NETFLIX CASE ANALYSIS
2011 – 2012
Netflix current company analysis, challenges the very idea of future sustainability and growth, without first changing how they do business. Our 2013 report contains an analysis of outcome between the joint venture of Disney and Netflix. We’ve included some information pertaining to some specifics and the recent outcomes of our analysis and although Netflix sits on top of the subscription provider segment on the media world. They did not get there without a few bumps and bruises along the way. During our analysis of the Netflix brand, we reviewed the financial reports, conducted research and ultimately gave direction to where we see digital streaming and the Netflix powerhouse evolving.
In late 2012, Netflix signed an exclusive licensing deal with Disney, through which it gained streaming rights to all Disney theatrically released films starting in 2016. In additional, Netflix gained streaming rights from 2013 to movies released directly to disk.
Netflix will now have all rights for content Disney, Marvel, Lucasfilm and Pixar. While the company is refreshing a large part of its film catalogue ahead of the summer, when there has now been a staggering 40% increase in streaming North American consumers, it now includes extended content and removing a batch of non-exclusive titles. Exclusive access to Disney’s movies will enhance Netflix’s offerings and should enable the company to attract and retain Disney fans. Given the box office success of Disney movies released in 2016, this should be a sizeable number of subscribers. However, Netflix will need to take several other steps to boost its slowing subscriber growth.
Competition in the streaming media industry is intensifying in the U.S., with players such as Amazon focusing on content, including live streaming of sports, to attract subscribers. While all players are offering similar subscription rates, popular, original and exclusive content will be key to retain and grow subscribers. Disney has had an amazing run at the box office in 2016, indicating the popularity of its movies.
Netflix is facing a slowdown in subscriber growth in the U.S. The company added 2.23 million net members in the U.S. for Q1 2016, but issued a weak guidance of expecting to add only 0.5 million net members in the U.S. for Q2 2016. In Q12016, the company’s operating income declined almost 50% due to a significant increase in the cost of revenue and technology and development expenses. Netflix is walking the thin line of maintaining a steady subscriber growth without impacting profitability significantly. The exclusive content strategy will work in its favour if the company is able to spread the high costs over a huge subscriber base. The deal with Disney should work positively for the company, but it needs to take several other steps to generate a high subscriber growth.
In conclusion, the venture has proven extremely profitable for both parties, however, moving forward Netflix will still need to produce its original content to stay relevant in an ever evolving digital landscape.