Swot analysis of Netflix. Netflix is a US production company and a quality content platform. Scotts Valley, Reed Hastings, and Marc Randolph are the founders of Netflix. They laid the foundation of the company in California in 1997. The headquarter of the company is in Los Gatos, California.
Netflix offers internet-based paid-subscription streaming services for television series and movies. The company has got paid-subscription of approximately 195 million people across the world by the end of 2020. Out of which 73 million people subscribers are living in the US.
Netflix is offering its services worldwide except in countries like Syria, Crimea, China, and North Korea. Some of the offices of the brand are in India, South Korea, Japan, Netherland, Brazil, France, and the UK. Some of the main products and services of Netflix are Recommendation, Videos on Demand, and Streaming to game consoles.
According to an estimate, the annual revenue of Netflix in 2020 was 23.819 billion US dollars, and it has boosted by 26.19%. Out of which the net profit of the company excluding all the expenses was 2.806 US dollars, and it has increased by 98.48%.
Apple TV+, Hulu, Disney+, YouTube, HBO Now, Playstation Vue, Sling TV, HBO Go, Sony Crackle, and Vevo are some of the main competitors of the company.
Today we’ll discuss swot analysis of Netflix that how the company could capitalize on its internal strength to avoid weaknesses/threats and exploit opportunities. For external factors, check out the pestle analysis of Netflix. Here’s the swot analysis of Netflix;
Strengths of Netflix
According to an estimate, Netflix is operating its online streaming business in more than 190 countries across the world. The company has a global database of customers. The brand has got roundabout more than 195 million worldwide paid subscribers. These statistical figures show the strength customer hold of the company. It gives the brand a competitive edge and bargaining power over studios to secure the position of its content.
According to a study conducted by Forbes, Netflix falls under the category of the world’s top 4 regarded companies. When we talk about online streaming content, then Netflix immediately comes to our mind. That’s why the company has achieved the status of a household brand within a short period.
One thing that irritates people while watching TV is advertisements. The ads break the mood and tempo of the story. The good thing about Netflix is that you don’t worry about interruptions and advertisements during the show. You’d be able to enjoy it without ads.
If we study the graph of earnings, customer base, and subscriptions of Netflix, then it has been growing consistently for the past 10 years. That’s why the company has become the most influential brand.
Focused Customer Service
Netflix is also highly focused on customer service. It also provides the option of downloading and watches it later on. In case if there’s a disconnection of internet service. It was a big issue for customers because they can’t have the facility of high-speed internet connection all the time.
Adaptable to Changes
The good thing about Netflix is that the company is adapting to the latest tech changes. For instance, the online video streaming service is available on all internet-connected devices like a desktop computer, laptop, smartphones, TV, and iPads. The growth of the company has increased a lot because of it.
Unique & Original
One of the strongest suits of Netflix is the uniqueness and originality of its content. The brand has a history of producing and delivering quality content to the users. Some of the most popular shows are Orange is the New Black, Narcos, Stranger Things, Money Heist, Mindhunters, and Tiger King. Such TV series has the most unique and original content that has increased the subscription of the company.
Economic Price range
The price range and packages of Netflix are very economical. Anyone with a high-speed internet connection can afford the packages of Netflix. It’s only 8.99 US dollars a month for subscribers. They would be able to watch unlimited videos, TV series, documentaries, and films with this package. If users want a better quality of videos, then they can update it to the premium package of 15.99 US dollars a month.
Won Awards & Nominations
According to an estimate, the shows of Netflix have received the highest numbers of nominations of 160th time in different categories at the Emmy Award 2020. It’s the highest number of nominations if we compare it with competitors like HBO, CBS, Fox, ABC, and NBC. It’s a fact that Netflix is growing among the public.
The interface of Netflix for users is very friendly and simple. The users can easily search for their shows and look around different without any assistance. One of the most interesting tools of Netflix is the suggestion and recommendation service. It studies the pattern of users’ interest, and then suggest the shows accordingly.
Weaknesses of Netflix
Basic, Standard, and Premium are the three packages that Netflix offers to its users. Some customers have claimed that these packages are so rigid for one show watcher. It’s because some users are only interested in watching one show. The company should offer to customize packages for irregular watchers.
Hasn’t Taken the Green Energy Initiative
As we know that the trend of green and clean has been growing. The world tech giant companies like Facebook, Microsoft, Google, Amazon, and Apple have shown their commitment to clean energy. On the other hand, Netflix hasn’t introduced any environmentally friendly and sustainable business model. A model that is good both for the business and the environment as well.
