Managing Products From Netflix Subscription Based Streaming Service

Executive Summary

The report has aimed to assess the digital service of Netflix regarding subscription-based streaming service considering which the firm has ensured achieving the firm’s strategic objectives. Key attributes regarding quality content, safety and privacy, revenue stream, and affordability of the streaming service, the report has managed to identify the macro and micro environmental condition of the service offering. Analysis of the market condition has identified that the firm with its service is facing challenges with safety and security measures, regulatory compliance, high content cost and many more. Considering this, recommended measures of changing its safety and security measures, adapting new regulatory compliances and changing the features and process of the subscription-based streaming service have been recommended here. 

1. Introduction

The digital service that Netflix is known to offer to its consumers worldwide indicates a subscription-based streaming service. After paying an amount to gain a premium account, users achieve the ability to watch TV series, web series and movies on the digital platform of Netflix (Joonas et al., 2023). Depending on the plan, it also allows users to download TV shows and movies on their laptops, TVs and mobile phones. Considering this digital service offering, this report has been established to explore the context of the subscription-based streaming service, its design, development, improvement, key attributes, main competitors and the issues it has faced in the existing macro and microenvironment ((Netflix.com, 2024). Moreover, with the evaluation of its current position within its product lifecycle, recommended measures to change its features and characteristics also have been discussed here.

2. Insights into the context within which the product was developed to achieve the strategic objective of Netflix

According to Joonas et al., (2023), the product and service offerings of Netflix have led the organisation to achieve higher customer satisfaction and with the offering of a wide variety of films, TV shows, web series, concerns, cartoons and documentaries, it has gained greater popularity. With this purpose of gaining consumer satisfaction and ensuring to entertain them effectively, the strategic objectives of Netflix are established considering a variety of components (Netflix.com, 2024).

• Content Quality: To stand out from the competitors, Netflix ensures maintaining high-quality content. This essentially justifies the service of subscription-based streaming service as the consumers are offered a variety of subscription packages to access the streaming service and the number of screens they can access through the subscription (Joonas et al., 2023). However, the quality of the content remains the same in every subscription package which justifies the quality of the subscription-based streaming service. 
• User Engagement and Subscriber Churn: This strategic objective of Netflix also indicates reducing subscribers’ churn and enhancing user engagement with the offering of affordable subscription packages and quality content (Song, 2021). This objective is also achievable by Netflix which is a subscription-based streaming service as the pricing offer depends on the usage of the platform among consumers and using the subscription pricing ensures a higher client retention rate as compared to other competitors in the market. 
• Financial Metrics and Cost-Leadership: To secure a market position, the business Netflix is known to use financial metrics and with the usage of a generic cost leadership strategy, it manages to stay competitive and selectable among consumers (Challa and Jena, 2024). This also justifies the adaptation of the cost-leadership pricing model to provide consumers with a subscription-based streaming service which is affordable and enables the organisation to maintain its profit margin while gaining competitive advantages.

In this way, the exploration of the strategic objectives of Netflix represents the context of its digital service offering related to subscription-based streaming services. 

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3. Overall responsibility for designing, developing and improving (the ownership) the selected product/service

The overall responsibility of designing, developing and improving the quality and offering of the subscription-based streaming service entails Reed Hastings who is the founder and executive chairman of Netflix. The approach of the business leader operating with other executives ensures designing, developing and improving the streaming service and the subscription package of Netflix in the competitive market. 

• Designing

The approach to designing the subscription-based streaming service starts with the attribute of gathering consumers’ information, needs and expectations by performing market analysis. Evidence-based knowledge justifies that to achieve constant revenue from subscription fees, Netflix ensures the acquisition of new consumers as well as the retention of its existing consumers (Kübler et al., 2021). This also justifies the design of the subscription-based streaming service according to a selected niche, determined Unique Selling Point, selected monetization strategy, selecting transaction platform and application and also by understanding the kind of quality and affordability the consumers in the market are asking for (Netflix.com, 2024). 

• Developing

Evidence-based knowledge justifies the factor that with the adaptation of disruptive technologies like Big Data and Artificial Intelligence, Netflix has ensured the establishment of its software infrastructure (Verganti et al., 2020). The usage of the technology with the collection and evaluation of consumer data has ensured personalising the user experience and design experience of the subscription-based streaming digital service (Netflix.com, 2024). This also justifies the development of the streaming service which is powered with innovation and technology where the subscription plan is tailored for different segments of consumers according to their demographics and socio-economic status. 

• Improving 

The approach of ensuring continuous improvement of the subscription-based streaming service of Netflix ensures focusing towards maintaining the quality of its streaming algorithm. However, the organisation to gain new customers and retain the existing ones has failed to offer its free trial service and the purpose of capitalising on its merchandise (Kim et al., 2022). Thus, in the situation of achieving improvement, the organisation requires effective feature changes in its subscription-based streaming service segment. 

