Netflix Business Model And Strategy Case Study (The Dark Side)

About Netflix

Netflix is the leading streaming service that streams shows and movies to audiences from the comfort of their home. In exchange for a very affordable monthly subscription fee that can go low as $9 and $13.99 as a whole package. Providing the audiences a considerable library of selected best-in-class movies, shows, and cartoons for the kids. They have covered almost 80% of the world, nearly 190 countries, with more than 30 different languages in their streamings. Yet, some countries are still banning Netflix from offering services to their citizens. The reason plays a role in Netflix’s policy and the country’s policy.

Netflix has reached 200 million memberships by 2021 since it launched in 1997, which is one of its most significant milestones.

What Is Netflix And How Ott(Over The Top) Works?

Users can binge-watch TV shows and films with Netflix, a streaming content provider. It is a subscription-based online streaming service that presents a library of movies and TV shows online.

WEB OTT PROVIDER NETFLIX IS THE BIGGEST.

OTT streaming service Netflix is the leading OTT service in the United States based on the share of total viewing hours with approximately 34 percent, according to a survey from 2021.

A $309.7 billion IPO took place in 2002 for Netflix.

The majority of Netflix’s funding comes from debt instruments.

ASSESSMENTS

Investors in Netflix include 7 companies, of which 4 are the lead investors, namely:

  1. TCV
  2. IVP (Institutional Venture Partners)
  3. Groupe Arnault
  4. Reed Hastings

PURCHASES

Two organizations have been acquired by Netflix:

  1. StoryBots (recently acquired on May 9, 2019)
  2. Millar World

Business Model Of Netflix– Revenue Model 

Netflix started as a DVD rental company; it took its rental services on the Internet by creating an online portal and began offering online rental services.

Netflix has been producing content steadily since it began. A house of cards series was Netflix’s first self-commissioned show in 2013.

Subscription-based content is currently pioneered by Netflix. It works on the Subscription Video on Demand (SVOD) model. Subscribers pay for a monthly plan and are given access to a vast media library—any time, anywhere. Thus, subscriptions are Netflix’s primary source of revenue.

It also has a DVD rental on a subscription basis.

Netflix has even set an alliance with PlayStation, X-Box, and many other businesses in the gaming industry.

It has developed partnerships with the gaming sector to cater to all its gamer subscribers with video games as per their needs.

During converting the business model from a mail-in system to a streaming platform, Netflix partnered with Microsoft, Apple, and Android.

And now, after joining the network on the web, it has successfully established its relations with big data providers such as Amazon and Google.

Content Costs and Content Acquisition

Everything Netflix offers on their library is basically licensed content owned by a third party. Netflix pays the distributor the right to use the movie/show to stream it on their platform.

Also, Netflix has its own production team and directors that write, produce, and direct their own movies and series. It has an entirely different cost. The highest payment Netflix has made for a single film (not a string or a sequel) cost them $200 million. The Gary Man was directed by the fantastic Marvel Avengers director, The Russo Brothers.

Though Netflix never mentioned how much do they spend on the movies that are streamed on Netflix that is not a Netflix original, we have gathered some information for you,

Netflix recently closed a deal on the movie “Knives Out” for $469 million (a multi-project agreement and multi-project agreement). It costs $234.5 million on each film, which is a costly deal that is more than what they spend on The Irishman.

Netflix can quickly pay between $100 million to 250 million dollars per blockbuster movie or multiple seasons tv shows.

Some tv shows can go up to $500 million depending on the demand. Keep in mind every show or movie has its own Flexi license.

The license can give Netflix the ability to stream the movie to multiple regions of the US nation only, depending on the publisher and the movie license.

How You Can Earn Money Through Netflix?

It’s not always about paying them; they pay you too!

First, Netflix will be paying you to watch movies and television series.

Netflix does pay people to “tag” programs on their behalf.

They hire fans of their shows to help them “tag” parts of their content.

These individuals get compensated for doing what they enjoy: binge-watching television shows, films, and documentaries.

“Editorial analysts” or “creative analysts” are the most popular slang terms for Netflix taggers.

