Netflix has a consumer base of over 100 million people across the world. Several companies with equally strong financial backgrounds have ventured into online streaming services and have cheaper monthly subscriptions and lots of exclusive content for users. As a result, this space has become more competitive than ever, paving the way for interesting times for any neutral with a close eye on the niche. Netflix, a global giant, is not perfect and has both strong and weak points that position it where it is. This piece will look at Netflix’s SWOT analysis and understand both sides of this giant and the combination that makes it deliver great content on our screens. Read on;
Overview of Netflix
Netflix is a US quality content platform and production company. The founders of the company are Marc Randolph, Reed Hastings, and Scotts Valley. In 1997, the three laid the foundation in California, and to date, its headquarters are in Los Gatos, California today.
Netflix offers a paid subscription service that works over the internet. The streaming services are available for both movies and television series. By the end of 2020, Netflix had 195 million people subscribed to their streaming services. Out of them, 73 million subscribers are from the US.
Netflix offers its services worldwide apart from countries like North Korea, China, and Syria. The brand has offices in the UK, France, Brazil, the Netherlands, Japan, South Korea, and India. Their main competitors are Hulu, Disney, YouTube, Vevo, and Apple TV+.
In 2020, Netflix had annual revenue of $23.819, which is an increase of 26.19% from 2019. Excluding all expenses, the company’s net profit was $2.806, an increase of 98.48% from the previous year.
Netflix’s Strengths
These are the internal factors that give the company a competitive advantage over other competing brands. Below are some of them.
Strong Brand Name
Netflix is a household name not only in the USA but also in other countries worldwide. It is one of the most popular and oldest brands in the online streaming market. Its brand name attracts a significant percentage of customers to the platform. Users associate Netflix with efficient streaming services, thanks to its reputation over the years, and would easily prefer them over the competition.
Original Content
Unlike most online streaming platforms, Netflix has a broad collection of original content. The company has heavily invested in original content around the globe in different local languages. This outstanding feature makes Netflix attractive to locals audiences. Users can enjoy all types of movies and TV series, curated for their location, which drives many users.
Reasonable Prices
Netflix’s pricing policy gives it a huge advantage over the competition. The monthly subscription for the standard plan is $8.99, and this is affordable for most users. For this price, customers can watch all types of content in HD. If you want the premium plan, you can get it at $15.99, which is still relatively affordable to many.
Great Technology
Netflix started as a DVD rental model in 2007 before, switching to an online streaming platform model, which helped it gain a lot of popularity.
Netflix’s online platform is easy to use and well designed. Customers can, therefore, maneuver through the app and site freely. It is globally recognized as one of the companies that invests a lot in technology, as seen from the few times it has experienced any significant downtimes over the years. This robust technology is the powering force behind great customer experience and reliability, which keeps users happy. An example is the “Play Something” feature, which uses artificial intelligence to pick and play a movie or TV show based on your viewing habits. It can pick a movie or series you were already watching, or an entirely new one on your list.
Large Customer Base
One of the differentiating factors of Netflix is its customer base. In 2020, the platform hit an all-time high of 195 million users. This is the most significant number of users any online streaming platform has recorded. Netflix’s quality products and global presence have made it a standard for all the companies in the industry. The number of users is expected to grow even further.
Netflix’s Weaknesses
Netflix’s weaknesses refer to all the internal problems it might have. They are;
Overreliance on US Market
Nearly 50% of the revenue Netflix has comes from the North American Market. If the US market were to stop using Netflix’s services, the company would experience a tough period. Besides the users, the company will also suffer if the US economy is affected. While they have made significant inroads in global markets, there is a need to expand reach outside the US market to diversify their user base and buffer the company from any issues that might affect its US customer base.
Growing Debt
Serving diverse content across a global market requires a lot of money, which has been Netflix’s Achilles heel for a long time. It has a huge long-term debt to its name and continues to take up more debt to sustain operations. In April 2020, Netflix reported $14.17 billion in debt and planned to raise an extra one billion in debt again. The increasing debt is a significant flaw for the company.
Lack of Environmentally Friendly Initiatives
There is increasing pressure on top firms to engage in environmentally sustainable initiatives. Technology companies like Google, Amazon, and Facebook have taken up renewable energy to protect the environment. This is good for its image as the giants have committed to using 100% renewable energy for their businesses. Netflix’s reluctance to engage in such initiatives is bad for the brand.
Customer Service Limitations
Netflix’s customer service support options are not robust enough to support the number of complaints they receive. This was particularly seen in the wake of the COVID-19 pandemic when the number of hacked accounts increased, and users needed help to recover them. In fact, Netflix reduced support hours which even made matters worse. Customer support is integral to customer experience and can significantly move customers to the competition if they feel their issues are not resolved correctly.
Rigid Pricing Models
Users need customized pricing with extra choices. However, Netflix’s pricing model is available in three types only. Users can go for the premium, standard or basic model. This leaves them with no option but to opt for other platforms like Disney+ with better pricing models.
Netflix’s Opportunities
Netflix’s opportunities are the external factors they can take advantage of to take things a notch higher. They include;
Expansion Opportunities
Netflix is available in many countries in the world. But it lacks original content for every country and language in the world. Netflix can choose to expand its content to cover every language and locality to attract more users. The company already has the resources to consolidate all the content under its platform. As such, it can benefit from expanding.
