SWOT Analysis of Netflix, Essay Example for Free

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Company Details

Founded:	August 29, 1997, Scotts Valley, California
Revenue:	25 billion USD (2020)
Video games:	Stranger Things: 1984,…
CEO:	Ted Sarandos (Jul 14, 2020–), Reed Hastings (Sep 1998–)
Founders:	Reed Hastings, Marc Randolph

Netflix, as an online streaming industry giant we know, showed up on the scene over twenty years ago. With a bumpy start and many setbacks by the competitors at the time who were using DVD rental service, Netflix captured the market slowly but permanently. Today, it is the most recognizable name in online content streaming around the globe.

In recent years, Netflix has experienced immense growth, mainly due to the pandemic when everyone was limited to their homes and needed content to consume. The brand has now a market capitalization of over $98 billion, making it one of the top 150 most valuable companies, especially in streaming media.

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SWOT Analysis of Netflix

Through SWOT Analysis, both stakeholders and researchers can see the advantages a company is enjoying as well as the disadvantages it is facing. Both of these aspects are divided into two categories; internal and external factors.

Internal factors cover strengths and weaknesses, while external factors cover opportunities and threats.

Contrary to a detailed SWOT Analysis, SWOT Table is designed to give readers a glance at key factors from all four elements. Before we move to that, let’s explore all the elements in detail.

Netflix’s Internal Factors

Before we explore the external factors that are affecting the survival and sustainability of Netflix, it is time to take a look at its internal factors, i-e. Strengths and weaknesses.

Strengths

Netflix is the second name of digital streaming media. Here are some points of competitive advantage that the company enjoys and some reasons why it is so.

Brand Reputation & Popularity

Netflix is one of the most popular brands in the world. In a short period, it has risen to great heights in brand reputation and popularity. Many ranking platforms rank Netflix to be among the top five most popular brands in the world, irrespective of the category.

Market Leadership

Many online content streaming platforms are direct competitors of Netflix. Still, it is enjoying market leadership in almost all metrics, including but not limited to the number of viewers, diversity, market cap, content indexing, etc.

Global Viewership

Netflix is not limited to a country or a region alone. Currently, it is serving viewers in over 190 countries. This is another competitive advantage that gives Netflix immense power over studios and production houses to curate content for its users who are ranging in over 170 million.

Original Content

Netflix prides itself n offering fresh and original content for its users. Of course, it has old shows and movies that are still popular with a new audience. By combining the good of both old and new, Netflix has positioned itself as the go-to media consumption platform for millions.

Flexibility Across Devices

Netflix adapted the multiple devices model early on. This allowed users to watch Netflix on a multitude of devices through one account. With its compatibility with desktop computers, TVs, tablet PCs, and mobile devices, the experience always gets smoother and crispier.

Consumers’ First

Many platforms depend on online usage time for their ad-based business model. The online streaming platform model of Netflix runs ad-free while also allowing users to download content for offline watching. This is, again, another strength for Netflix users.

Strategic Pricing

This is where Netflix shines through the online streaming market. By offering multiple pricing options, users can pick one that suits their needs without taking any dictation from the platform. Consumers get better value for their money and feel in control of their pricing and content which all bodes well for Netflix.

Industry Accolades & Nods

The content played on Netflix is constantly getting better. With a string of original content periodically, Netflix is winning the hearts of both peers and professionals. In 2020 alone, Netflix has received over 150 nominations surpassing all other conventional and digital platforms in the race.

Weaknesses

With a market-leading content and regional pricing structure, Netflix still has weaknesses in its ranks.

Netflix does not own most of its content. Combined with support shortages and rising operational expenses, the company needs to best its weaknesses.

Lack of Content Ownership

Even though Netflix has an immense catalog of original content, much of its content is still owned by other studios. After license expiration, the content resurfaces on other websites. This affects Netflix negatively.

Mounting Debt

Netflix’s long and short-term debt is piling up. Since it caters to the needs of diverse customers, Netflix has to come up with original content that requires financing. Currently, its debt is over $14 billion which will rise further.

