Streaming Media and Netflix Essay Example for Free

Streaming Media and Netflix EssayNetflixs main subject area is they face increased mart place competition from newentrants into their industry. In addition, Netflix suffers poor relationships with providers, which interferes with their ability to meet merchandise demands leading to increased costs and the need to increase prices. This affects Netflixs ability to increase market share, and maintaining core values, resulting in declining subscribership, and declining margins.ANALYSISCOMPANY ORIGINS. Thorough analysis of Netflix begins with a discussion of the companies origins. Netflix was founded by Reed Hasting (CEO) and Marc Randolph in 1997 in Scotts Valley, California, with main head posteriors now located in Los Gatos, California. The trustworthy business model was as an shekelswork TV company providing online blow and DVD/Blu Ray rentals shipped direct to a subscribers home. This subscription and selling serving utilise in 1999, and in 2000 launched their personal ized movie recommendation service CineMatch (Funding Universe, 2014). Shortly thereafter Netflix exe go forthed their initial public offering in 2002 with approximately 600,000 members in the US and by 2005 membership rises to 4.2 trillion. Perhaps most important is Netflix introduces mental picture drift in 2007, and later in 2008, partners with consumer electronics companies to incorporate Netflix video streaming on consumer electronic devices. advertise growth is achieved in 2010 when Netflix launches internationally in Canada, Latin America, and Caribbean (Netflix Media Center, 2014).THE BLUNDER YEAR.Mid-July 2011 Netflix announces Qwikster, which was an take on to separate online video streaming services and DVD rentals, resulting in an immediate 60% devaluation of Netflix line of reasoning and pointtually to a low of $62.37 by December of that year. Ultimately, on October 10, 2011 the Qwikster proposal is scrapped by Netflix. However, the damage was already done becaus e on July 13th their stock price was at an all time high of $304.79, and eventually bottomed out at $55.19 on December 31 of that year (Thompson, 2012).RECENT DEVELOPMENTS.Once the disaster of 2011 passed, Netflix rebounded by expanding into the Latin America and Caribbean markets. later(prenominal) in 2012,Netflix expands its international market further by becoming available in Europe that intromit the United Kingdom, Ireland, and Nordic countries. In addition, Netflix wins its first Primetime Emmy Engineering Award. Furthermore, in 2013, Netflix expands to the Netherlands, and de scarcelys sure programming that earns Netflix 31 primetime Emmy nominations including gravid drama series, comedy series, and documentary or nonfiction special for _House of Cards_, _Orange is the hot Black_, and _The Square_ respectively. much importantly, _House of Cards_ wins three Primetime Emmy Awards qualification Netflix the first internet TV network nominated, and gentle, a primetime Emmy award. Furthermore, in 2014, Netflix launches in 6 new countries in Europe that complicated Austria, Belgium, France, Germany, Luxembourg, and Switzerland. Again, Netflix wins 7 creative Emmy Awards for _House of Cards_ and _Orange is the bare-assed Black_. moreover, Netflix now has over 50 million globular subscribers (Netflix Media Center, 2014).FINANCIAL STRENGTH.Netflixs performance has been solid, although they underperformed in the three quarter of this year, 2014, perhaps due to over forecasting which Netflix does often, creating the cognition to investors and analysts that the company has underperformed (Seward, 2014). Their numbers go on strong and stock is currently valued $379.01per share (Yahoo pay, 10/30/14). just, Netflix had $4.3B in Revenues in 2013 and revenue is projected to $4.7B by year end 2014, and current ratio is 1.42 demonstrating the harbor ability to cover current liabilities, See Appendix A, Financial Sheets, Tables 1 done 6 on pages 15 throug h 20, for additional details of Netflixs strong monetary performance. Generally speaking, all key financial statistics are trending upwards over the past five fiscal years ( grocery Watch, 2014). Furthermore, as of the third quarter of this year, Netflix has 53.1 million subscribers worldwide and that is forecast to climb to 57 million subscribers at year end 2014 (Netflix letter to Shareh honest-to-goodnesss, 2014).FIVE FORCES MODEL OF COMPETITION.See Figure 1 in Appendix B, Netflix-Porters Five Forces Model, page 21, for a graphicalal analytic tool that summarizes the following forces._COMPETITION AND RIVALRIES._ Competition and rival threats expect high. Netflixs rival, for capability and subscribers, is now term Warner, who owns Home Box Office (HBO) and possesses a broad subscriber base as well as original limit. However, when competition involves subscribers, amazon Prime Instant tv set is becoming a direct rival. Soon, amazon depart air original programming thus be coming a competitor for study as well (Casteele, 2014). In addition, Hulu, Apple TV, Google TV, Google owned YouTube, and CBS All Access has, or will have, original glut available in the near future. Although Amazon does not have the number of subscribers that Netflix has, approximately 5 million versus 50 million plus for Netflix, both have the edge against traditional networks by employ customer data instead of market research and Nielsen data for developing original field (Kleinman, 2013). Furthermore, competitors