Also, Netflix should look to increase its subscribers in South East Asian countries, India and Pakistan. The benefit of such regions is that English is their second language hence they will be more interested in watching the films.
Additional Pricing Plans
Netflix only offers three pricing plans for customers. To attract more customers, it should create more plans. Some customers look for specific content like TV series and would be glad if the brand offered a particular plan for TV series alone.
Netflix can, therefore, break its current plans into smaller ones that are tailored to specific customer preferences. The price of each plan can be relatively low, which will increase the number of customers subscribing.
Mobile Streaming
Most of the online customers use mobile devices to stream. Even if Netflix has already developed the Netflix app for Android and Apple users, there is room for improvement. The company has been testing cheaper variants of the streaming services in mobile phones, and if the variants work well, it is bound to bring in more customers from developing countries.
Threats
Threats are the outside issues that Netflix has to deal with. Threats are essential in a SWOT analysis because they focus on market changes that the company should react to to stay afloat.
Increasing Competition
The most formidable threat to the company is the increasing competition. The online entertainment market is always subject to rapid technological changes. Also, the fewer the barriers to entry in this niche have increased the number of players offering similar or even better services.
Players such as Amazon, Hulu, HBO, Apple TV+, and Disney + prove to be significant competitors and can give Netflix a run for their money if they are not careful.
Video Piracy
Netflix faces the threat of video piracy from peer-to-peer networks like torrents. Some successful TV series like Orange Is the New Black and House of Cards have been downloaded illegally, leading to huge losses. The black market can download any content Netflix offers, and this is a significant threat for them.
Also, most people between 20-30 years download content for free. They do not pay the subscription fee but can still access the content.
Regulatory Problems
If Netflix chooses to expand, it might face problems due to regulatory restrictions. For instance, China, which is one of the biggest global markets, does not allow foreign media companies to participate in their country. They are concerned about the content offered. This is why Netflix finds it hard to expand in China and other countries with regulatory issues.
FAQs
Question: Which is the best subscription plan to pay for?
Answer: Netflix offers three different subscription plans; basic, standard, and premium. If your household has more than two people, investing in the standard or premium plan is not a bad idea. You should go for the premium plan if you are looking forward to watching films and series in 4K resolution.
If you live alone and plan to stream Netflix on your mobile phone, the basic plan will do the trick for you. Netflix will offer you a one-month free trial which you will test the service. After that, you will decide whether you should pay or not. You could start by testing the premium plan and switching to a cheaper plan once the trial period is over.
Question: How to cancel a Netflix plan?
Answer: You can cancel your subscription at any time. Go to the ‘Account’ page and choose ‘Cancel Membership.’ After canceling the membership, you can use your account till the billing period is over.
Question: What makes Netflix stand out?
Answer: Netflix will always show you a list of the top ten films and series in your country. They update the list daily. There is also a ‘Search’ option, where you can search for the series or film you want by keying in the title or genre of the film. Netflix gives you a suggestion of a series or film which you would be interested in. It uses an algorithm to find these suggestions and displays them with a percentage match. It also has “Play Something,” a feature that will automatically pick a tv series or movie based on your viewing habits.
Netflix does not have advertisements, regardless of whether you are in the trial period or not. Also, there is a wide selection of children’s films. You can set an age limit for the films you want the kids to watch.
Question: Which is the best subscription plan to pay for?
Answer: Netflix offers three different subscription plans; basic, standard, and premium. If your household has more than two people, investing in the standard or premium plan is not a bad idea. You should go for the premium plan if you are looking forward to watching films and series in 4K resolution.
If you live alone and plan to stream Netflix on your mobile phone, the basic plan will do the trick for you. Netflix will offer you a one-month free trial which you will test the service. After that, you will decide whether you should pay or not. You could start by testing the premium plan and switching to a cheaper plan once the trial period is over.
Question: How to cancel a Netflix plan?
Answer: You can cancel your subscription at any time. Go to the ‘Account’ page and choose ‘Cancel Membership.’ After canceling the membership, you can use your account till the billing period is over.
Question: What makes Netflix stand out?
Answer: Netflix will always show you a list of the top ten films and series in your country. They update the list daily. There is also a ‘Search’ option, where you can search for the series or film you want by keying in the title or genre of the film. Netflix gives you a suggestion of a series or film which you would be interested in. It uses an algorithm to find these suggestions and displays them with a percentage match. It also has “Play Something,” a feature that will automatically pick a tv series or movie based on your viewing habits.
Netflix does not have advertisements, regardless of whether you are in the trial period or not. Also, there is a wide selection of children’s films. You can set an age limit for the films you want the kids to watch.
Thoughts on Netflix SWOT Analysis
Netflix is an online streaming giant, and as it is with any company, it is not as perfect as we might assume. Despite its strengths that keep it on top, it has a couple of challenges and threats that continue to affect its ability to expand and grow. However, the team at Netflix is aware of the situation, and we believe that they are working to take Netflix to the next level with innovations and improvements to the current service. Businesses can learn from some of the SWOT analysis elements of the different sides of the online streaming business and derive insights for their own ventures if they wish to try out in this space.
- Dan Bilzerian Bio - December 9, 2022
- OLA Model Explained - November 23, 2022
- Service Value Chain Explained - November 23, 2022