Company and Competetive Landscape

Company Description:

Netflix (NFLX) is a multinational streaming and subscription service founded in 1997 by Reed Hastings and Marc Randolph. The service allows subscribers to stream a vast library of movies, TV shows, documentaries, and other types of digital content. Netflix is a subscription based streaming service which has a business model that offers digital content for a subscription fee. Their target market includes individuals and households looking for appealing entertainment options that span across demographics and global market. They are involved in primarily the entertainment sector and digital production subsector.  Netflix content can be consumed and watched on several devices, including tablets, smartphones, computers, and Smart TVs, which makes it accessible around the world. Netflix is based in Los Gatos, in the Santa Clara county of California, about 50 miles away from San Francisco and close to the lower slopes of the Santa Cruz Mountains. 

They are known for their content production, licensing, and original film distribution. For several years, Netflix has produced its own original and critically acclaimed content such as “House of Cards,” “The Irishman,” and “13th.” The company has also licensed content from other film studios and production companies. This allows them to offer their subscribers a wide range of content, including popular TV shows and movies from other producers. Lastly, Netflix has brought production onto a global scale and has been dominating global markets for the past decade. Therefore, they cater to audiences from different cultures and regions by dubbing, subtitling, or licensing content from regional to studios to bring an authentic experience. 

Comparing Netflix and it's Competitors :

Netflix pioneered the video streaming industry and led the cord-cutting revolution that has disrupted traditional pay-tv. However, the company now faces intensifying competition from a range of entertainment and tech rivals also offering subscription video-on-demand (SVOD) services. With the streaming market maturing, competitors are vying for consumer attention and monthly entertainment budgets.

Paramount+ has rapidly emerged as one of Netflix’s foremost SVOD adversaries. Parent company Paramount Global possesses an enormous content library and roster of globally recognized intellectual properties, from Top Gun and Mission Impossible to SpongeBob SquarePants. Like Netflix, Paramount is pumping billions into developing exclusive original programming tailored to a streaming audience. High-profile franchises may enable Paramount+ to chip away at Netflix’s dominance – for example, its new Halo TV series poses a threat by converting the mega-popular Xbox shooter’s fans into Paramount+ subscribers.

AMC Networks has also pivoted to streaming by bundling its suite of niche, specialty cable TV channels into the AMC+ platform. For $6.99 per month, subscribers gain access to AMC’s vault of acclaimed shows plus exclusive originals the network is producing specifically for its streaming service. The AMC brand has proven its ability to generate zeitgeist-capturing hits, with The Walking Dead previously ranking as cable's highest-rated show. AMC+ provides an affordable streaming alternative for fans of the network’s distinctive, genre-skewing content.

While not purely a streaming provider, Dish Network's live TV streaming service Sling TV includes various premium cable channels and on-demand programming for only $40 a month. Offering popular live sports and news at a budget price point allows Sling TV to eat into Netflix’s market share by appealing to cord-cutters seeking entertainment and TV replacement options. Dish already mastered satellite distribution, positioning Sling TV to potentially grow into a major Netflix disrupter.

Comcast also warrants attention given how intricately streaming and cord-cutting are now intertwined with smart TV operating systems. Comcast’s software and hardware facilitate Netflix access in tens of millions of households. However, Comcast now leverages this platform power to promote its own ad-supported streaming service. Offering free, quality content could limit how much consumers are willing to spend on Netflix each month amidst rising subscription fatigue. Comcast also possesses relationships with TV brands that Netflix lacks.

These competitors share similarities with Netflix beyond just offering premium video content for a recurring monthly fee via the internet. Netflix’s prior success has shown rivals the formula of using exclusive original programming, harnessing data analytics, and establishing direct billing relationships with customers. Competitors with extensive film/TV libraries are now optimizing these assets for streaming while leveraging their brands and franchises to attract subscribers. And the burgeoning rosters of fresh, streaming-native content across services means consumers face overwhelming choice regarding where to allocate their viewing hours and monthly entertainment expenditure.

