Netflix is an online content producing and video streaming multinational company based in Los Gatos, California, USA. Marc Randolph, Reed Hastings, and Scotts Valley founded Netflix in 1997.
Netflix provides products and services like videos on demand, recommendations, and gaming consoles. The company is operating its video streaming business empire worldwide approximately in 190 countries. Roundabout 195 million people are using the paid services of Netflix. The US market share of Netflix comprises of 73 million active subscribers.
According to a report by MacroTrends, the annual revenue of Netflix was 23.819 billion dollars in 2020 and it has amplified by 26.19%. Out of which the net profit of the video streaming company was 2.806 billion dollars and it has amplified by 98.48% since 2019.
Netflix has to face the competition of following brands like Vevo, Hulu, Sony Crackle HBO Go, HBO Now, Sling TV, Playstation Vue, YouTube, Disney+, Apple TV+.
Today, we will focus on the swot analysis of Netflix. The study of swot analysis would help you to analyze various internal and external factors of the online video streaming business.
Here’s the swot analysis of Netflix as follows
Table of Contents
Awards & Nominations
In the Emmy Award of 2020, 160 shows on Netflix have won the nominations. Other platforms like HBO, Fox, NBC, CBS, and ABC have received 107, 33, 47, 23, and 36 nominations respectively. Their nominations are less than Netflix. It proves the fact that the popularity of Netflix is increasing among people.
Netflix offers economical packages to its customers. They fall under the category of affordability of high-speed internet users. For instance, Netflix charges 8.99 dollars for unlimited movies, TV shows, and video streaming.
If you compare its packaging price with cable TV and cinema, then it’s much cheaper. Netflix also offers full HD quality video to its premium subscribers for 15.99 dollars a month.
Netflix cares about its users. The video streaming platform has recently added a new feature for offline users. It allows paid subscribers to download the show and watch it later on while traveling or at any convenient time.
As we know that Netflix is an online video streaming tech platform, and it heavily relies on technology to run its entire business. The platform runs very well on different hardware devices like laptop computers, smartphones, iPhones, iPads, and TVs. The flexibility of the platform has increased its growth rate.
Whether it is TV shows like Mindhunters, Stranger Things, Narcos, Orange Is the New Black, Tiger King, or Money Heist. The focus of Netflix has always been on the production of quality content. The company did so and it has multiplied the subscribers.
Database of Customers
Netflix is providing the online video streaming service in roundabout over 190 countries worldwide. The brand has a database of more than 195 million active users globally. The high customer market provides the platform a competitive advantage when it’s deciding terms and conditions with studios.
According to Forbes, Netflix was at the 4th position of the world’s top brand in 2019. The video streaming platform has achieved this platform in a very short time.
High Growth Rate
The growth rate of Netflix has increased its influence among online content producing and video streaming platforms. It’s not only limited in the US but also worldwide.
If Netflix offers more TV shows, movies, and other video content, it would bring more subscribers. But the direction, production, and content creation cost have increased a lot in recent years. For instance, the video brand has spent approximately 12.04 billion dollars in 2018 and 14.61 billion dollars in 2019. The content and operational cost have been growing.
Netflix has increased the monthly subscription charges. The other video streaming platforms are less expensive than Netflix. For instance, Apple TV+ charges 4.99 dollars monthly and Disney+ offers video streaming services at 6.99 dollars a month. The monthly packaging price range of both of these platforms is lower.
Limited Customer Support Staff
The Netflix account hacking activities have amplified in the early month of the pandemic in 2020. They wanted to enjoy the TV shows to spend their leisure time. When they contacted the customer support service to complain about the account hacking activities, the working hours of the staff were short under the circumstances. The company also had limited staff and it annoyed many customers.
Over-dependence on North America
As we know that Netflix is a multinational brand and the company is offering video streaming services in more than 190 countries with millions of users. But a major portion of the company’s revenue is dependent on the North American market. For instance, the platform earned 10.05 billion dollars in 2019 from North America and it was more than 50% of the total company’s revenue.
Netflix offers three packages; basic, standard, and premium. Many Netflix users want more packages with a variable hourly price range to attract more customers. The limited options have decreased the interest of people. It’s because some users want to watch only one show.
