RESEARCH PROJECT – NETFLIX CASE

While talking about the film industry, you can’t mistake talk about Netflix. Netflix is a renowned worldwide movie production and entertainment company that has been around for 24 years. It started as a movie rental company, and lately, it combines both movie rentals and the production of its original content. We will analyze the whole Netflix business model and how it could gain a fortune and become one of the world's billion-dollar companies. We will analyze from when it was established and view its progress over the years, checking its finances business strategies. Looking at how it has managed to remain at the top for so long and constantly beating its competitors out of the game

Netflix was founded in August 1997 by two entrepreneurs, reed hasting and mark Randolph. The company began initially in Scott’s Valley, California. Mark Randolph met reed hasting at his previous companies, pure software, and the idea of starting a movie rentals company was formed. It started as a purely rental movie service. Clients would order movies in the online Netflix platforms created, and they received the movie DVDs. After finishing with the DVDs, they would return them in the envelopes and post them back to Netflix. At that time, this was very convenient to most people who did not have a movie rental close to them.

The business worked through monthly subscriptions instead of payment every time a client required the movies. When starting, the two founders did not think that the company would be successful. They just pushed the idea, and they were also surprised by how much it grew. Currently, Netflix is one of the biggest movie rental companies in the world. It has more than 151 million subscribers, and its presence is felt in over 190 countries globally. It offers a wide range of entertainment from producing its original content, tv series, documentaries, and features films from a wide range of third-party producers. . Netflix has a wide variety of consumers. Still, mainly, it consists of young people between the ages of 16 to 34 years. Young people are the most consumers of Netflix products, and hence most of the content created suits this age bracket preference.

Netflix has been successful due to the services that it provides to its consumers. The company does not value profit instead values its consumers want and satisfaction. This has created a loyal relationship with its consumers leading to it generating more profit in recent years. It delivers its products mainly through online platforms where consumers can reach out after a monthly subscription and view any product they offer. Netflix assets by 2020 amounted to a total of 39,280 billion dollars. It also acquired significant companies in the Millar world, a comic book company and story bots, an American children’s educational media company, to increase its entertainment and capture a wide range of consumers worldwide. Netflix has used different strategies over the years to be able to achieve its goals. One of the essential strategies that Netflix is using is focusing on the development of original content. It producers a wide range of content to suit any consumer and has been popular among people. It has recently expanded its movie collection, offering its content and third-party movies on its platform. Also, Netflix provides high-level internet service to its users, making it more preferable for people worldwide. This strategy has enabled Netflix to remain dominant and relevant in the market and due to their easy adjustment to the business environment. They have been able to come up with content that pleases their subscribers and satisfies their needs.

The film industry comprises any commercial or technological institutions involved in filmmaking. The film industry is a vast industry that started way back in the 20 century. The top movie production country is the united states. United States cinema which is referred to as Hollywood, started in the early 20. It is the oldest and largest movie production film industry in the world. Most movie production companies are found in the United States. The film industry generates a lot of revenue for the United States. The film industry generated almost 110 billion dollars in 2019. It has a lot of consumers and suppliers. Netflix has managed to emerge as one of the leading entertainment production companies in the world. This video streaming industry is growing fast and is expected to grow approximately 82 million used by 2023. Some of the big markets like Asia and the pacific yet to be fully explored, and at the same time, an increase in the number of companies worldwide has led to stiff competition. Netflix has the highest number of paying users among its competitors. The high range of content it offers in its services has led it to become very popular. Netflix has tried so hard in creating its original content, and the efforts have bored fruits according to how much their popularity is increasing daily. The Netflix original content accounts for 37%.

The figure above shows the view distribution of shows from Disney, Fox, and Netflix, as we can tell from the figure that Netflix's original content (non –marvel) is increasing day by day.

The market competition has become so great in the film industry that every player in the field needs to think of new creative methods to capture consumers' attention worldwide. In this case study, Netflix's main competitors were amazon, prime video, Hulu, and HBO. Each competitor in the list has its power in the market hence proving to be a viable competitor. Looking at Amazon, they have expanded their content production to offering Thursday night football and increasing their production on original content. Hulu has also developed a strategy of advertisement in its platforms that generates more revenue, hence lowering its consumers' subscription cost and offering unique packages to its consumers, hence increasing their relevance in the film industry. Their forces drive every market, and hence constantly tasting the player's availability to remain relevant and satisfy its consumers, we can divide them into five main categories.

