Netflix, Inc.

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Netflix, Inc. is a provider of streaming media and on-demand content. The company is known as the leading network for television, movies and original programming on the Internet. Netflix's promise is that customers can watch the content anywhere, anytime they choose without commercials and commitments ("Netflix," 2013). It is difficult to specifically know the mission of Netflix, Inc. as the company does not have a specific published mission statement on its website. However, the co-founder and CEO of the company, Reed Hastings, expressed at a Dublin Founders conference in October of 2011 that Netflix' vision is to become the leader the global entertainment distribution, license content on both the domestic and international fronts, create markets that ensure filmmakers have accessibility to and reach a global audience with its content (Shaughnessy, 2011).

The essence of Netflix, Inc. is that the company wants to be impactful in the area of online content as it pertains to movies, television, and original programming and they essentially have been and continue to be because of their company values which drive their overall promise to consumers. Netflix's company values include judgment, productivity, creativity, intelligence, honesty, communication, selflessness, reliability, and passion. They unequivocally ensure that these attributes are published on their website in addition to making sure that consumers see them as such.

The Netflix Promise

It can be said that once a company establishes its mission and vision, it does not change or alter it unless the consumer marketplace demands a particular shift. Netflix's history can be traced back to 1997 as an effect of a decision by the CEO who was subsequently forced to pay overdue fines for the movie, Apollo 13 (“Netflix, Inc. History, 2013). It was there that the budding idea of moving away from the conventional online rentals began to take flight and the concept of Netflix was born particularly without the late fees, shipping and handling charges, rental fees and due dates. Thus, Netflix would change the face of movie rentals and online media content. This would ultimately lead the company to become not only a lucrative venture in the short term but in the long run also.

On the basis of Netflix's promise to provide consumers the best of the best in content, the rationale here is that in order for them to remain viable, successful and competitive, the company can be viewed as a flexible organization. This reasoning is seen in their cost-conscious attitude and moves toward original programming and video streaming. Netflix wholeheartedly understands the consumer marketplace. Local rental stores with VHS tapes have become a thing of the past. Video stores and the concept of video rentals is a "death spiral" (Seitz, 2011). Given their comprehension of the consumer marketplace, which has not only gravitated toward online rentals, streaming and the like, Netflix's concept of creating great and exceptional content is in its backward integration business strategy. Their board and key leaders, who include Reed Hastings, the aforementioned CEO; David Wells, the CFO and Ted Sarandos, the Chief Product Officer have experienced firsthand the electrifying move of consumers from television and video to not only DVDs but streaming content.

One of the key indicators that Netflix, Inc. understands the consumer marketplace, is driven by its matrix-organized structure. The entertainment industry itself is one of the simultaneous objectives to reach a common goal. As a result of the various activities, it stands to reason that Netflix, Inc. is always striving not only to keep its leadership status in the area of online content but to change the face of business as well. Moreover, the business is centered on improving the consumer experience by expanding the content that is available while mixing in original programming as well. Yet, despite the move toward making the consumer experience more enjoyable, Netflix does understand that they must operate within their net income to prevent significant losses and obtain revenue in the process.

While the Netflix promise has held true to date, the environment that Netflix operates in is very unstable. However, the company is focused more on growth than the volatility of the environment, by continually coming up with ideas that both retain the customers they already have and obtaining new customers. Faruk (2013) asserts that Netflix is "on a roll, adding more than 2.7 million subscribers to its roster around the globe. Netflix's momentum is adding new subscribers in the future and boosting its earnings profile will be instrumental for the company's prospects going forward" (p.1). It can be predicted that the company is continuing to more or less drive the industry of online streaming and content in spite of the volatility that exists in such a market. The "DVD business is holding up pretty well" (Faruk, 2013) and because of this, Netflix stands to not only gain traction but keep the traction it has already established.

Netflix: The King of Competitiveness?

As with all industries, Netflix does have competitors, but none of them measure up to the expansive and extensive nature. Wal-Mart started an online rental service in October 2002 but departed shortly thereafter in May of 2005. They returned, however, in 2010 with the Vudu service. Netflix also sees Amazon.com on its radar as a potential competitor due to Amazon's increasing amount of offerings and notoriety among consumers. At one point, Blockbuster Video began a monthly subscription service in August of 2004, and this in turn, began a price war in terms of the competitiveness of the plans that Netflix offered. For example, Netflix offered a rental plan for $17.99, while Blockbuster would as a result, offer a lower amount for one of their plans by offering $14.99. Of course, Netflix would respond by lowering their prices in order to better compete with what appeared to be a striking competitor (Cohan, 2013). Additionally, Netflix sees Redbox and Hulu as viable competitors.

