Netflix Inc. is a subscription-based movie and television show rental service, founded in Los Gatos, California by Reed Hastings and Mark Randolph. Over the years, it has grown to reach many Americans, reaching its target of 500,000 in February 2002 and posting its first profit of $6.5 million in 2003 (Chatterjee, Barry, & Hopkins, 2016). However, with developments in data packaging and transfer; a migration from the DVD era, on which Netflix had built its success, to a streaming service has occurred. While streaming is not an entirely new concept to our company, it has led to dramatic changes in the requirements to penetrate the entertainment distribution market.
The process of content acquisition and distribution has considerably become more complex. Acquisition costs have gone up, as content providers have been increasing the value of their material and recently demanding premium compensation for licensing powers. This, in part, is contributing to the loss of over 80,000 subscribers; the first time Netflix is experiencing a decline in customer base (Chatterjee, Barry, & Hopkins, 2016). As the marketing manager, I propose the following three strategies to revitalize our brand:
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Produce our Content
With the updated pricing, Netflix faces a real threat to its profitability. Content providers, on realizing that streaming services have increased the value of their material, have imposed very high costs to acquire their content. As a solution, Netflix ought to consider producing and showing its own content. This would greatly reduce the amount of financial resources diverted towards acquiring content from external producers. It is evident that Netflix works on the basis of a vicious cycle, where the more the content; the more the customers; the more the customers; and the more market base we acquire.
However, this solution would infer that Netflix changes from being a solely online content distributor to an online content producer with distribution services. While this diverts the main agenda, vision, and mission, it is necessary to adjust this aspect to compete in the volatile market, where competition is high from cable channels to online content distributors. Additionally, Netflix would need to buy or acquire superior production capabilities to create high-quality content. Nonetheless, the success that the company has had in the Netflix Originals is a reflection that more content from Netflix will see us diversify our revenue streams.
Build more Partnerships
The benefits that Netflix has gained from partnerships in the past are evident. In December 1998, Netflix partnered with Amazon Inc. Amazon would advertise their products on the high-traffic website, while Netflix directed its customers to buy their DVDs from Amazon (Chatterjee, Barry, & Hopkins, 2016). Moreover, Netflix has also partnered with Apple Inc., allowing the owners of the Apple TV to sign up to Netflix directly. Such partnerships would enhance the long-term stability of Netflix within the market.
After a proper assessment of the dominating telecommunications companies, we should approach these companies and seek to make deals with them that are beneficial to both parties. This would enable Netflix to gain a significant competitive advantage over other content distribution companies.
Penetrate the Global Market
Netflix ought to penetrate markets all over the world. Being available in almost every US household, Netflix has little potential for growth within the local market. Therefore, it needs to venture into global markets and establish itself as the first global subscriber-funded content distributor in the world. Additionally, it should ensure that it produces not only American content, but also content particular to every region it ventures. However, this strategy would require extensive market analysis to understand foreign markets and their preferences. This is necessary to avoid incurring losses. Therefore, Netflix Inc. should establish a project committee to analyze and present the most prolific markets to explore. Efforts made recently to include content from Nollywood, the world’s second-largest movie industry, is a move that can help steer the company’s success.
Finally, Netflix Inc. remains one of the largest content distributors in the world, irrespective of recent challenges. The stated measures ought to be taken to revive the company and revitalize the customer base.
- Chatterjee, S., Barry, W., & Hopkins, A. (2016). Netflix Inc.: The Second actmoving into streaming. Ivey Publishing, 11(18), 1-12.
