NETFLIX

PROJECT BY-
PREET PARMAR
ABOUT NETFLIX

Netflix is a leading media-service provider operating in more than 190 countries

with 148 million subscribers worldwide. Netflix started online DVD rental and sale
operations with only 30 employees and 925 titles. In 1999, Netflix started
subscription services that allowed its customers to watch unlimited DVDs with
One monthly payment. In 2007, the company taken an initiative to move away
from its DVD rental business and start streaming services via internet.

Netflix's initial business model included DVD sales and rental by mail, but
Hastings abandoned the sales about a year after the company's founding to focus
on the initial DVD rental business. Netflix expanded its business in 2010 with the
introduction of streaming media while retaining the DVD and Blu-ray rental
business.

The company expanded internationally in 2010 with streaming available in

Canada,followed by Latin America and the Caribbean. Netflix entered the content-
production industry in 2012, debuting its first series Lilyhammer.

The company has 148 million paid subscribers and offering its streaming services
in more than 190 countries. In this article we will perform Netflix pestle
analysis to find out how political, economic, socio-cultural, environmental, legal
and technology factors affect the company.
PESTEL ANALYSIS FOR NETFLIX

How Political Factors Impact Netflix

The first political factor that poses an immediate effect on Netflix’s usage is a
petition filed by AT&T to the Federal Communications Commission. This petition
aims to limit the usage of online streaming platforms such as Netflix. If the
Communication Commission agrees to this petition then the Congress may pass a
law that will increase the price of internet usage and therefore reduce the usage of
online streaming platforms, namely Netflix.
The EU has chosen to pass a different law that affects the content of Netflix. This
law states that any media content provider within the EU will have to produce at
least 30% content that is strictly European in nature.

The law further implies that Netflix will be charged the same amount of tax as a
traditional media provider, which is 26%. As a result, Netflix users in EU will have
to pay a higher price to use the platform.

How Economic Factors Impact Netflix

The primary economic advantage that Netflix enjoys is its competitive pricing
model. The price for using Netflix is much lower than other traditional media
services, and thus users are more attracted towards using Netflix.
However, the currency exchange rates along with tax laws of different countries
and states, for example, Chicago has imposed tax on digital media service
providers, force Netflix to increase its price for different subscription plans.
Piracy is a serious threat to Netflix.

Torrent sites allow it user to freely upload and download tv shows and movies. Not
only Netflix but other streaming media providers like Amazon, Hulu, HBO and
many more are also dealing with the same issue. Even together they are unable to
stop piracy.
How Socio-Cultural Factors Impact Netflix

In both US and UK markets the success of Netflix is primarily owed to the change
in media usage patterns of the people. Both countries show a massive surge
towards online streaming platforms, mainly Netflix, rather than traditional media
services. Almost one third of the UK population has made the switch and US has
shown record numbers which has left devastating effects on cable service
providers.

Another cultural factor that is affecting Netflix usage is the switch from bigger
screens to smartphones and tablets as the primary content watching device. Since
traditional cable does not extend its services to such devices, Netflix is becoming
the most used streaming platform by users.
This number is also facing a constant growth implying that Netflix usage will be
on the rise in times to come.

How Technological Factors Impact Netflix

4K television purchases have increased majorly in the US and all over the world as
well. To make sure that Netflix users can avail their content in 4K quality, the
company has put into place mechanisms that will provide the necessary quality.
But the challenge they face right now is ensuring that a huge amount of data is not
consumed in order to stream 4k content.

Other recent technological developments from Netflix include the new translator
rating mechanism.
How Environmental Factors Impact Netflix

All tech companies are expected to take active steps to reduce their carbon
footprint. The amount of data centers that Netflix puts to use is huge and thus their
need of the hour is to ensure that they cause less damage to the environment.

Various environmental groups have petitioned Netflix to use renewable energy to

run its data centers, especially in North America.

How Legal Factors Impact Netflix

Netflix was faced with a class action lawsuit regarding PR confusion. This
confusion was based on the fact that the company wanted to raise the price of
subscription, but they did not clarify as to how it would affect existing customers.

Netflix had to also put in place various technical blocks to ensure that their
international clients were not using various hacks to stream content meant for other
countries.
This was done to ensure that they do not face copyright lawsuits from owners of
the content on their platform.
Netflix Marketing Mix (4Ps) Strategy

Product:
The product strategy and mix in Netflix marketing strategy can be explained as
follows:
Netflix is one of the leading online streaming media and entertainment businesses
in the world, which started as a DVD rental business. Netflix is now a website that
you register and pay to watch TV shows, movies, documentaries, etc.
The best part of Netflix is you don’t have to see any commercial while you are
enjoying the content. It is updated regularly so to it does not get out of date. To use
its services, you can first try it for a period of one month and after that you have to,
only if you like it or wish to continue, take monthly subscription and the good
thing is you don’t have any contract with them, no cancellation fees, no
commitment. You can cancel online subscription anytime. For those who wish to
take Netflix’s membership there are three plans as follows which give different
levels of access of the content to users:
1) Basic Plan
2) Standard Plan
3) Premium Plan
It also offers streaming software for viewing any video instantly as a part of its
marketing mix product portfolio but specified internet speed and system
requirement is necessary for better experience.
A few years ago, Netflix decided to produce films and TV shows and created some
like Narcos, Orange is the New Black, Thirteen Reasons Why, etc. It also acts an
online distributor by acquiring broadcasting rights. In addition to all these, it
provides delivery of DVD rentals.
Price:
Below is the pricing strategy in Netflix marketing strategy:
Netflix pricing is the amount that a customer is expected to purchase a product to
avail the services. Netflix provides one month free trial service in order to attract
them and then convert these prospective customers into actual ones.
After the one month period is over, it charges a minimum amount in the form of
subscription which depends upon the type of plan opted for which is a follows
Basic Plan, Standard Plan, Premium Plan which range from $7 to $12.
From the above price list, it is easily evident that it uses psychological pricing. The
prices by Netflix are pocket-friendly which is in line with its motto for which it is
founded, i.e., to subsidise the rental costs for consumers. According to the plan you
have opted for, you get the additional benefits.

