SWOT Analysis of Netflix

Summary of the Netflix SWOT Analysis

A SWOT Analysis of Netflix highlights its dominant position in the streaming industry, driven by strong brand recognition and a vast global subscriber base. Netflix’s strengths include its status as a household name, with over 300 million subscribers worldwide and a diverse, high-quality content library. The company’s investment in original programming, such as “Stranger Things” and “Squid Game”, continues to attract and retain viewers. Netflix’s innovative ad-supported tier and expansion into live events and gaming further strengthen its market position. These factors provide Netflix with significant bargaining power and consistent revenue growth.

However, Netflix faces notable weaknesses. The cost of producing and acquiring original content remains high, putting pressure on profitability. The company often does not own full rights to much of its original programming, allowing rivals to acquire content after exclusivity periods. Environmental concerns and criticism over sustainability practices also affect its public image.

Opportunities for Netflix include expanding into new markets, such as China, and forming partnerships to access local-language content. The rise of new technologies and demand for region-specific programming offer further growth potential.

Threats include intense competition from platforms like Amazon Prime Video, Disney+, and HBO Max, as well as the persistent challenge of digital piracy, which threatens revenue and content investment.

Netflix Strengths

• Brand Name – After ten years, Netflix has become the sole brand name for online streaming content with a share price increase of over 6000% since 2007 (Bradshaw and Bond, 2017).
• Large customer base – Through serving 190 countries, Netflix has access to over 100 million subscribers. This strength gives the company bargaining power when in talks with studios to secure exclusive content (Bradshaw and Bond, 2017)
• Original content – Through careful acquisitions, Netflix have secured numerous original shows that have appealed to audiences. In 2017, two Netflix shows are so popular they have pushed subscribers from 83m to over 100m in one quarter (Bradshaw, 2017).

Netflix Weaknesses

• Cost of original content – While its original content creates a competitive advantage for the company, the cost continues to grow to support this content. In 2017, it is expected for Netflix to invest $2.5bn solely on securing original content rights (Bradshaw, 2017).
• Lack of rights to original content – Unlike many traditional television studios, Netflix does not own most of their original programming. Due to this, usually rights expire after a year and the original content can be shown on rival services (Bradshaw, 2017)
• Environmental cost – Netflix has been ranked ‘D’ in terms of environmental awareness. This has garnered bad publicity for the company as rival competitors Amazon and Facebook use over 40% renewable energy with their services (Lewis, 2016)

Opportunities for Netflix

• Expansion into China – Difficulties with licensing has left Netflix unable to enter China through traditional means. The company must find a ‘joint-venture’ to capitalise on the 500m Chinese users who currently stream media content (Russell, 2017),
• Partnerships in Europe – To meet new European laws, Netflix can partner with the BBC and Canal Plus to gain access to a wealth of native-language European content and grow customers in local markets (Murgia, 2017).
• Growth of technology – With the growth of VR and 4K UHD content, Netflix has new ways to allow customers to access their content and provide further competitive advantages (Mintel, 2016).
• Region specific content- A growing market for content is foreign-language programming. Partnerships with local-language content will curb traditional criticism that US-based streaming services only offer English-speaking content (Mundy, 2016).

Threats to Netflix

• Increased competition – Facebook is the latest to try and take on traditional media by launching its own original content. Amazon, Hulu, HBO, and YouTube also compete for audiences to subscribe to their platforms. For Netflix, this will continue to develop as more companies seek to buy the latest ‘original content’ exclusively for their platform (Kuchler & Bond, 2017).
• Digital piracy – For more than 30 content providers (including Netflix), piracy has led to 5.4bn downloads of media content in 2016 alone. This threatens the whole of Netflix’s business model and ability to fund content in the future (Opam, 2017).

