An Overview of the Success of Netflix in the Entertainment Industry

In 1997, the DVD mailing company “Netflix” was established in Scotts Valley, California. In 2007, Netflix became a subscription based streaming service of television shows and movies. In the past few years, Netflix has had a significant effect on both the movie and television industries. In previous generations, in order to see a movie, a visit to the movie theaters was required. Later on, there was the introduction of video rental shops such as Blockbuster; Netflix quickly overtook such companies. Authors John V Pavlic and Shawn Mcintosh state “Despite the rise of the Internet and other new media, people still spend more time watching television than they spend with any other medium.

” Netflix as a company, integrates the internet and television and gives users access to thousands of titles at the click of a button. In the years to come, there is no doubt that Netflix will continue to grow as a company, however the companies’ growth has the potential to either be heightened or lowered as a result of it’s lack of content, debt and competition.

Overall, Netflix has done an incredible job at putting out original content. So far, Netflix has managed to receive 10 Golden Globe awards, 45 Emmy’s and two academy award nominations in the past few years. Although it’s original content has proven successful, for consumers who wish to sit back and enjoy a classic movie, their needs most likely won’t be satisfied. Due to the complication that comes along with receiving the rights to movies and televisions shows, Netflix’s content is very limited.

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Once a DVD rental company, Netflix offered an expansion of content available to customers–now, content is frustratingly limited. Rachel King, writer for “Pop Matters” explains, “The key reason why Netflix was able to cater to rarefied tastes (along with very mainstream ones) was…because of the materiality of the DVD…Back when Netflix bought DVDs for rental, it owned those DVDs in perpetuity, and no rights holder could stop the company from mailing them out to customers in those iconic red envelopes.” As a result of this limit, Netflix’s growth could be affected in comparison to the growth of its competitors.

In its efforts to continuously spew out original content, Netflix has accumulated a lot of debt. Author Timothy Green writes, “Netflix doesn’t earn enough profit from its U.S. operations to fully fund both its original content ambitions and its rapid international expansion…At the end of 2014, Netflix had $900 million in debt on its balance sheet… [in February] it raised an additional $1.5 billion in long-term debt…As debt piles up on Netflix’s balance sheet, the potential negative consequences of the company’s expansion plans falling short of expectations will be magnified.” This, in turn, is a huge weakness for Netflix. If the amount of money being generated doesn’t outweigh the money in which Netflix is spending for original content, there could be terrible repercussions for the company as a whole.

Currently, Netflix’s biggest competitors are Amazon and Hulu. At first, Netflix dominated the streaming market, but with a change in it’s policy, Amazon has become a very strong competitor. For years, Amazon Video was only offered to those who had an Amazon Prime account which costs $99 a year. Recently, Amazon steered clear of that and now offers users access to Amazon Video for $8.99 a month, which is a dollar cheaper than the standard plan which Netflix offers. Mark Fahey, data journalist for CNBC writes, “It’s hard to draw any ironclad conclusions, but it does appear that the two companies are neck and neck in the type of content they’re offering. That means that a dollar difference in price could make a big difference, and other perks – like the ability to download on Amazon or the extra original content on Netflix – could sway customers who aren’t sure which service to use.” Although Hulu is also a competitor for Netflix, the fact that Hulu still plays ads with a paid subscription of $7.99, is a huge weakness. However, if Hulu were to suddenly change this characteristic, Netflix would definitely be in trouble.

Ultimately, Netflix continues to dominate the streaming market and has the potential for expansion. In order to have a one up on it’s competitors, Netflix would benefit from getting rid of its different plans. Netflix’s most basic plan is $7.99 a month and doesn’t allow for HD streaming and only allows for viewing on one screen at a time. The Standard plan costs users $9.99, allows HD and viewing on 2 screens at once. The Premium plan is $11.99 and allows users to watch on 4 screens at once as well as added benefits. If Netflix were to offer a plan which gave users all the benefits of the Premium plan for $9.99, Netflix may see an increase in subscriptions, ultimately allowing for dominance over Amazon and Hulu.