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Aseel
overview
Netflix is a leading streaming video on demand (SVOD) company
operating in 190 countries with 130 million subscribers [1]. The
product and revenue model in video streaming industry is very
tangible and direct. Users watch TV shows, movies (on-demand)
or any video content on variety of devices e.g. Tablets, Laptops,
Smart phones. Netflix, being one of the early pioneers in this
industry has a managed to make a firm user base and as well as a
business model that generates a substantial revenue for the firm.
The video streaming industry is growing and is expected to grow at
approximately USD 82 Billion by 2023, at 17% of compound
annual growth rate (CAGR) between 2017 and 2023[15]. As the
prospect of the growth is higher and some of the big market (like
Asia-Pacific) remains relatively unexplored so, the video streaming
space is increasingly becoming a competitive industry. Companies
like Amazon (Amazon Prime/Fire TV), Hulu, HBO, Google
(YouTube Premium) have entered the market or adapted their
existing infrastructure to enter the market. And other companies
e.g. Apple, Disney are planning to enter the market. The barrier to
entry in streaming space is low. There is no “entry blocking”
patented technology or any regulation that hinders the entrance of
new player. Environment analysis of SVOD industry in presented
in Exhibit 1. With no differentiation in the distribution of the
content, subscription (annual or monthly) and business model, the
video streaming industry is rapidly converging towards becoming
an entertainment or media industry or a content generation
industry. Users do not incur any switching cost and can quickly
change the provider. In such scenarios, the content is and will be
the sole differentiator in SVOD space. There two ways the
companies get the content, they license it already produced
content (popular movies, series etc.) from the studio or they make
their own series and movies. With the licensed product, the
content remains with the company only for a fixed time. So, there
are limited popular content with no exclusivity. Besides, there are
contractual obligation (like only for certain region, countries) that
company must adhere, and this hinders the same user access and
experience across the platform. The content provider companies
like Disney themselves are entering into SVOD space and will pull
out their content from other SVOD providers [16]. This is the
reason that Netflix and other competitors are making their own
shows and movies. The company needs a quality content to entice
the user to them. And, this demand and creation of “original”
content is expansive and there is no guarantee that every new
shows and movies will be received the user favorably. Even if the
new content is popular, there is only fixed shelf life for the content.
Most content remain popular only during first 6–12 months. Then,
there is piracy, one of the biggest threats to SVOD. It quickly starts
eating into the potential revenue [13].
Core business
Netflix is a subscription-based business model making money with three simple plans: basic,
standard, and premium, giving access to stream series, movies, and shows. The company is
profitable, yet it runs on negative cash flows due to upfront cash paid for content licensing and
original content production.
Close competitors
Netflix still rules the streaming universe. As of the end of March, it had 207.6 million
total paying subscribers, with about 67 million in the United States, the company noted
in an earnings report on Tuesday.
But its main competitors — Disney+, HBO Max, Paramount+ and AppleTV+, as well as
the old-guard streamers Amazon Prime Video and Hulu — have cut into Netflix’s share
of viewers’ attention.
The global demand for original Netflix programs, like “Bridgerton,” the much buzzed-
about romance series from the super-producer Shonda Rhimes, has started to drop
relative to similar offerings from newcomers, according to the data firm Parrot
Analytics, which has developed a metric to rate not only the number of viewers for given
shows, but their likelihood of attracting subscribers to a streaming service.
In its latest rankings, Parrot reported that Netflix’s share of total demand —
a measure of the popularity of its shows — was slightly above 50 percent for the first
three months of the year, compared with 54 percent a year ago and 65 percent in the
first quarter of 2019.
In other words, competitors have started eating into Netflix’s dominance.
Operating countreis
Netflix is available for streaming in over 190 countries. Our library of TV shows and movies
varies based on the country and will change from time to time.
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