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
Share of video streaming – US market
Netflix Financial Performance 2019
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
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.
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 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.
In early 2020, Netflix raised a cool one billion pounds to fund more content development and possibly further acquisitions.
Customer Base
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.
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.
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
Netflix Opportunities
Netflix Threats
Increased Competition
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.
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.
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.
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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