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At the same time, debt and expenses have also increased and fluctuated year to year as Netflix branches out into creating their own content and licensing more material. Looking at the debt to asset ratio for 2018 almost 80% has gone down to 71.8% showing that the high level of debt is directly affecting their total assets. The amount of upfront debt can prove to be a difficulty
NETFLIX STRATEGY IN 201812going forward and puts Netflix in the position of being heavily reliant on their subscribers to create a positive cash flow for the organization (Kasi, 2019). Their current strategic direction of global expansion also puts a heavy weight on the amount of upfront expenses as marketing is a large portion of that expanding in new areas (Thompson, et al., 2020). They will need to continue to be consistently aggressive with their tactics to keep a profit margin. Netflix’s current financial situation allows them to be able to take risky strategic choices and be aggressive with their global expansion as this method has proven to work for them. See Excel Historical Financials Netflix for Competitors Ratio Analysis Netflix vs. Amazon and the Entertainment IndustryNetflix has several competitors in the streaming service market. Of them all the strongest competitor and biggest threat to Netflix’s platform is Amazon Prime Video (Moskowitz, 2020). Not only do they offer streaming their content with their ‘prime rate,’ but they also have original content and have the same amount of brand recognition as Netflix does. Amazon, as of 2019, hasover 150 million subscribers, a number which is rapidly growing as they follow in Netflix’s footsteps with original content streaming (Moskowitz, 2020). Although Amazon saw a decrease of 1.42% in their gross profit margin, this result was still higher than Netflix’s which has slowly grown half a percentage point year over year since 2018. This data shows that Amazon’s management team is generating revenue at a higher rate than Netflix. An area Netflix is superior in is in their net and operating profit margins. Netflix reflects 5% points higher than Amazon’s net profit margin and over 10% points higher than Amazon’s operating profit margin. This showsNetflix is making more profit off of their products than Amazon. As Amazon offers other services it is difficult to compare specifically their video streaming financials to Netflix, but because of their other services, if the streaming portion is
NETFLIX STRATEGY IN 201813struggling they have other areas of income that can compensate from a lack of “subscribers” or people tuning in to their content. Amazon is able to bundle the streaming service with their delivery package making it very appealing to consumers (Moskowitz, 2020). Netflix only offering the one service of video content streaming puts themselves in a position of being reliant on their subscriber platform to bring in needed revenue to compete at the same level. Overall, both Amazon and Netflix have strong business plans due to their consolidated approach which has led to financial stability.