Supplier’s power means the capability of a supplier to be able to view the market and be able to provide quality and satisfactory services to its consumers. When the suppliers can achieve this, they can rule the industry and remain relevant competitors in the market. The consumers determine the supplier’s powers as the more consumers a supplier has, the more power he holds in the market. Looking at Netflix consumers worldwide, Netflix has provided relatively acceptable content to its users as it is the leading film company in the number of consumers and content viewers.

Buyers' power is the capability of the consumer to determine the content been provided. The consumer holds the key to the supplier’s success. When the supplier can please its consumers through high-level content, more and more consumers end up subscribing and viewing it. The bargaining power of consumers helps them select a wide range of packages in these film companies that satisfy their needs both financially and in terms of products offered. Consumers have a wide range of programs from which they can choose and increase access to these online programs worldwide. An increase in globalization also adds to the consumer’s power

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This is the most crucial factor when it comes to the film industry. New content is being produced every day, and people are coming up with more and more creative ideas. The competition is not just within but also other entertainment industries such as the music industry, which have come up with a one-stop-shop so that their consumers don't have to visit multiple shops for the entertainment they require. This threat has seen the entertainment industry develop 3D capable screens that movie enthusiasts can pay premium prices and enjoy.

The rivalry in the film industry is intense—every person wanting a share of the fortune that comes with the film industry. The competition is far and wide, with every supplier coming up with creative ideas to satisfy its user’s preferences. Telecommunication companies such as Verizon have unique packages such as delivering television programs via ultra-high-speed internet connections. The rivalry has seen many companies develop strategies to be favorable in the eyes of the consumers. A common strategy that has been used in the industry is the collaboration of some companies producing products accepted by the consumers and hence having a competitive advantage over other film production companies.

Stakeholder group refers to groups that influence the industry's policies. Such groups are unions, the government's shareholders, and creditors. Unions can affect if a concern is raised with members that they are not being treated fairly or receiving incentives or compensation that they feel they deserve. Governments set policies to govern and control the film industry, leading to a problem in production due to laws made. Shareholders invest their money where it seems profitable enough for them. It's about benefiting from the sales. If the company’s performance is disorienting, then the interests in the company might be sold, leading to low stock prices. Creditors are also essential as they determine the credibility of accompanying and their market power to determine whether they might be granted any financial help to support any investments.

Netflix has been able to remain top of the game due to their intelligent market strategies and been flexible been able to adapt to every situation and create appropriate solutions that will favor and them and still be able to take care of their customers wants

In this section, we analyze the financial performance of Netflix Company, take a look at data 3 years down the line, analyze its performance, and look at Netflix assets, liabilities equity, and inventories to come up with a comprehensive financial report of Netflix Company. This will help us determine the financial position and whether or not Netflix is making profits.

Balance sheet of Netflix in the previous 4 years excluding 2020

Results and discussions

Current Ratio:

According to the graph above, Netflix has an n increasing current ratio until it started falling in 2019.

Netflix was able to increase its quick ratio by 35.4% between 2016 and 2019. This was an excellent performance in the four years.

Netflix ratio increased during the four years till reaching its pick in 2019

Netflix grew its return on total assets substantially till 2018 where there was a small decrease.

Netflix profit margin grows reaching its pick in 2019 at 10.4%

Netflix is the most enormous and popular movie streaming platform in the whole world. Looking at its financial performance over the years, Netflix is a king above its competitors like Disney world and amazon prime. In the four-year analysis, we see how Netflix grew in all its financial ratios. With growth on return of assets and return on equity, they could reduce their debt ratio to its lowest amount in 2019. Also, cash and inventory ratios were able to improve significantly over the four years. The return on equity ratio decreased, and the UN was steady in the four years. Looking at how the commutated data and the graphical analysis Netflix has had a successful financial period in the four years, the efforts they are making are being rewarded by the consumers who are making the company great. No one can think that a simple idea to prevent people from going to movie stores to buy movies could pay out at long last.