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4. The key attributes of the chosen product and its main competitors in the current market

The key attributes related to the subscription-based streaming service of Netflix indicate content quality and variety, safety and privacy, predictable revenue stream, membership models, and curation model. Here, the key attributes of Netflix and its main competitors in the current market have been discussed.

Content quality and variety are established under the subscription-based streaming service according to the quality and diversity of content where consumers can watch different global shows within a particular platform (Ying et al., 2023). On the other hand, the safety and privacy of users’ information are essentially maintained with mindfulness of privacy policies. With the approach of gaining yearly payments upfront, Netflix achieves the ability to predict its financial condition under a predictable revenue stream (Huang et al., 2021). The curation model ensures offering recommended knowledge on the upcoming TV series, web series and movies in the platform which keeps the consumers connected to the streaming service and subscription monthly or yearly. 

The main competitors of Netflix in the current market are possible to evaluate with the application of Porter’s five force model here.

Competitive Rivalry	Threats of New Entrants	The bargaining power of suppliers	The bargaining power of consumers	Threats of substitute
This is a strong force based on the global presence of Netflix and its competitors like Amazon Prime, Hulu, HBO, Disney+ and many other region-based streaming service platforms.	This is also a strong force because of the possibility for new streaming service organisations to establish their subscription strategy as highly affordable for consumers (Kumar et al., 2020).	The strong force of limited suppliers in the market makes it challenging for Netflix to maintain its connection with suppliers as there are other competitors with a dominating effect over the organisation.	This is also a strong factor for consumers due to their power in changing their streaming service provider where they are achieving an affordable subscription package (Kübler et al., 2021).	This can be a moderate factor based on the purpose of many online organisation that provides free access to consumers to websites where they can watch TV series, movies and web series without any subscription.

5. Current issues in managing this chosen product within existing macro and micro environments and associated risks

Macro Environment Issues

Technological Advancements The company has been consistently developing new technologies to stay in line with the modern approach that entails consumers wanting to watch quality movies through streaming. By 2024, the mobile industry will have an estimated 1 billion 5G users around the world (Kalem et al., 2021). It aims to provide 9 billion subscriptions by 2025 and advanced streaming but at the same time requires the company investments from Netflix to upgrade its infrastructure.

Regulatory and Legal Challenges Having a presence in over 190 countries, Netflix has to deal with numerous regulatory systems and successive legal regimes. Punitive measures of the GDPR: the European Union’s General Data Protection Regulation 2018 has proved to be a success as GDPR fines have exceeded €1 billion in the year 2023 across multiple companies (Solove and Schwartz, 2023).

Economic Factors For instance, economic environments shape the subscriber numbers and retention of Netflix around the world. At the moment of 2023, the world’s inflation rates have increased and the IMF claimed that a global inflation level as high as 8 per cent has been achieved (Saliu and Memaj, 2023). It puts economic pressure on the consumers and thus leads to a reduction of disposable income and the presence of the additional criterion of price elasticity for the cessation of subscriptions.

Cultural and Social Trends The increasing heterogeneity in cultural demographics demands a dynamic content-creation model by Netflix. There is no denying that Netflix has emerged as one of the media companies focused on the international audience: in 2023 it is claimed that account for more than 60% of the company’s subscribers are from countries other than the US (Zhang et al., 2023). The model of shooting local series and spreading them to the world turned out to be successful: for example, Netflix is ​​investing in the series “Money Heist” from Spain and “Sacred Games” from India.

Micro Environment Issues

Figure 1: Examining Factors Influencing Early Paid Over-The-Top Video Streaming Market Growth

(Source: Lee et al., 2020)

High Content Costs Netflix content spending in 2023 reached over seventeen billion in comparison to attracting and retaining subscribers with original series or cinema films that require creation. High production costs and its struggles with gaining content rights further cripple financial resources. Investments in original shows like ”Stranger Things” or ”The Crown” can help generate high profits but losses can also be large as well (Kim, 2022). For example, the series “Jupiter’s Legacy” with $200 million invested received just one season of broadcast due to high costs of content.

Subscriber Retention and Acquisition One of these challenges is the ability to maintain and attract subscribers amidst a highly competitive and already saturated market. At the start of 2024, Netflix has around 230 million subscribers and just like millions of others, people are probably overwhelmed with the clutter of content choices and all those diverse streaming services such as Disney+ and Amazon Prime Video (Rohmann, 2020). The retention rate for streaming services was reported to be at about 37% in 2023; this was because it was very difficult to hold onto subscribers.

Data Privacy and Security In 2023, the global average cost of a data breach was at 4. 24 million dollars. Stolen credit card numbers can sell for tens of thousands of dollars on the black market according to IBM’s “Cost of a Data Breach Report (Jarvis, 2022).” Compliance with data protection laws such as GDPR and CCPA plays a critical role in breast protection. The loss of user information can threaten the competitiveness of Netflix and have serious legal and financial consequences. Security policies and technologies that can be used to encrypt data should also be bolstered to increase the level of security for the users.

