One Potential Recommendation for Netflix
One potential recommendation for Netflix is to develop strategic alliances or partnerships. With a subscriber base of 130 million subscribers they wouldn’t necessarily need to focus on building but maintaining their subscriber base. Subscribers may not be willing to pay for multiple services, so these alliances would give them more content to choose from. For instance, Netflix’s competitor Hulu is a joint venture between the Walt Disney Company’s Disney/ABC TV Group, Twenty-First Century Fox’s Fox Broadcasting Company and Comcast’s NBCUniversal Television Group. While it has not been an issue so far, as only 6.5% of homes in the U.S. subscribe to Hulu (this is just over 16% of the households who subscribe to at least one streaming video service), that does not mean it may not be an issue going forward. With Time Warner, owner of HBO, possibly buying into Hulu this would give Hulu subscribers access to both Showtime and HBO movie and television offerings, giving them more flexibility than Netflix. So, in turn Netflix would need to keep up and create these alliance giving their subscribers more content to choose from so they don’t risk losing their them.
Our second recommendation would be to continue to implement a prospective strategic approach that suggests expanding its brand identity. This strategy focuses on product innovation and market opportunities. In Netflix’s perspective, this would be the continuation of entering into new geographic locations with carefully analyzed data to tailor their geographic specific SVOD catalog. This option is unique to Netflix’s competitors, because Netflix is the pioneer of this strategy by successfully employing these strategies. As a result, foreign-based studios will recognize Netflix as a means for expanding their own brand into a global one. And if properly maintained, Netflix can continue to produce interesting and original content. This sort of effort appreciates the individuality of its content to tailor made catalogs. This results in Netflix’s ability to back-up its premium pricing strategy to cover its high costs and to sustain its subscribers. Which has already made revenues surge by 32% to 11.7 billion due to its subscribers agreeing to pay the premium pricing.
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The reason we chose to implement our alternate recommendation and not our first or second is because with more companies starting their own streaming services, they may begin to pull their content, like disney for instance who is pulling all their marvel movies from Netflix. They may also begin cutting contracts which would leave viewers with less content, resulting in lost subscribers. If the number of Netflix subscribers falls below a break-even threshold, the company may not be able to be profitable. This would then be costly and leave Netflix absorbing those cost until they fill that void. And although our second could help it would not be the best solution because their original content is already costing them three to four billion more than what their subscribers are bringing in, leaving them negative and adding to their debt of over 30 billion.