Netflix also faces threats from Big Tech behemoths and traditional media names. Amazon channels video to support its e-commerce ecosystem and entice Prime loyalty. Apple uses premium shows and movies to sell more devices and services. Disney transformed into streaming giant almost overnight by leveraging renowned brands like Marvel and Star Wars. And telecom conglomerates like Comcast are bundling streaming into platforms serving over 50 million broadband subscribers – demonstrating their ability to secure a recurring share of household entertainment wallet.

Customers: 

  As a trailblazing force in the video subscription streaming market catering directly to consumers, Netflix today boasts an immensely global yet fragmented customer roster consisting primarily of individual households and families across 190 countries paying monthly fees in exchange for unlimited on-demand access to the platform’s library of licensed shows, original programming, and films.

In stark contrast to traditional Hollywood studios, which still rely on a patchwork of intricate distribution relationships with intermediary media platforms to deliver their content to end viewers, Netflix maintains direct subscriber relationships with over 200 million global accounts. This establishes direct, recurring monthly revenue streams and crucially actionable user data insights unavailable to legacy entertainment industry competitors dependent on ad revenue or third-party distribution. Spanning North America, South America, Europe, Asia, Africa, and the Middle East, regional tastes drive differences in viewing habits. But Netflix’s investments in international content production, localization features, and global marketing campaigns continue lowering barriers to satiate this worldwide demand. Through efforts like producing original series catering to Indian sensibilities and adding Korean pop content, Netflix increasingly interweaves regional viewer preferences into its content acquisition and product decisions.

Netflix’s dominance in the United States provides a robust customer stronghold. Over 70 million memberships currently exist domestically. However, international markets outside North America offer more untapped growth potential as global broadband connectivity continues expanding, especially across developing economic regions. Netflix targets international subscribers through lower-priced mobile plans, downloading capabilities for inconsistent networks, and partnerships with wireless carriers and multichannel video programming distributors. To appeal to local and international viewing tastes, Netflix actively licenses popular shows internationally while developing slate programming and local originals tailored by market. By better resonating cultural norms, preferences, and languages – for example, through Korean thrillers and anime in Japan – Netflix is increasingly ingraining itself into global streaming habits, so first-time subscribers cling to the service.

Netflix’s consumer-centric positioning allows the bending of typical Internet business models by exploring consumer behavior and sentiments before finalizing decisions. Recent initiatives like clamping down on password sharing and adding advertising-based plans responded to economic necessity – but close attention to membership data and spending potential assists in implementing such changes without disenfranchising key demographics. Growing competition from both born-on-the-internet streaming pure plays and media old guards adapting to cord-cutting trends will challenge Netflix’s long-held dominance as incumbents catch up on delivering premium programming directly to viewers through internet pipelines Netflix itself pioneered. Yet rivals must contend with a globally entrenched customer base that continues gravitating to Netflix’s intuitive interface melded around personalization algorithms that simplify wading through thousands of titles. Coupled with the platform’s slate of buzzworthy original shows and movies even competitors chase in licensing deals of their own, Netflix retains its alluring shine over 200 million times over due to successfully interlocking its technical and product capabilities with content investments catering what individual global streamers desire in their on-demand entertainment.

Why Netflix doesn't necessarily have any Suppliers ? : 

Since Netflix caters specifically to customer demand patterns in choosing what content to license, they essentially have a demand-based inventory model. They utilize advanced algorithms to analyze viewing habits and determine which shows and movies to invest in and make available based on predicted subscriber interest. This eliminates much of the guesswork involved in gauging what traditional suppliers or wholesalers may stock.Their on-demand business model also negates the need to own extensive hardware/infrastructure to store content. As a streaming platform, they only require enough server capacity to meet peak streaming demands instead of housing physical media inventory. This provides more flexibility and lower overhead.