would include credit line and satellite TV companies such as DirectTV, Comcast xfinity, and the movie theaters._SUBSTITUTES_.The threat of substitutes remains high. Products viewed as close substitutes include Hulu Plus which may also be considered a rival in some respects but exist more as a complementary product to Netflix and focuses on current run and older TV shows targeted at a younger market. Moreover, Hulu provides fewer movies compared to Netflix and forc es subscribers to view commercials when streaming content. Another substitute would include Amazon Prime Instant Video (APIV) available only through a year subscription through Amazon Prime, a free two-day shipping service, and provides an extensive movie and TV library (Shanklin, W, 2014). Furthermore, Vudu is Wal-Marts offering of online streaming and similar to what one finds on YouTube or iTunes but providing more full length give birth films (Prindle, D., 2014). Other substitutes include Google Play, RedBox Instant, and Microsofts Xbox video streaming (Shanklin, W, 2014). These substitutes are unlikely to threaten the market in excess, and Netflixs threats remain with APIV._NEW ENTRANTS._The threat of new entrants is strong. In addition, there exists a strong likelihood of suppliers offering content on their ownwebsite because of low barriers to enter the video streaming market. The TV market is increasingly moving to the on-demand online streaming model. The recent entry of Time Warners HBO, and CBS into the on-line streaming realm is a testament to new entrants. More Web based enterprises will shift or add on-line streaming content because the barriers are already low for these enterprises (Lever Estienne, 2014). In addition net neutrality rulings leave open the window of hazard for new companies to enter the market (Selyukh, 2014)._BARGAINING POWER OF SUPPLIERS._Bargaining power of suppliers is high. Moreover, suppliers can withhold content and meshwork Service Providers (ISPs) can intentionally without quality service to Websites using large portions of bandwidth. Until a net-neutrality regulation is in place, this will remain a major issue for companies providing on-line streaming content such as Netflix (Selyukh, 2014)._BARGAINING POWER OF CONSUMERS._Bargaining power of consumers is high because on-line video streaming is highly price flexile and consumers will migrate to the perceived better value. Therefore, there is great sensitivity to pri ce and content. Consumers will be given to the best suppliers of content and a bargain price without much loyalty. Netflixs slower subscriber growth in the third quarter of this year was attributed to price increase that the company undertook recently (Sikka, 2014). In addition, the industry moldiness contend with the distribution and use of illegal downloads and the lack of established enforcement of pirating content. Content is king and consumers demand content, and original content is even better. swot up ANALYSIS.See Figure 2 in Appendix C, page 22, Netflix SWOT Analysis, for a graphical analytic tool that summarizes the following described strengths, weaknesses, opportunities, and threats._STRENGTHS._Netflix will invest a entire $3 billion (US) by years end in program content to provide content and meet the diverse tastes of its more than 36 million U.S. and 14 million international online subscribers. In addition, Netflix will spend $600 million (US) on marketing and $400 mi llion(US) on technology upgrades. (Netflix ups ante, 2014). Moreover, Netflix possesses brand deferred concedement and the word Netflix even becoming a verb among profit users.Furthermore, the Netflix App has created greater accessibility and enabled subscribers to stream media on nearly all net profit enabled devices. Perhaps most important of all is Netflixs original content of award winning programs such as House of Cards, Orange is the New Black, and Hemlock Grove enhancing international growth. In addition, Netflix has sign(a) a number of interconnection agreements with Internet Service Provider (ISPs) to ensure faster Internet speeds for subscribers (Sikka, 2014). More importantly, Netflix has positive financial ratios although profit margins remain low internationally, and continues to demonstrate outstanding stock market growth._WEAKNESS._ integrity Netflixs largest weakness is their cost of content relating to the mass of licensing packages and the in-house original co ntent production company Netflix is accumulating a large amount of debt and profit margins are low relative to the international market. Furthermore, the DVD and Bluray domestic subscriber market is declining, from 7.0 million paid subscribers at the end of the third quarter 2013 to 5.9 million subscribers at the end of the third quarter 2014 ( earn to Shareholders,.2014). Moreover, Netflix has had a account of subscriber revolt when raising subscription prices and their recent $1 increase was not having any significant impact on subscriptions, however may impact subscriptions nonetheless (Steel, 2014).The last attempt to raise monthly subscription prices left current subscribers upset and Netflix stock tumbling. In addition, Netflix accounts for about 57% of day-to-day internet traffic (Sikka, 2014). Therefore, with net neutrality laws being struck down, Netflix will either need to convey more debt, which they will spend $1 billion (US) or the next 15 months, or cut content, whic h they will do the complete opposite. Perhaps most importantly, both Amazon