PGupta0919 is a writer passionate about marketing and branding.
What Is a SWOT Analysis?
A SWOT analysis is an amazing and a powerful way to analyze any company’s position in it's industry. SWOT is an acronym that stands for . . .
Through strengths and weaknesses, we can explore the internal factors that can affect a company's success, and through opportunities and threats, we can explore the external factors. This article is a complete SWOT analysis of Netflix, one of the reigning OTT (over the top) media platforms of our time.
Company Overview: Netflix
Before we move on to the SWOT Analysis, it is imperative to first take a look at the company's background. We will be covering the following to get an overview.
- About the company
- Business model
About the Company
Netflix was founded in the year 1997 by Reed Hastings and Marc Randolph in California, USA. Initially, Netflix sold DVDs and offered a DVD rental service to its customers. Today, it is a content platform and a production company. It offers a subscription-based streaming service to its customers that includes a variety of content, including the content that it produces in-house. It offers its streaming service to subscribers in over 190 countries.
In 2020, it reported a revenue of $25 billion and also surpassed 200 million paid subscriber count. Netflix accounted for more than 45% of the market share for streaming subscribers as of 2020.
Product Portfolio and Business Model
Netflix offers a content streaming service. Subscribers can log in to their accounts on various devices such as mobile phones, tablets, laptops, TVs, etc., and whatever they want to watch—usually a movie or a TV series—they can stream on the device itself from anywhere. On its streaming platform, you can also find Netflix's original content.
The subscribers pay a subscription fee per month, which gives them access to the content available in the Netflix library. Subscriptions are divided into three tiers. Each tier offers certain extra benefits to the user, such as being able to stream on multiple devices. Each tier is priced differently, and based on the subscriber’s preferences, they can choose their subscription.
Over years, a bunch of similar services have been launched. The company faces competition from . . .
- Amazon (Prime Video)
- HBO Now
- Apple TV+
SWOT Analysis of Netflix
Now that we've covered some background info, let's dive into the SWOT analysis of Netflix. Here, we will be able to explore some of the external and internal factors that affect the company's success.
Let’s examine some of Netflix's strengths. These are the core competencies of the brand, which give Netflix a competitive advantage over others in the business.
Strong Brand Equity
The company has been able to build strong brand equity over the years. It has done that by offering a high level of service to its customers, which has increased its popularity.
In recent years, Netflix started creating original shows and movies. Some of them became so popular that new subscribers started flocking to the platform. Some of those shows include Stranger Things, Narcos, etc. This gives Netflix a competitive advantage over the other platforms because the content cannot be found elsewhere.
Large Customer Base
In 2020, its global subscriber base increased to 200 million. No other platform currently enjoys this large a customer base, which also gives Netflix a competitive advantage.
Netflix is able to provide an ad-free experience to its users. The content that they watch is free from intrusive advertisements, unlike some platforms.
Let’s examine the weaknesses of Netflix.
Apart from the content that is produced by Netflix on its own, Netflix does not own the copyrights to the content in its library. Netflix has some rights for a certain period of time for content created by other producers. Some of the same content can be found on other similar platforms as well. This is a potential weakness for the platform.
Replicable Business Model
Netflix's business model is not so unique that no one else can replicate it. Many similar platforms have emerged, and these services are taking some of the market away from Netflix.
Requirement for Internet
Netflix's service can only be used by subscribers if they have access to the internet. Even though subscribers can now download the content to watch it offline, the internet is needed to download the content in the first place. This heavy dependence on the internet may pose a problem for the platform, especially in countries where internet infrastructure is not highly developed.
Let’s now examine the opportunities Netflix has as a brand. These are external strategic factors Netflix can focus on to grow its business and increase its revenue.
Expansion Into Newer Markets
Netflix has a huge presence worldwide. It is available in over 190 countries. In countries where the service was introduced more recently, however, most of the population remains untapped. This is a potential user group for Netflix, and if they can find a way to tap this market, they can increase their revenue.
Evolution of Product Mix
As the world is becoming more and more globalized, people want to see what is being watched in other countries while watching local content. International content could be offered to users to develop additional interest in the platform.
Multilingual Content Development
Netflix is working on bringing on more content in localized languages. It can further work on bringing local content and stories to the people of the countries it operates in. The variety of content could also be improved upon.
Now let's examine some of the threats Netflix faces.
Since its business model is easily imitable, Netflix faces huge competition from its competitors. Players like Amazon Prime Video, Disney+, etc., are not only licensing other producers’ content, like Netflix, but they are also producing their own content in-house to attract a dedicated audience. This is a big threat to Netflix, as the fight is now for market share.
Particularly seen in emerging economies (which also form potential markets for such services), content piracy is still prevalent and a big threat to companies like Netflix. Content is illegally streamed on various websites by users who do not use Netflix.
Censorship of Content
Censorship on the internet is becoming a concern for many governments, so censorship of content on platforms like Netflix may not be far away. If this happens, content may have to be approved by censorship boards before being shown to the audience.
Despite abundant challenges, internal and external factors indicate that the company has room to grow worldwide. These factors are all interdependent, but as long as Netflix continues to innovate and provide quality content to its subscribers, it is here to stay. As long as it keeps doing what it does best and seeking new solutions to tackle threats and weaknesses, Netflix will remain a market leader.
References and Further Reading
- Netflix Stock Set to Hit $600?
- Netflix Shares Rise on Strong Subscriber Growth, Considers Share Buybacks
- Netflix Analysts See Regained Mojo After Rocky Start to 2021
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2021 PGupta0919