Preventing the Demise of Netflix Essay Example
A CNBC article states that Netflix, Inc. shares are down 10% after the company released its 2019 second quarter financial earnings report (Feiner, 2019).This is caused by multiple factors that I have discovered in my research about the company. I have compiled several marketing strategies issues that Netflix is experiencing in today’s market. I will provide further insight on these issues as well as expressing my recommendations to remediate the issues.
Netflix, Inc. was as a media streaming and video rental company in 1977 by Reed Hastings and Marc Randolph. Netflix is one of the world’s biggest providers of streaming content. As technology improved, Netflix altered their company image by focusing on just streaming services. In 2011 Netflix split the companies DVD rental service and Streaming service. The new company that would provide the DVD rental service was now called Qwikster. This move was not perceived well by the consumers due to the fact that they would have to pay for two subscriptions. At the time before the split, the Netflix subscription price was $9.99. After the split was complete, the two companies offered their services for $7.99 and $15.98. If consumers opted in to pay for both services, the amount they would pay would be 60% higher than the price before the split. This is one of many questionable decisions that Netflix has made in its history.
One marketing issues that is becoming a growing problem is that they are losing much of their content from companies that are deciding to create their own streaming platforms. One prime example is Disney creating their streaming platform named Disney+. Disney has the rights to “have the entire output of the studio, animation, live action at Disney, including Pixar, Star Wars, and all the Marvel films" as stated by the Disney CEO in the Business Insider article (McAlone,2018). That will remove a lot of big name nostalgic titles such as The Lion King and Toy Story.
Another issue that was stated in the Ivey Publishing Case Study: Netflix Inc.: The Second Act — Moving Into Streaming are that Netflix has a low switching cost. The case study goes on to mention that “The threat was not that subscribers would leave Netflix for a competing service, but rather, that they might leave due to a lack of compelling content for the price charged” (Chatterjee, 2018). With Netflix’s subscription being so affordable at $7.99, customers could easily try other streaming services. This is an ever growing threat because Netflix continues to accumulate more competition in the media streaming industry. Some examples of their direct competitors are Amazon Video, Hulu, HBO, and Starz.
One proposed solution to Netflix’s marketing issues is to merge with the one company that excels in the area that they lack in. This area is providing consumers with up to date content for Television shows. If Netflix were to merge with Hulu, they would become a powerhouse in the media streaming industry. Hulu provides next day content for its subscribers. If a television show airs that night, it will be available on Hulu the next day. Netflix has a select number of television shows in their library, but they are not up to date. They only air past seasons. Hulu would benefit substantially just from the amount of Netflix subscribers around the world. Netflix would help Hulu in the movie category because they are lacking severely in that department. From my experience, Hulu does not offer many movies that peak my interest unlike Netflix does. This merger would offer a true alternative to cable television too. Hulu is now offering live television packages to its subscribers. Merging Hulu and Netflix would satisfy customer wants for live television, on demand television, and on demand movies.
Netflix should set up multiple customer advisory panels to determine exactly what consumers want. They could propose multiple marketing ideas and they would be able to get direct feedback. If Netflix proposed the idea to panel that they were going to increase their subscription prices, they could directly ask the panel how much of an increase would they feel comfortable paying. Netflix could also propose the idea of increasing the price in increments until they reach their target price.
Netflix continues to create its own content and labeling them as Netflix originals. Since Disney is removing their content from Netflix library, Netflix will no longer have to pay millions in license agreements for that content. This will allow Netflix to allocate more funds to create their Netflix originals. They could hire experts to research the movie industry and to see what movies consumers like to watch.
My last recommendation is for Netflix to create more value for its subscribers. They wouldn’t have to increase the subscription price, but they would have to offer more to the consumers. They could partner with multiple theatres such as Cinemark, Regal, and AMC. Netflix could come up with a subscription plan that includes tickets to see movies that are still in theatres. By creating more value for the subscription cost, consumers will have multiple reasons to not cancel their subscription.
Chatterjee, S., Barry, W., & Hopkins, A. (2018, November 18). NETFLIX INC.: THE SECOND ACT — MOVING INTO STREAMING[Scholarly project]. In Ivey Publishing. Retrieved July 20, 2019.
Feiner, L. (2019, July 17). Netflix tanks after whiffing on global paid subscribers. Retrieved July 20, 2019, from https://www.cnbc.com/2019/07/17/netflix-earnings-q2-2019.html
Hosch, W. L. (2019, April 24). Netflix. Retrieved July 20, 2019, from https://www.britannica.com/topic/Netflix-Inc
McAlone, N. (2018, June 28). Most Netflix subscribers with young kids have no idea Disney content will get pulled off the service. Retrieved July 20, 2019, from https://www.businessinsider.com/netflix-subscribers-with-kids-dont-know-disney-content-will-be-pulled-2018-6
Rodriguez, A. (2018, April 14). As Netflix turns 20, let's revisit its biggest blunder. Retrieved July 20, 2019, from https://qz.com/1245107/as-netflix-turns-20-lets-revisit-its-biggest-blunder/