Fundamentals of Business
Project -1
By,
Naresh
Nikhil
Amol
Vidhya
Deepak
Ceona
Tanmay
Contents
Overview (Tanmay)
Impact on the Covid - 19 pandemic on Netflix (Tanmay)
Demand-Supply of Netflix (Naresh)
Demand-Supply Curve of Netflix - PreCovid (Naresh)
Netflix's Demand-Supply Flexibility (Naresh)
Supply-Demand Curve Just Before Covid-19 Strike (Nikhil)
Shift in Demand Curve During Covid (2019-20) (Nikhil)
Supply-Demand Curve During Covid - 2020 (Nikhil)
Shift in Demand Curve During Covid (2020-21) (Amol)
Supply-Demand Curve During Covid - 2021 (Amol)
Shift in Demand Curve During Covid (2021-22 Q2) (Amol)
Shift in Demand Curve During The Covid Timeframe (2019-22) (Vidhya)
Shift in Equilibrium Price -> (2019-20) (Vidhya)
Shift in Equilibrium Price -> (2020-21) (Vidhya)
Shift in Equilibrium Price -> (2021-2022 Q2) (Deepak)
Elasticity of Demand and Supply (Deepak)
Changes in Quantities Demanded & Supplied and in Price (Deepak)
Effect of Macro-Economic Factors ( Ceona)
Fiscal and Monetary Policies (Ceona)
Global Development (Ceona)
Overview of Netflix
Founded: 1997
Business Model: Subscription-based streaming service
Content: Wide range of TV shows, movies, and original
content
Industry Impact: Revolutionized the entertainment industry
Impact of COVID-19 on Netflix
Subscriber Surge: Significant increase during the pandemic
2020 Growth: Added over 36 million new subscribers
Total Subscribers by End of 2020: Approximately 204 million
-Reasons for Growth: Increased home entertainment
demand due to lockdowns and social distancing
Post-Pandemic Challenges and Strategies
Competition: Heightened from Disney+, Amazon Prime
Video, HBO Max, etc.
Content Investment: Continued heavy investment in original
content
International Expansion:Ongoing efforts to grow global
reach
Current Subscriber Details (as of mid-2024)
Total Subscribers: Approximately 238 million worldwide
Demand/Supply Of Netflix - In Three
Timeframes.
Demand-Supply Curve of Netflix - PreCovid
Netflix’s Demand-Supply Flexibility
1. Market Demand Fluctuations: Many companies find it challenging to adjust their supply in
response to market demand fluctuations.
2. Cloud Technology Utilization: Netflix employs cloud technology in their backend, with AWS
providing the infrastructure to scale resources almost unlimitedly at any time.
3. Dynamic Resource Management: This technology enables Netflix to stretch and shrink their
backend resources based on demand, ensuring continuous supply.
4. Avoiding Shortages and Wastage: Netflix effectively avoids resource shortages during
peak demand periods and prevents resource wastage during low demand times.
5. Unparalleled Flexibility: This method grants Netflix unmatched demand-supply flexibility,
ensuring they can meet market needs efficiently at all times.
Netflix Covid Era
Netflix’s success lies in balancing demand and supply by understanding consumer preferences, leveraging
technology, and investing in content and infrastructure, allowing it to dominate the streaming industry.
Demand Factors Supply Factors COVID-19 Impact
1. Consumer Preferences: Shift from traditional 1. Demand Surge: Increased subscribers
TV to on-demand streaming. 1. Content Production: Heavy investment in
original and acquired content. due to more time spent at home.
2. Content Variety and Quality: High-quality 2. Production Delays: Content production
original content like “Stranger Things.” 2. Licensing Agreements: Securing rights for
popular third-party content. slowed down due to lockdowns.
3. Global Expansion: Increased subscriber base Post-Pandemic Scenario
through international markets. 3. Technological Infrastructure: Investment
in streaming infrastructure, e.g., Open 1. Stabilizing Demand: Demand growth
4. Technological Advancements: Better internet normalized but remained high.
speeds and smart devices. Connect.
4. Content Costs: High production costs 2. Resumption of Production: Content
5. Price Sensitivity: Various pricing tiers to production resumed, ensuring steady
manage demand elasticity. impact content supply.
content supply.
Supply-Demand Curve Just Before Covid-19 Strike
Shift in Demand Curve During Covid (2019-20)
Supply-Demand Curve During Covid - 2020
Shift in Demand Curve During Covid (2020-21)
Supply-Demand Curve During Covid - 2021
Shift in Demand Curve During Covid (2021-22 Q2)
Shift in Demand Curve During The whole Covid Timeframe
(2019-22)
Shift in Equilibrium Price -> 2019-20
Shift in Equilibrium Price -> 2020-21
Shift in Equilibrium Price -> 2021-2022 Q2
Elasticity of Demand and Supply
Changes in Quantities Demanded & Supplied and in Price: Netflix
Pre-COVID Period:
• Steady growth in subscribers due to rising streaming popularity.
