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Barnett 1 Case Study: Netflix A company’snever-ending cycle for innovation and maintained revenue is realized through an analysis of Netflix Inc.: The Second Act. Netflix started off as a very small player in the home entertainment industry. Through technology and smart business positioning Netflix is a leading media streaming company in the world. Netflix is evolving strategies every single day and the competition is as well. Increasing costs for content acquisition, high consumer expectations and emerging rival services are the main reasons that I am presenting three solutions to improve and generate more business for Netflix. Issues Currently Surrounding Netflix For a brief period of time, Netflix was the only streaming subscription service. Production companies licensed shows and movies to Netflix at little cost because it was essentially free extra revenue for them. The cost of content increases year after year, between 2011-2016 the average cost of licensing and programming fees increased 8.9% per year (Dixon, 2017). In perspective, National inflation only increased at 1.6% per year. Content creators understand the value that having a vast collection of titles meant for Netflix’s success. Outside content comes at a 30%-50% mark up for Netflix (Lovely, 2018). In response to rising costs and the lessening availability of content, Netflix increased the cost of memberships and started producing original content. When Netflix increased subscription costs, the service lost 800,000 customers (Chatterjee et al., 2016). Consumers care about getting quality content at an affordable price, on a reliable basis (Nye, 2011). Netflix Originals are fundamentally a good idea because it saves licensing costs in the long term, but the flood of low-quality content was cutting into Netflix’s competitive edge (Lovely, 2018). Most of the Netflix
Barnett 2 Original Content starred relatively unknown or C-list celebrities Netflix had an optics problem in recruiting celebrities for its projects. Bringing on Adam Sandler legitimized the platform. Netflix has invested heavily in artistic talent. Artist are enticed to Netflix’s platform for the creative freedom that they are offered. Major actors star in Netflix projects and Oscar winning directors are releasing Netflix exclusive projects. By 2018, 85% of Netflix’s new spending is going towards Netflix Originals (Lovely, 2018). Unfortunately, Netflix Studios cancels about as many shows as it produces.