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Institutional Background

Discuss about the Netflix Strategies for Startz Limited.

The report considers a case study on Netflix Inc. the company provides video streaming services to its customers. It has been discussed that how the company has achieved growth. It has also been discussed about the future of Netflix in competitive market. The report discusses about the strategies as being adopted by the company in realizing its long term objectives (The New York Times magazine, 2016).

In 2008, Netflix has come up with a partnership with Startz limited to increase its media. This has enabled The Netflix Inc in increasing its sales. The company has approximately 93 million users worldwide as calculated in January 2017. It has above 125 million hours of movies, TV shows, which includes original series, documentary films, and featured films. The company has a competition with Wal-Mart, Blockbuster, Amazon, Red box (McKay, 2017).

Netflix Inc is a company headquartered in United States. It was introduced by Marc Randolph and Reed Hasting in 29th August, 1997. The company deals in providing services of film production, film distribution, and television production. The company also deals in streaming media, providing video on demanded by mails, and it also provides media services. During the initial period of the company, it had only 30 employees (Ophelia, 2015).

After one year of incorporation of the company that is in 1998, the company started by introducing DVD by mails. In 2007, the company diversified its business into streaming media. The DVD and Blu-ray rental service were continued by the company. The company in 1999 introduced the concept of monthly subscription. The concept of introducing flat free rentals without due fees, shipping and handling fees, late fees, per title rental fees, has made the company reputed in the minds of the consumer at large. This innovation has leaded the company to grow internationally. This has opened channel for the company for operating globally. In 2002, Netflix Inc introduced its Initial public offering (IPO). In the first year of its IPO the firm sold its 5.5 million shares at US$15 per share, and on 26th January2017, the company has a share price of 139.52 US$. In 2010, the company expanded its business in Canada. While operating the business from there, by 2016, the company has made a global presence in above 190 countries. The company also deals in production services. This service has been introduced by Netflix in 2013 through a debut of first series of House of cards. After the successful operation of its production services, the company expanded its production in television series and films both. As calculated in 2016, the company has release approximately 126 original series in its production (Steel, 2015).

Brief History of Netflix

Netflix Inc continuously demands their customers’ feedback to change in their technology. The reviews are considered of its customer and discussed with the managers to help them in making better decisions in what series to watch. The company has incorporated various technologies in their system like React Gibbon. In 2014, the company was working with its partners to work on its devices to make them compatible for high visual quality. In 2014, after the launching of smart TVs, many shows can be played with high visual quality of 4K content, which includes Set top boxes, Smart TVs, and game consoles. In January 2017, the company has introduced Ultra HD 4K to windows 10 for supporting Netflix. It would help the company in making a big list of movies, TV shows. This would make easier for the customers to watch the shows around the world in the best quality of picture. The company is also working in adding 7th Gen Intel Core CPUs and windows 10 to their list (Wilson & Crawford).

The company started its business in 1997 by streaming retail business of DVD. Afterwards it was realized by the company the needs of online streaming. Hence the company introduced its online business in 2007. The company has after coming into online retailing, better able to compete with its competitors like Amazon, Hulu and other competitors too. Netflix provide customized service of providing a huge content, with full navigation control for their viewing shows. Besides this the company also provides a facility of customized service for each customer by creating his view page profile and recommending them the content on the home page on the basis of their previously based watched shows (Mcalone, 2016).

Besides this to remain ahead from the competitor, the company provides facilities of user interaction facility. Company continuously invests in its media infrastructure and user interface. To improved user interactions, the back end managers are continuously involved in the process. The company provides a facility of providing personalized suggestion to users, and tags each and every shows and movies on the user’s platform. For this company engineers are continuously working on making the company supported to tens of millions devices across the world at any time, any place. For the better working of the online content of Netflix, proprietary open content delivery network is used by the company, which exchanges the traffic with ISPs that is internet service provider directly; which is stored on ISP networks for delivering content.

This Rise of Netflix

Netflix Inc optimizes its multiple terabytes per second and accounts up to one third of the North American internet traffic at its prime or peak times. And in during off prime times, the company fills the content with videos, which the company’s algorithm predicts what the people most likely to watch. This heavily reduces the network utilization during the prime hours (Devine, 2017).