Place:
Following is the distribution strategy of Netflix:
Netflix is an online streaming business and hence available everywhere. Almost
the entire business of Netflix is conducted online. Its services are accessible
through Smart TVs, tablets, smartphones, etc. with internet access.
Online availability makes it possible for its customer to avail its services anytime
anywhere though it has strategic distributors as well which allows for easy delivery
of rented DVDs and has several branches as well.

Promotion:
The promotional and advertising strategy in the Netflix marketing strategy is as
follows:
Netflix uses almost all media channels to promote itself and that too through the
content which it offers. Its first month free trial policy is kind of a promotion
activity to build brand awareness at first and then retaining those who subscribe to
it.
After that month only, you have to pay subscription if you wish to continue with
Netflix as a customer. It makes use of social websites like Facebook and Twitter as
well. The use commercial billboards in the offline mode. TVCs and print ads also help
Netflix showcase the various shows, latest movies etc which users can see using the app.
 INTERNATIONAL STRATEGIES ADOPTED BY
NETFLIX

The Three C's of Netflix Global Expansion Strategy

Global ambitions have taken the content streaming giant, Netflix far
from its California roots into markets across Europe, Latin America and
Asia. In early 2016, streaming giant Netflix, Inc. announced that it had
rolled out its service to 190 countries around the world. In June, 2016
Netflix international subscriber growth wasn't performing as forecasted.

The company had faced major headwinds as it tried to conquer the

world. However, Netflix blasted past its own forecasts — and most of
Wall Street's and now has 104 million subscribers worldwide.
According to a recent study provided by Leichtman Research Group,
more people report subscribing to Netflix than owning DVRs.

The three C's Netflix has tackled to improve its global expansion
strategy:

 Content
 Cost
 Competition
CONTENT:

Internationally, Netflix had far less content. The company had to bulk up on global
licensing deals. There is a strong demand from foreign audiences for both more
and different content. In 2016, Netflix had focused mainly on English-language
films and series, with an 80/20 model of U.S. vs. local content in most territories. It
had focused much of its local investment on marquee original productions — with
foreign-language series such as Columbian crime drama Narcos, French political
thriller Marseilles or Hibana (Spark), a series set in the world of Japanese stand-
up. The bulk of its content, however, had been in English, something that, in many
territories, limited Netflix' audience appeal.

Netflix addressed this problem by introducing dubbing and subtitling in Poland and
Turkey and is tilting more towards local content in countries like Japan. When
Netflix began to work with international rights holders, it often got translated
subtitles that weren’t exactly up to par. Now that the company is distributing its
originals around the world, it is itself working with thousands of translators, said
Chris Fetner, the company’s director of content partner operations. The
international subtitling of Chelsea Handler’s talk show alone required 200
translators. Netflix has also improved its own internal translation tools. “Three
years ago, we had a blanket style guide for all languages,” Fetner said. These days,
Netflix is working on a constantly updated Wiki, often tapping into a pool of
translators and academics to make sure that key terms and phrases don’t get lost as
international audiences tune into Netflix’s shows. To further build a stable roster of
global translators, Netflix even developed its own online test, dubbed Hermes,
which the company launched to the translation community this Friday. Translators
can use that online tool to get scored by the company as a way to get approved for
future projects.

To date, Netflix has only translated its apps and catalog into 20 languages, and
Netflix co-founder Reed Hastings acknowledged Thursday that it will take some
time to localize for additional territories. “We will add 2-3 languages each year,”
he said, pointing to Greek and Romanian as some of the languages that are next on
the list.
COST:

In many parts of the world, Netflix is already, arguably, too expensive. In most
Asian markets, notes Venugopal, Netflix is among the most expensive SVOD
offerings and often more expensive than existing pay-TV services.

The company has negotiations with cable and cell phone operators to give it almost
instantaneous access to potential new users without having to spend a fortune on
advertising and distribution deals in markets where its brand and content are often
still relatively unknown. Though many of them initially resisted such deals with
online content providers, gaining access to Netflix’s exclusive programming helps
set them apart from local rivals, just as customers’ online habits have shifted
toward video, particularly on their smartphones and other mobile devices.

Overall international contribution profit being at a loss in 2016 comes as no

surprise, as profits in early markets were used to improve, localize and build other
international regions.

COMPETITION:

Netflix's main challenge comes from local competition. In Europe, Sky is a major
buyer, and producer, of the kind of binge-worthy TV that Netflix specializes in.
Netflix said it expects to see strong growth ahead even as it faces more competitors
such as Amazon, which is also expanding globally. Amazon Prime's streaming
service is a major Netflix competitor in select European markets. In Germany,
Amazon is actually ahead of Netflix.

In order to continue ingenuity in their business model, the company is tinkering

with different formats for the way its 104 million subscribers in nearly 200
countries consume its content. Its newest innovation revolves around interactive
technology and story branching options.children’s shows with the ability for the
subscriber to choose the way the story plays out. If this catches on, other adult-
oriented shows will join in the experiment.

Netflix is growing rapidly, but the battle for video entertainment is now on a global
scale. Can Netflix keep up? They're on the right track with creating their own
content, which certainly help prevent licensing conflicts.