Professor Shin-Ping Tucker
Chapter 10: Online Content and Media
1. What are three challenges that Netflix faces?
The first challenge of Netflix is the high cost of content including older series purchase and new content. Furthermore, the cost is growing faster than revenues because Netflix has to pay hundreds of millions for the license of Hollywood movies. The second challenge is the high risk of creating new content because it has limited experience to create new content that viewers may be interested in. Finally, Netflix also has many potential competitors because it does not have any unique techniques that make it distinct from other competitors.
1. What are the key elements of Netflix's strategy today?
To remain successful as well as compete with other tech companies, Netflix has to perform the strategy which has 4 main key elements. Firstly, Netflix has to strike good deals with Comcast and other ISPs to develop high-speed internet service to its customers. Secondly, Netflix should develop and produce their own content in an attempt to reduce the cost of content. Thirdly, Netflix needs to expand its service in new countries where there are many opportunities for growth and raise profits. And finally, Netflix is trying to enhance the quality of the TV series to catch the attention of new customers.
2. Why is Netflix in competition with Apple, Amazon, HBO, and Google, and what strengths does Netflix bring to the market?
Similar to Apple, HBO, and Google, Netflix also provides substitute products and services by giving consumers access to movies if they have the Internet. However, the strengths of Netflix are its differentiating factors like brand recognition as well as algorithms to help consumers find movies and TV shows. Furthermore, a growing list of production studios is supplied with original content. Of course, these other companies could perform like these ways as well in music, literature, or video form, but only with considerable effort, cost, and time.
1. Go to Amazon and explore the different digital media products that are available. For each kind of digital media product, describe how Amazonís presence has altered the industry that creates, produces, and distributes this content.
Three main types of digital media that Amazon provides are music, video, and e-books. In the video and music category, it also offers purchase of physical products such as CDs and DVDs as well as downloads of single tunes, shows, and music. However, in term of digital media portfolio, Amazon seems to destroy traditional record stores and music rental store. For the music part, they do not really disturb the music industry because Amazon helps the music industry to convert to the digital format, also with a lot of help from Spotify. In addition, Amazon starts to sell books online through its Kindle platform and soon developed e-books that compete in the book industry. It increases the demand for digital media rather than reading a paper book. And now Amazon is becoming a monopoly in the e-book industry because no one else could match their product variance or service levels. In my opinion, I believe that Amazon has become an industry leader when it came to the digital media of books but was an industry follower when it came to music, movies, and TV series with other competitors such as Netflix, Spotify.
2. 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?
∑ Hulu (Subscription digital content revenue model): Hulu is a subscription video-on-demand service which is located in the U.S. It provides people opportunities to access to older movies and TV shows and many popular original TV shows. Hulu is becoming a big competitor of Netflix because its fee is competitive, only 5.99$ per month while Netflix charges 8.99$ for a basic package.
∑ iTunes (A la carte model): iTunes is a program of Apple which provides its content on an a la carte through individual downloads (it is also a cloud storage site), and sells more current movies and TV shows. Their revenue is from the pick-and-pay revenue model that referred to a pricing model for pay television services in which customers subscribe to individual television channels. All sales are through an Apple account with a customer credit card.
∑ Google (Advertising-supported): is a diversified technology company which including search engine, office support tools, mail services, cloud-based services, marketing support services, products. Google earns revenue from running advertisements and also on pay per digital content such as mails subscription to private business.
In my opinion, I prefer advertising support revenue models to another one because advertising is becoming an important strategy that any business would like to use to catch the attention of people. Therefore, they are always willing to pay for advertising. For example, Facebook and YouTube are also two technology company which make a lot of revenue from advertising for many brands or products on their platform.