Netflix is an American publicly traded company primarily engaged in Internet and subscription-based streaming media, Internet television distribution, and video content production. The company is headquartered in Los Gatos, California and has several regional offices in Latin America, Europe, South Asia, East Asia and Southeast Asia, as well as subsidiaries in the UK and Singapore.
The broad adoption of the Internet in the mid-2000s and the massive improvement in Internet bandwidth and speed forced Netflix to explore the idea of offering video streaming services. The idea was inspired by the growing popularity of YouTube. In addition, DVDs and other storage media have become less popular due to advances in technology associated with the Internet.
Today, the company has over 120 million paid subscribers in over 190 countries. Of course, it competes with other streaming service providers such as YouTube and Amazon, TV network and Hollywood producer streaming services such as HBO and Fox Entertainment, and other similar competitors such as HOOQ and iFlix, among others. Understanding Netflix’s success and how it competes with other similar businesses requires understanding the key elements of its business strategy.
Internationalization and localization strategy
Netflix is available in over 190 countries. It is able to reach a global target audience on the Internet through the use of servers strategically located in different regions of the world. It is worth noting that Netflix is using the Amazon Web Services cloud computing platform for more cost-effective and public large-scale computing power. With cloud computing, a company can scale, deliver services globally, and mitigate the risks associated with network outages and traffic bandwidth.
The company’s headquarters is located in California. However, to maintain a global presence and better manage global operations, the company maintains offices and subsidiaries in countries such as the Netherlands, Germany, Luxembourg, Brazil, India, Japan, South Korea and Singapore.
Working on a global scale means dealing with a diverse target audience with different preferences. To address this issue, Netflix also used a localization strategy as part of its business strategy. The company has received licenses to distribute content not only from Hollywood producers, but also from regional producers.
Diversification strategy through content production
Netflix is primarily a video-on-demand streaming service provider. This video content includes television series, films, animations, and documentaries produced in the United States as well as other countries such as the United Kingdom, France, Germany, India, Japan, and Korea. However, the company diversified the business to include numerous subsidiaries.
The company owns and operates three content production companies: US-based Netflix Studios, German-based Netflix Services Germany GmbH, and Singapore-based Netflix Pte. Ltd. These subsidiaries are production studios that produce original television shows and films. Some of the films and TV series that are exclusive within the company have earned critical acclaim and positive response from the audience. Exclusive and original content allows the company to attract and retain subscribers.
Marketing strategy and activities
A critical component of Netflix’s business strategy is its marketing strategy and specific marketing activities. It is interesting to note that the company’s marketing strategy is relatively simple.
Because it is an online business that follows the general principles of e-commerce, Netflix makes extensive use of various forms of digital marketing. For example, a company maintains a social media presence using Facebook, Twitter, and YouTube to keep in touch with social media users. In addition, it also uses online advertising, such as social media advertising, websites and blogs, search engines, and mobile apps, to promote its streaming services and content.
Advertising strategies are also an important part of Netflix’s overall marketing strategy. The company offers a one-month trial period as a special promotion tactic to encourage new customers to sign up. It also partners with telecom service providers and conventional ISPs to offer free or discounted subscriptions to new or existing customers while tapping into these providers’ existing customer base and converting them into subscribers.
Netflix’s pricing strategy is very flexible. It offers three price options. The base price includes a single-user subscription with a standard definition streaming service, while the mid-range or standard option includes up to two users and high-definition dual streaming. The highest quality and most expensive option or premium plan includes four users who can watch ultra high definition streaming at the same time. These pricing options allow Netflix to target different customers with different financial capabilities and streaming needs.
Technology strategy and capacity building
The fact that Netflix is an online business using the general principles or structure of e-commerce means that it is dependent on technologies related to the Internet and digital communications.
To reach its global target audience and support regional markets, the company decided to use cloud computing or virtualization. Cloud computing gives Netflix several benefits, including cost and operational efficiency, by not having to build and maintain a physical network and server infrastructure, global scalability, and a workaround for network outages and power outages.
Netflix is also involved in software development. The company has developed and released web and native applications for multiple computing platforms, such as a version for Microsoft Windows and Apple macOS operating systems, as well as Android and iOS mobile operating systems. The company regularly updates its applications to introduce new features and improve the user experience, allowing users to access services regardless of the platform they use.
Also part of Netflix’s business strategy are anti-piracy initiatives. The company works with other manufacturers and technology companies to fight piracy and protect content rights. They have special programs to scan and report content that has been illegally distributed on the Internet. Applications have built-in digital rights management systems aimed at preventing illegal copying and distribution.
The company also uses machine learning to improve the quality of streaming, especially with a sophisticated algorithm and statistical analysis to test network bandwidth. The company has a dedicated department called Netflix Research that aims to harness the power of machine learning for a variety of business purposes.
