Netflix Case Study

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Regarding social factors, an evolution that mainly concerns the upper middle class and the young and that is characterized by the rising awareness, interest and usage in SVoD, and the huge increase in mobiles devices’ sales is occurring in the two countries. However, in France, despite this change in social environment, the greater part of the population keeps its habits of “catch-up TV, DTT, pirating and streaming video from free platforms”. Finally, in terms of technological factors, internet infrastructure is developed continuously, the penetration rate of internet technology and connected devices is constantly increasing. Nevertheless, the extent of this phenomenon is lower in France where there is still lack of high speed internet in some part of the country and a very limited number of SVoD platforms.

First up for the five forces is the threat of new entrants, which is low in both countries. Indeed, the industry requires high fixed costs at the entry, a great service diversification is present and existing brand already have a lot of experience. The main difference concerns the regulations that are stricter in France, making the threat of a potential new entrant even lower in this country. Concerning the substitutes, i.e. linear TV, rental stores and the theaters, the threat is greater in France (medium) than in the USA (low). Indeed, in France, as mentioned, the consumers’ behavior is not as “advanced” as in the USA concerning SVoD services. Then, for the power of buyers, as well for France as for the USA, there is almost no switching costs between the operators. However, the consumers in France are more concentrated than in USA, that’s why their power can be defined as greater (medium) than in the USA (low-medium). About the suppliers, their power is high in both countries. In fact, there are two type of suppliers: film studios and telecom operators, who are present in a very few number and who therefore set the rules. In France, Netflix and the other players are almost obligated to negotiate with the ISPs, they don’t have a choice. There is also race for the acquisition of the streaming rights. Therefore, the studios take profit of the situation by raising their prices. Moreover, forward vertical integration also represents a great threat. An important notion that limits the power of the suppliers is the principle of neutrality, mentioned above. In the USA, it has almost been always respected (until recently), which made the industry more “fair”. In terms of competitive rivalry, it can be considered as medium in France and low-medium in the USA. In France, Netflix faces greater competition from pirating, free French TV channels and other players present on the VoD market than in the USA, mainly due to the fact that the consumer's habit are not the same and that pirating is more common practice in France.

After comparing the environmental characteristics and competitive structure of the American and French industries, the main point is that the ability of Netflix to settle itself in France encounters some obstacles and is more difficult than in the USA. The French market does not seem favorable to SVoD but as situation evolves, time will tell where that takes the company.

Question 4.

From the analysis of Netflix’s strategy on the SVoD segment, apart from minor improvements to be done, the general point of view is that Netflix is gradually prospering.

In order to analyze the pertinence, the positive and negative aspects of Netflix’s strategy were underlined. Concerning the positive relevant aspects, Netflix was the first to notice, understand and react to the change in behavior of the customers. He was also one of the first to respond to the new trends by making his streaming available on multi devices and adapting its library with local contents. Moreover, recently, Netflix also announced it will start offering his products offline. That’s a great strategic move since some of his competitors already offer that advantage.

Concerning the negative aspects, or points that need to be improved, Netflix should update its transnational strategy by having “real” operating headquarters locally. By that matter, Netflix might understand even better local customer preferences and it might try to get around local regulations by being a local player. An improve of its interface may also be useful. Indeed, even though Netflix already has a great interface and research engine, it is sometimes hard to find a show.

In terms of performance, Netflix has been in perpetual growth since its creation. The number of subscribers began to rise strongly in 2012, one year after Netflix launched its streaming platform. Besides between 2011 and 2012 where the amortization jumped, the net profit is also increasing each year. The final conclusion is therefore that, despite some of the obstacles encountered, Netflix is still maintaining a good position in the SVoD market.