No Environment Initiative
Many tech companies like Facebook, Google, Amazon, and Microsoft are shifting towards clean energy. They’re even planning to utilize 100% clean and green energy. On the other hand, Netflix also falls under the category of tech organizations. The video streaming platform hasn’t started utilizing clean energy. The brand should adopt eco-friendly sustainable options.
Netflix offers different types of customized content to target customers in different countries. It requires a huge amount of funds to offer customized video content. The company relies on debt for its upcoming projects. For instance, the video streaming platform acquired the debt of 15 billion dollars to finance its shows.
The shows we watch on Netflix don’t belong to the company. The online platform only gets the license from the studios to play it on its platform. Other platforms start playing the same video content a few years later after the expiration of the license. It confuses many people when they want to watch the show again and couldn’t find it on Netflix.
Corporate Social Responsibility
Netflix is a socially responsible organization. The company plans to invest 2% of its annual revenue in the development of the black communities. It comprises approximately 100 million dollars.
Cheaper Annual Packages
The monthly subscription packaging isn’t profitable to the company especially when the platform launches a new show. It attracts a lot of new monthly subscribers to watch only one show. They unsubscribe their package after the completion of the month.
Netflix should launch new annual packages at a discounted price range so that the users would convert from monthly to annual subscribers. It would help the company to multiply its revenue and profitability.
Netflix launched some of the shows in foreign languages like Money Heist in Spanish and Sacred Game in Hindi. They turned out to be a great success for the company. It’s because these shows were focusing on a certain market. Video streaming should launch such projects often by following niche marketing.
Alliances & Partnerships
Alliances and partnerships have always been a great option for businesses and companies to expand their platforms. Netflix has also recently partnered up with Channel 4 is a very good example of it. The video streaming platform should join other streaming platforms and channels to increase its market share.
The content library of Netflix is indeed comprised of many good shows. The platform should update its platform with the new upcoming shows. It would attract the attention of the audience and the wait would increase the thrill and suspense of the new show.
As we know that Netflix has got more than 195 million active monthly subscribers. It’s a huge market share for an online paid subscription platform. Netflix could increase its customer market by adding content in foreign languages to target a newly developing market.
Advertisement Business Model
Ads based business model is a great option and it would attract a plethora of new customers because of the advertisement sponsored free shows. Many companies like Facebook Google, YouTube, and others are also offering free content with ads.
The smartphone user market and the trend of mobile video streaming has been increasing consistently. Netflix should offer packages cheaper mobile packages just like the company did for the Indian market, 3 dollars monthly. This is the only way to compete with the cheaper subscription packages of Peacock, Disney+, Apple+, and other companies.
The market and network of Netflix are expanding. The commissioner of the European Union explained in March 2020 that the HD video of the platform interferes with the hospital equipment and the country’s defense system. The commissioner requested users to watch the normal video instead of HD. If it keeps on happening, the platform would lose its premium packages.
According to a report by Shift Project, the impact of the carbon footprint of tech companies like Netflix is more dangerous than the aerospace companies. The video streaming platforms contribute 1% of the global carbon emission. The carbon emission jeopardizes environmental sustainability. It sends a negative message to eco-friendly users.
Hacking of Accounts
The rate of cybercrimes like Netflix account hacking activities increased in the early months of the pandemic of covid-19. The platform had limited customer support staff and it aggravated things. If the platform doesn’t tighten its security system, users would join other platforms where their privacy would be safe.
The illegal downloading of videos, movies, and TV shows are the major threats to the video streaming company. It jeopardizes billions of dollars of investment for the company. There’s no way to stop the torrent sites.
Freedom of speech and free media are the major threats to authoritarian regimes like China. Such governments require a high level of editing of the video content before airing it in their country. The video platform won’t offer its services in the world’s largest consumer market.
HBO, CBS, NBC, YouTube, Disney+, Apple TV+, Hulu, and many other video streaming platforms are expanding their market share. The tough competition puts more pressure on the platform to produce and deliver quality content. The brand has no other choice but to loan more money to finance new shows.