Regina Ramírez Pasquel

00406921
With its new business model, will Netflix be able to maintain its position as the
leading streaming platform company in the United States?
INTRODUCTION
Netflix is a streaming service, which was founded in 1997 by Reed Hasting
and Marc Randolph. This service allows people to watch a wide variety of series,
movies and documentaries, which can be viewed through a device with internet
access, as well as cell phones, smart tv tablets, computers. The Netflix service is
paid through a fixed monthly fee.
SITUATION ANALYSIS
Since the start of 2022, Netflix has had a terrible year and its U.S. platform
has been no exception, as, during Q2, net subscription churn losses in the U.S. and
Canada were 1.3 million, up from losses of 636,000 in Q1 and 433,000 a year
earlier; with this, Netflix reports that it has 73.28 million paying subscribers in the
U.S. and Canada, and likewise 220.67 million worldwide. Seeing the problems the
company was having, Netflix decided to partner with Microsoft to develop its new
modality, which is based on a low-cost subscription, but has an advertising inclusion.
INDUSTRY ANALYSIS
Greg Peters, Netflix's chief operating officer, noted that "Microsoft offers
flexibility, innovation and strong customer privacy protection". The new Microsoft and
Netflix plan will be based on the fact that, on the streaming platform, customers will
be able to pay less, but will have to have commercial breaks or, similarly, keep the
same monthly fee and not have to watch commercial breaks.
COMPETITIVE ANALYSIS
Netflix, today, has a great competition in the streaming platform market,
however, in the year 2022, its biggest competitors have been Amazon Prime and
Disney plus. On October 20, 2022, it was disclosed that, so far this year, Netflix has
223.09 million subscriptions and, on the other hand, on January 5, 2022, it was
disclosed that Amazon Prime has 148.6 million users. Likewise, in Q2 2022, Disney
+ increased 32% of its subscribers, so it currently has 137.7 million users.
POLITICAL & LEGAL REVIEW
Netflix, on its official website, indicates the tax charge, which varies
depending on the country where the purchase is made. In the United States, Netflix
must pay taxes that are between 6% and 9%, the percentage depends on the state
in which the purchase is made.
TECHNOLOGICAL
In the United States, since the beginning of the year, its citizens have cut the
cable, i.e., they are watching more TV through streaming services than through
cable operators. In July 2022, streaming amounted to 34.8% of the share of total TV
consumption, i.e., a growth of almost 23% in the last year.
The report notes that streaming has surpassed traditional TV before, but it is
also the first time it has surpassed cable viewing, where Netflix is the largest
streaming platform thanks to its Stranger Things series.
As you can see, streaming platforms in the U.S. have been growing as time
goes on and, the top eight audiovisual companies in the U.S., have their sights set
on spending at least €100 billion on new movies and TV shows to try to cope with
streaming.
As of 2022, Netflix has a large library of content in the U.S., as it has 3,600
movies and 1,800 TV shows. Netflix has 1,300 sets of recommendations, which are
built from the user's viewing preferences, i.e., the algorithm.
DEMOGRAPHICS & SOCIO-CULTURAL
Americans spend 22.4% minutes watching Netflix, this makes it one of the
most watched apps, as Netflix is in first place, then Youtube, then Hulu, Prime Video
and Disney +. As is well known, Netflix is the leading streaming company in the
United States. Its main customers are Generation Z or millennials, as they represent
80% of Netflix's North American users. They have a lower income range of $20-50K.
Similarly, Netflix has a higher percentage of female users, in which 52% are women
and 48% are men; in the United States, the average Netflix user profile has a great
relationship with the average citizen, this is according to a study of census data.
In the United States, Hispanic Americans are more likely to have a Netflix
subscription, where 70% say they have their profile on the platform, while white
Americans have a percentage of 70%.
Netflix, in the U.S., has high penetration, with 70% of U.S. broadband
households subscribing to the streaming service, indicating that the U.S. is a
saturated and mature market.
 The average age of the U.S. Netflix user is 34-44 years old. For its part, the
most watched show in the United States on this platform is The Office, with a total of
57.1 million minutes. 31% of users do not pay for the platform.
ECONOMICS
According to Netflix's latest financial reports, its current company revenue
(TTM), is $31.47 billion dollars. Compared to 2019, that year it had a revenue of
$29.99 billion dollars, so it is up from 2020 revenue of $24.99 billion dollars.
A monthly Netflix subscription in the U.S. costs between $6.99 and $19.99.
The new basic plan with ads costs $6.99, while the standard DVD and Blu-ray plan
starts at $9.99 per month and, finally, the premier plan costs $14.99.
BUSINESS MODEL CASE
Microsoft is a company created by entrepreneurs Bill Gates and Paul Allen,
which markets computer programs and devices to run them, where multiple solutions
are given to entrepreneurs, office workers, students and users in general. Netflix is
the leading streaming service company in the United States.
As previously mentioned, Netflix has lost large users in the United States and,
likewise, globally; in order to avoid this type of actions and that Netflix does not lose
its value, the company has decided to ally with Microsoft to generate a new business
plan, which will generate a new plan for users, based on a lower monthly payment
price, however, if a user decides to use the economic plan, he will have to see the
advertisements that will be programmed through the alliance of Microsoft and Netflix.
With all the information collected, we can see that the alliance of Microsoft
and Netflix, in the United States, will generate a great economic range, because 31%
of users who use the platform do not pay for it, this due to the exchange of
passwords, so a cheaper plan could support the hypothesis that that 31% will
already have the ability to pay their Netflix plan, so Netflix will continue to be the
leading streaming company in the United States, because also its great competition
Prime Video, continues to raise its monthly prices.
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