This idea of how Netflix’s unique streaming business model shapes their supplier relationships and inventory demands compared to traditional retailers will be expanded upon in subsequent posts #4 and #5. Those posts will provide more details around the types of licensing agreements Netflix enters as well as how their technology infrastructure and delivery capabilities allow them to operate without relying on traditional supply chains.

Long-Run Measures Netflix:

With over 220 million global subscribers as of 2022, Netflix has firmly established itself as the dominant player in the online video streaming space. However, the company faces continuous disruption from competitive, technological, economic and health forces that management must continually adapt to.

The most pervasive long-run threat affecting Netflix is escalating competition. What began as essentially a duopoly between Netflix and the now defunct Blockbuster has erupted into an increasingly crowded playing field. Major players like Amazon Prime Video, Hulu, Disney+, HBO Max and Paramount+ are all vying for streaming subscribers. 

Furthermore, Apple, Google and even Facebook have introduced or are planning video services to leverage their massive user bases. This mushrooming competition threatens to siphon market share from Netflix. Each rival is investing heavily in their own libraries of original content to differentiate and directly compete against Netflix's acclaimed series like Stranger Things. Exclusive content and first-run popular shows are how streaming platforms battle for fickle subscribers in a zero-sum fight. To remain ahead, Netflix has had to dramatically boost spending on fresh content, reaching $17 billion in 2021 alone. The streaming wars will burden Netflix with swelling expenses for years to come.

Simultaneously, Netflix faces risks from advancing streaming technologies. As video compression, mobile devices, smart TVs and broadband all rapidly evolve, Netflix must adapt its platform and distribution infrastructure accordingly. Changes like super high resolution 8K video or virtual reality could necessitate heavy product development or partnerships to implement. If Netflix fails to adjust and provide quality accessible service as viewing habits shift, subscribers may turn to more technologically savvy competitors. Netflix also remains dependent on deals with TV manufacturers and mobile app stores to prominence for its app. Changes in these key gatekeeper relationships could disadvantage Netflix. Technological disruption will pressure Netflix to constantly modernize and cater to consumer preferences.

More broadly, the state of the economy substantially impacts the entertainment industry. Recessions typically cause consumers to cut discretionary expenditures like media subscriptions. Even minor economic slowdowns often translate into subscriber losses for Netflix. This occurred in 2019 when a relatively modest decline in US growth induced Netflix to badly miss membership forecasts and lose domestic subscribers for the first time in 8 years. While the service's low $15 per month cost limits downsizing, customers pinched by high inflation and cost of living struggles may still opt to churn. Economic disruption of any scale pressures Netflix's subscriber figures and revenue expansion necessary to finance expensive content investments.

COVID-19 represented the epitome of disruptive external events. The global pandemic uniquely both boosted and hindered Netflix. Widespread lockdowns and mobility restrictions dramatically lifted subscriber counts and engagement throughout 2020 and 2021, providing a temporary growth stimulus. Yet later COVID waves and complications substantially hampered production; Netflix grappled with postponements, delays and shutdowns across planned movies and series. This hampered their ability to release anticipated original content necessary to drive subscriptions. High inflation, supply chain turmoil, and talent pay also flowed through to markedly increase production expenses. Hence Netflix continues to endure COVID's lingering operational and financial impacts while sustaining increased output demand.

   Sources: 

Mergent: 

https://www.mergentonline.com/companydetail.php?pagetype=synopsis&compnumber=105639

      Wall Street Journal:

    https://www.wsj.com/articles/how-netflixs-algorithms-and-tech-feed-its-success-90632b92

      LinkedIn:

    https://www.linkedin.com/pulse/strategy-case-study-series-netflix-effect-leading-disruptive-carl-li/

     CNBC: 

     https://www.cnbc.com/2023/10/18/netflix-returns-to-growth-mode.html#:~:text=There%20once%20was%20a%20time,actual%20results%20three%20months%20later.