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Netflix Company Overview
Netflix is definitely the leader in the space. It started as a DVD rental service back in 1997 and now counts more than 130 million monthly subscribers. Netflix has essentially created the market for paid streamed content. The market is so big that the competition is currently trying to take a piece of the pie. Today we will go over a SWOT analysis of the Netflix company and its business model.
Netflix Strengths 2021:
- Huge customer base. As we said they count more than 130 MILLION subscribers. With such a monsterous client base, they have the power to sign deals and demand lower prices from the content/movie/series suppliers with ease.
- They are essentially the biggest brand name, and the only company many customers think of when they hear the phrase streamed content. This type of exposure combined with their customer base, allowed them to create their own series.
- Binge watching. This is an incredibly appealing feature to the millions of people that had to wait a week for a new episode to be released.
- ZERO ADS. The single most annoying thing about television has always been the ads. You are literally bombarded with advertisements every 10 minutes while your favorite show is on.
- Pricing. The pricing of the service is at the right point for what the company is offering. For only 8.99 a month you get to watch unlimited content. There is no comparison to how much you are saving compared to renting out the movies or series from a DVD/movie rental.
- Growing demand for SVOD Services. Netflix is still the industry leader, and managed to add 1.5 million net new subscribers in the second quarter of 2021. According to DEG, the total spending of consumers to SVOD services reached the $12.2 billion mark. Resulting in a 21% total increase just in the first half of 2021.
Netflix Weaknesses 2021:
- Increasing Operational costs. The downside of producing your own content at scale is that the production costs go over the roof. The budget for 2018 according to the economist was around 13 billion dollars.
- Non-friendly on the environment. Netflix has gathered a lot of negative publicity because it has one of the lowest rankings in environmental awareness compared to other big companies like Amazon and Facebook.
- Not fully owning the copyrights. This means that after a certain period of time, the content is not exclusively found on Netflix and users can see it on many different websites.
- Increasing its pricing. Even though the price is affordable, Netflix has increased since they originally launched their service. Most customers are afraid that the price is going to increase over and over again.
- Netflix has such a huge client base worldwide and hasn’t even tapped on the Chinese market. This is going to be one of the biggest opportunities for the company. Chinese viewers that stream content on their devices are around 500 million.
- The diversity within Europe means that there are many untapped markets speaking other languages than English that Netflix could also tap into.
- The ever-increasing availability and affordability of VR and 4K technology gives the opportunity to Netflix to create more offers for their content.
Netflix Threats 2021:
- The market is so lucrative that the competition has increased signifficantly.
- Facebook, Amazon, Youtube, Hulu all want a piece of the pie. Every single company is on the run to buy the exclusive rights on a popular show/series so customers have no choice but sign up with them. Prices increase, profitability decreases.
- Digital Piracy is almost impossible to be stopped. No matter the measures and laws, there is always going to be a website or platform that has some movies or episodes of series available for download. Netflix is losing billions of dollars every year, which desperately needs in order to fight the fierce competition.
- In 2021, Disney outpaced the subscriber growth rate of Netflix. Disney doubled it’s subscribers from 58 million a year ago, to 116 million this year. They also offer lower monthly pricing. The overall growth rate of Disney could be a potential threat to Netflix’s market share. Allthough, Netflix’s management is dismissing any threats from Disney’s services.
Netflix SWOT Analysis Conclusion:
Netflix is still the biggest brand in the series/movie streaming sector. Despite the threats, people still trust the brand. Netflix can capitalize on this and address some of the concerns such as the pricing. They can offer more attractive pricing packages. If they focus on the huge opportunities that are available to them right now like the European market and the new technologies like VR they can thrive.
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1) Netflix, Annual Report 2020
2) Forbes 2021, “The Streaming Wars Is About Global Distribution And Investing In Programming“
3) Financial Times 2021, “Disney outpaces streaming rivals as it doubles subscribers in a year“