MEDIA AND ENTERTAINMENT

(Service Industry )
NETFLIX
(Service Brand ) Riya Wadhwani 143 TYBFM

INTRODUCTION
Netflix began as a subscription service which gave customers’ access to unlimited DVDs
to rent, rivalling the then market leader, Blockbusters. While they were successful, their
stratospheric rise must be in part attributed to them embracing technology to improving
their service and beating competition. In 2007, Netflix began to offer streaming as part of
its subscription, and since then has revolutionised the industry. The convenience for
subscribers to be able to watch movies or series’ streamed from their computer, instead
of needing to go to a store or wait for delivery to get a rental, proved popular as their
subscriber numbers soared. It has risen to such highs that, according to a 2018 study,
15% of the world’s total interest bandwidth is used by Netflix’s services.

MARKETING CHALLENGES
A. Different Packages
 One challenge Netflix faces from its current competition is that these firms
can offer consumers something extra, perks for its other services. Netflix
exclusively provides a streaming subscription service, whereas its
completion has expanded its business from other industries.
 FOR EXAMPLE:
 Amazon’s Prime Video subscription is packaged with other perks including
free shipping on selected products purchased on Amazon.
 Amazon Prime Video provides users with 30 days to begin watching the
downloaded video. While Netflix downloads expire from your device in
less than seven days, with the expiry time showing in the “My Downloads”
section of the Netflix app.
 From personal experience, I have found that, given the content from
various services is high quality, these perks (particularly free shipping from
Amazon) is a highly significant factor when deciding which service I will
subscribe to.

B. Competition Ramping Up
 To the extent that Netflix has been able to sustain price increases
in the past, it was due to the company’s first-mover advantage.
Now, Netflix faces competition from Amazon Prime Video, HBO
Now, and Hulu, and the competition is only going to get more
intense. Disney, NBCUniversal (CMCSA), and Time Warner (T) are
all launching their own streaming services in the next two years.
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 Disney’s streaming efforts, in particular, represent a significant threat to Netflix.
Disney CEO Bob Iger announced on the company’s recent earnings call that it
will offer a bundle of Disney+, ESPN+, and ad-supported Hulu for $12.99/month,
the same price as Netflix in the U.S. 
 In one high-profile example, the era-defining sitcom Friends, which has been a huge hit
on Netflix since being added in 2015, will be moving entirely to HBO’s platform in 2020.
 Netflix looks precarious. Old shows are disappearing, and the company faces an
unprecedented fight for the new ones.
 NETFLIX biggest competitor is YouTube, I think one of the main reasons YouTube is so
successful in emerging markets is that it is more mobile-centric. Short-form video lends
itself to mobile viewing versus long form. It is not particularly comfortable watching a
two-hour movie on your phone.

C. Digital Piracy
 A further challenge to Netflix, and the industry as a whole, is the illegal
pirating of content. While advancements in technology have been vital for
Netflix’s success, advancements have also made pirated content more
accessible. Applications such as BitTorrent are able to “operate over a
decentralised network with no single point of shutdown” and its content
has become “more accessible to the average Internet user”. This increased
accessibility of illegal content has cost Netflix an estimated $192m per
month.
FOR EXAMPLE:
 In January 2020, Disney removed all its content from Netflix to further their
own new streaming service, Disney+. Consumers could respond by: 1)
Purchasing a Disney+ subscription in lieu of or in addition to their Netflix
subscription.
 2) Buying or renting the Disney content.
 3) Watching the Disney content for free online .
 It is plausible that substitution between a legal subscription streaming
service (i.e. Netflix, Apple TV) and an illegal streaming website (i.e.
Putlocker, 123 Movies) would be widespread given their resemblance to
each other.
 Legal sites have no marginal cost and illegal sites have minimal marginal
costs associated with search time and risk of computer malware.
  Adapting to Challenge of Piracy
Content is less likely to be pirated if it is easily available at a reasonable
price. The study explains that Netflix’s service has already lessened the
pirated of its content; however I believe they could go further with more
flexible price structures. This could be done, for example, by offering
different priced packages with different terms (i.e. 1 week or 1 year
subscriptions).

D. Problems With Password Sharing

 A further challenge facing Netflix is the sharing of passwords, allowing
users to share accounts. A recently posted article from Bloomberg explains
that they are considering a crackdown on this practice. While previously
they were content with letting it happen, as it gave their platform more
exposure, and encouraged potential users to get to get their own account.
Recently Netflix have become concerned they are losing out due to this
behaviour.

FOR EXAMPLE:
 Advantage of Algorithm
One opportunity which technology provides Netflix to create a competitive
advantage with rival services is enhancing user experience with algorithms.
Netflix is able to use data collected on users, creating a profile, and
 identifying which type of movies/series’ they would most likely be interested
in, based on what they have already watched. This algorithm can be used
to recommend new programmes to users which they would most enjoy, but
can also be used to enable creators of Netflix original content to target their
programmes to the demand of users. This algorithm also could encourage
users to be more keen to be the sole user of their profile on their account
(i.e. not share their password), for this would allow the algorithm to be most
effective at suggesting new programmes suited to their taste.

(man choosing which programme to watch )

 CONCLUSION
Netflix was able to explode into the industry, utilising new streaming technologies,
and putting rivals offering outdated services, out of business. Since then it has
faced challenges including competition both for subscribers, but also securing the
rights to programmes. Possible solutions to remain competitive could be to scale
up the production of targeted original content. They also face the challenge of
digital piracy, for which more flexible and convenient price plans could help ease
this pressure. A challenge Netflix has only recently become concerned with is
password sharing. Perhaps the advantages which one gains from being the sole
user of the account will be able to tempt people to stop sharing their accounts.

BIBLIOGRAPHY
 https://medium.com/digital-society/challenges-faced-by-netflix-a577e82384a

 https://www.forbes.com/sites/greatspeculations/2019/08/20/all-the-reasons-why-
netflix-is-doomed/?sh=7191fff9465e

 https://indianexpress.com/article/technology/techook/netflix-vs-hotstar-vs-
amazon-prime-video-which-ott-video-streaming-service-should-you-choose-
5844946/

 https://venturebeat.com/2018/12/09/netflixs-biggest-competition-isnt-sleep-its-
youtube/

 https://www.fsb.miamioh.edu/lij14/