Netflix SWOT Analysis: Will The Tech Giant Survive Or Thrive? (2024)

Brand

Netflix seized the opportunity of growing bandwidth and instantly became a popular success based on its range of content.

Since its launch, Netflix has become synonymous with video streaming and consistently it has held the largest global share of the video streaming market.

Netflix holds the 65th position in the Interbrand global brand rankings.

Range of Content

A library of original content is a critical factor for differentiating between the main video streaming providers. As an example, with a strong portfolio of content in 2017, Netflix was able to grow by 17M in one quarter.

Netflix invests heavily in original content not only in the US but it also produces local content and distributes this globally. The idea of this is simple, people can experience interesting international content, and people who live in other Countries get to experience homegrown content.

Ads-free Content!

The quality of Netflix’s content has led to it winning several awards.

In early 2020, Netflix raised a cool one billion pounds to fund more content development and possibly further acquisitions.

Customer Base

Netflix has a substantial global presence. At the end of 2019, Netflix grew its subscriber base to over 167 million.

However, those numbers have grown significantly as a result of people being confined to their homes during COVID lockdown.

Technology

Netflix relies on a large global technology infrastructure to be able to store and deliver videos on demand.

In 2019, Netflix invested over $1.5 billion in technology and development. The overall service focuses on quality, consistency and availability across a broad range of devices and browsers.

Marketing

n 2019, Netflix’s marketing expenses amounted to 2.65 billion U.S. dollars, up from 2.37 billion in the previous year.

Netflix uses a blend of marketing methods, from advertising online to billboards to tie in with major brands, including Coca-Cola and Burger King, to promote content.

Additionally, they use social media especially Twitter, they don’t even sponsor tweets—instead, they simply craft a teasing tweet about a forthcoming show and within seconds it goes viral.

Business Model Easily Replicated

If you take away the unique content then there is little to differentiate video streaming offers. The content dictates the audience and the degree of difference.

The Netflix Business Model is increasingly dependent on production of a range of local and global content that is unique. The company has brought in top directors like Steven Soderbergh and Fernando Meirelles to bolster its need to produce.

Content

Netflix has a substantial balance sheet of loans and investments that have been used to fund content. In 2019, its content obligations amounted to over $19 billion.

Rising costs in operations, marketing and content are leading to a substantial amount of long-term debt.

Netflix faces increasing pressure to rely less on debt to fund its content. Yet at the end of 2019, Netflix had increased its long-term debt by over $4Bn.

With over two-thirds of Netflix content is licensed – that is content that Netflix doesn’t own but pays for.

Content Portfolio

Netflix has an ageing portfolio of hits that drew in its subscriber’s in the US market e.g. Frankie and Grace.

However, faced with stiff competition in the US market Netflix has to strengthen its position or face losing out to newcomers.

User Experience

Other big tech companies like Facebook, Amazon and Google have made strategic acquisitions in Artificial Intelligence. It’s no surprise that these giants with all that user data can transform the customer experience and offer more personalized suggestions.

there have been repeated comments in the media and from users generally about how Netflix makes recommendations.

Netflix seems to be lagging in behind though making many people question the sophistication of its technology and choice of investments.

Sustainability Track Record

Netflix has only just recently started to offset its global energy footprint and by using renewable energy certificates.

Increased Competition

The competition is increasing through Asian video streaming companies moving west, new entrants e.g. Disney and existing players expanding e.g. Amazon, Hulu, HBO, and YouTube.

New entrants like Disney with their blockbuster portfolio of content and family appeal will make inroads into the market.

Even companies like Facebook could be a danger, they already have the distribution channel and could easily buy content to gain traction, plus offset costs through advertising.

China

China is a critical market for many of the tech giants. However, China is heavily regulated and fosters brands that comply with and adhere to how the way the government works.

Netflix is unlikely to be given access to the market unless it forms a strategic alliance with an existing player. The threat then is that a Chinese player can grow significantly, dominate the market and make it unpenetrable for Netflix.

Rising Prices

Netflix in the last few years has raised its pricing in the US. With the advent of COVID and the rising levels of unemployment, it will remain to be seen if this causes a backlash post lockdown.

This probably is no surprise when you consider that Netflix in India starts at 199 rupees (roughly $2.80). On the other hand, a Hotstar subscription can be had for 999 rupees (just over $14) a year, much cheaper than Netflix’s mobile-only plan.

Piracy

Piracy of the licensed content is still an issue worldwide and is particularly prevalent in emerging economies.