Critical Thinking

When own service and becoming less reliant on

When you’re finished changing, you’re finished. “-Benjamin Franklin             

Netflix, Inc is an American provider of on-demand internet streaming media and flat rate DVD-by-mail supplier. Netflix’s business model is of providing service as a core product. Online streaming service and DVD delivery service are the two main product lines for Netflix.

With every network company perceiving Netflix as a competitor and raising the licensing cost of shows to compete with it and eat away its profits.

Netflix is choosing to outcompete rivals based on differentiation by offering a wider product selection, value-added service, and attractive styling. Netflix is working to make a portfolio of movies and shows which will attract and retain viewers. This paper talks about the strategy adopted by Netflix to invest in its own and through it its revenue growth will outpace cash burn rate, allowing them to leap ahead from its competitors and cross the chasm successfully.

Background:

Netflix is the world’s top internet streaming TV network with over 110 million subscribers around 190 countries. This service is provided with a monthly fee and content is aired without commercials. Due to the high scope of the internet streaming business, TV networks like CBS and cable companies like Comcast are launching their own service and becoming less reliant on Netflix.

The greatest expense for Netflix is securing licensing agreements with TV networks, filmmakers, and other content owners. In early 2015, Netflix revealed that its budget for obtaining new licensing deals and renewing expiring arrangements for exclusive and non-exclusive content would exceed $6 billion through 2018.

Netflix started producing original programs by investing billions of dollars, a strategy that steers the focus away from need for content licensing. So far it was successful to introduce multiple series including “House of Cards” and “Orange is the New Black”. This focus has helped them to stand out in the marketplace.

Segmentation: Netflix’s market is very dynamic and constantly changing in response to changes in technology and consumer behavior. Segmenting the market in the content streaming industry is not measurable, differentiable and actionable due to highly diverse nature of the customer who varies in age, income, geographic area, education level and watching preference.

Targeting: Netflix target a mass market of consumer who pay an online streaming subscription of TV shows and movies aiming to have the biggest market share with the highest number of subscribers. To break even the cost of investment for producing new content, a high number of paying subscribers are required.

Positioning: Customer’s top priority is content availability, ease of use, reasonably priced, suitable to individual taste of the video streaming and high selection of titles.

 

 

Evidence

By producing its original content, Netflix does not require to license shows from other networks. With hits like “House of Cards,” Netflix has cemented its position as a go-to-place for all streaming services.

Over the years the share price has kept raising giving investors value of their investments  

Netflix’s pioneering practice of buying up an entire season (or two) of a series without requiring a pilot is luring writers, actors, and producers to work with them, thus attracting new talent towards it.

In October, Netflix announced it added 5.3 million more subscribers around the world, bringing its total subscriber base to 110 million. It is a clear leader in the media streaming sector and at the same time when people are migrating from other modes of watching television and movies.

Recommendations

To further increase its presences in the streaming business Netflix should focus implementing Live Television into their portfolio. Online streaming of live sports is big market to capture. Study shows between 21.6% and 22.4% of all fans in Major North American Sports Leagues spend between 1 and 4 hours a week on internet search for the sports news and clips (sports business daily.com). This will further increase its customer reach.

Second action that Netflix could do is focus on the international market. Netflix now stream its services in 190 countries but only shows content made for American audience. There are few shows which belong to that market, but their number is too less. Netflix should start making their original content for those markets as well. Asian countries like India, China, Korea is the next global opportunity for Netflix. Due to large population, Netflix could protentional gain a lot of subscribers which would increase the revenue.

Conclusion

Overall, Netflix had effectively made use of eight modes of communication (Marketing communications mix) which includes advertising, sales, events, public relations and publicity, interactive marketing, direct marketing, personal selling etc. (Philip Kotler, 2014).

The cornerstone of holistic marketing concept is customer relationships and Netflix has succeeded in building mutually long-term relationships. To successfully cross the chasm, Netflix focused on their online streaming web-customers (niche marketing) and then slowly win dominance over the firms like Sony, Samsung to include its application in their devices to reach millions of customers. Netflix used them as a springboard to capture the online streaming market, and now with its own content moving ahead and creating an entry point in the larger segment.