Debt to Launch New Projects
According to an estimate, Netflix has a debt of more than 15 billion US dollars by the end of 2020. The company takes debt to finance its future projects. The brand has a list of diversified content that the company plans to do in the upcoming years. All of it depends on the debt, and it’s one of the weaknesses of the company.
Most of the content that the users watch on Netflix doesn’t belong to the company. The brand takes the rights of the content for a few years. When the contract expires, the user would see the same content on other platforms.
If we compare the price range of Netflix with other video streaming services, then it’s highly comparatively. For instance, Apple TV+ charges 4.99 US dollars a month and Disney+ charges 6.99 US dollars a month. They’re offering the same services as the company is providing.
Fall of Customer Support
During the covid-19 pandemic, many Netflix users have complained of the hacking of their accounts. They couldn’t go out because of the lockdown shut down everywhere. Things got worse when the company announced that the customer support hours of Netflix would be short during the pandemic. Many users have faced a lot of issues because of it.
Relying on North America’s Market
According to an estimate, Netflix has earned 10.5 billion US dollars of annual revenue from North America’s market in 2019. It means that roundabout 50% of the company’s total revenue comes from the NA market. On the other hand, the NA market is on the verge of saturation. If it happens, then it would be very bad for the company’s total revenue.
Increasing Operational Cost
As we know that more content on the platform gives the company a competitive edge. But the streaming cost and content support cost has been increasing. Such costs increase the operational expense of the company. For instance, the operation cost of the company increased from 12.04 billion dollars to 14.61 billion dollars from 2018 to 2019.
Opportunities available to Netflix
Expanding Customers Market
Netflix has got hundreds of millions of users across the world. But the company still has weak market positions in some countries of the world. If the brand targets those markets like North Korea, China, Syria, and Crimea, then it would increase the market share and profitability of the company.
Using the Ads
Tech giant companies like Google, Facebook, and Amazon are following the ads based business model. If Netflix starts using the ads-based business model, then it would more billions of dollars to the company’s total revenue.
As we know that the smartphone mobile industry is one of the world’s largest markets. Netflix has recently introduced a cheaper mobile package for the Indian on a trial basis. The company should launch this package worldwide in the global market. It would help the company to compete with low price competitors like Disney and Apple.
Some customers only get the package whenever Netflix launches a new show for a month. Instead, the company should also introduce an annual package. It would help the company to retain the profit and customer base for a longer time. It’s because monthly subscription time is too short and it’s not sustainable.
Targeted Niche Marketing
Netflix should also apply the niche and target marketing concept to its content. It means that the company should launch TV series for different regions and cultures with local regional characters. Just like Money Heist for Spain and Sacred Game for the Indian market.
Partnerships & Alliances
Netflix should make partnerships and alliances with different internet providing companies of different companies. They would help the company to increase its market share and reach more audiences. Just like the brand has made a partnership with channel 4.
Updating the Library
Netflix should announce the in-process production content if the company can make the deal. It’s because it would help the brand to attract more users, and make old customers renew their contracts.
Funding the Black Institutions
Netflix has recently taken a great initiative of allocating 2% of its annual revenue for the welfare of the black community.
Threats Netflix have to face
We’re currently going through the 2nd phase of the covid-19 pandemic. Online piracy is still a major issue for artists and content creators. People find a way to download the data without the owner’s permission and keep using it. Piracy is one of the major threats to the company.
Rules & Regulations
The Chinese government has imposed serious restrictions on Netflix for the broadcasting of foreign content. It makes it difficult for the brand to expand its operations in the Chinese market. If other governments start following the same policy, it would be great trouble for the company.
When we talk about online video streaming platforms, Netflix isn’t the only one. There are many, YouTube, CBS, and HBO are some of the tops. They all are offering the same service, and even at a lower price. If they somehow increase its market share, it would reduce the brand’s profit to a great extent.
The EU commissioner has taken notice in March 2020 that the HD video streaming of Netflix interferes with systems of the hospitals and defense system. Netflix has no choice to reduce it to the normal print definition video streaming within 30 days. If it means that the company has to finish its premium packages, a huge loss for the company.
According to research conducted by Shift Project, the tech companies like Netflix emit more carbon into the atmosphere than the aerospace industry. According to its estimate, video streaming companies emit approximately 1% of the total carbon globally. It can threaten the future of the company because customers are becoming environmentally conscious nowadays.
The hacking of Netflix user’s accounts has increased during the lockdown period due to the pandemic of covid-19. It frustrated many customers as a result. If the company doesn’t take any notice, then unsatisfied customers would move to the other brands.
After an in-depth study of the swot analysis of Netflix, we have realized that the company has a strong position in the video streaming industry. But the hacking of user’s accounts and piracy are serious issues; the company should tighten its security system. If the brand does that, it would strengthen company’s future.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.