, Inc. Currently Netflix, Inc. remains in the lead amongst its competitors; however, there is no guarantee that this advancement is a permanent one. It is inevitable that emerging companies will come up with creative ideas to gain the competitive edge and receive more consumers. For example, Amazon.com has “amplified

As the world entered into the 21st Century, humanity has witnessed an ecology of innovation that ranges from artificial hearts and livers to iPods to Bluetooth technology to smartphones and many more ("21st Century Inventions That Made an Impact”). Each with its own unique attraction has become a catalyst in nature for how individuals think, act and live. Along with these state of the art developments, Netflix has become the cutting – edge service for internet streaming media. Deemed as “a worthless piece of crap” from Wall Street analysts, Netflix with tremendous leadership gained control of their industry and swiftly transformed the delivery of movie rentals ("How Netflix Beat Blockbuster: An Exemplar of Emerging Technologies”). Faced with impossible odds, we will discover how Netflix was able to survive, conquer and prosper as the emerging technology in their industry.

Also Netflix needs to prepare a better plan to recover old customers, gain new customers and make sure that the people who still have Netflix keep it. Establishing a bundle price for both online streaming and DVD rental will allow The Netflix Company to recover some market shares and remain the leading overall digital film company. The recommendations are as follows:

The point of the current ratio is to measure the ability of a company to pay off debt obligations. Netflix has a constant ratio hovering around 1.25-1.5 for the past five years (Appendix II, Exhibit 2). While this ratio would ideally be over 2.00, it does not indicate anything good or bad within the company. It is similar to this industry average, and is also similar to its Time Warner and slightly above Amazon. Because this ratio is similar to its competitors, investors should not worry about the company’s ability to meet payment deadlines. Having a ratio of over 1.00 indicates that Netflix has more current assets than current liabilities, which means that Netflix is unlikely to go bankrupt in the near future because it can afford to pay immediate obligations. Also, it is good that the ratio is not too high (above 3.00) because this would indicate that the company is not using its assets efficiently. Netflix has a steadily increasing ratio ending with 1.54 in 2016 (Appendix II, Exhibit 2). This indicates that Netflix has been slowly growing its current assets in relation to current liabilities which is a positive sign for investors.

Netflix, the online subscription-based DVD rental service aimed to better satisfy customer in a way competitors didn’t, customized and personalized service with unlimited monthly rentals from a great variety of film offerings. Now they want to leverage their strengths to enter into the Video on Demand market

Netflix Inc. is in the entertainment market, which is a part of a larger video, film

Netflix exhibits dominant economic characteristics in the online movie rental business. They enjoy strong market size and growth rate when compared to rivalry competition. The number of rivalries are increasing, and the market remains dominated by only a few sizeable rivalries like Blockbuster Video, Wal-Mart, Walt Disney Movies and Movielink’s Downloadable Movies. Netflix is determined to offer new and innovative technology to sustain their competitive advantage.

Streaming technology has reformed the way people view entertainment today. Online streaming gives viewers control over when and how they watch their favorite TV shows and movies. Over half of smartphone and tablet owners use at least one television type of application at least once a month (Page, 2015). Services like Netflix, Hulu, and Amazon Prime offer access to shows via TV, gaming systems, smartphones, and tablets from any location with wifi. Netflix’s competitive strategy and accurate predictions of the future of streaming has made it the leader in its industry. Using the three circles analysis will show that by understanding its customers’ needs, its own offerings, and its competitor’s offerings, Netflix continues to dominate the industry and is moving towards the future.

Video-on-demand or VOD, a service that allows users to select and watch videos over the internet, will be one of the greatest innovation as stated in the Netflix case study. It will be a great opportunity for Netflix, but it will also be a challenge to integrate or do away with its current business model. Its current business model is one that relies on the internet and the post service to deliver DVDs to its subscribers. Netflix should carefully enter the VOD market without doing away with its current model. This will allow it to maintain its growing position as a giant in this media industry. In order to better understand Netflix and the problems it faces, we must first identify its strengths. What does Netflix offer its customers that its competitors do not? What differentiates it from its competitors?

This study will assess strengths and weaknesses of Netflix Inc., and illustrate their position in the current marketplace for their given industry. Issues will be addressed, and recommendations will be made for the company to continue to succeed and grow in this industry.