References for SWOT Analysis of Netflix

A-L Sources

• Bond, D. (2017) Traditional TV becomes turn-off for young viewers. Financial Times. [Online] Available at: https://www.ft.com/content/0aa8f2fc-6339-11e7-91a7-502f7ee26895 [Accessed on: 27/07/17].
• Bradshaw, T. (2017) Netflix boosted as viewers outside the US tune in. Financial Times. [Online] Available at: https://www.ft.com/content/e8c742f2-6b34-11e7-b9c7-15af748b60d0 [Accessed on: 27/07/17].
• Bradshaw, T., and Bond, S. (2017) Netflix looks to become world’s entertainer as it hits milestone. Financial Times. [Online] Available at: https://www.ft.com/content/06b55bb8-6d0c-11e7-bfeb-33fe0c5b7eaa [Accessed on: 27/07/17].
• Darrow, B. (2017) Greenpeace Just Dropped This Video to Push Netflix on Energy Use. Fortune Tech. [Online] Available at: https://fortune.com/2017/01/13/greenpeace-netflix/ [Accessed on: 27/07/17].
• Digitaltveurope.net. (2017) 4K TV market ‘to be worth US$380.9bn by 2025’. Digitaltveurope. [Online] Available at: https://www.digitaltveurope.net/715831/4k-tv-market-to-be-worth-us380-9bn-by-2025/ [Accessed on: 27/07/17].
• Greenburg, J. (2016) For Netflix, Discontent over blocked VPS’s is boiling. Wired. [Online] Available at: https://www.wired.com/2016/03/netflix-discontent-blocked-vpns-boiling/ [Accessed on: 27/07/17].
• Kuchler, H., and Bond, S. (2017) Facebook takes on TV and YouTube with long-form video push. Financial Times. [Online] Available at: https://www.ft.com/content/2047563c-4bd6-11e7-a3f4-c742b9791d43 [Accessed on: 27/07/17].
• Lewis, D. (2016) Will the internet of things sacrifice or save the environment? Guardian Business. [Online] Available at: https://www.theguardian.com/sustainable-business/2016/dec/12/will-the-internet-of-things-sacrifice-or-save-the-environment [Accessed on: 27/07/17].

M-Z Sources

• Mintel. (2016) Music and Video Streaming-UK-April 2016. Mintel Academic. [Online] Available at: https://academic.mintel.com/display/770307/ [Accessed on: 27/07/17].
• Mundy, S. (2016) Netflix to make first original series in India. Financial Times. [Online] Available at: https://www.ft.com/content/67bf29c6-2bda-11e6-bf8d-26294ad519fc [Accessed on: 27/07/17].
• Murgia, M., and Bond, D. (2017) Netflix seeks European crown in local content push. Financial Times. [Online] Available at: https://www.ft.com/content/c286c25e-04d5-11e7-aa5b-6bb07f5c8e12 [Accessed on: 27/07/17].
• Opam, K. (2017) HBO, Netflix, other Hollywood companies join forces to fight piracy. The Verge. [Online] Available at: https://www.theverge.com/2017/6/13/15791688/hbo-netflix-hollywood-ace-fight-piracy [Accessed on: 27/07/17].
• Pelts, S. (2016) Factors that could affect Netflix’s international expansion. Yahoo Finance. [Online] Available at: https://finance.yahoo.com/news/factors-could-affect-netflix-international-130712152.html [Accessed on: 27/07/17].
• Robinson, D., and Murgia, M. (2017) Controversial EU rules could make life trickier for tech groups. Financial Times. [Online] Available at: https://www.ft.com/content/e44b1d8a-409a-11e7-9d56-25f963e998b2 [Accessed on: 27/07/17].
• Romm, T. (2017) Facebook, Google and others are in a lose-lose position with an upcoming congressional net neutrality hearing. Recode. [Online] Available at: https://www.recode.net/2017/7/26/16029192/amazon-facebook-google-netflix-net-neutrality-hearing-congress-testify [Accessed on: 27/07/17].
• Roettgers, J. (2017) How Netflix Wants to Rule the World: A Behind-the-Scenes Look at a Global TV Network. Variety. [Online] Available at: https://variety.com/2017/digital/news/netflix-lab-day-behind-the-scenes-1202011105/ [Accessed on: 27/07/17].
• Russell, J. (2017) Netflix enters China via licensing deal with top video streaming service iQiyi. Tech Crunch. [Online] Available at: https://techcrunch.com/2017/04/25/netflix-china-iqiyi/ [Accessed on: 27/07/17].
• Spangler, T. (2016) Netflix User Sues Over Rate Hike, Claiming Breach of Contract. Variety. [Online] Available at: https://variety.com/2016/digital/news/netflix-user-lawsuit-class-action-rate-hike-1201807561/ [Accessed on: 27/07/17].