Brief company description
Netflix is a media services provider, currently offering a library of their own content as well as licensed content for a subscription fee. Netflix was founded originally as a DVD rental service, and has since transitioned into a digital subscription platform. In the recent years, Netflix has started to put more resources into their own content (originals), with firms predicting that Netflix spends nearly 18 billion currently on content, and 85% of that going to the production of originals.
During the COVID-19 pandemic, Netflix saw their subscriber count increase by nearly 26 million, showing the effect of consumers having to stay at home and look for digital forms of entertainment. Their stock price increased by nearly 60% from the start of the year, but is starting to slow down now.
Key Issue
As mentioned above, the pandemic was a great growth vehicle for Netflix. However, that growth seems to be slowing down. While reporting third quarter earnings, Netflix mentioned that they added 2.2 million subscribers in that quarter, which is lower than any other point across the last 4 years. The key issue here is whether Netflix can sustain or keep growth at a reasonably close level to what it was during the pandemic.
Recommendation(s)
- Establish strategic partnership with Dish Network to have exclusive rights to Sling TV subscribers, contents in exchange, and share of revenue for $6 billion in 2020. The shared revenue from Sling TV would estimate to be around 5% additional revenue for Netflix;
- Diversify the existing range of products by partnering with mobile infrastructures and introducing Netflix’s own unique shows and changing the production process toward the development of original content as the company’s main asset;
- When developing unique content, placing the emphasis on semi-serialised shows and especially sport-related shows;
- Integrating Netflix applications within a device so that customers could have an immediate access to the variety of services that the company has to offer;
- First option: partnership with Sling TV (with the focus on sport shows and the opportunity to expand the current range of audiences);
- Second option: reconsidering the current range of content types and focus on developing unique, company-produced TV shows;
- Deviating from the serialised content in favour of semi-serialised in order to gain the attention of new audiences faster.
Market Attractiveness
The current attractiveness of the target market in which Netflix is trying to keep its position of a leader is very high since the company has been producing its services for the global audience. Offering its streaming options virtually worldwide, Netflix has managed to encompass the largest range of customers possible, at the same time catering to the culture-specific demands of its customers. Therefore, the overall attractiveness of the global market is extraordinarily high for Netflix.
Competitive Advantage
Although Netflix’s competitive advantage remains very high, the company is facing very tight competition, particularly, from Hulu and Amazon Prime. In addition, the examples of Hulu and similar streaming services indicate that Netflix should expand its competitive advantage by partnering with other companies in an effort to keep its content consistently good and introduce new shows regularly. Therefore, collaborating with a live TV service would allow propel Netflix with its renewed competitive advantage to the top of the food chain.
NPV
Brainstorming
- Begin to create more content for an international audience now that the pandemic has allowed Netflix to reach a wider audience.
- Club additional offers and restructure its pricing. Netflix’s approach toward setting prices has been quite sensible, yet the absence of clear differentiation makes Netflix’s framework rather flawed and unattractive to customers. Therefore, greater price differentiation and the introduction of new plans with discount options should be deemed as necessary.
- Netflix can have a subsidiary that follows the model of Youtube offering free and premium services (which would allow shorter videos to be uploaded as well)
- Acquire MGM Studios, already a potential target of theirs with rights to the James Bond film series and a strong television program base;
- Creating a more viable risk management strategy to ensure that Netflix is not affected by any other issues occurring in the global market, including impediments associated with COVID-19 and the relevant financial issues.
Work Cited
Yun, Jinhyo Joseph, et al. “Benefits and Costs of Closed Innovation Strategy: Analysis of Samsung’s Galaxy Note 7 Explosion and Withdrawal Scandal.” Journal of Open Innovation: Technology, Market, and Complexity, vol. 4, no. 3, 2018, p. 20.