In the article, "Netflix vs Hulu vs Amazon Prime vs Redbox Instant: Which is the best subscription movie streaming service for you?" it discusses the various offerings that each have and essentially comes to the conclusion that each respective service has its pros and cons, but that Netflix wins out because of the fact that it has most titles (p.1), so consumers understand that Netflix is the prime choice because they can rent what they want when they want whereas, with the others, the content is limited. The market conditions do not seem to have affected the consumer choice in keeping their Netflix subscriptions but have impacted the frequency and plan selection of consumers.

Brooks (2012) asserts that Netflix's saving grace is their huge amounts of revenue and research, but also contends that "the rising cost of content is coming from the high demand and popularity of instant streaming, and the stiff competition that Netflix faces" (p.1). Therefore, while Netflix continues to be able to hold off the competition and still dominate the area of online streaming and movie content rentals, it is in a state of flux because of this factor. Brooks (2012) goes on to say that while Netflix offers a variety of offerings for its subscribers, consumers may opt for cheaper options in the long term rather than spending a monthly subscription (p.1). One such competitor is Redbox that offers movie rentals for one dollar rather than the plan fees that Netflix has.

So how can Netflix respond to the uncertainties of their competitors for not only the here and now, but for the future? In their 10-K report dated December 31, 2012, Netflix, Inc. casts itself as differentiating itself from others and in effect, surviving the competition by "leveraging a substantial scale and significant content budget. [Its] licensing terms are expert programmers informed by more than a decade of rich data on viewer preferences and viewing habits that uniquely enable them to license a compelling mix of TV and movie content to effectively provide Netflix members with compelling content. To further differentiate [themselves, their] content offerings provide members with innovative and effective user interfaces that enhance their Netflix experience" (p.2-3). The positive outlook that Netflix has despite its competitors is impressive because the company understands that consumer satisfaction is the driving force behind who they are. But do consumers really want what Netflix offers? In other words, are they looking for the specific content that Netflix assumes they are per research data?

A recent survey found that “63% of current Netflix subscribers are either extremely satisfied or very satisfied with the service, a slight improvement from 57% in the firm’s May 2013 survey and the highest level since Netflix’s marketing fumble on price hikes and rebranding in the second half of 2011. In addition, 68% of current Netflix subscribers are not at all likely to cancel their subscriptions in the next three months, with just 2% extremely likely to do so, the best customer satisfaction ratings in more than two years,” according to RBC (Spangler, 2013). Netflix has also had to deal with the increasing government regulations, which has, in turn, affected their decision-making processes and will determine their future success.

Recently, the FCC published a rule, and as of September 30, 2012, “any full-length programming (except for living or “near-live” content) that appears on television with closed captioning must also have captions when it is redistributed on the web or via other IP-delivery mechanisms” ("As FCC’s CVAA regulations take effect, Netflix, Amazon are (finally) getting serious," n.d.). Based on this data, Netflix will continue to be viable because consumers are loyal and will continue to be despite price hikes and the changes that have gone on within the company.

Internal and External Motivating Factors of Netflix, Inc.

While Netflix continues to dominate, there are both internal and external forces that have to be examined in terms of their assured future success. The company appears to be in a formalization stage in terms of its life cycle, which essentially means that it seeks to expressly find new ways to appeal to its consumers and grow its operations. As a result, one internal factor that will always be a prime aspect of the company's continued viability is in its employee base. A company cannot, of course, remain consumer friendly without the essential pieces of the structural puzzle.

There is reason to believe then that just as the market fluctuates, so will the employee quantity fluctuate. The company's dynamic growth will not only cause both a downsizing, but also intense hiring due to the growing demand for online streaming content. Another interesting factor that more or less contributes to the continuing growth and development. The company operates on a freedom premise, which essentially gives employees the opportunity to make decisions and accept responsibility for those decisions. As such these are all factors that weigh into the success of the company in that a variety of perspectives are obtained and if implemented, will decide the fate of the company.