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Associated Risks

Market Saturation

Research also shows that the streaming market in developed regions such as Europe is almost at full capacity. In 2023, there is a huge level of penetration in the North American and Western European states with the rate of over 85% of households subscribing to one or more streaming services (Lotz and Eklund, 2024). This saturation makes it difficult for advertisers to get new subscribers. Netflix has taken steps to offset this including entering new markets in Asia as well as Africa with improved digital admittance increasing subscriber prospects.

Content Production Risks

Big-budget investment in unique programs also has several risks. Recently, adaptations like “The Witcher” have shown they could lead to millions in new subscribers, while their misfires destroyed financials (Kim, 2022). This risk is compounded by the fact that audiences will react in varying ways. The success of the platform was proven in 2023 when Netflix ceased supporting expensive series that were not in demand and were unsuccessful, such as “Cowboy Bebop,” which reflects the cost of content development.

Regulatory Compliance

 Failure to adhere to such laws can result in serious problems. Complaining about the lack of control over content Netflix had to comply with new Indian regulations that were introduced in 2022 and mandated stricter requirements for IT platforms (Kudeshia and Jain, 2022). Failure to adhere to these terms will attract penalties, removal of content or even restricted access which will have direct and negative consequences on their revenue.

6. Evaluation of its current position within its product life cycle and its market

Product Life Cycle Stage

The 4 models of PLC’s Netflix are in the maturity stage, this stage is defined by high market coverage and brand recognition in addition to a large number of contented customers. Netflix is currently in operation in early 2024 with over 230 million subscribers worldwide and this can only imply that almost every market is adequately covered (Guadiana, 2020). Nonetheless, the growth rate has been to be less compared to in the past due to market and competition.

Market Position

Figure 2: International Brands Rise to the top of the Indian streaming market

(Source: Buchholz and Richter, 2024)

Market Leadership: Netflix shows no sign of slowing down in its race to the top of the streaming industry. They may stiff competition from the likes of Disney+ 162 million subscribers and Amazon Prime Video but with an enormous content library and a constant drive to better themselves they are still the market leaders (McDonnell, 2022). Netflix has also been heavily relying on original content such as ‘Stranger Things’ and ‘The Crown’ to maintain its customer base.

Competitive Edge: Netflix’s competitive advantage is based on a huge library, and it offers special exclusive content and advanced algorithms for personalisation and ease of use (Frey, 2021). The feature allows it to push content to a user based on the all-important algorithms ensuring the user engages with the platform more often and longer.

Challenges and Opportunities: However, as with any company, Netflix has its fair share of weaknesses like high production costs, and lack of laws in various countries. The company also invested over $17 billion in 2023 for content acquisition implying the cost associated with this strategy in terms of providing diverse and attractive content to its consumers (Gao et al., 2023). Furthermore, India and the European Union are some of the most important consumers of medical cannabis, forcing companies to embrace compliance with changes in the regulation of these markets.

Potential for further expansion also exists in various markets, particularly the markets that are yet to be explored like the Asia and Africa Markets due to the advances they are making in terms of improving the Digital Infrastructure and scaling their Coverage even as Internet penetration rates continue to rise. Netflix should use strategic pricing designed to focus on these markets and also localized production in these markets.

7. Conclusion

It can be concluded from a marketing assessment from the overall establishment of the report that the subscription-based streaming service of Netflix is essentially aligned with its strategic objectives and the executives and leaders are responsible for its design, development and improvements. On the contrary, the key attributes regarding quality, safety, privacy, and revenue stream, Netflix also has established a variety of competitors with a unique competitive edge in the entertainment mass media industry. However, it can also be concluded here that with the uncertain macro and microenvironment of the organisation where there are potential challenges regarding the safety and privacy of users, high-cost content, market saturation and regulatory compliances, recommending changing the feature and process of the digital service is highly essential here.

8. Recommendation

Recommended measures which are essential to achieve by Netflix to deal with the changing situation of the competitive market, the key feature and process of the subscription-based streaming service needs to be improved. 

• The first recommended action indicates the approach of improving its security policies and technology to ensure that consumers are subscribing to the streaming service without the challenge of security vulnerability and data theft.
• To achieve a better consumer base, exploration of different markets in Asia and Africa is essential. Here, Netflix will ensure adapting an affordable or penetration pricing strategy to enter the market with its high-quality content offerings at a low price. 
• Establishing content which meets the demand and expectations of consumers while ensuring the creation of the content in an affordable manner, also needs improvement in the subscription streaming model for Netflix.
• The necessity of complying with different region-based regulations and ensuring change in the subscription model by aligning the number and diverse types of TV and web series based on the subscription packages differently, this feature can also enable Netflix to enter into new market segments without any barriers.

Each of these factors is essentially recommending the approach of changing the feature of the subscription-based streaming service that Netflix can acquire effectively in its business.

Reference List

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