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Netflix is an entertainment company that is mostly focused on streaming media (films, TV series), producing media, and distributing media online. According to the company, there are more than 98 million subscribers as of 2017 (Netflix 2). In this paper, the company will be analyzed using PESTEL framework. The firm performance will also be discussed.
PESTEL
The political factors that can influence the company are the following: government regulations on online content distribution and copyright regulations. Government regulations can present both opportunities and threats; if online distribution is supported and not seen as a substitute to national television, Netflix will be able to continue its functioning successfully. Nevertheless, any issues with copyright materials can lead to lawsuits that will negatively influence company’s image and operations in particular countries.
Economic factors that affect Netflix ability to function efficiently and expand include disposable income and economic stability of a state. For example, Netflix’s users in Malaysia use its services if their disposable income allows them to purchase additional subscriptions (Lobato and Meese 151). At the same time, any economic instabilities and downfalls will lead to decreased subscription rates because users will mostly spend their money on necessities.
Social factors that influence the company include the age of the population, cultural and societal changes. It is more popular among millennials and members of the generation Z but can be adversely influenced by the aging population (Matrix 122). Societal and cultural changes can lead to decreased interest in binge watching, which can also negatively affect the company.
Technological factor that presents both threats and opportunities is Netflix’s use of big data and recommendations. On the one hand, it can gather more valuable information using big data from its customers. On the other hand, big data often causes privacy concerns that negatively influence customers’ willingness to use the service (Amatriain 2).
Environmental factors are also to be considered by Netflix. The company should focus on its impact on the environment; data hubs and services can negatively influence the surroundings and lead to the increased utilization of resources (electricity). The company does not publish data about its impact on renewable energy consumption (Boboltz par. 6).
Legal factors such as changes in regulations, restrictions of online broadcasting, and high charges of streaming services can negatively influence Netflix and interfere with its expansion both in the USA and outside of it.
Firm Performance
Although the company has to compete with such serious rivals as Amazon and Hulu, its expansion continues to progress. The company ensured its success with self-produced shows such as House of Cards or streaming of cable TV shows for those users who missed the show (Monica par. 2). According to Monica, Netflix stock “has soared more than 535%” since 2011 (par. 8).
The company also decided to charge the newer users with $8.99 instead of $7.99; this innovation was expected to increase the company’s revenues (Monica par. 12). The company states that its “revenue for the international segment grew 62% year over year” (Netflix 1). Furthermore, the company’s revenues during the first, second, and third quarters of 2016 continued to grow, and in the first quarter of 2016, the company added 5 million members (Netflix 1). As it can be seen, despite competing with strong rivals in the market, Netflix continues to be a highly successful company that is able to increase its revenues and add more subscribers every year.
Works Cited
Amatriain, Xavier. Big & Personal: Data and Models behind Netflix Recommendations. 2013,
Boboltz, Sara. “Greenpeace Says Netflix Binge-Watching May Not Be Good For The Environment.” Huffington Post, 11 Jan. 2017,
Lobato, Ramon, and James Meese. Geoblocking and Global Video Culture. Institute of Network Cultures, 2016.
Matrix, Sidneyeve. “The Netflix Effect: Teens, Binge Watching, and On-Demand Digital Media Trends.” Jeunesse: Young People, Texts, Cultures, vol. 6, no. 1, 2014, pp. 119-138.
Monica, Paul. “Netflix Stock: Record Setting Performance.” CNN Money. 2014.
Netflix. Shareholder Letter. 2017.
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