Netflix SWOT Analysis: Will The 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

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

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 The Tech Giant Survive Or Thrive? 1

    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

  1. International Growth

    Asia Pacific and Latin America are huge opportunities for Netflix.

    China has already hasan equivalent entertainment platform called iQiyi Inc.

    An interesting comparison here is that Spotify has partnered with Tencent to improve and open up possibilities in Asia market. Netflix needs to either acquire a contender, or create a strategic partnership. It has already signed a deal with Alibaba which might deliver this potential for growth.

  2. Localised Content

    Netflix is focusing heavily already on its own content. However, it has had mixed results in many markets. CEO Reed Hastings admitted in 2019 that the company was unable to attract new users, as it lacked strong content in India.

    To compete with other established players in big markets, Netflix needs to have award-winning content that catches the attention of people and pulls them to their platform in new and emerging markets.

    Working with the best producers in these countries will be critical.

  3. Content Library

    Can Netflix balance buying quality content from distributors and studios as well as unique content.

    The unique content undoubtedly will bring in an audience but there isn’t enough volume of content to keep an audience. Netflix needs to refresh its library and buy content that gives people to come back.

  4. AI/VR Technology

    AI in the future could even analyse and recommend stories and themes for production. Implementation and production of content though will always remain as an art and therefore in the human domain.

    Even if Netflix focuses on improving its recommendation engine, then this will help surface new and relevant content to users.

    Another opportunity for Netflix is to work with VR technology and look at how Netflix can innovate the customer experience. Netflix isn’t a hardware manufacturer and would need to partner with a company like Samsung to achieve this.

  5. Acquisitions

    Originally Amazon was an eCommerce store but has since expanded to now provide video streaming, ebooks and is aggressively looking to move into health.

    A possible strategy for Netflix is to move into another adjacent market and harness its infrastructure. An obvious comparison would be to acquire a music streaming company!

Netflix Threats

  1. Increased Competition

    Netflix SWOT Analysis: Will The Tech Giant Survive Or Thrive? 2

    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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