SWOT Analysis of Netflix (2019)

Company: Netflix
CEO: Reed Hastings
Year founded: 1997
Headquarter: Los Gatos, USA
Number of Employees (2018): 7,100
Public or Private: Public
Ticker Symbol: NFLX
Market Cap (Feb, 2019): $155.81 Billion
Annual Revenue (2018): $15.79 Billion
Profit |Net income (2018): $1.21 Billion

Products & Services: Video on demand | Streaming to game consoles | Recommendations

Competitors: Hulu | Amazon Instant video | HBO Now | HBO Go | Twitch | Vevo | Crackle | Sling Orange | Playstation Vue

Fun Fact:Did you know that Netflix was originally called Kibble?

An Overview of Netflix

With 137.1 million subscribers from around the world, Netflix has grown tremendously over the years. It is one of the leading internet entertainment services in the world with paid memberships in over 190 countries.

70% of the subscribers binge-watch the TV series on Netflix. Not just a TV series, it offers movies, documentaries, and feature films with various genres and languages.

In 1997, Reed Hastings and Marc Randolph co-founded Netflix, starting as a DVD sales and rental by mail but after a year they focused on online DVD rental service.

In 2007, Netflix introduced streaming media online while retaining its DVD rental service. They started expanding online streaming internationally in 2010. With such a global reach, Netflix’s profits tripled this year.

How is it so successful? Did it face any ups and downs? To answer these fundamental questions, let’s look at a detailed SWOT analysis of Netflix.

SWOT Analysis of Netflix

The SWOT analysis of Netflix is given below:

Netflix’s Strengths – Internal Strategic Factors:

  1. Exponential Growth – In the past ten years, Netflix has become an influential brand for online streaming content not only in the US but across the world.
  2. Global Customer Base – Netflix is serving over 190 countries across the world, having a global customer base. There are over 137 million subscribers of Netflix, and it gives the company a strong bargaining power with the studios for securing exclusive content.
  3. Originality – Another one of its strength is that Netflix has been producing original content over the years with the highest quality. Some of its original shows like Stranger things, Narcos, Mindhunter, and Orange is the new black became so popular that its subscriber count kept increasing over the quarters.
  4. Adaptability – Netflix adapted to various technologies instantly by providing streaming on all internet-connected devices like personal computers, iPads, mobile devices, and televisions. Due to this, their business grew immensely over the years.
  5. Competitive Pricing – The pricing strategy of Netflix has given it leverage over its competitors. The plans that Netflix has designed are affordable and offer great value. Subscribers can watch unlimited movies, either on DVD or streaming for an affordable price of $8.99 a month. It is less expensive than cable movies or going to the cinema and also offers a wider selection. For a higher price, subscribers can even get premium plans.
infographic source: Statista

Netflix’s Weaknesses — Internal Strategic Factors:

  1. Growing Operational Costs – The original content produced by Netflix gives it a competitive advantage, but the cost of supporting this content keeps growing. The projected spending (June 2018) on original programming by the Economist for this year was 12-13 billion USD. The amount has exceeded from the last year’s spending.
  2. Limited Copyrights – Netflix does not own most of its original programming, and this affects the company negatively. The rights taken from other studios expire after few years, and that content starts appearing on other sites.
  3. Increasing Debt – Netflix is serving its diversified content in many countries around the world which requires huge amounts of money. Netflix keeps adding to its long-term debt to fund new content, and as of September 30, 2018, it reported $ 34 billion in long-term debt. The increase in debt every year is the sign of a significant weakness.
  4. Lack of Green Energy – Netflix has still not utilized renewable energy and hasn’t created a business model to promote environmental sustainability. Contrary to this, tech companies like Amazon, Google, Apple, and Facebook have already started using renewable energy to help sustain the environment. The four tech giants have committed to using 100% renewable energy for their businesses. The lack of green energy utilization has a negative impact on the brand image of Netflix.

Netflix’s Opportunities – External Strategic Factors:

  1. Expand Customer Base – With such a huge current subscriber base, Netflix can tap into many other countries and expand its services and subscribers. They can start to target the countries where it is currently not available. Recently, Netflix expanded its operations and added a few more countries on its operation list. However, it is still unavailable in China, Crimea, North Korea, and Syria.
  2. Refresh Content library – It can expand its content licensing by increasing the contracts with various movie distributors. Additionally, Netflix should refresh its content library as it is now producing its original content.
  3. Alliances – It can also partner up with various telecom providers and offer bundle packages in different countries. Alliances and partnerships can prove to be beneficial for Netflix. In the past, Netflix partnered with Channel 4. It can form more solid partnerships with local broadcasters.
  4. Niche Marketing – Producing region-specific content in their local languages is also another big opportunity for Netflix. Niche marketing has been proven beneficial for Netflix. For example, it started an original TV series ‘Sacred Games’ in India, and Spanish series (La casa de paper (Money Heist), which are massive hits.

Netflix’s Threats — External Strategic Factors:

  1. Competitive Pressure – Netflix is not the only one which provides digital streaming around the world. Its competitor base keeps increasing every year. HBO, Amazon, Hulu, AT&T, and YouTube are competing continuously with Netflix by giving repeated access to new and original content to its subscribers.
  2. Government Regulations – Strict governmental rules and regulations regarding service providers like Netflix in many countries can be a big threat for them. For example, Netflix expansion to China will be unlikely because of its restriction on foreign content.
  3. Piracy – Digital piracy is still at its peak as thousands of people around the world find ways of downloading media content because of high monthly costs which they cannot afford. It is another big threat that Netflix faces.
Article source: Forbes.com | Infographics source: Statista

Recommendations:

The SWOT analysis of Netflix highlights where the brand currently stands and the threats it is facing in this era. Following are a few suggestions for Netflix that were recommended after this detailed analysis:

  1. Tap into new geographical locations by partnering up with their local cable providers and streaming their local content as well as international content in various languages. In this way, they will gain more profits and subscribers.
  2. Netflix should try connecting with IMDB, Rotten Tomatoes, and other internet services to provide a variety of ratings and other information for their users.
  3. To avoid digital piracy, Netflix should strengthen their security and expose whoever is behind digital They can also provide even more generous subscribing packages for different economic classes.
  4. Improve their application and website by providing a more user-friendly interface for their subscribers.