Stiff Pricing Structure

Even with multiple pricing options, the structure still feels rigid to many customers. That is one of the reasons why the projected rise in the number of viewers has yet to be materialized.

Dependency on North-American Viewership

Netflix is a global brand but most of its paying customers belong to one continent only – North America. In 2019, almost 50% of Netflix’s revenue was generated in this region alone. This is another crippling factor that can hurt both the short and long-term sustainability of Netflix.

Support Complications

Due to the pandemic, Netflix reduced its support staff and time coverage. Since people were flocking around Netflix due to the lockdown, problems started to rise. With no staff to handle these issues, it put a dent in its customer experience.

Hefty Operational Costs

Netflix has to pay top dollar for content creation and hosting on its platform to keep its subscribers with fresh content. In the last couple of years, it is getting expensive for the company to meet the financial requirements of planning and creating content.

Higher Comparative Pricing

Direct competitors who are using the same business model, such as Disney+ and Apple TV+ are offering much lower prices for subscriptions. On the other side, Netflix has to raise pricing to meet the costs. This is another weakness that can affect its revenue streams.

Netflix’s External Factors

Netflix’s external strategic factors offer as many lucrative opportunities as the underlying threats to its revenue streams and long-term growth.

Opportunities

Netflix can still explore many opportunities to narrow the gap between its weaknesses and strengths.

Flexible Pricing

With already a flexible pricing structure in place, Netflix can exploit it further. By focusing on a limited number of devices and specific types of devices, such as mobile devices, the company can win new paying Netflix users through this mechanism.

Adopt Ad-Based Business Model

Netflix runs ad-free to provide a hassle-free and streamlined experience to its viewers. This also means that Netflix is losing potential billions in advertisement revenue. By adopting a smart ad-based business model, Netflix can improve its financial health.

Global Expansion

Netflix is a global brand but still, there are many regions where it is hardly known or dwarfed by local competitors. By improving lead generation and demand creation, Netflix can have a strong footing in such markets.

Business Alliances & Collaborations

Instead of purchasing content from studios, Netflix can make alliances and collaborations with channels and production houses. This will allow the streaming service to showcase its content library without incurring all the production costs.

Regional Content

Netflix can also tap the untapped markets by creating regional content. Movies and shows that are made in the regional language and themes bring a new yield of subscribers. Hit shows like Narcos and Money Heist are a testament to this fact.

Annual Subscription Plans

With monthly subscription plans, Netflix loses and gains customers every few months. In most cases, users subscribe and consume as much content as they can in a month and then disappear for a couple of months.

Instead, Netflix can take advantage of annual subscriptions to get and retain subscribers when compared to other online streaming platforms.

Threats

These threats are putting the company’s business at risk and should be addressed to avoid any long-term debacle.

The competition is Catching Up

Netflix is not alone in the online content streaming race. Due to lucrative market gains and returns, competitors are adding to this race each year. Now, companies like Hulu, HBO, Apple TV+, Disney+, and many more are competing for the same pie.

Content Regulations

Due to strict government regulations in many countries, Netflix faces a lot of challenges in providing content and securing a customer base. A classic example is the reception and expansion of Netflix in China where the government does not allow foreign media to operate freely.

Piracy & Theft

Netflix’s whole business model is based on providing content for money. Still, many people around the globe find ways to download or “torrent” content from the internet. This is a direct threat to the company’s survival.

Poor Cyber-Security

In the last couple of years, It has become quite a norm that Netflix accounts to get hacked. The situation worsened during the pandemic when the number of users reached its peak. If the account security issue won’t be resolved, users may leave the platform for good.

Deepening Carbon Footprint

According to some estimates, global online content streaming produces around 1% of the global carbon emissions. Since Netflix is the biggest player in the game, most of it falls on its brand. This can lead to restriction or capping of data being used by Netflix.

Tussle For Resources

With a large volume of data usage, governments often direct Netflix to put a ceiling on its offerings. This allows other sectors like banking and health to operate at optimum capacity. This has already happened in 2020, at the peak of the COVID-19 pandemic. The result was poor customer experience and delayed content delivery.