Streaming Media and Video Content

Intensity of Competitive Rivalry: The threat of rivalry is relatively low. The movie rental industry is dominated by a few firms, namely Blockbuster, and Movie Gallery (which liquidated all itself in 2010). However they are in competition with other industries such as cable and satellite companies, VOD services and sites like Hulu and Amazon.

There are a lot of strong competitors: Blockbuster, Apple, Red box, and etc… Beside, product in this industry is not differentiated. On the other hand, the products and services are not difficult to imitate. This market is very competitive.

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,

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

The CineMatch software also allows Netflix to maximize their library utilization. Increasing the demand for older or smaller market movies not only assists Netflix in better meeting subscriber demand but also decreases the payout of revenue sharing that often accompanies the most popular new releases. Netflix has revenue sharing contracts with most of the major movie studios. Under the agreements the firm pays a percentage of the subscription fees for a predetermined period of time in exchange for receiving the most popular titles at a considerably discount over the whole sale price (Netflix SEC).

Blockbuster was too confident in their brand and their reach that failed to see the threat from the online rental business, meanwhile Netflix took advantage of their slow entrance to build a market and leverage on growing technology (DVD) that took off really quickly.

One the one hand, the fertility of the industry opened the doors to corporations that sighted substantial growth potential. New entrants with big pockets such as Walmart could pose a certain threat to Netflix, by exploiting a playing card based on cost reduction. On the other hand, barriers to entry became relatively significant as established video rental retailers such as Netflix have the experience and the knowhow to market movies to people. In this industry, firms that do not have a technological advantage can’t compete. The best example is Netflix’s CineMatch program that offered personalized film recommendations based on customer’s rental patterns. This way, Netflix was able to better serve its subscribers. From a cost perspective, the movie rental industry requires high capital expenditures, and the major expenses are highly related to acquisitions of DVD library and investments in technology (exhibit 2 continued). Thus, we may say that entry is difficult in this industry as the competing firms have reputation, experience and recognizable brand names.

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

Rivalry among industry competitors – Netflix and Blockbuster are in a highly competitive industry. Competitors include merchant retailers, such as Wal-Mart, Best Buy, and Target; video and game store like Hollywood Video, Movie Gallery, and Game Stop; supermarkets, convenient stores such as Publix, and McDonald's. The significant rival is Hollywood Video which offers movie and game rentals (Xie & Lin, 2008).

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.

Today, digital technology and the Internet are deeply reshaping the motion picture industry with a trend toward the digitalisation and disintermediation (Zhu, 2010). Media streaming services are an example of this current restructuration. Providing an access to a wide collection of entertainment online at a cheap price, they have penetrated the monopoly that cinema once enjoyed (Herberg, 2017). A significant example can be found in the US company ‘Netflix’, source of nearly a third of all North American downstream internet traffic at peak hours (Hallinan & Striphas, 2016). Once a small DVD subscription service created in 1997, it offers today to its subscribers to watch its own produced movies and shows as well as content of other

Many of their competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than Netflix does. Some of their competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantially more resources to marketing and Web site and systems development than Netflix does. The rapid growth of their online entertainment subscription business since their beginning may attract direct competition from larger companies with significantly greater financial resources and national brand recognition. For instance in 2003 the extremely wealthy Wal-Mart used their online site to launch an online DVD subscription service, Wal-Mart DVD Rentals. With increased competition reduced operating margins may result as well as a loss of market share and reduced revenues. In addition, our competitors may form or extend strategic alliances with studios and distributors that could adversely affect our ability to obtain titles on favorable terms.

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?