Case Study: Netflix

Introduction

Netflix has made significant steps, to grow as we know it today, to be the preferred alternative non-cable to the native cable TV. Over time it has acquired new users looking for quality and original content for their entertainment needs. The rise of Netflix caused a disruption in the existing movie landscape because of the improvement is undertaken regarding technology put in place that has a competitive edge in the movie industry. The digital movie streaming platform is dominated by Netflix which and is way above its competitors which include Apple, Amazon, and Hulu. The new strategy devised by Netflix is attributed to its domination in the digital movie streaming industry. However, challenges are inevitable in the business environment; hence Netflix also faces various business problems which it has to overcome to ensure its perpetuity (Muzumdar, 2014).

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The following paper is an analysis of a case of the business environment under which Netflix is found. The challenges faced by Netflix will be identified and addressed effectively through evaluation of the current strategies devised to overcome these business problems. The assessment will be based on the implications by which the new strategy will impact the digital movie streaming industry. After that, the case study will be concluded with an evaluation of the state and basis of competition between Netflix with other digital media streaming providers, for instance, Apple, Amazon, and Google.

Challenges

The problem of international growth is remaining to be a challenge posed to Netflix. The global subscription growth is slowing, with the current rate of growth recorded at 1.5 million new users quarterly. The reduction in growth stands at 25 percent less than the previous years when Netflix ventured into the digital media streaming industry. To remain relevant and be able to maintain a competitive edge, Netflix has to develop strategies which will enable them to venture more into English and Latin-speaking nations. New developed strategy to tackle the problem of international market penetration should consider various factors which include competition, content, and pricing (Rollinger, 2018).

The challenge posed by content offered by Netflix on the global scale is in terms of insufficient digitally streamed media, and the content viewed as being too American by other international customers. The challenge may be overcome if Netflix practices the art of breaking the figures of its subscribers based on the global territories, thereby, ensuring customized content is channeled to specific consumers. For instance, the movie Orange is the New Black will get effective reception when channeled and advertised in places where the content will have the most response by the subscribers (Rollinger, 2018). Moreover, international consumers often demand new content, having new experience from their predecessors. The focus by Netflix on film and series has largely been English-language dominated. A limited number of films and series have been based on foreign languages, for instance, Narcos- Colombian crime series, and Marseilles- France thriller. Therefore, reception of Netflix in other global territories is limited significantly. Despite some international territories able to understand the English language, the fact that it is not their first language limits the domination of Netflix in those regions, for instance, India.

Netflix suffers from the high cost of operation in terms if huge content budget which is about six billion dollars annually. However, the huge cost can be attributed mostly to the fact that Netflix is still setting up its operation base. The huge costs trickle down to the subscribers who bear it in increased subscription costs. Reports around the world term Netflix to be expensive than the local service providers found in those territories. IFlix, Malaysian-based operator price their consumers an average of three dollars as compared to Netflix who charge the same subscribers an average of nine dollars. The effect is seen as there is a reduction of new subscribers to Netflix. Moreover, Netflix loses its subscribers to the local pay-TV operators, and this has a significant bearing on Netflix in terms of its international domination (Muzumdar, 2014).

Current Strategy

The ability of Netflix maintaining a competitive edge was as a result of developing an amalgamating strategy which proves to be successful. The new strategy has enhanced the viewing experience, in terms of faster streaming options thereby meeting the needs of their subscribers. However, there is a need for more digital media streaming capabilities. The new strategy may seem to overwrite the original business model upon which Netflix is founded; therefore, effective measures should be employed to ensure the original model is adhered with. The original business model can be maintained by the implementation of a two-part structure, such that the DVD rental services are followed by increased streaming options made available to the subscribers. The second part of making more streaming options available to the customers enables Netflix to enjoy the transition of its customers from the Video on Demand platform to the digital media streaming platform. Therefore, a large subscription base will be developed having delivery of DVD by mail content and digital media streaming options (Rollinger, 2018). This offers a wide selection of movies based on the customers' preference, consequently charging low prices for the subscription. A more competitive advantage is enhanced as compared when Netflix adapts to media streaming options as the sole service delivery undertaken.

