- Case Summary
- Competitive Advantages
- Recommendations and Future Prospects
Most people who have access to the Internet are familiar with Netflix – the company that provides streaming services on a subscription-based model. Netflix is one of the most popular services across the globe, having approximately 160 million customers in over 190 countries (Wayne & Castro, 2020). The company’s strategy initially allowed it to become the leader in the video rental market (Oh & Myer, 2016). In the late 2000s, the company’s leaders made correct predictions regarding the extinction of DVDs and the dominance of the Internet in the everyday lives of people (Oh & Myer, 2016). It enabled them to establish the streaming video-on-demand service that lies at the core of Netflix today.
Netflix was able to capture a major portion of the audience via the Internet. Currently, it generates a significant part of its revenue from subscriptions, although its expansion allowed the company to explore additional sources of income (Oh & Myer, 2016). It is also worth noting that these attempts to gain exclusive rights on movie releases were met with a backlash from theatrical movie chains (Oh & Myer, 2016). Despite this negative response, the company continues its attempts to obtain additional exclusive screening rights to reduce its dependency on content producers.
The company’s global expansion is one of its primary priorities in the past decade. Oh and Myer (2016) state that Netflix has experienced a “slow growth in a saturated domestic market,” while receiving positive feedback from its initial expansion attempts (p. 5). Despite having troubles in some countries due to various external obstacles, the company was able to adapt to nearly any cultural and political environment (Oh & Myer, 2016). It is crucial for the company to preserve its flexibility in order to overcome the remaining challenges.
While numerous issues that stem from global expansion still persist, Netflix has been successful in its attempt to enter local markets. The company has gained a significant portion of market shares, surpassing local competitors in nearly every location (Oh & Myer, 2016). To expand its customer base, Netflix paid licensing fees so high that it reported major losses on the outside markets in several years while claiming the necessity of these expenditures for long-term success (Oh & Myer, 2016). There are still unresolved issues that prevent the company from reaching its full potential, but Netflix continues to evolve and adapt to an ever-changing market environment at a rapid pace.
The primary competitive advantage of Netflix is its accessibility and convenience to the users. Not only it has a relatively low subscription price, but the ability to access the service at any spot with an Internet hotspot with a sufficient speed made the service available almost everywhere. Although there are many new entrants on the market of SVOD, Netflix remains the top company in this industry, albeit experiencing a slowdown of growth (Oh & Myer, 2016). Despite this fact, the company has been able to reach the largest number of locations, securing its position in the global market.
The second advantage comes from the content on which Netflix has exclusive rights due to the sponsorship of production. Series produced by Netflix include Orange Is the New Black and House of Cards, which saw as a huge success, attracted new partners who helped Netflix to expand further the number of platform-exclusive titles (Oh & Myer, 2016). Nowadays, many other streaming service companies, such as Amazon Prime Video and Hulu, are following this path and taking advantage of sponsorship in order to obtain exclusive streaming rights.
Due to the extensive usage of machine-based analytical tools and innovative AI technologies, Netflix has been able to adapt to the international market. Lobato (2019) states that Netflix has successfully implemented algorithms that are “used to auto curate selections of content geared around individual users’ data profiles” (p. 40). Personalization of the content is a highly disputed topic due to its “datafication of culture,” although it is widely used in many modern companies as one of the most efficient means of success (Lobato, 2019). Algorithms allowed Netflix to keep up with user tastes and adapt its content to every country.
Recommendations and Future Prospects
There are several critical issues that arise from the fact that the company operates in heavily data-oriented markets across the globe. The company continues to encounter obstacles that prevent it from reaching some parts of the world, primarily due to the U.S. sanctions that prohibit companies from operating in specific countries, such as Syria and North Korea (Lobato, 2019). Moreover, Netflix is unable to perform in China, which has the most extensive customer base available for this type of service, due to the strict censorship policies (Lobato, 2019). Lobato (2019) states that “Netflix’s rise has revived some deep-seated tensions in international media policy” (p. 3). It is essential for the company to resolve these issues in order to acquire access to otherwise missed out opportunities to expand its customer base.
Another severe issue comes from the way local broadcasting companies perceive Netflix’s appearance on the market. Lobato (2019) writes that, in some countries, there are “fears about U.S. cultural domination in internet-distributed television services” (p. 49). There are long-standing disputes with local companies regarding the licensed content, potential impact on national cultures, and the disparity between locally produced movies and Hollywood ones that are accessible via Netflix (Lobato, 2019). In order to resolve this issue, Netflix needs to approach each country’s market in a different way and add local content to alleviate fears linked with the prevalence of the US-produced media.
Netflix can utilize machine-based analytics to generate a suitable list of recommendations based on the ongoing events in the world. The company already actively uses machine learning to provide the personalization of content to its users (Fouladirad et al., 2018). By expanding the reach of this technology, the company can enable it to adapt customers’ recommendations to the most relevant topic in today’s society. The speed of reaction is essential to catch people in the state of emotions where they will be more likely to view the movie or series.
One of the future strategic moves that Netflix might consider is streaming movies at their release since the replacement of theatrical chains by SVOD services is already underway. In previous years, Netflix attempted to provide additional support in the development of exclusive content, which allowed it to gain a more extensive customer base. In the current pandemics, as the theaters suffer from the forced lockdown, Netflix remains accessible, making it a significantly more attractive platform for movie releases. Theatrical chains across the globe continue to lose their customers to Netflix due to the sheer convenience of its services. Gaining the upper hand in deals with movie producers might be the final nail in the coffin of movie theaters.
Fouladirad, M., Neal, J., Ituarte, J. V., Alexander, J., & Ghareeb, A. (2018). Entertaining data: Business analytics and Netflix. International Journal of Data Analysis and Information Systems, 10(1), 13-22.
Lobato, R. (2019). Netflix nations: The geography of digital distribution. New York, NY: NYU Press.
Oh, W., & Myer, D. (2016). Netflix: International expansion. London, Canada: Ivey Publishing.
Wayne, M. L., & Castro, D. (2020). SVOD global expansion in cross-national comparative perspective: Netflix in Israel and Spain. Television & New Media, 2020.