most content selection. (Investopedia.com) Netflix has the largest selection of original content.
Complementary Products
The most important complement product of Netflix is technology itself. Technology
including high bandwidth needed for the quality of their content as well as all of the devices used
to watch Netflix on. Without a high bandwidth, Netflix services would not be of high quality,
which would most likely decrease brand loyalty and more importantly, the number of
Netflix: SMP Analysis
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subscribers. Another complementary product to Netflix would be the various devices that have
access to their services. A few of these devices would be the Nintendo Wii, PS3, Xbox, Apple
products, etc. For consumers who already own one of these devices, subscribing to Netflix is
easy and convenient. Without these devices, Netflix wouldn’t stand where they do today as the
leading streaming service.
Implications
From these 5 forces we can conclude that this industry is highly competitive due to lack
of differentiation.
There is little difference between the services provided by the market leaders
(Netflix, Hulu, Amazon Prime). There is a growing threat of substitutes which include, live
streaming and the ever present illegal streaming websites. These will probably affect the future
business endeavors of Netflix.
Bargaining power of suppliers could become stronger in the
future if Netflix’s competitors gain more of the market. Suppliers can t
hreaten to leave Netflix
for another online streaming service if Netflix does not pay a higher price.
There is a threat of
new entrants but, it will be hard to compete with Netflix’s financial powers and long
-standing
contracts without entering into a joint venture or through acquisition by a larger company.
Lastly, we can conclude that the buyer's shape the content that Netflix’s provides.
There is no
switching costs with Netflix since there is no annual contract.
To keep its customer base, Netflix
will have to maintain a high quality of provided content to remain competitive or they can start
enforcing annual contracts.
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Strategic Groups
The streaming industry is organized into different strategic groups. Netflix, Hulu, and
HBO GO all have subscription based pricing, while Youtube provides free content with
advertisements as a downside. While the companies with subscription based pricing get
payments monthly, Youtube gets paid from the advertisements that are played before a video.
Although, now Youtube has brought Youtube Red to the market, which is also a subscription
based pricing model without any advertisements. From having heavy competition mainly in the
same strategic group, it would make it extremely difficult for any companies trying to enter the
industry. If new companies did enter the industry, they would have to find a huge way to
differentiate themselves compared to their competition.
