Movies, series, and TV shows are some of the main ways to escape pressing problems and relax. This is largely due to the entertainment component of the content that is offered to the viewer. Netflix is one of the most famous multimedia companies. Over time, two competitors appeared in the film industry, Netflix and Blockbuster. However, it is worth noting that Netflix remains the leader at the moment. It is important to analyze what methods the company used to achieve such results.
Netflix is an entertainment company that provides movies, TV shows, cartoons, and TV series based on streaming media. The company was founded in 1997 by Reed Hastings and Marc Randolph (Maddodi, 2019). The main advantage of Netflix is reviews of new products and frequent announcements of new films and TV series (Voight et al., 2017). Another method of increasing the audience was the rental of the most top-end and interesting videos. Thus, the company managed to sell more than 10 thousand copies of Bill Clinton’s testimony in the high-profile Lewinsky case, which led to an attempt to impeach the US president in a week.
The ability to feel the moods and needs of people quickly brought the company forward. At the same time, there was a struggle with competitors, and the main one was the Blockbuster network, with annual revenue of $ 5 billion (Martínez-Sánchez et al., 2021). Netflix feared that a rival company would launch an online rental and lure customers away, so they acted quickly. Consumers began to offer discounts and bonuses, played a trip to Los Angeles, etc. This approach allowed the company to gain new customers and capture the market. At the moment, the strongest competitor of Netflix is Amazon. As of the fourth quarter of 2019, Amazon Prime Video had about 150 million subscribers – a number that has been growing rapidly over the past two years as the company has increased the production of its original content Prime Video offers subscribers access to thousands of titles, from feature films and documentaries to television. Like its competitor Netflix, Amazon Prime also has its original movies and TV series.
Did Blockbuster Do the Same Job for Consumers that Netflix Did?
Over time, Netflix increased its audience and became known throughout America. This is largely due to the complete rejection of online sales, where it would have to compete with Amazon and other giants. Netflix remained in the online rental market, which, according to management, was much more promising. In early 2000, Netflix introduced a movie recommendation system called Cinematch (Voight et al., 2017). The system analyzes the preferences of site users and advises interesting movies for them, which greatly simplifies the choice. In the same year, agreements were reached with Warner Home Video and Columbia Tristar (Chopra, Veeraiyan, 2017). According to the deal, Netflix received the primary right to host the products of film companies for a share of profits.
The main strategic mistake that predetermined the financial catastrophe of Blockbuster lies on the surface: the veteran of the market for a quarter of a century of existence has not managed to find his face in business. Thus, Blockbuster turned into a shapeless agglomerate of services for every taste and color, devoid of individuality and intentional focus in anyone – winning and branded — direction. In addition to the obvious miscalculations, Blockbuster made another — not so noticeable – mistake, which, in my opinion, predetermined his demise in the end. If the company had limited itself, as the same Netflix did, only to the American, at worst — the Anglo-Saxon market, Blockbuster would have had enough resources for a comfortable existence in the next decade.
Netflix’s SWOT Analyses
Netflix attracts a wide audience and takes into account the diversity of its users. The service overcomes national and cultural barriers, offering shows in more than 30 languages. For example, the German TV series Dark, the French Lupin, and the German-American Unorthodox. The service has the widest selection of content — both produced by other studios and exclusive. The lists of videos vary depending on the country, but in total, Netflix offers subscribers about 15 thousand films, series, and shows — everyone can find something for themselves here (Maddodi, 2019). Today, the company does nothing “at random”. Netflix has 60 to 90 seconds to get a person’s attention. They carefully analyze large amounts of data, user behavior, and select content that the audience will obviously like.
Netflix’s financial model is a vicious circle: they need more customers to get more money and then invest them in content to attract new users. To fill the library, the company has to purchase products from other studios. The rights to such films and shows are expensive, and they can be shown for a limited time. Another disadvantage of third-party content is that it is not exclusive to Netflix — people can get it on other platforms. Netflix is in a continuous race to get new users: the company’s expenses are growing, some customers unsubscribe from the service, and investors are waiting for a constant increase in the audience. That is why the company is so concerned about pleasing users and keeping them on the platform.
The streaming industry has not yet fully formed — there are no established boundaries and rules, and the window of opportunity is wide open. As one of the first players in this market and the vanguard of innovations in the field of streaming services, Netflix continues to develop, look for new solutions, and set the tone for competitors. Today, Netflix profits from three monthly subscription packages. By updating the pricing model, the company can increase revenue from its user base. In addition to video, the service now competes with platforms that broadcast video games and music and may develop other segments in the future. For example, VR, podcasts, and user-generated content. So Netflix will be able to cover the broad needs of the audience and keep visitors on the site.
Over the past five years, streaming wars have gained serious momentum. And although Netflix is still leading in this area, rivals are stepping on their heels, giving their subscribers access to new and original content. Netflix has 208 million subscriptions; it is gradually catching up with Disney+ with several 100 million. HBO / HBO Max has 44.2 million, Apple TV+ has 40 million, and Hulu (39.4 million) and YouTube (30 million) are on the list (Preifer, Conroy, 2017). This situation conveys the second threat to the company. Digital piracy is still rampant in the world — people download content illegally. This poses a serious threat to Netflix: the company is losing potential users and, accordingly, revenue (Maddodi, 2019). Moreover, Netflix is a popular target for hackers – they hack into the accounts of existing users and resell access to the client’s personal data. Therefore, the service needs to minimize this vulnerability to show that the platform can manage its technology security.
Value Chain Analyses
Netflix’s values can be described by the phrase “people are more important than the process.” They also believe in the concept that “all your colleagues are extraordinary in their work and are very effective employees.” Behind the company’s back, Netflix is an interesting and inspiring path to success that requires risk, effort, and self-belief. Moreover, they appreciate the importance of the brand – as it is a way to give significance in the eyes of the audience. First of all, Netflix is a brand that is confident that it can communicate with its audience in a natural way. The company maintains accounts on social networks, posts memes, reacts to the responses of its subscribers, and respects their opinions. Therefore, such close contact with the audience inspires confidence.
Now Netflix has shouldered the burden of competition with everyone: with cable channels producing content traditional for the small screen, with studios supporting various kinds of independent cinema. Moreover, they plan to create their streaming platforms with big cinema companies. The head of Disney+ has already announced the imminent launch of his own Netflix with child-friendly content and an emphasis on original web shows. It is not yet clear whether this will clip the wings of the multimedia adventurer of the decade, but so far, every challenge from the market has only made the company stronger.
Chopra, S., & Veeraiyan, M. (2017). Movie Rental Business: Blockbuster, Netflix, and Redbox. Kellogg School of Management Cases.
Maddodi, S. (2019). Netflix big data analytics-the emergence of data-driven recommendations. Srivatsa Maddodi, & Krishna Prasad, K.(2019). Netflix Bigdata Analytics-The Emergence of Data-Driven Recommendation. International Journal of Case Studies in Business, IT, and Education (IJCSBE), 3(2), 41-51.
Martínez-Sánchez, M. E., Nicolas-Sans, R., & Díaz, J. B. (2021). Analysis of the social media strategy of audio-visual OTTs in Spain: The case study of Netflix, HBO and Amazon Prime during the implementation of Disney+. Technological Forecasting and Social Change, 173, 121178.
Pfeifer, P. E., & Conroy, R. M. (2017). Netflix, Inc., 2007. Darden Business Publishing Cases. Web.
Voigt, K. I., Buliga, O., & Michl, K. (2017). Entertainment on demand: The case of Netflix. In Business Model Pioneers. Springer, Cham.