Pricing of the products and services is considered as one of the most crucial decisions of the management. If the price is set too high it is considered as skimming the market, and it may be possible that the company got out of the market. While if the prices are set too low then the products are considered less quality added in the minds of consumers (Pelts, 2016). According to Netflix managers, the pricing strategy successfulness have been achieved by executing at micro level first (Papple, 2017). At micro level, the company adds more value and content through their mechanisms. The strategy of pricing of company is that it offers variety of prices level to its customers. The price is usually followed at same levels. The price levels are basic, standard and premium. In basic price it is $7.99 per month, standard price is $9.99 per month and at premium price it is $11.99 per month (Chaudhary, 2017). In these levels the company provides more value added services to high level and medium level pricings. Netflix plans to price its products and services at approximately $10 per month, which is much lower than its competitors (Cohan, 2013).

The strategy followed by Netflix in case of change in the prices, the company firstly communicates all the required information to its department and customers. The required changes in the prices should compliment with the additional services offered (Hickie, 2014). Thirdly the compliments to the requirement of changes in price should be such that it seems benefitting to its customers. A proper question answer round has to be prepared by the Netflix Inc in case of question asked by the customers regarding changes in prices (Murphy, 2011).

Apart from these innovations, Netflix also introduced the concept of ‘mine for user data’. This analysis is done for serving the customers, and helping them in finding the content appealing to them. The use of original data has lead to success for the company. It has forced the TV industries to make changes in their strategies regarding enabling flexibility on the basis of their customers’ needs. This can be understood by the compatibility of TV shows and movies can be operated on the computer, mobile phones, TV, and other gaming devices. Traditionally TV shows were only seen on televisions. The change in their compatibility is due to Netflix (Ingram, 2016).

Changing Technology

Video streaming is the facility provided to the consumer to watch or download any shows or movies from anywhere. Online video streaming is provided by the companies like Netflix, HBO, Amazon and many more. The success of online video streaming has attracted many retailers. Netflix has market share of 4.27%, while the competitor of the company, Amazon has 12.99% market share (Kerr, 2013).

In the period of 1999, the customer used to watch shows by DVDs, they used to keep it without late fees. However in the era of 2000 to now, digital media comes in trend. Netflix has quickly adopted this change and started providing digital streaming media and downloadable music. In the period of 2009, Netflix Inc launched recent television shows and movies on its video streaming website. In 2010, the company has rebranded its mail DVD service as its subsidiary called as Qwikster. By this change the company has made a change in the consumption model of the entertainment shows, and quit the concept of rental video stores in America (Volpe, 2013). As estimated in 2013, the company had more than 3million streaming members. Hence the company has able itself in focusing on digital shows providers. Netflix can be said to remain as the dominant provider of online video streaming. It can be said because the company quickly adopts its business model that helps the company to remain as the dominate player of video streaming. Netflix has increased its market share to 31.6% in 2013, while the You Tube had just 13.19%.  Hence it can be said that Netflix had made itself able t enjoy the monopoly in streaming the videos on demand (Chapman, 2017).

According to Dayna sargen, who is a brand marketing manager at news cred. According to him Netflix Inc has changed the business strategies of videos streaming as from providing DVDs on rent to providing online shows. As a content provider, the company has announced its strategies that it will create quality content that will affect the marking and business goals. According to Sadq (2013) the company seeing this as an opportunity of purchasing or produce numerous programs. The strategy besides this as adopted by the company is to start focusing on adult programming. The continuously keeps an eye on watched shows and movies by the users, to estimate about the future demands of the shows. The strategy as adopted by the company is having an appropriate staff. The team with Netflix is very focuses to their work. So that it has made easy for the company to focus on its audience department, operational efficiency, and many more factors (Sargen, 2016).

Operating Online

Netflix Inc has made a numerous deals with small cable operators. The company has made a deal with TiVo so that Netflix able to available on TiVo set top boxes. Hence by this the users get an advantage to enjoy both content offered by Netflix and conventional TV. Therefore the strategy of the company is to change the customer preference and their habits regarding consumer consumption choices (Kerns, 2016).

The members to Netflix are increasing day by day as by attracted towards thousands of micro services as provided by the company. However the services offered by the company are operated by different teams having expertise in it. The company set benchmarks for their teams, as to get a framework that can assist the company under a condition of work load (Netflix, 2016). Netflix Inc to increase its customer base has introduced the original series of House of cards and Orange is the new black.

