Tam Pham Bang Le
November 15, 2019
CH10 Online Content and Media
Case Study – Netflix: How Does This Movie End?
1. What are three challenges that Netflix faces?
First, and most important: competition. Against giants like Apple, Google, or HBO, it is hard for Netflix to stay competitive and offer unique content that its users wouldn’t be able to find anywhere else. It is also hard as well to be the most creative when they are facing such strong competition, it is hard for them to come up with show ideas that would be a big hit, and it is hard to predict if their subscribers will like the new shows proposed by Netflix or not. Another challenge that Netflix faces is that all of what they do is expensive, and they only make 5% of profit out of their revenue, which is very small and impossible to predict with time. The shows they are “renting” to companies like Disney, MGM, Lionsgate and others cost millions and as they are not supported by adds, they barely make a margin which can be dangerous in the future.
2. What are the key elements of Netflix's strategy today?
The elements of Netflix strategy are strike deals with Comcast and other ISPs to develop high speed Internet service to its customers, reduce content costs by producing their own content, expand offshore where opportunities for growth are higher than the United States, and. expand its offerings of high quality television series
3. Why is Netflix in competition with Apple, Amazon, HBO, and Google, and what strengths does Netflix bring to the market?
Apple, Amazon, and Google all provide substitute products and services by providing Internet consumers access to movies. The strengths of Netflix are its differentiating factors like brand recognition, algorithms to help consumers find movies and TV shows, and a growing list of production studios supplying it with original content. Competitors could develop these attributes as well, but only with considerable effort, expense, 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 Amazon's presence has altered the industry that creates, produces, and distributes this content. Prepare a presentation to convey your findings to the class.
If this question pertains to downloadable digital media and streaming such as music and video, Amazon has had a major impact on the industry that creates, produces and distributes such content. One way that Amazon has altered the distribution of digital media, is making the media very accessible. By going on Amazon and having a Prime membership, you are able to endlessly stream music and video; even if you do not, the content is easily downloadable with an online purchase. From my perspective, Amazon has nearly defeated the distributers of digital content by making it so easy and available to access through their e-commerce site.
2. 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.
I believe that Amazon’s move to purchase Twitch was a good idea. It let users stream their video game sessions. Here are the main reasons why I think this was a good idea:
1. The acquisition bought Amazon a significant audience (young, male, and technophiles, wealthy) for a decent price. Twitch has an online audience of about 55 million. Amazon paid about $18 per viewer. Twitch is currently the 4th largest source of Internet traffic (after Netflix, Google, and Apple).
2. The acquisition helps Amazon’s push into Web video. Amazon is trying to develop video content delivery infrastructure, and Twitch has this.
3. The acquisition was a defensive move to prevent Google from buying Twitch.
However, here are some of the reasons I could find as to why it wasn’t such a great idea:
1. While Twitch has raised $35 million from investors, the company is private and does not report revenues. It is unclear if revenues exceed expenses. Analysts estimate Twitch generates $30 million in revenue from advertising.
2. The acquisition might detract from Amazon’s main line of business, which is online retailing. Amazon has little management experience as a creator or broadcaster of video content.
3. It is unlikely that Twitch will ever generate enough revenue to make a difference for a company the size of Amazon. Twitch, in the best case, will be a rounding error in the financial statements of Amazon which generated $74 billion in revenue in 2013.