These “taggers,” also known as editors or creative analysts, operate by watching a lot of Netflix content and then “tagging” each film and episode with the necessary metadata.

If you didn’t know, this is one of the ways Netflix obtains helpful information about some of the series or movies you watch.

The team behind Netflix can provide their viewers the ability to get paid from Netflix directly.

The budget splits across these factors:

  • Vocal dubbing

You can apply to become a dubbing agent where they give you the English script, and they provide you a studio to record your vocals translating the words or morel like acting the scenes again, but in a different language so they can use that audio file and place it as dub or voice-over translation

  • Arabic subtitles

If you can prove that you can translate movies, creating your own translation file is very effective. When you apply to become Netflix’s translator, you won’t be a full-time person. They will just ask you to translate a couple of lines. Others will solve a couple of bars and get paid for it.

  • Data exposure

Netflix is more than happy to provide any committee information about their original movies. Let us face it, it’s free SEO for them.

Does piracy affect the Netflix Business Model?

The phenomenon of digital piracy has been 20 years indeed still poses a financial threat to media companies’ talents.

In my opinion, everyone likes to watch pirated movies/series.

We can’t ignore that there are many countries where piracy is very high, and people do not see it badly.

But time is slowly changing, and people slowly value the content creators.

Some television companies are already leading the way to Pay for Netflix.

I saw one article in Khaleej Times in which:

They provide a Netflix button on the remote control, making it more accessible.

If you watch the advertisement, the price may seem a little higher, but it will change the weather and the arrival of more competitors.

This can be a game-changer for Netflix.

Key Lessons to Learn from Netflix Marketing

I hope so and given that Netflix has been around and developed over a solid number of years.

I also expect many innovations from their side to support success as a VOD supplier.

The amount of content and the meager price it can be offered instantly beat the more traditional salespeople. They served the same range also gradually imposed themselves on traditional viewing forms such as that cable TV and satellite services.

This convergence will help, in my opinion, to offer greater reach.

The platform is available on so many platforms, so many devices says a lot about its popularity worldwide, and I think it will stick around for several years.

Netflix will need to continue to add content that we love and update the product with new features and valuable services.

Problems faced by Netflix in every Region

Suppose you visit abroad and try logging into your Netflix account to binge-watch your favorite movies/ shows. In that case, you may have encountered the issue of content not being available in your Region.

That’s because of the copyrights enforcements and royalties. Every country follows some strict guidelines for ott platforms like Netflix. Therefore not all content is always available.

Content costs are very high, and they outnumber revenue. There is also a great deal of risk in creating new content, and Netflix has limited experience in this area. Netflix has strong competitors that combine technology, content creation, and content distribution (Google, Apple, HBO, Amazon), which come up with much cheaper plans. 

The three giants offer some access to movies for online consumers. The strength of Netflix is ​​its distinctive features, such as product recognition. Algorithms help consumers find films and TV programs and increase production studios that provide authentic content.

Growth of Netflix in the United Arab Emirates

Netflix was launched for the first time in the UAE on Jan 1, 2016, along with 130 other countries all at once. It was their most significant step to the future. Netflix will become 5 years old in the UAE by 2022, while in the first quarter of 2020. Netflix witnessed the best quarter in the UAE. Their subscriptions increased 26% solidly, according to the TRA (UAE’s Telecommunication Regulatory Authority), which saw a high increase in their following counts on social media by 15,000 in just one month.

All that happened due to covid forcing many people to stay at home.

How Netflix Normalizes Religion Disrespect & Cultural values

We have seen many movies and shows on Netflix that are somewhat disrespecting our beliefs, now if we feel offended then we can skip that movie or show and watch something else, but actually, Netflix is somehow forcing us, we will take for example the presentation “Messiah” which was set in Syria then in Palestine and Israel then to the USA, back and forth to these countries will attract people of these countries, most of the people who are from these countries are Arabs, Americans, and Jews, now the show was set in these countries so it’s obvious it will attract those people, but the thing is, the Muslims and the jews share a very strong belief in standing against homosexuality and its a very strict concept in both religions and yet Netflix still promoted homosexuality to these people, making the young generation watching the show say its normal, and netflix is just showing it typically for these people, yes it is normal for non muslims and non jews, but yet respect is a very important wave to surfe, using the muslims and jews in the show means using the respect to their culture.

