Netflix is an American-based company that provides Internet streaming of media throughout the world, including in Canada, the United States, Ireland, the United Kingdom, Sweden, Norway, Finland and Denmark. The service is provided at a flat rate. Netflix was established in 1997, has its headquarters in Los Garos, California, and started a digital distribution service that is subscription based in 1999. Approximately 100,000 titles were offered on DVD by 2009, and nearly 10 million people were subscribed to the service. The one billionth DVD was delivered in 2007. In 2011, the company had reached $1.5 billion in revenue and over 26 million subscribers throughout the world, (Kim, 2011). While the success of Netflixis undeniable, the current state of the company makes it unattractive for investors.
Netflix intends to attract business from people who want to watch movies and television. The company came onto the scene by storm in 1997 and offered hundreds of thousands of DVD rentals. But the company shifted and adapted in 2007 to streaming content, which was quickly gobbled up by customers. In 2010, it expanded its horizons to find new customers throughout the world, and the company was then worth nearly $12 billion. The core proposition of being the go-to source for movies and television has driven the company to massive success and has led it to be known as an innovative company. Its value proposition puts its price in the competitive category. It wants to provide original content that is of excellent quality. The support systems are standard and the availability of content is universal, meaning it wants to provide all the content a customer would want, (Lawton, N.D.).
Amazon.com’s subscription video-on-demand (SVOD) feature is causing Netflix to lose much of the market share. “Amazon Prime’s SVOD offering could eventually be carved out as a standalone product that would compete more directly with Netflix for subscribers,” (Szalai, 2012). This brand extension sets Amazon.com up as a direct competitor for subscribers for video streaming. The company is expanding overseas and this is an area that Netflix hasn’t quite mastered yet. If Amazon.com gets a stranglehold on the market outside of the United States, they could choke the market share before Netflix really gets a chance. Amazon.com also has much more capital from which to spend than does Netflix, which puts the company at an even larger disadvantage. Amazon is clearly being aggressive, as it was only recently in France that Canal Plus wasn’t allowed to have exclusive rights to the SVOD and VOD network. This tells me that Amazon is aggressively seeking complete market share, on a global scale. “Canal Plus deputy chief Maxime Saada added that Netflix was getting ready for an entry into the French market early 2013, although its arrival has been unofficially announced more than once,” (Godet, 2012). Amazon isn’t only ahead of the game in France: in 2008, the company purchased LoveFilm, a British SVOD company. Along with the purchase, Amazon gained two million subscribers from five European territories, including the U.K., Germany, Norway, Sweden and Denmark.
Once Netflix is able to uploaded more quickly, the company will appeal to a wider audience. At that point, it can begin to win back subscribers and then lower the heightened price that lost a large percentage of its audience. Netflix should create a survey for its customers to see what the company is lacking, and what it can give people so that they will keep coming back. This needs to be augmented by rapidly expanding throughout the world. The company is actually doing both of these things and are moving forward with plans at a relatively rapid pace, though it is having some problems in Europe with getting licensed. For this reason and others the expansion throughout Europe will have significant costs. There is a lot of legal attention that goes into this expansion and the company will need to spend a lot of time in this area. But several additional countries in Europe should come on board each year, and those within the European Union should be targeted first because they have similar laws for this type of activity. The idea of proving content faster will take significant upgrades and require high licensing costs. However, the reward could be substantial, as people will be more willing to go with Netflix if they are meeting demand. The licensing process of using new videos should happen immediately for a successful outcome.
In reviewing the success of these strategies it will be important to see which shows are coming onto Netflix and how rapidly they are. The European expansion will become visible as each country comes on board, and this will increase the capital that Netflix has to add to its library and at a more rapid pace.
Kim, J. (2011, June 16). Discouraging EDU lessons from Netflix Streaming. Inside
Lawton, T. (N.D.) Assembling Your Business Model. Thomas Lawton. Retrieved from
Szalai, G. (2012, April 3). Analyst Downgrades Netflix Due to Competition, Content
Cost ‘Inflation.’ The Hollywood Reporter.