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Running Head: NETFLIX7-2 Final Submission: Netflix Research PaperSouthern New Hampshire University: ECO 201Melissa MorrisonJune 19, 2020
2Netflix Inc.In a world with numerous internet entertainment services, Netflix is number one and has approximately 183 million paid memberships in over 190 countries (IR Overview, 2020). Netflix’s service provides its members the ability to stream unlimited commercial-free shows, movies, and documentaries anytime and anywhere while also having the luxury to pause and resume as needed. I will conduct a microeconomic analysis of Netflix, which will assist me in evaluating the company for future success. In conducting this research, an analysis of different microeconomic material that will help explore and examine multiple critical elements within the company, such as the supply and demand conditions, the price elasticity of demand, the costs of the production, and the overall market for the publicly traded company. Once completed, this analysis will offer recommendations for how the company can be successful in the future.HistoryReed Hastings and Marc Randolph, both software engineers, founded their company Netflix in 1997 (A brief history of Netflix, 2014). Netflix is currently known for its media streaming capabilities but it originally started off as simple DVD rentals. Netflix’s members would rent DVDs that would be shipped directly to their homes. Once the customer finished the movie, they would simply reseal the DVD and return it by mail. In 1999, looking to enhance the customer experience while also ensuring a profit, Netflix implemented a monthly subscription model that charged customers one single monthly rate for unlimited rentals. Unlike other providers, Netflix did away with movie rental due dates, eliminated late fees, as well as shipping and handling charges, Co-founders Reed Hastings and Marc Randolph come to realize they gained profits from their strategic planning, in addition, their company increased its customer base to 4.2 million dollars. In 2002, Netflix went public with 600,000 subscribers and fewer than 400
3employees (Barret, Parham, Raftery, Rubin, & Watercutter, 2017). Netflix saw steady increase intheir subscribers after the IPO announcement. By 2005, Netflix’s subscribers was a ground-breaking 4.2 million (Media Center, 2018). In 2007, Netflix yet again broke the paradigm of entertainment by offering instant streaming of movies and TV shows. From 2008 to 2010, Netflix partnered with top consumer companies, such as Microsoft’s Xbox 360 and internet-enabled Blu-ray disc players, which increased the availability of their streaming services. Netflix also gained much of its success from original content that received 31 Emmy nominations in 2013. In 2014, Netflix won 7 creative Emmy Awards for “House of Cards” and “Orange is the New Black” (McFadden, 2020). Netflix is undeniably on top of their game and are continuously excelling in the world of online streaming especially with their subscriber base, as well as their customer loyalty. However, with technology rapidly changing, Netflix will also see an increase in competition as well as an increase from their current competitors.