External factors also play a role in the assessment of the company. The external factors include keeping up with the changing times, appealing to specific demographics, and what the media has said about the company. Netflix has been an innovative force in the entertainment arena. The company initially began as a DVD rental service and consequently, expanded into a streaming service that consumers now look to for their television and movie viewing. Currently, Netflix reaches a total of 29.93 million subscribers, which exemplifies its approach to honing in on consumer demand for entertainment (Lawler, n.d.). Netflix does utilize marketing techniques to specific demographics, such as data collection, email marketing and even social media campaigns. This allows them to fashion their marketing accordingly and also drive the externality of the marketplace in their favor.

In addition to this, Netflix understands that consumers want better experiences, so they frequently work on new approaches to further the way they are seen in consumers. Recently, Netflix sought to change the way consumers experience their platform. It was essentially a hint of how they will approach consumers in the future - subtle, but effective. This platform change included a guide channel on their cable box, which was done to ensure that consumers did not see streaming content as different from that of regular television (Watercutter, 2013).

Further, Netflix also integrated user-friendly imagery on their website. The media and press have also factored into the organization's ability to grow and progress. While Netflix has seen its share of issues over the course of its time as a company since it was a venture back in 1997, the company consistently emerges as the dominating force behind streaming content. This is because the media and press speak highly of the company in its future promise despite hiccups and mishaps that have happened. Netflix took advantage of a specific need in the consumer marketplace at a time when there were no Hulu's, Redboxes or Amazon Primes. Thus, both internal and external factors have undeniably assisted the company in becoming what it is today.

The Future of Netflix, Inc.

Shaw (2013) assesses that Netflix's future is in surpassing what it has done thus far. In order to do this, Hastings, Wells, and Sarandos must come up with new ways of approaching the consumer. Netflix has shaken up the industry of television and luring consumers away from cable (p.1). Additionally, the company has also altered the face of conventional media watching. Netflix must become even more aggressive than it has been due to the aforementioned competitors. This means appealing more to international companies and offering perhaps more services on the domestic front. Shaw (2013) notes that one of the key issues that Netflix must focus on is its streaming business given other companies such as Amazon and Hulu are considering more programming choices (p.1).

Netflix's future then is in the business of television rather than movies. The company does still offer DVD rentals to consumers, but there is reason to believe that it will not put any additional money into that side of the business because the streaming content is what consumers are drawn to. Shaw (2013) also discusses the rumor that Netflix will be streaming sports, specifically NFL games, on its service and that the leaders of the company asserted that they had no plans to do so (p.1). Yet, that may allow Netflix to become even more dominating than they are and put them on the map to compete with pay-per-view fights and the like. Moreover, consumers will then potentially look to Netflix for everything as far as television. It could of course, backfire in that Netflix only wants to remain a streaming service/DVD rental company rather than a cable or satellite enterprise.

It seems as though the company has learned from its hiccups, as most companies do. Netflix has been able to withstand the many changes that come with consumer demand. One way Netflix can keep up with the times is to produce more marketing efforts. While what they have done so far has been good and allowed them to become dominate in the industry regardless of the fluctuations that take place, with other services taking full advantage of the consumer marketplace in terms of appealing and attracting them, Netflix, must employ new marketing techniques to have a promising future. History has shown that consumers do in fact pay attention to what a company offers as evident by the Qwikster mistake that occurred at the company in 2011 when they separated their two service offerings. The backlash could have crippled the company, but they quickly assured consumers that they would go back to the way things were. Netflix then will have to examine each specific decision they make in order to ensure that once out in front of the consumer, they won't lose the customer as a result.

The financial future of Netflix appears to be promising as well. Levine-Weinberg (2013) argues that the secret to Netflix's success is in its profitability and consumer dependence. That while companies such as Amazon and Hulu can be considered significant threats, the base of subscribers at Netflix, continues to grow and expand at rapid rates, which has increased their revenue (p.1). The company, based in Los Gatos, California then has undeniably positioned itself a place in the future of online streaming entertainment on a global basis. With this impressive growth behind them, Netflix, Inc. stands to become even more successful than it has been already. Furthermore, given its freedom premise that it operates under allowing employees to make suggestions that are taken seriously, the company stands to come up with even more new products and offerings for the consumer to meet the demands of both DVD and online streaming.

References

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