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Growth in demand for internet-based entertainment
The past decade has been characterized by an increment in demand for internet television and film entertainment. The demand has been enhanced by growth in internet technology. To stimulate economic growth most countries are investing in internet technology. Consequently, firms in the Information and Communication Technology industry are increasingly investing in research and development. This presents a unique opportunity for Netflix Incorporation to increase its profitability both locally and internationally. In 2012, total spending on television and film amongst the US population increased to $ 18 billion from $17.96 billion in 2011.
Netflix performance during the 4th quarter in 2012
During its 4th quarter in 2012, Netflix experienced significant growth in its customer base. The growth emanated from an increment in demand within its domestic and international streaming. Approximately 10 million customers were added to the firm’s global customer base during the 4th quarter. More than 2 million customers were added within the domestic market while international streaming accounted for 6 million additional members within the same quarter. As a result, the firm’s global membership increased to over 33 million individuals. One of the factors contributing to the firm’s growth is its investment in the international market.
The firm’s total loss during the 4th quarter of 2012 amounted to $ 105 million. The loss was a result of the high cost of launching that it experienced when venturing into the Nordic countries.
Netflix’s projection during 2013
Despite the loss incurred by Netflix’s projects that the demand in the Nordic countries reflects the prevailing market opportunity in the international market. The firm intends to lower its losses within the international market significantly by increasing international membership. During the 1st half of 2013, Netflix does not plan to venture into additional international markets. On the contrary, the firm intends to evaluate several potential markets that it can venture into in late 2013 or 2014.
The firm projects that the growth in content spending in the international market will contribute towards an increment in its sales revenue. To exploit the ever-growing demand for internet television, Netflix is committed to developing new products that satisfy market demand. In 2012, the firm introduced several major original series.
Challenges faced by the firm
Despite the firm’s success in its international and domestic markets, some challenges might limit its future success. One of these challenges relates to increment in the intensity of competition. Netflix is currently experiencing intense rivalry between local broadcasters and other distributors who offer TV Everywhere-type products. Because the firm deals with the provision of digital products, piracy presents a major challenge. Some of the firm’s major competitors include Clarovideo, Amazon Lovefilm, Sky Now, HBO Nordics, and Viaplay.
Recommendations
To deal with changes in the external business environment, Netflix needs to consider investing in research and development. Consequently, the firm will be required to allocate a substantial amount in its budget to ensure the programming of great content. Additionally, Netflix will also be required to improve its member streaming experience. This will contribute to the development of a high level of customer loyalty. The resultant effect is that the firm’s competitive advantage will increase significantly hence promoting its survival in an industry that is becoming very competitive.
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