Another essential strategy devised by Netflix is the need of developing its content rather than depending on formerly produced content, after that distributing it. Previously Netflix was majorly involved in the distribution of generated content from companies such as the Weinstein Company (BURLING, 2018). For instance, Netflix has leveraged their relationship culminating in the negotiation of right for distribution of content to reach more customers located around the world. Effective negotiation deals have enabled Netflix to acquire distribution rights thereby maintaining a competitive edge leading to their domination in the digital media streaming industry. The increased following will be dependent on the availability of content which is better than other players in the digital media streaming industry. To achieve this,

An additional strategy which will enable Netflix to maintain its competitive advantage includes effective monitoring of the sales emancipating from DVD rental services. Proper running of the rental services will facilitate the development of Netflix as a brand, enabling it to acquire more subscribers. The customers will maintain their loyalty as a result of efficient services offered to them; hence this translates into the development of a competitive advantage over other players in the industry. The DVD rental model makes use of a different strategy, which has enabled the business to influence a broad customer base available in the market. The differential strategy works under the basis of reducing the cost of renting a DVD, enhancing satisfaction by the customers, and improved customer service through incremental innovation. There is the risk of development of confusion when trying to focus on the two models of business, which is DVD rental services and digital media streaming. Addressing this confusion requires the formation of a cross-sectional team which will ensure the future of Netflix as a renowned digital media streaming option is built. The administration of Netflix should devise new strategies taking into account the availability of ever-changing information technology and improved internet platforms. The strategy should focus on counteracting some of the consumer behavior, and this can be done when the Video on Demand feature has embraced that match the customer's needs, which include fast delivery as it is the demand in the market (Rollinger, 2018).

Implications of New Strategy for Cable TV

The general implication of the new strategy, for instance, Comcast, is the maintenance of a competitive advantage over their rivals in the digital media streaming industry. Therefore, Netflix will be able to get reach more customers who rely on cable TV for their entertainment needs (Jenner, 2016). Moreover, there will be a change in the status quo of how content providers relate to both consumers and operators. Netflix has worked had to developed good relationships with operators such as Comcast and AT&T to facilitate delivery of service through cable TV. Netflix prefers a partnership with AT&T as compared to Comcast because of its customer base that stands at a whopping 22 million subscribers around the world. Moreover, AT&T as an operator has continued to improve progressively on its capability in online video delivery which has acquired its unique niche in the video streaming services. The partnership entails Netflix building applications to be integrated into the AT&T hardware to enable the access by customers through the operator (Rollinger, 2018).

According to research by Leichtman, Netflix is on top by the number of subscribers having hit the 50 million mark (Rollinger, 2018). Consequently, the previously existing cable TV providers have lost a total of 10 million subscribers to Netflix over the entire time of its entry. Over the last five years, the customer base under Netflix has doubled in number, with a total increase of 27 million subscribers. The rapid growth meant that with time Netflix is going to disrupt the entire cable TV industry to emerge as the best. The total subscribers of internet, satellite, and cable digital media streaming services stand at slightly above 93 million. The steady improvement by Netflix is expected to surpass the numbers in due time, reaching over 100 million subscribers.

The establishment of the relationship between Netflix and the cable companies has worked to ensure the success enjoyed by Netflix as a result of growth in numerical advantage. Comcast charges higher rates which are justified by the enhanced quality of video experienced by the consumers. The video quality declines when Comcast is not paid sufficiently and promptly. Therefore, Netflix has dedicated to paying the rates due which enables fast delivery of services to the customer's satisfaction devoid of loading time and other delays. Hence, Netflix customers are more satisfied with staying loyal to their subscription. At one time conflict of interest was experienced between Netflix and Comcast, as Netflix was paying high rates for service delivery which was not well undertaken by Comcast (Jenner, 2016). This made Netflix alter its agreement, thereby, relying on intermediate operators of cable TV which were more expensive than Comcast. The burden was felt by the customers who were forced to pay higher subscription rates. However, customers found a value for their money as the services were improved, thereby staying loyal and true to Netflix. Customers prefer high-speed internet on the go, hence are thankful and interested about. The satisfaction by the customers made them refer additional subscribers of cable TV to Netflix enabling them to have an experience which is comparable to none other. The success of Netflix is also attributed by having Comcast distributing their content directly rather than relying on intermediate companies. This results in cutting of cost which can be utilized in improving other services offered by Netflix. The new strategy has made the future of Netflix to be promising, as subscribers around the world are increasingly cutting their traditional cable TV subscriptions, consequently, venturing into Netflix as their number one provider of...