Introduction
According to company analytics, the brand has managed to secure a large subscriber base that includes more than two hundred million subscribers worldwide. One thing that is suggested to have helped the company grow to where it is currently is the ability of its management to choose to adapt to new ways and methods in the market. Despite all this, the company is also facing issues that are posing as challenges to its continuous growth and expansion goals. For instance, since it provides streaming services, it is difficult for users in certain countries with low internet penetration rate such as India to continue using the platform. One of Netflix’s strengths is the good image that it has established among its users over the years of producing up-to-date content. Despite this, most of its content is owned by various productions which makes it hard for the company to offer cheaper subscription plans. Apart from being a weakness, this can also be an opportunity for the firm to expand and attract more subscribers when it starts producing its own content. This way, it has a chance to expand further. However, laws and policies in different countries pose as a threat to this goal. This paper looks at the challenges the company faces and recommends some solutions for the same.
Key challenges facing netflix
For instance, the streaming service is paying more to get new subscribers which is its biggest problem (Lobato & Lotz, 2020). Marketing and streaming content spending has gone from three hundred and eight dollars per new subscriber in 2012 to five hundred and eighty one dollars as at now. All this is happening while revenue plus subscriber growth are going down. The firm’s incremental costs every year are fifty per cent higher than its incremental revenue (Castro & Cascajosa, 2020). Rising client acquisition costs makes it difficult to see how it reverses its trend of negative free cash flow.
Reliance on Licensed Content
Despite the firm failing to release its viewing information, analytics indicate that licensed content consisted of sixty three per cent of viewing hours on the platform (Amoroso, Pattuglia & Khan, 2021). This is not good for the growth of the company and expansion in the near future. In 2019-2020, most of its combined revenue went into either producing or buying content (Elnahla, 2020). Increasingly, the focus is on producing nation-specific content instead of licensing it. Netflix created forty new shows last year and might produce one hundred more this year.
Price Challenge
Less popular streaming services took a hit on revenues in 2020-2021. Netflix has established a solid foundation since more content in native languages is among the ways of adding more subscribers. It is a constant cycle, one that the company continues to play out in countries such as India (Arroyo-Almaraz & Díaz-Molina, 2021). It has continuously pumped significant sums to deliver its original content. Netflix brand is facing a price challenge especially in poor nations such as India. The firm has attempted to widen its appeal to draw price-discerning Indians (Pilipets, 2019). The question remains to be how much lower is the company willing to lower their prices to gain subscribers in India. Whereas Netflix fails to release specific analytics, Media Partners Asia puts its blended per subscriber average at five dollars monthly. The figure is lower than the averages in every of its four markets (González, Membiela-Pollán & Cuns, 2020). In the US, it managed nine dollars while trending lower. The streaming service thirty per cent less in Asia-Pacific in contrast to the United States plus lacks pricing leverage.
Poor internet penetration rate
Apart from the price issues, another key challenge faced by Netflix in global markets is lower internet penetration as well as existing connections with low bandwidth. This restricts its target customers in countries such as India to the small portion of the populace that can access high speed internet. Accessing Netflix on mobile phones is not a cheap affair for majority of nations in Asia, where data download as well as upload restrictions for mobile phone plans exist. Making its global segment profitable is a difficult task for the firm (Havens, 2018). It requires to invest significantly in local content as well as better streaming quality over low bandwidth connections to gain new subscribers. Nonetheless, the costs can be recovered if the consumer base expands exponentially.
Stiff Competition
Netflix faces stiff competition from various local players in global markets plus some of them such as Amazon are looking to gain a larger market share. Governments in various countries are pushing to help local companies offering the same services as Netflix to become bigger in their local markets (Rahe, Buschow & Schlütz, 2021). Moreover, customers in Asian nations subscribe to Pay-TV for local content as well as might not be planning to replace that with Netflix. Doing so would be expensive unless the latter can offer popular as well as exclusive local programs, as suggested by (Rahe, Buschow & Schlütz, 2021). Despite the potential of global markets driving Netflix’s growth later in the years, the main challenge remains is making this segment profitable.
Reflections and recommendations
The company started by selling movies in DVDs which are barely used these days but decided to adopt the online streaming service as the founders discovered that it was the new way of doing things. Many companies have failed in adaptability and because of the ego of their owners and their unwillingness to adopt new skills and methods, they eventually run out business. This is the opposite of Netflix that chose to focus on what the consumers needed and delivered. However, it is not so since many cannot afford the prices of the various subscription plans. For another business, a company can choose to lower the prices to accommodate more consumers (Wayne, 2018). However, Netflix is at a crossroad since it buys most of its content and thus it would be expensive for them to lower the prices in an attempt to gain new subscribers.
Produce More Original Content
Despite the challenges and the success that it has had, Netflix brand can still continue to grow. The first thing the brand needs to do is producing its own content. Buying content from other companies makes it hard for them to offer the movies and shows at lower prices. The research suggests that the company would gain more consumers if they lowered costs of subscribing to one of their plans. During the coronavirus pandemic, many experienced financial struggles and in the developing countries, it was worse.
Lower Subscription Charges
The prices of basic needs still remain high as governments continue to struggle to get back their economies to stability. This makes it hard for people to prioritize paying for subscription plans and not basic needs. Producing their own content means that Netflix will be at a great position to decide when to drop or raise the prices. It is also important that the brand embraces the idea of producing content that uses languages from different parts of the world.
Produce Content in Local Dialects
This would ensure that the consumers in the country embrace the idea of paying for subscription plans (Hertzberg & Rask, 2021). Additionally, the brand can also use the subtitles feature that would ensure many in different countries understand the shows. It is hard for people to pay for content that they do not understand anything about. There are languages in the world that are spoken by a large group of people across country territories. For instance, Swahili language is spoken in various parts of Africa despite emerging from the East Africa. Producing shows that are interpreted in such a language can win a great subscriber base in the African market.
Conclusion
One of the best ways to illustrate this is through how the company uses social media platforms to interact with its users worldwide. Their users on Twitter get updated on the kind of movies and television shows that are being aired or the ones that are yet to be released. With great strategies in place, the future looks bright for the Netflix brand.
References
Amoroso, S., Pattuglia, S., & Khan, I. (2021). Do Millennials share similar perceptions of brand experience? A clusterization based on brand experience and other brand-related constructs: the case of Netflix. Journal of Marketing Analytics, 9(1), 33-43. Web.
Arroyo-Almaraz, I., & Díaz-Molina, R. (2021). The meme phenomenon in the creative strategy of Netflix Spain on Twitter. ICONO 14, Revista de comunicación y tecnologías emergentes, 19(2), 312-337. Web.
Castro, D., & Cascajosa, C. (2020). From Netflix to Movistar+: How subscription video-on-demand services have transformed Spanish TV production. JCMS: Journal of Cinema and Media Studies, 59(3), 154-160. Web.