List of movies promoting homosexuality on Netflix:

  • Pariah
  • Funny Boy
  • I Am Divine
  • Alice Junior
  • Schitt’s Creek
  • Disclosure
  • The Boys in the Band
  • I Care a Lot
  • A Secret Love
  • The Half of It
  • Circus of Books
  • Messiah

How did Netflix begin?

Netflix, founded in 1997, started as a DVD rental. It was one of a kind that got very popular back then. You pay for the DVD rental, watch the movie, and then give it back to the rental shop, aka NETFLIX.

They started in a small city in California called Scotts Valley by two very young men, Reed Hastings and Marc Randolph.

The history of Netflix as we go through the timeline

  • In 1998 Netflix launched its domain Netflix.com to make DVD rental easier. You place the order and get it shipped to your doorstep.
  • In 1999 Netflix decided to move its rental concept to the next level. You pay a monthly fee to rent the movies as long as you want and return them without extra charges; sounds familiar?
  • 2000, personality became important, Netflix introduced the personalized suggestion that fits your last order. They send you movies that are similar to what you love.
  • 2002, Netflix finally became public by selling shares priced at $1.
  • 2003, Netflix has passed 1 million memberships.
  • 2005, the Users system is finally here, creating lists of your favorite things and introducing where you can create personalized users for your family members.
  • 2006, memberships are now above 5 million.
  • 2007, the evolution, now instead of renting out DVDs, Netflix finally started streaming the movies and shows directly from the Internet, which is leading until today.
  • 2008, the Netflix application was introduced on the Xbox 360. It was the first step for Netflix to provide its services on the consumer electronics 
  • 2010, they are on mobile phones!
  • 2022, 400 million subscriptions and counting.

Insights from the Early Stage?

Categories: Digital Entertainment, Media and Entertainment, TV, Video, Video Streaming

Headquarters Regions: San Francisco Bay Area, Silicon Valley, West Coast

Head Office: Los Gatos, California, United States

Founded Date: Jan 1, 1997

Founders: Marc Randolph, Reed Hastings

Operating Status: Active

Finding Status: IPO

Type of Funding (Last): Post-IPO Debt

Number of Employees: 9400-10000 (till 2020)

Downloads(30 Days):  17,915,929

Monthly Download Growth -4.19%

Number of Current Team Members: 162

Netflix has 13 board members and advisors, including Rich Barton.

Legal Name: Netflix, Inc.

Child Hubs: Netflix Alumni Founded Companies

Stock Symbol: NASDAQ: NFLX

 

Conclusion

As solitary confinement/ isolation in quarantine and streaming are commonplace, Netflix has created long-term gains by successfully capturing audience content. Also, their long-term strategy of focusing on customer experience paves the way for a higher quality of life.

Global Presence

With 200 million subscribers worldwide, the workflow of online business has not been disrupted in any way by the epidemic crisis. With a global presence among most local OTT providers, Netflix has an estimated 73 million subscribers in the US alone. Even outside the US, it surpasses other OTT providers by 70-87% of registered users in English-speaking countries and 55-64% of users in non-English-speaking countries.

Subscription-based business

By using a business model that earns money from streaming subscriptions, Netflix has become a simplified content provider in times of violence. For those who live alone or are forced to separate, taking or extending their registration seems to be a valuable way to call their time. Considering the current situation where most outdoor entertainment is not an option, the Netflix-based model has been successful even in times of crisis. However, the epidemic has proved to be a testament to Netflix’s customer data and spotlight that shines brighter than ever on this broadcast platform.

Great content library

While some OTT content providers struggle to meet customer demand in times of violence, Netflix has an extensive library of authentic content that offers its members thousands of options. As viewer satisfaction is paramount, Netflix executives make sure to keep the library informed of new and up-to-date content.

As the epidemic limits daily practice, people have been asked to follow social segregation rules. Consumers increasingly turn to stream services such as Netflix. While customers are willing to pay for online streaming services, it remains to be seen whether this increase in customer numbers can be sustained once the world recovers from this crisis.

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