• Increased demand driven by original content and international expansion.
• Moderate competition from other streaming services.
• Consistent release of new content; investment in AWS for reliable service and scalability.
• Basic subscription price maintained at ₹499, with tiered pricing for varied user needs.
During COVID-19:
• Sharp increase in demand as lockdowns kept people home, leading to a global subscriber surge.
• Higher engagement levels with more content consumption per user.
• AWS’s elastic infrastructure handled increased streaming demands.
• Accelerated production and remote content delivery adapted to new conditions.
• Basic subscription price kept at ₹499, focusing on retention and acquisition over profit maximization.
Post-COVID Period:
• Demand stabilized at high levels with increased competition from new entrants.
• Shift in consumption patterns as routines normalized.
• Ongoing investment in original content to stand out in a crowded market.
• AWS continued to support efficient service scaling.
• Basic subscription price stable at ₹499, providing consistent value through diverse content.
Key Insights:
• Netflix’s elastic supply capabilities ensured seamless service during demand spikes.
• Price stability, despite demand fluctuations, helped maintain and grow their subscriber base.
• Strategic pricing and technological investment were crucial in navigating market volatility during the pandemic.
Effect of Macro-Economic Factors
Inflation
Due to the highly elastic nature of demand and supply that Netflix possesses, recent inflationary
pressures haven’t significantly impacted the company. Netflix managed to keep its subscription prices
stable during inflationary periods, ensuring continued customer retention and market share.
Unemployment
Unlike many industries, increased unemployment can actually benefit OTT platforms like Netflix. As
more people stay at home with limited entertainment options, the demand for streaming services rises,
leading to increased subscriptions and viewership for Netflix.
Taxes
While direct taxes haven’t had a substantial impact on Netflix, indirect taxes on commodities such as
gas and diesel can influence consumer behavior. Higher costs in these areas may deter people from
spending on outside entertainment options, which inadvertently benefits Netflix by driving more
consumers towards affordable, home-based entertainment.
Fiscal and Monetary Policies
Support for Online Video Platforms
Many countries have started supporting the growth and acceptance of online video platforms. This support includes regulatory frameworks
and incentives to encourage the expansion of digital entertainment services.
Tax Policies in the EU
Several EU nations have implemented tax policies aimed at fostering a competitive environment for domestic OTT firms against multinational
giants like Netflix. These policies are designed to balance the market and support local content creation.
Global Tax Agreement
A significant development in fiscal policy is the global tax deal finalized by 136 countries, including India, which ensures that multinational
corporations like Netflix pay their a minimum global tax rate of 15%. This agreement aims to address tax avoidance and ensure fairer tax
contributions from large companies.
National Entertainment Taxes
Each country has its own entertainment tax structure, with many offering more favorable tax conditions for OTT platforms compared to
traditional tele-entertainment mediums. These favorable tax policies often result in lower net payable taxes for OTT services, providing them
with a competitive edge.
Advantages for OTT Platforms
Overall, these fiscal and monetary policies have been advantageous for OTT platforms like Netflix. The support from various governments,
combined with favorable tax structures, helps these platforms to thrive and expand their market presence globally.
Global Development
Widespread Internet Access
Over the past 10-15 years, the internet has become a ubiquitous commodity for individuals worldwide. This widespread access has been a
critical factor in the growth of online video platforms.
Impact of 5G Technology
The introduction and proliferation of 5G technology have revolutionized online streaming, making it even smoother and more flawless.
This next-generation technology offers significantly faster internet speeds and lower latency, further enhancing the user experience and
allowing for seamless streaming of ultra-high-definition content.
Affordable Gadgets and Technology
The development and availability of affordable gadgets, such as smartphones, tablets, and smart TVs, have been instrumental in the
rapid rise of OTT services. These devices have made it easier for consumers to access streaming content anytime, anywhere.
Reduced Internet Costs
In countries like India, internet charges have decreased significantly over the past five years. This reduction in cost has enabled
individuals to stream content for extended periods without financial strain, contributing to the surge in OTT platform usage.
Rise of Work-from-Home Culture
The widespread acceptance and implementation of the work-from-home model have also bolstered the growth of OTT platforms. With
more people spending time at home, the demand for home-based entertainment has increased, leading to higher subscriptions and
viewership for services like Netflix.
Global Reach and Market Expansion
The combination of these factors—improved internet infrastructure, affordable technology, and changing work habits—has allowed OTT
platforms to expand their global reach. Companies like Netflix have capitalized on these developments to penetrate new markets and
grow their user base worldwide.
Video Presentation -
Overall Analysis of the
Project - Netflix
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