Revitalizing Netflix Moving Into Streaming

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Table of Contents

Introduction
Main body
Conclusion
References

Introduction

Netflix, a popular subscription-based online movie rental service, was founded by Reed Hastings in the late 1990s. Originally based in the U.S., it utilized postal services to deliver DVDs directly to its subscribers homes. In 2011, Netflix decided to migrate from its business model of delivering DVDs by mail to streaming media content and movies directly to its subscribers televisions. To secure its profits, the company started to charge more for receiving DVDs, which should have been perceived as a minor add-on to the existing customers original subscription arrangement. However, this move led to a big problem as a number of subscribers defected and Netflixs stock price dropped. The company faced the dilemma of how to remain profitable in the video streaming business while dealing with competition and paying much more for content (Chatterjee, Barry, & Hopkins, 2016). This paper discusses the key marketing strategy issues in Netflixs business model and suggests recommendations on how those issues should be handled.

Main body

Netflixs business model has been considered highly successful. However, one may notice several strategic issues that existed in the process of the companys development. First, Netflix decided to follow the path of famous internet brands like Amazon, choosing a similar business model. Unfortunately, the company did not realize it because of competitive advantages with other retailers until discovering that the customers would not return after having their first negative experience. Second, Netflix is completely dependent on other studios content, which provides the suppliers with extreme power over the company. Third, Netflix did not take into account the bargaining power of its customers who, if left unsatisfied, might choose to decide to spend their money on alternative products or services. All these issues have led to the most critical and urgent problem in Netflixs business, which is customer loss (Chatterjee et al., 2016). Also, the company currently faces increasing competition, with Disney being the most significant threat, and has to deal with rising content costs (Lobato, 2019). Hence, customer acquisition, along with the creation of its own content, price increases, and separation of Netflixs services, can be suggested as the main strategies to improve the companys business performance.

First and foremost, it is vital to take into account that Netflix depends on its customers disposable income, meaning that the slow growth of economic rates would immediately impact the customers purchasing power and the company as a whole (Chatterjee et al., 2016). In such conditions, it becomes essential for Netflix to price competitively against its rivals to maintain its competitive advantage. Though low price, no late fee policy, large selection, and free shipping are among the companys strengths, price increases will allow this streaming video giant to show more flexibility in managing its costs. Second, Netflix should invest more in the production of its own content targeted at a broad audience. Seeing as the company might be influenced by copyright law changes, creating large-budget mass films and shows will allow Netflix to compete with such streaming services as Disney, WarnerMedia, and Apple. In addition, it will give the company an opportunity to maintain attractiveness, thus developing new customers and retaining old ones, as well as sustaining its market share.

Obviously, maintaining new subscriber growth is the main issue for Netflix. Currently, Video on Demand has a significant impact on the companys performance as this service is more convenient than DVD rental. Given the fact that the Internet and technology have changed peoples daily lives, it becomes evident that the company working in the context of online business should keep up with this continually evolving and developing sector to sustain its success. However, although the world slowly progresses from physical DVD systems to digital streaming, evidence shows that the DVD rental industry grosses every year (Lobato, 2019; Sadq, 2015). This suggests that Netflix might tap into this growing business and expand into markets, even though the decision to migrate from its old business model in 2011 has led to negative consequences. Based on this information, separating its services instead of combining them will be a wise decision for Netflix that will allow the company to expand internationally and remain the leader due to its scale, advanced technologies, and original content.

Conclusion

To conclude, Netflix is a popular subscription-based online movie rental service that decided to respond to the continually changing society and science technology sector and migrate from delivering DVDs to streaming media content and movies directly to its subscribers televisions. However, the companys decision to charge for receiving DVDs led to customer loss, leaving Netflix at a crossroads and with questions about whether it should return to combining its services or continue with two separate services and live with the negative consequences. Analyzing current evidence and key strategic issues in Netflixs business model has generated recommendations that customer acquisition, along with the creation of its own content, price increases, and separation of Netflixs services, can be suggested as the main strategies to improve the companys business performance. As suggested, such an approach will allow the company to maintain its competitive advantage and compete with such streaming services as Disney, WarnerMedia, and Apple. In addition, it will expand into international markets, thus maintaining new subscriber growth, as well as sustaining its market share.

References

Chatterjee, S., Barry, W., & Hopkins, A. (2016). Netflix Inc.: The second act moving into streaming. London, Canada: Ivey Publishing.
Lobato, R. (2019). Netflix nations: The geography of digital distribution. New York, NY: NYU Press.
Sadq, Z.M. (2015). Analyzing Netflixs strategy. International Journal of Science and Research, 4(3), 2271-2273.

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Revitalizing Netflix Moving Into Streaming

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