Netflix is one of the most popular subscription-based media streaming service providers. The company operates in more than 190 countries with its massive library of media contents. Over the years, the company has expanded its reach to various international markets and have also heavily invested in adding new content to its catalogue, to attract new customers and retain the existing ones. In this article, our expert from writing essay services has conducted an in-depth SWOT Analysis of Netflix to help you prepare a paper on this. The internal and external factors affecting the business operations of the company have been discussed thoroughly.
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Netflix has built a strong financial position for itself, by catering a large number of customers. As of 2019, the company has earned USD 20.15 billion in revenue (27.62% increase from previous year). The strong financial status of the company allows it to invest heavily into new content development, acquiring distribution license from content production companies and improving its services further. The high revenue of the company also helps in attracting more investors and shareholders, which can further strengthen its financial position.
The popularity of Netflix is one of its core strengths. Since, it is one of the early adopters of the media streaming service, therefore it has developed a strong brand awareness among its customers. The increasing number of subscribers from all across the world clearly suggests that the company has high brand preference in the global market. This high brand equitycan prove to be a strong competitive advantage for Netflix against other market players.
Netflix invests heavily on introducing exclusive contents in its library, this as a result has further increased its popularity among the customers. The exclusive content of Netflix sets it apart from its rivals and creates a strong differentiation in the media streaming industry. Most of the content of Netflix is targeted at binge watching, which allows the company to retain its existing customers, whereas the constant addition of new contents draws in new customers.
The content library of Netflix varies greatly over across international markets. The distribution licenses acquired by the company from various production houses are geographically restricted. Therefore, in order to make a media title available in certain geographic region, Netflix has to acquire the license for distributing in the said region. This can prove to be quite cost intensive for Netflix, which is why Netflix is not able to provide its full library of content, in all target markets. This as result can reduce its attractiveness among the customers, and they may choose to switch to another media streaming service provider.
The business operation of Netflix is highly dependent on its domestic market of the US. Even though Netflix has a wide international presence, in over 190 countries, the company is most successful in the US and Canada region, with a revenue of USD 10.05 billion, followed by EMEA with USD 5.54 billion and Latin America with USD 2.79 billion. This indicates that the company is struggling to make its presence in the international locations, just as much as in the domestic market. This can expose the company to many competitive threats from other international market players.
The content present in the Netflix library are not permanent, as their availability on the platform is subject to license agreements. The company is only allowed to make a title available for streaming, as long as it has its license. Thus, Netflix may not necessarily have an ever-growing library of content, which can be disappointing for some customers, who wants to enjoy some older classics.
The marketing mix of Netflix is easily imitable by other market players like Hulu, Amazon Prime Video, etc. This as result can have a negative impact on the competitive advantage of the company. Just as Netflix has been focusing on offering exclusive content, Amazon Prime Video has also started doing the same. This as a result, reduce the differentiation of Netflix’s value proposition.
Netflix has significant growth opportunities in the music streaming sector. Recent studies have indicted that music streaming industry is about to reach a market value of USD 21 billion, by 2025, at a CAGR of 5.4%. Netflix is already a well-established brand in the media streaming industry with nearly 160 million subscribers. This can help the company to offer music streaming as a new service to its massive existing customer base, thereby further increasing its revenue generation.
Netflix also has opportunities to enter into the cloud gaming service. Granted that the cloud gaming service is currently at its infancy stage, but it has gained significant popularity in the recent past, especially following the introduction of Google Stadia, GeForce Now, PlayStation Now, etc. Since, Netflix is already operational in the global digital entertainment sector, it can expand into closely related sectors through diversification.
Netflix can collaborate with well-established production companies to make more exclusive content. This as a result can help the company to attract more new customers, thereby allowing it to increase its subscriber base. Moreover, due to the global pandemic of 2020, people are more inclined to stay home a binge watch streaming content. It presents significant opportunity for the company to introduce new contents.
The company can strengthen its position in the international markets, such as Asia Pacific, by focusing on regional content. This localization approach can help the company to improve its competitive advantage and increase its revenue in the host countries. As mentioned earlier, Netflix is not as dominant in the international markets as it is in the domestic market. The focus on localization can enable the company to create a strong brand awareness in those regions.
The most concerning threat for Netflix is the steep competition in the media streaming industry. Market players like Amazon Prime Video, Hulu, HBO Max, Disney Plus, etc. offers the same core value to its customers. Moreover, all of them have same core value offering at competitive pricing. This as a result makes it very difficult for Netflix to create a distinct differentiation for its customers. It should also be noted that the growth of the media streaming sector has attracted a lot of new players in the industry such as Apple and is likely to draw in more players, thereby making the market even more competitive.
Netflix operates in multiple international locations, which exposes the company to different political factors. Sudden changes in governmental policies and trade regulations can disrupt the business operations of the company. Netflix can also face backlash for certain type of content, which may be considered culturally inappropriate in certain regions.
The company has admitted that other entertainment services such as online gaming title like Fortnite, poses a significant threat to Netflix. The consumption of Netflix relies on how the customers spend their leisure time. The rising popularity of online gaming, is taking most of the leisure time of younger generations, thus diminishing the need to binge watch on Netflix.
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