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Netflix Business Case97.1Competitive Forces AnalysisBarriers to entry are low for the online streaming industry. Any company with a website can build its server capability and acquire licenses to movie titles and shows fromtelevision networks and the film industry. Netflix has combated this by gaining exclusive rights to certain new television shows, like “Orange is the New Black”, which prevents its competitors from capitalizing on those shows when they become hits. The power of suppliers is weak. Independent film and television show makers have a hard time getting their product known. Only a few films are released on the big screen, and once they are few do well as DVDs. The same is true of relatively obscure television shows. Few shows make it to the big networks like Fox, NBC, and CBS. Netflix, and other video-on-demand providers, provides these industries another outlet. Netflix uses its recommendation system to also provide consumers with the option of watching these independent films and television shows.The power of buyers is weak in the video on demand market. Buyers are fragmented because of the low cost of purchase and quantity and it is difficult for them tocome together to demand more from the product. In addition, each buyer does not purchase large enough quantities to be effective, only one subscription per month, nor is there credible threat of buyers backward integrating into the industry.The power of substitution for video on demand is strong. Consumers can watch regular programing on TV or movies they have bought in addition to the few mom and pop DVD rental places still around. They can even go to the movie theaters. Netflix has combated this by creating the want for no commercials and more convenient ways to access entertainment.
Netflix Business Case10The rivalry among existing competitors is strong. Because it is so easy for large firms from similar markets to enter into the video-on-demand market and the power of substitutes is so strong, competitors are jockeying for a piece of the market share. Amazon, from the retail industry, and HBO, entered by offering similar prices but also additional perks that Netflix can’t. Netflix main competitive hold is its larger selection of movies and shows and a personalized movie selection based on a survey of the consumers preferences.7.2Competitive Profile Matrix (CPM)On the competitive profile matrix, provided in the CPM appendix (Exhibit 6), Netflix has the highest score of its two highest competitors. This is because it scores high in number members, content, selection development, financial profit, market share, and global expansion. Netflix’ has 60 million subscribers, original programing, and advancement of independent filmography help give it high scores. Netflix also has a high market share in the video on demand industry and has reached out globally to Europe, Australia and Asia. This is due to its head start in the mail order DVD rentals and its earlyadoption of internet streaming.