netflix swot analysis

netflix swot analysis: will this tech giant survive Or Thrive?

The Netflix SWOT analysis provides some insights onto how this tech giant will perform in the future.

What makes Netflix interesting is, of course, is its business model which harness the power of the subscription business model.

Quick Facts About Netflix

Company name:Netflix
Founders: Reed Hastings and Marc Randolph
Annual revenue:2019: $20.16 Billion
Profit | Net Income:2019: $1.86
Market Cap:(April, 2020): $423 Billion
Year founded:1997
Company CEO: Reed Hastings
Headquarters:Los Gatos, USA
Link:Netflix
Number of employees:(FY 2019): 8,600
Type of business:Public
Ticker symbol:NLFX

Netflix Competition

At the end of 2019, and after only been launched for a few months, Disney already had a reported 26 million daily subscribers within its first months of launch.

Besides Disney, you have some big powerful tech companies also after some of Netflix’s recurring revenue.

Company Competitors:Amazon Prime Video, Apple TV+, Disney+, HBO, Hulu, Vevo, YouTube
netflix share of market
Share of video streaming – US market

Netflix Financial Performance 2019

How Netflix Makes Money
How Netflix Makes Money – The Netflix Business Model

Netflix has shown consistent growth across all regions. What’s interesting is that despite several difficulties Netflix is gaining ground in emerging economies. Although, it is far from being a complete success story as Netflix struggles with content in India.

The Netflix SWOT Analysis

The Netflix SWOT analysis is a quick way to understand how Netflix is competing in its business environment and whether it will be able to sustain its current performance.

Netflix Strengths

  1. Brand

    Netflix seized the opportunity of growing bandwidth and instantly became a popular success based on its range of content.

    Since its launch, Netflix has become synonymous with video streaming and consistently it has held the largest global share of the video streaming market.

    Netflix holds the 65th position in the Interbrand global brand rankings.

  2. Range of Content

    netflix swot analysis: will this tech giant survive Or Thrive?

    A library of original content is a critical factor for differentiating between the main video streaming providers. As an example, with a strong portfolio of content in 2017, Netflix was able to grow by 17M in one quarter.

    netflix swot analysis: will this tech giant survive Or Thrive?

    Netflix invests heavily in original content not only in the US but it also produces local content and distributes this globally. The idea of this is simple, people can experience interesting international content, and people who live in other Countries get to experience homegrown content.

    Ads-free Content!

    The quality of Netflix’s content has led to it winning several awards.

    netflix swot analysis: will this tech giant survive Or Thrive?

    In early 2020, Netflix raised a cool one billion pounds to fund more content development and possibly further acquisitions.

  3. Customer Base

    netflix swot analysis: will this tech giant survive Or Thrive?

    Netflix has a substantial global presence. At the end of 2019, Netflix grew its subscriber base to over 167 million.

    However, those numbers have grown significantly as a result of people being confined to their homes during COVID lockdown.

  4. Technology

    Netflix relies on a large global technology infrastructure to be able to store and deliver videos on demand.

    Additionally, it needs to operate across different languages and offer personalised recommendations through its machine learning and AI technology

    In 2019, Netflix invested over $1.5 billion in technology and development. The overall service focuses on quality, consistency and availability across a broad range of devices and browsers.

  5. Marketing

    n 2019, Netflix’s marketing expenses amounted to 2.65 billion U.S. dollars, up from 2.37 billion in the previous year.

    Netflix uses a blend of marketing methods, from advertising online to billboards to tie in with major brands, including Coca-Cola and Burger King, to promote content.

    Additionally, they use social media especially Twitter, they don’t even sponsor tweets—instead, they simply craft a teasing tweet about a forthcoming show and within seconds it goes viral.

Netflix Weaknesses

  1. Business Model Easily Replicated

    If you take away the unique content then there is little to differentiate video streaming offers. The content dictates the audience and the degree of difference.

    The Netflix Business Model is increasingly dependent on production of a range of local and global content that is unique. The company has brought in top directors like Steven Soderbergh and Fernando Meirelles to bolster its need to produce.

  2. Content

    Netflix has a substantial balance sheet of loans and investments that have been used to fund content. In 2019, its content obligations amounted to over $19 billion.

    netflix swot analysis: will this tech giant survive Or Thrive?

    Rising costs in operations, marketing and content are leading to a substantial amount of long-term debt.

    Netflix faces increasing pressure to rely less on debt to fund its content. Yet at the end of 2019, Netflix had increased its long-term debt by over $4Bn.

    With over two-thirds of Netflix content is licensed – that is content that Netflix doesn’t own but pays for.

  3. Content Portfolio

    Netflix has an ageing portfolio of hits that drew in its subscriber’s in the US market e.g. Frankie and Grace.

    However, faced with stiff competition in the US market Netflix has to strengthen its position or face losing out to newcomers.

  4. User Experience

    Other big tech companies like Facebook, Amazon and Google have made strategic acquisitions in Artificial Intelligence. It’s no surprise that these giants with all that user data can transform the customer experience and offer more personalized suggestions.

    there have been repeated comments in the media and from users generally about how Netflix makes recommendations.

    Netflix seems to be lagging in behind though making many people question the sophistication of its technology and choice of investments.

  5. Sustainability Track Record

    Netflix has only just recently started to offset its global energy footprint and by using renewable energy certificates.

Netflix Opportunities

Netflix Threats

  1. Increased Competition

    netflix swot analysis: will this tech giant survive Or Thrive?

    The competition is increasing through Asian video streaming companies moving west, new entrants e.g. Disney and existing players expanding e.g. Amazon, Hulu, HBO, and YouTube.

    New entrants like Disney with their blockbuster portfolio of content and family appeal will make inroads into the market.

    Even companies like Facebook could be a danger, they already have the distribution channel and could easily buy content to gain traction, plus offset costs through advertising.

  2. China

    China is a critical market for many of the tech giants. However, China is heavily regulated and fosters brands that comply with and adhere to how the way the government works.

    Netflix is unlikely to be given access to the market unless it forms a strategic alliance with an existing player. The threat then is that a Chinese player can grow significantly, dominate the market and make it unpenetrable for Netflix.

  3. Rising Prices

    Netflix in the last few years has raised its pricing in the US. With the advent of COVID and the rising levels of unemployment, it will remain to be seen if this causes a backlash post lockdown.

    This probably is no surprise when you consider that Netflix in India starts at 199 rupees (roughly $2.80). On the other hand, a Hotstar subscription can be had for 999 rupees (just over $14) a year, much cheaper than Netflix’s mobile-only plan.

  4. Piracy

    Piracy of the licensed content is still an issue worldwide and is particularly prevalent in emerging economies.

Summary of the Netflix SWOT Analysis

The Netflix business model has been highly successful and shows no sign of slowing down. In fact, COVID has bolstered its subscriptions. However, this isn’t to say Netflix isn’t without problems. Juggling the complexity of a global organisation and competing in multiple markets, each with their own dynamics creates significant challenges.

The biggest risks are associated with unique content and the high level of competition. First of all, investing in the content that will keep existing subscribers hooked and bring in new subscribers is vital for Netflix’s future. Secondly, its a tough and highly competitive market and unless Netflix creates a stronger competitive advantage it could be vulnerable in the long run.

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