Prime Instant Video (APIV) and Google owned YouTube have announced their own original content productions becoming a direct competitor to Netflix._OPPORTUNITIES._Netflixs greatest opportunity lies in International Expansion and their ability to create original content will enhanceinternational growth. In addition, the international opportunities will depend on Netflixs superior software apps and service created from their own global technology investment, process knowledge, data acquired from related markets, and their globally recognized brand (Netflix enormous term View, 2014). Moreover, Netflixs original in-house programming should take full reward of the many entertainment related clever devices with Internet capability. Households that have a TV or other device connected to the Internet, as of 2013, stood at 49% up from 24% in 2010 and is undoubtedly higher in 2014 (Sikka, 2014). There exist an ente rprisingness for Internet TV and Netflixs exclusive in-house content will allow the company to take full advantage of that demand._THREATS._Because Netflix accounts for about 57% of daily Internet traffic, ISPs have lobbied to require major website traffic contributors pay for the understructure undeniable to support this heavy volume of traffic (Sikka, 2014).. Until net neutrality is resolved one way or another, this will remain a top threat for Netflix. Furthermore, competition such as Amazon Prime Internet Video (APIV), and Googles YouTube are implementing their own original content and are direct competitors to Netflix. Moreover the expense of licensing and renewing license agreements remain a threat to Netflixs ability to increase margins. However, in-house production of original content benefits the company by generating a word-of-mouth advertising and elevating the company into an Emmy award winning content producer. In addition, there exists the threat of brand loyalty as subscribers are price conscious and excellent to price increases.ALTERNATIVESPossible alternates range from doing nothing to focusing completely on the international market. If Netflix does nothing and continues their corporal delivery of DVDs and Bluray discs will continue to cost more over time because of the need for maintain even a minimum of distribution centers for delivery to subscribers. Another alternative may be to simply pay the premium price required to acquire more and more content through expensive licensing agreements. This alternative as a stand-alone strategy and may notprovide the competitive advantage needed to attract the number of subscribers needed for desired growth. A third alternative could be to combine the buy of content and licensing with original content programming to attract domestic subscribers and increasing international market sixth sense in the video streaming market.RECOMMENDATIONThe recommendation made by the author is a confederacy of th e reducing and phasing out the physical DVD delivery model combined with the purchasing of content and licensing, and using original content programming to attract domestic subscribers, and increasing international market penetration.IMPLEMENTATIONInternet television is replacing linear television, at the same time that apps are replacing network channels. so creating the proliferation of viewing screens for streaming content. In addition, Technology is improving and more available than ever before make this technology less expensive. Furthermore, streaming is the leading source for Ultra HD 4k video, and TV everywhere provides an economic transition for existing networks. Hence, new entrants into the Internet streaming realm, including Netflix, are innovating rapidly and driving improvements (Letter to Shareholders, 2014). See Appendix D Graph 1, Netflix Market Share Bubble Graph on page 24 for a graphic representation of Netflixs market share compared to APIV and Hulu.Netflix should phase out of the physical DVD via mail service market and that will help reduce operating costs. Meanwhile, focus on Internet streaming of content, and producing original content will expand viewership and subscribers, both domestically and internationally, as well as help limit supplier control. This will help contribute to increased margins leading to increased revenue and stockholder confidence. Netflix is in a growth strategy in the international market where investment needs are high. Therefore, margins will be lower than desired expectations, and growth potential in the international market remains very high. Therefore, Netflixshould remain on this strategy.ReferencesCasteele, J. (February 24, 2014), Netflix vs HBO Is the Rivalry as Intense as it Seems? The Motley Fool. Retrieved from http//www.fool.com/investing/general/2014/02/24/is-the-netflixhbo-rivalry-as-intense-as-it-seems.aspxFrance-Presse, A. (April 25, 2014). Netflix announces content agreements with several cable companies, RawStory.com. Retrieved from http//www.rawstory.com/rs/2014/04/netflix-announces-content-agreements-with-several-cable-companies/Funding Universe (2014). Netflix, Inc. History, _International Directory of Company Histories_, Vol. 58. St. James Press, 2004. Retrieved from http//www.fundinguniverse.com/company-histories/netflix-inc-history/Kleinman, A. (March 3, 2013). Netflix vs. Amazon Could Be The Cool New Rivalry, Huffington Post. Retrieved from http//www.huffingtonpost.com/2013/03/05/netflix-vs-amazon_n_2811454.htmlKline, D. (July 26, 2014). 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