As technology progresses, so does our form of daily entertainment. For many years, people would rush home to watch their favorite cable television shows. In fact, the average household in American would watch at least eight hours of television each day (Chatterjee, Berry, & Hopkins, 2016). In this new era of entertainment, people want to watch whatever they want, whenever they want. As more people begin to cancel their cable television contracts and purchase streaming subscriptions, companies such as Netflix began to thrive. In the past, Netflix has rose to the top and remained above of all competition. Now the competition for streaming and television services begin to become more difficult and Netflix is facing some dilemmas. With a very strategic plan, Netflix could overcome these issues. If Netflix does not create a solution, these issues can be very detrimental to the success of the brand. All in all, everyone will be watching to see will Netflix survive in this new generation.
In 1997, Netflix was created by partners Reed Hastings and Marc Randolph in Scotts Valley, California. The two developed a relationship at Hastings’ company, Pure Software. Reed Hastings was a software creator. He sold his company Pure Software for $700 million. Marc Randolph was the co-founder of a computer mail order company, MicoWarehouse, and also worked as the Vice President of Marketing for Borland International. With Hastings software expertise and Randolph’s executive marketing experience, they started Netflix with $2.5 million start- cash. The company was introduced to the world as an unlimited movie rental service (“A Background and History of Netflix – Netflix As A Modern Technology”, 2015). Netflix eliminated traditional pay-per-rental methods and late fees by offering users monthly subscriptions. The company built its reputation by offering a “flat fee” for unlimited rentals for movies and video games. Netflix eliminated the hassle of due dates of late fees and shipping and handling cost (“A Background and History of Netflix – Netflix As A Modern Technology”, 2015)
Netflix’s First Dilemma
When starting to offer streaming services, Netflix decided to separate its streaming and DVD service. This is one of the company’s first mistake, and they are still ridiculed for this to this day. Qwikster was its DVD mail-order service and Netflix was the streaming video service. Although it made sense that both of the services would need to be marketed differently, separating the two caused a lot of confusion. Netflix intended on the two to grow and operate independently. In 2011, the company realized its mistake and decided to bring Qwikster to an end. All DVD mail-order services would operate under Netflix again (Chatterjee, Berry, & Hopkins, 2016). Some people thought the ending of Qwikster would be the end of the DVD service. They were wrong. In 2018, over 3 million people are still getting DVDs by mail from Netflix. Netflix has been proudly offering this service for over 20 years. One would think the decline from 9 million subscribers in 2008 to 3 million in 2018, would raise some red flags (Bonazzo, 2018).
Even though this is a great accomplishment, Netflix should heavily consider ending their DVD mail service. Netflix currently has more than 118 subscribers globally. If only 3 million subscribers are using the DVD mail-order service, majority of the users are satisfied solely using the streaming service (Bonazzo, 2018). Because of wireless technology most users prefer streaming services. People around the world have stopped using DVD and Blu-ray players because they feel they are over-priced for their use. Most televisions or video game players allow users to use television apps as a source of entertainment. Netflix should end this service because it is more harm than good. If Netflix ends this service, they can save on overhead cost for the storing and upkeep of the product. The company will also save on shipping/handling fees.
In handling this issue, Netflix can create a marketing campaign entitled “Streaming is Good for the Environment!”. This campaign will show that the company is going paper and product-less. They can announce the ending of their DVD mail-order service and encourage all mail subscribers to use their streaming service. The company could even give mail subscribers the first year 50% off. This would be great incentive and marketing strategy that would help the company save tremendously in the future.
Who wants Rerun Tv?
Customers are starting to notice that most of Netflix’s content can be watched somewhere else. Netflix capitalized off being recognized as a place where any subscriber could watch their favorite rerun television shows. Although this was a great strategy for the past, subscribers are wanting more in the future. Competitors such as Hulu offer both new shows that are aired on television networks as well as on their streaming service as well as their reruns. Netflix should consider doing the same (Chatterjee, Berry, & Hopkins, 2016).
A Solution for the Rerun Dilemma
Netflix may not want to spend millions of dollars purchasing active television shows because they already spend millions acquiring rerun content. Instead of spending more to compete with companies such as Hulu, Netflix should spend more time marketing their Netflix Originals. Netflix Originals are original shows and movies that are shown exclusively on Netflix. It would be of great benefit to market that content on other television networks. Netflix should create social media marketing for YouTube, Instagram, and Facebook. The company should also market the content on television networks such as Fox and/or ABC. These marketing efforts could potentially bring the company new subscribers who are interested in the shows, especially with the company offering the first month subscription free. Unlike other rerun series, each show could be released every week to build anticipation. This solution will also help with companies pulling content from Netflix. In 2018 Disney released a statement telling the public that they will be launching their own streaming service and pulling their content from competitors (Spangler, 2018). Instead of trying to find another network to fill this void Netflix should start building their Netflix Originals instead so they will not have to heavily rely on other content more than their own.
Netflix spends millions of dollars on creating one-of-a-kind content for its subscribers. The company believes that “if they have more subscribers, they can buy more content; More content will help subscribers find the service more attractive” (Chatterjee, Berry, & Hopkins, 2016). The more subscribers that Netflix has, the more profit they will receive. The company can use the profit to purchase more research and development. Netflix’s competitive advantage has always been its patent algorithm. The company has always strived to easy to find content that is tailored for every user. Recommendations are offered based off their past viewing and each screen is customized for the specific family user. One may think, what could be wrong with this business model? It is not about what is the company doing wrong, but more about what more can the company do right.
The truth about Netflix’s algorithm is that the company spends entirely too much on this feature. Each year millions of dollars are spent to make sure content is tailor made for each individual user. Even though this is a great feature, the company could spend those marketing dollars somewhere else. Instead of marketing mostly to old subscribers, Netflix should try to get new subscribers instead. Netflix relies mostly on word-of-mouth and with the competition getting stronger (Xfinity, Hulu, and now Disney), word-of-mouth is not enough. As a proposed plan, it is not enough to just market the shows Netflix has to offer, there is more that needs to be done. Netflix should market their shows next to its competitors. For example, Netflix should have a commercial on the STARZ network after the hit show “Power” stating, “If you love Power, you’ll love the Netflix Original, “Bad Boyz” realizing next month. Try your first month for free!” This is using the algorithm data in a different way. If a consumer likes “Power,” a crime filled drama, the consumer will also like “Bad Boyz”, another crime filled drama. Netflix should analyze user data and use this marketing strategy for all Netflix Original content. This will help gain new subscribers as well as keep old ones.
Netflix’s Survival in the New Generation
In order for Netflix to be successful in the new generation, the company should develop new marketing strategies that will gain new subscribers and keep older ones. Netflix has many issues including, being classified as “rerun tv”, not using its algorithm as an external competitive advantage, and it’s almost obsolete mail-order service. The company can overcome these issues by implementing solutions found in this case analysis. No one knows what the future may hold but, if Netflix chooses to handle these issues they can rise above the competition and in the end, survive in this new generation of entertainment.
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