In case of financial performance of the company, it has been observed a 30% increase in the revenue earned and 24% increase in the gross profit. It has also been observed that there has been an increase in the company’s earnings by 0.15$ that is 50.11% increase in 2016 as compared to 2015 financial data.

Netflix is a subscription based company which provides TV shows and movies by delivering DVDs through local post as ordered by mails. The company is aiming to increase its customer base to 180 million by 2020, which is just double of 2016. According to Mathew Ball, who is a strategist of Otter media, quoted that the cable service providers offers various channels. The customers of this, used to switch over the shows they want to watch. Hence by this the cable service providers make customers to pay for those channels too, which they don’t watch. But in modern scenario this is not demanded by the customers. By offering high production values to its customers, the company is at a better position to compete with its competitors. Here Netflix provide customized services to all its customers. In order to remain in the future, the company continuously reviews its user interface and media infrastructure. The company is also working on the compatibility of its shows and movies on millions of devices at any time. One of major cons to the company is of having a huge data with it for delivering the shows to end customers with high quality (Mavinkurve, Becker & Christensen, 2014).

Pricing Strategies

The strategies of Netflix involve a complex, massive and highly distributed infrastructure system in such a way that no one can trace the status of company’s system. For this, the company has shifted it’s in- house data to a third party. Besides this the complete IT infrastructure is located at Amazon’s cloud data centre. In case of the production team, the company has divided its team into engineering teams. Each and every team is responsible for coding, resolving and testing of issues on their work. Apart from this, the company has also developed tools to check and provide related visualizations and insight to diagnose and resolve the problems.  Hence by this compliance, it can be said that the company long term objectives can be achieved (Newman, 2014).

Furthermore, with the introduction of content creation, to keep cost low, the company has fixed the prices for revenue model. Due to low in variable cost the company is able to focus on growing its customer base. Hence it can be said that the company would be able to stay in a changing and growing industry as it is providing the compelling value proposition to its customers. Besides from this, the company is continuously developing and innovating new tools and methods to remain stable and expand and improve its customer’s experiences (CSI market.com, 2017).

Conclusion

Video streaming is considered as mandatory for the business providing online television shows and movies. The company has started its business in 1997 by providing DVDs on rent. Due to change in customer demands as in case of new consumers the company also changed its strategies. As the company has started its online business in 2007. This concept has replaced linear TV concept. The company is also involved in dealings with cable operators like TiVo. Now Netflix is available everywhere across the world except china. The first debuted series by Netflix was made in 2013, and in 2016 the company has became global. In case of pricing the company sets three level that are basic level, standard level and premium level, which contains the differences in facilities and quality provided. The company continuously reviews the customer feedbacks and changes in its strategies accordingly. Due to proper division of work among teams has increased the company’s efficiency. 

References

Chapman,B. 2017.  Independent. How Netflix took over the world: Video streaming membership grows to 93.8 million. Retrieved at https://www.independent.co.uk/news/business/news/netflix-video-streaming-93-million-membership-global-6-billion-spending-original-content-series-a7535386.html (Accessed: 28th January, 2017).

Netflix’s Innovations

Chaudhary,V. 2017.  Live mint. Netflix open to modifying its pricing strategy in India. Retrieved at https://www.livemint.com/Consumer/45N4s0qcdcLQemAeNGgnxN/Netflix-open-to-modifying-its-pricing-strategy-in-India.html (Accessed: 29th January, 2017).

Cohan, P. 2013.  Forbes, How Netflix reinvented itself. Retrieved at https://www.forbes.com/sites/petercohan/2013/04/23/how-netflix-reinvented-itself/#225f037074ea (Accessed: 28th January, 2017).

CSI market.com 2017.  NFLX’s competition by segment and its market share. Retrieved at https://csimarket.com/stocks/competitionSEG2.php?code=NFLX (Accessed: 28th January, 2017).

Devine,T. 2017.  Inc. Retrieved at https://www.inc.com/ted-devine/what-netflix-can-teach-your-small-business-about-price-restructuring.html (Accessed: 28th January, 2017).

Hickie,B. 2014 Openview.Netflix pricing strategy: learning from qwikster mistakes. Retrieved at https://labs.openviewpartners.com/netflix-pricing-strategy-learning-qwikster-mistakes/#.WImepvIVTIU (Accessed: 28th January, 2017).