Netflix has been able to come with creative business strategies that have helped it rise over the years. Most people consider Netflix, and by the look of things, it’s winning the streaming video wars. Netflix's target is not money or to reach people, but it works by first establishing a niche that applies to people then creates content containing these niches and hence reaching people worldwide. Its main agenda is to satisfy the wants of its consumers worldwide. In 2016 Netflix came up with an intelligent advertising format. Instead of using pictures or posters in its user's interface, Netflix incorporated short preview videos scrolled out in the title card. This helps many Netflix subscribers know what they want to watch instead of viewing a poster and growing to search for the movie. This has helped provide better services to its consumers. Netflix also provided a download and watch feature in their platform, which people could download and watch the series while still offline. Netflix also improved its Netflix mobile experience for the consumers who preferred mobile phone s to enjoy with satisfaction. They changed the encoding of video clips in mobile phones for the videos to require a few bits. These efforts in satisfying its consumers helped Netflix to stand out against its competitors and rule the film industry and be proud of the success it has been able to achieve over the years.

The top two Netflix competitors consist of amazon prime video and Hulu productions. Amazon is a film production company that was developed and started by amazon in 2006. Amazon offers various products, including film and TV shows, for purchase or rent by their consumers. The company has also taken some fantastic deals to set itself apart from the rest of its competitors. Such kind of deal includes multiple licensing with HBO. Amazon has continued to rise despite the stiff completions offered by its competitors. Amazon operates in over 200 countries all over the world. Amazon also started offering sports services to its consumers. They made a deal to be able to get rights and showcase the NFL games. The deal was worth 50 million billion dollars. Amazon's revenue ranges at 135.98 billion dollars, with assets accumulating to about 83.4 billion dollars. Also, Amazon has been able to give employment opportunities to more than 541,000 workers. Amazon has shown its supremacy in the market by constantly making a profit and providing endless entertainment to its users.

Hulu is a company that offers its subscription services through demand services like Netflix. Hulu is a company formed by several entertainments big wig companies who collaborated to form Hulu. These companies are Walt Disney, 21st-century fox, and time Warner Company. Hulu provided a large variety of content to its consumers. Hulu services include TV content production and web syndication. Hulu's revenue amounted to one billion dollars and has close to 32 million users worldwide. It also launched its first streaming service in 2017.

Netflix's plans consist of an increase in the production of its original content. Netflix plans are to increase its investment in original content to be able to acquire more subscribers. It plans to release one new original series every week to maximize its content and be ahead of its competitors. Increasing more foreign-language TV shows to reach more people worldwide and expand its base of operations quickly, creating new algorithms such as the shuffle play, which helps consumers choose movies according to their liking and what satisfies them. The algorithm focuses on a person’s habit and predicts movies accordingly to how the consumer watches or prefers. A price increase might be incurred due to an increase in quality products provided by the company. This has already started in February 2021. The subscription cost in the UK rose from 8.99 to 9.99, and hence this might also be seen in other countries. If the company can increase its providence of original content, it will capture many consumers and be successful in the preceding years.

Netflix's future goal is to provide unlimited movies, documentaries, and tv shows to its viewers from all available niches and easy access to streaming the contents worldwide. Ensure that consumers control what they want to watch, with no ads to dampen the watching mood in just one subscription.

I would prefer that the company take on technology with the evolution of machine learning to create algorithms such as movie predictors, which can predict consumers their movie tastes and align all the movies in that genre. As a data science enthusiast, I am looking forward to the creation of such algorithms. They will be exciting to use, and they will revolutionize movie production.

In conclusion, Netflix is one of the most successful film production companies, and as the co-founder reed hasting likes to put it, “rarely a company gets killed when it makes first moves, but slow moves lead to frequent death of companies. Hence the big moves the company has made has brought it a success

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Current ratio of Netflix

Quick ratio of Netflix

Cash ratio of Netflix

Return on total assets of Netflix

Profit margin of Netflix