Chapter 10 Assignment
Case Study Questions
1) What are three challenges that Netflix faces?
· The three challenges that Netflix faces are:
· The challenge about their content: This is a challenge because Netflix has to acquire regional content. They have a very limited library and users are trying to pay the least amount possible for the subscription, they wont pay anything more then what they are right now because of limited content.
· Profitability: This is a challenge because it is tough to gage the national average income to try and settle on a price that even the lower class will pay while still being able to compete with their competitors while making a profit.
· Their Infrastructure: Not every country in the world has fast internet. Therefore, it is tough for some to be able to access the content due to the way the infrastructure is run.
2) What are the key elements of Netflix's strategy today?
· There are a few elements to Netflix’s strategy. They have to make deals in their favor with Internet service providers and big content companies like Disney and Hollywood movie producers. to develop high speed internet to be the best they can be and keep them ahead of competition.
· Secondly, Netflix has made it one of their strategies to write and producing their own content in an attempt to decrease the cost of content. These are known as Netflix Originals and the first one they made was House of Cards. However, the initial investment for creating their own content is very high, but it can prove to be profitable in the long run as they don’t have to pay any fees or royalties to any external party.
· Netflix keeps expanding their service in new countries where there are opportunities for growth and increased profits. And continue to make their content more accessible.
· Lastly, Netflix is trying to expand their use of high-quality TV series to catch new customers interest while also keeping current subscribers engaged.
3) Why is Netflix in competition with Apple, Amazon, HBO, and Google, and what strengths does Netflix bring to the market?
· Netflix is in competition with these other companies because they are starting to challenge Netflix in the streaming service market. Amazon has Prime video and the others also have streaming services. These companies also have a ton of money and are large so they are able to impact the market. Because they are larger, it gives them an edge to negotiate contracts with major Hollywood producers because they can afford to spend more money while also getting better deals.
· Netflix’s strength is that they are the original streaming device, so they have the first mover advantage that we talked about earlier in the semester. Since they were the first to do it, they have a high number of loyal customers, something around 40 million in just the US. Also, their selection of movies sets them apart because they have movies from CBS, Fox, Sony and other big networks.
3) Identify three online sources of content that exemplify one of the three digital content revenue models (subscription, a la carte, and advertising-supported) discussed in the chapter. Describe how each site works, and how it generates revenue. Describe how each site provides value to the consumer. Which type of revenue model do you prefer, and why?
· Netflix (Subscription) Netflix is a subscription-based platform. Meaning you pay a monthly fee for all access to their services. This is how they generate value, along with advertising, royalties and rights from other production features. This is the model that I prefer over the others.
· Amazon (A La Carte) Amazon can also be looked at as A La Carte Model They have a wide range of products and services including but not limited to, technology operations, including E-Commerce portal, cloud based services, marketing support services, logistics organization and products like Echo, Alexa, Kindle. Amazon mainly generates revenue through the sales of both physical and digital content through its library for products like Books and movies on a pay per item method.
· Google (Advertising Supported) We all know of the giant company known as Google. They are a diversified technology company, including search engine, mail services, office support tools, cloud-based services, marketing support services, and products like Pixel and Nexus. They make revenue from running advertisements and on a pay per digital content through the usage of their products like mails subscription and Google Cloud.
5) In 2014, Amazon purchased Twitch, which lets users stream their video game sessions, for almost $1 billion. Why would Amazon spend so much money on Twitch? Create a short presentation either defending the purchase or explaining why you think it was a bad idea.
· Twitch started in 2011 as a branch of a popular video-streaming site known as Justin.tv. Twitch is focused only on video-game-related content where users can upload footage of them playing video games, host a video-game podcast or shows, and add audio over their footage. Most e-sports competitions are broadcasted live on Twitch. Amazon wanted to buy this because in just 3 years, Twitch grew from nothing to 40% of live-streaming traffic by volume in the U.S. They were the number one live-streaming platform by a huge margin. They were also 4th in peak internet traffic in the U.S in 2014. Amazon saw how big Twitch was getting and wanted to buy it before anyone else because Google was also wanting to buy it. Amazon saw how big they were getting, and they know that the future of videogames is a giant market in people’s lives. So, this was their move to get into the gaming industry. I think this was a good deal for both sides and Amazon made the right call. It is where our future is going, and this will help set Amazon apart from its competitors.