Business model of Netflix ~ Business Plan, Revenue Model, SWOT Analysis

Introduction

Netflix is a streaming content provider specialized in entertainment. The Business model of Netflix involves its business Plan, Revenue model, its competitors, SWOT Analysis and many more.

Netflix is a paid subscription-based OTT platform. It is an online streaming media service that provides customers easy access to their favorite shows and movies on as many devices as they want.

Business Plan

Its first business model was based on a DVD rental system sent by mail to the entire United States. Over time, Netflix converted its business model. The Netflix platform is designed to please a wide range of subscribers. For this reason, its catalog covers the most varied titles, able to entertain fans of films, series, documentaries, and shows of all genres, for all ages and preferences.

Revenue Model

Netflix has a huge cost structure. Netflix offers three different plans of membership, which may be upgraded or downgraded at any time. Netflix has established a global presence with international streaming to expand its customer base. They are:

Basic: For the lowest fee, you have unlimited movies and TV shows, and you can watch the content on any device (laptop, TV, smartphone, tablet …), but HD is not available, and you can watch only one screen at a time;
Standard: With this plan, you have HD available, and you can have two screens on at the same time;
Premium: The top plan of Netflix offers content in Ultra HD and the possibility to watch four screens at the same time.

Competitors

Though OTT content is gaining new heights and the market is soon to get any saturation, thus it is easy for any competitors to enter the industry. Here is the list of some of competitors of Netflix:

Amazon Prime Video
Disney +
Hulu
ZEE5
HBO Max
YouTube TV
Showmax

SWOT Analysis

Strength

Netflix has a strong brand reputation and has become a household name by substituting some top-rated television programs. The company has also shown exponential growth in recent years.
Netflix has a global presence and is affordable to many Southeast Asian countries. It has given them an advantage in the continually changing market scenario.
Netflix’s original movies and TV shows offer ample opportunities to budding filmmakers. The audience enjoys the mode of the content presented by the platform as their original content.
The company has high adaptability. Netflix continually modifies its service, based on the market and the viewers’ choice. It is the reason Netflix is currently high on demand.
Over time, the company has provided its users with all sorts of nifty solutions to their problems. For example, they’ve introduced a download feature allowing clients to watch Netflix programs wherever, whenever. Even after experiencing enormous success, the brand is still driven by the users and their needs.
The great thing about this service is that you can watch its program on all platforms. Whether it’s PC, iPad, TV, or mobile devices, Netflix is easy to access and enjoy.

Weakness

Netflix has limited copyright, which tolls upon their revenue. The debts of the company are also increasing.
There is a lack of original content in several countries. Therefore they have less demand for high price subscriptions in some countries.
The company mostly depends on its North American customer base.
Netflix lacks sound customer care executives, which harms customer service, leading to decreased customer satisfaction.
Not only are their pricing plans inflexible, but they are also continuously increasing in price. This can pose a major issue, especially if you consider that their direct competitors Disney Plus and Amazon Prime, have much cheaper, basic plans.
Netflix’s weaknesses were further exposed during the pandemic. As many people stayed at home, they were forced to rely on Netflix shows as one of the main sources of entertainment.

Opportunities

As Netflix has a brand reputation, the great demand for OTT platforms in the current market can allow the brand to expand.
Since Netflix is signing up for exclusive Netflix-only content, they can bring in other product lines, including video games, comic books, and more.
Netflix is already a global presence. They can strengthen their subscriber base by a strategic partnership with local markets that will help them to capture the local market. Netflix made a few major hits when creating content for specific regions. Besides having numerous shows in English, they also started producing originals in Spanish, Indian, and other languages. This would allow them to increase the subscriber base in some of the most populated countries of the world.
The company can choose to work on new concepts that are better than other OTT platforms. Netflix has already said no to the traditional advertising-based business model, which is an opportunity for them to provide good customer service.
The company has considered developing a cheaper mobile version for the international markets. According to the initial projections, this service would go as low as $3 per month. This will provide a major increase in profits but would also help them compete with Amazon and Disney.

Threats

COVID-19 has affected the reproduction of new original shows and movies. Like most parts of the entertainment industry, Netflix is also affected by the pandemic. Gradually with normalization, the condition will improve.
The government regulations in certain countries can hold them from expansion.
Piracy is a major problem, not only for Netflix but all other streaming services. This issue is especially present in foreign markets, in countries where there isn’t a lot of regulation.
Another reason for fewer customers for Netflix is that many people share one account simultaneously.
When performing Netflix industry analysis, the company is especially worried about the North American market saturation.
The lockdown has demonstrated a major issue in the company’s system. Simply put, it is too easy to hack into user accounts.

Conclusion

Netflix’s business model is entirely built on subscriptions from people all around the world. They do not have an ad-based business in their service, as this is something they do not intend to run, avoiding the risk of losing clients to a competitor.