Ingram,M. 2016.  Fortune. Here’s why Netflix share price is getting clobbered. Retrieved at https://fortune.com/2016/07/18/netflix-stock-earnings/ (Accessed: 28th January, 2017).

Kerns,C. 2016.  Marketing land. Streaming social: what marketers can learn from Netflix’s social strategy. Retrieved at https://marketingland.com/streaming-social-marketers-can-learn-netflixs-social-strategy-171659 (Accessed: 29 th January, 2017).

Kerr, D. 2013. CNET. Video streaming is on the rise with Netflix dominating. Retrieved at https://www.cnet.com/news/video-streaming-is-on-the-rise-with-netflix-dominating/ (Accessed: 28th January, 2017).

Mavinkurve,R. Becker,J & Christensen,B. 2014.  The Netflix tech blog. Improving netflix’s operational visibility with real-time insight tools. Retrieved at https://techblog.netflix.com/2014/01/improving-netflixs-operational.html (Accessed: 29th January, 2017).

Mcalone,N. 2016.  Business insider. 80% of people have no idea about the Netflix price hike that’s coming next month. Retrieved at https://www.businessinsider.in/80-of-people-have-no-idea-about-the-Netflix-price-hike-thats-coming-next-month/articleshow/51733182.cms (Accessed: 28th January, 2017).

McKay,I. 2017.  Netfix. Creating a high-performance TV user interface using react. Retreived at https://techblog.netflix.com/ (Accessed: 28th January, 2017).

Murphy,E. 2011.  Netflix pricing strategy. Retrieved at https://blogs.harvard.edu/cqtwo/2011/07/14/netflix-pricing-strategy/ (Accessed: 28th January, 2017).

Netflix. 2016.   Annual report. Retrieved at https://ir.netflix.com/secfiling.cfm?filingID=1065280-16-47&CIK=1065280 (Accessed: 29th January, 2017)

Newman,J. 2014. Times tech. Netflix crowned king of streaming with more than a third of peak traffic. Retrieved at https://time.com/98987/netflix-streaming-traffic/  (Accessed: 28th January, 2017).

Ophelia, 2015. Technology and operations management: A course at Harvard business school. Netflix Behind the scenes. Retrieved at https://rctom.hbs.org/submission/netflix-behind-the-scenes/ (Accessed: 28th January, 2017).

Papple,N. 2017.  Early to rise: health, wealth and life well lived. Who has a better pricing strategy: Netflix or Amazon prime? Retrieved at https://www.earlytorise.com/better-pricing-strategy-netflix-amazon-prime/ (Accessed: 28th January, 2017).

Pelts,S. 2016. Market realist. What is the Netflix pricing strategy? Retrieved at https://marketrealist.com/2016/10/netflix-pricing-strategy/ (Accessed: 28th January, 2017).

Sadq,Z,M. 2013.  Analyzing Netflix’s strategy. International journal of science and research (IJSR), Vol 4th, Issue 3rd

Sargen,D.2016.  American marketing association. Marketing takeaways from Netflix’s content strategy. Retrieved at https://www.ama.org/publications/MarketingNews/Pages/netflix-content-strategy.aspx (Accessed: 28th January, 2017).

Steel,E. 2015.  The New York Times magazine. Netflix refines its DVD business, even as streaming unit booms. Retrieved at https://www.nytimes.com/2015/07/27/business/while-its-streaming-service-booms-netflix-streamlines-old-business.html (Accessed: 28th January, 2017).

The New York Times magazine. 2016. Can Netflix survive in the new world it created. Retrieved at https://www.nytimes.com/2016/06/19/magazine/can-netflix-survive-in-the-new-world-it-created.html?_r=0 (Accessed: 28th January, 2017).

Volpe, J. 2013.  Engadget. Netfix still the dominant streaming provider, according to latest NPD report. Retrieved at https://www.engadget.com/2013/06/04/netflix-still-dominant-streaming-provider-npd-svod-report/ (Accessed: 28th January, 2017).

Wilson,T,V & Crawford, S. How stuffworks tech. How Netflix works. Retrieved by https://electronics.howstuffworks.com/netflix.htm (Accessed: 29th January, 2017).

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