Essay Sample on Challenges that Netflix faces

Introduction

The problem of international growth has remained to be one of the main challenges facing Netflix. Recently, Netflix announced its expansion to serve a global market including outside of China. The proposed expansion would open Netflix to a bunch of new subscribers but then getting the subscribers to come on board hasn't been easy. The global subscription has portrayed a slow growth with the current growth rate recorded at 1.5 million new users quarterly. This reduction in growth stands at 25percent less than the previous years since Netflix entered the digital media streaming industry. While Netflix has grown in countries like Latin America, the U.K. and Scandinavia, smaller regional competitors have popped up around the world thus posing a threat to Netflix's dominance. This struggling international rollout for Netflix has left its library somewhat lacking in some countries except the U.S. Netflix has been spending heavily in a bid to acquire global rights for blockbuster content just as it did with Gotham before the first episode was released on TV. However, Netflix will be on part with itself in a diverse market internationally, but then the competition remains fierce.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The other challenge faced by Netflix concerns profitability and debt. Netflix suffers from the high cost of operation in terms of colossal budget content which is about six billion dollars annually. The considerable cost can, however, be attributed to the fact that Netflix is still setting up its operation base. With such costs, the burden tends to be injected to the subscribers who end up being subjected to high subscription rates. Reports from trusted experts have identified Netflix as being an expensive service provider compared to other local service providers. Netflix has also been reported to accumulate a hefty 20.54 dollars in debt to produce more of the original content after the competition has proved tough. This has instilled worry in the investors who think that it's a big task to fight the war with companies owning larger revenue streams like Amazon and Facebook.

Another evident challenge Netflix faces is the overblown fear of losing content. The decision by Walt Disney Company to leave Netflix caused investors to realize that the company has a potential weakness which could lead to its downfall. With the withdrawal of Disney movies, this shows that Netflix does not directly produce original content, but it licenses it from other studios. A good example is "Orange is the new black" which is produced by Lionsgate Televisions and also "house of cards" which is produced by Media Rights Capital. In theory, Hollywood studios could decide to work with other streaming services besides Netflix; and many players are encroaching on the field of video streaming. Already, Facebook and Amazon are heavily involved in the streaming business. But Hollywood studios are generally not going to turn their back on streaming services which serve over 100 million subscribers.

Key Elements of Netflix’s Strategy

There exists a strategy that Netflix has opted to wield to counter the challenges at all angles. The first strategy that Netflix has adopted includes enhancing the viewing experience, regarding faster streaming options, therefore, meeting the needs of the subscribers. Therefore Netflix has expanded its offerings of high-quality television series. The original business model can be maintained by the implementation of a two-part structure, such that DVD rental services are accompanied by increased streaming options made available to the subscribers. More streaming options have also been availed to customers for them to enjoy the transition to digital media streaming.

The other strategy devised by Netflix is the need to develop its own content rather than depending on formerly produced content. Previously, Netflix was mainly involved in the distribution of content from other companies such as Weinstein Company. For instance, Netflix has leveraged their relationship culminating in the negotiation of right for distribution of content to reach more customers all over the globe. The negotiation deals conducted by Netflix have enabled them to acquire distribution rights hence maintaining a competitive edge in the digital media streaming industry. If Netflix offers better and original content, then they are sure to keep their customers and even attract more.

Besides, Netflix has also established an effective method of monitoring sales emancipating from DVD rental services. Proper running of the rental service will facilitate the growth of Netflix as a brand, enabling it to enable more customers. Such customers will uphold their loyalty given that Netflix offers a variety of services compared to other streaming companies in the market. Providing both DVD rental services and video streaming services gives Netflix an upper hand. Netflix has even gone to the extent of reducing the costs of renting the DVDs to please the customers. Quick delivery of the rental DVDs has also been a boost to the sales.

Another strategy employed by Netflix is the introduction of native series aimed at targeting subscribers from countries other than the United States. This is after Netflix noticed a limited number of subscribers from the countries such as in Latin America. Most of the audience is not well conversant with the English language, and therefore Netflix saw the need to offer films and series in other languages. For instance, the series "Narcos" and "El-Chapo" are Colombian and Mexican oriented respectively, and all these were produced to capture the attention of territories outside the U.S.

Implications of Netflix’s New Strategy for the Cable Television Systems Like Comcast

The principal implication of the new strategy employed by Netflix would be the need for cable television companies like Comcast to maintain a competitive race in the digital media streaming industry. Netflix has proven aggressive in reaching the customers who rely on cable television for entertainment. However, such an implication would ensure a change in the status quo of how content providers relate to both customers and operators. Netflix has worked hard to develop a good relation with operators such as Comcast and AT&T to facilitate the delivery of service through cable TV. The establishment of the relationship between Netflix and the cable companies has worked to ensure the success enjoyed by Netflix as a result of growth in numerical advantage. Netflix has however preferred a partnership with AT&T as compared to Comcast because its customer base stands at 22million subscribers around the globe. Moreover, AT&T as an operator has continued to improve progressively on its capability in online video delivery which has acquired its unique niche in the video streaming services. The partnership entails Netflix building applications to be integrated into the AT&T hardware to enable the access by customers through the operator.

Netflix has been noted to register a good number of subscribers, nearly 50 million subscribers. These numbers accrue from the fact that the cable TV companies including Comcast have lost 10 million subscribers. The partnership of Netflix with AT&T entails Netflix building applications to be integrated into the AT&T hardware to enable the access by customers through the operator. Comcast charges higher rates which are justified by the excellent quality of video experienced by the customers. The video quality depreciates when Comcast isn't paid sufficiently and promptly. However, Netflix has dedicated to paying the rates due which enables fast delivery of services to the customers. This technique by Netflix has satisfied many customers thus maintaining their loyalty.

There was once a conflict of interest between Netflix and Comcast where Netflix was charging high rates for service delivery which was not well received by Comcast. This made Netflix change its agreement with Comcast, therefore, ending up relying on intermediate operators of cable TV which were more expensive than Comcast. This burden was transferred to Netflix customers who were forced to pay higher subscription rates. However, customers found a value for their money as the services were improved, thereby staying loyal and faithful to Netflix. Nonetheless, it can be said that Netflix's success was attributed by having Comcast distributing their content directly rather than relying on intermediate companies. Ultimately, with the new strategy employed by Netflix, subscribers are increasingly cutting their traditional cable TV subscriptions, consequently venturing into Netflix as their number one service provider of digital content.

Competition of Netflix with Apple, Amazon, and Google

Even though Netflix stands out as a robust internet brand today, it has many strong competitors. The technology utilized by Netflix is not unique, and it is widespread and well understood. The success of Netflix has attracted Amazon, Apple, Yahoo, and even Google to the battle. Some of these firms are tech firms with vast internet audiences, strong brand names and a good understanding of what their millions of online customers want. For instance, Apple is the leader in downloaded movies where customers own and rent movies. Apple also has its renowned iTunes which is the world's largest online media store for the purchase of music, videos, and TV series.

Also, Netflix's competitors have very deep pockets meaning that Netflix has competitors for talent and the production of new content, and perhaps price pressure as well. Amazon tends to offer free streaming to its 60 million Amazon prime customers without additional fees. To add on, Amazon has far larger databases for subscribers and their preferences. On the other hand, Google is actively pursuing long-form content creators for its video channel program, and there is no cost to Google users because the service is ad-supported.

Conclusion

All in all, the strengths of Netflix are its differentiating factors like brand recognition, algorithms to help consumers find movies and TV shows, and a growing list of production studios supplying it with original content. Competitors could develop these attributes as well, but only with considerable effort, expense, and time.