Competitors
What differs Netflix from relevant competitors?
Nowadays there are hundreds of different streaming platforms for movies, TV-shows, and series. Netflix is one of the biggest with members in over 190 countries worldwide. But who are the competitors and how does Netflix differ from them? This section focuses on the number of users, annual revenue, and awareness level the main competitors of Netflix are Amazon Prime Video and Hulu relatively cultivated. There are a few rising companies like YouTube with YouTube Red, but at the moment the three mentioned streaming platforms dominate the market.
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Revenue:
Comparing to recent statistics Netflix, Amazon and Hulu show big differences in their annual revenues over the last years. Hulu takes the third place with a total revenue of $2.0 billion U.S. dollar in 2016 (Hulu, 2017). Second place goes to Amazon with $6.4 billion U.S. dollar. This number counts the sales from “retail subscription services”. It is a new category in the annual report which includes revenue from all Amazon subscription services, such as Prime, music, digital video, e-book and audiobook services (Kim, 2017). It is not possible to differ which amount of revenue belongs to the digital video section itself so it could be that Hulu is more successful as a streaming platform. Undoubtedly, Netflix achieved the most profit with $8.83 billion U.S. dollar in 2016 which is $2.1 billion U.S. Dollar higher than the revenue in 2015 (Netflix,2017).
Users:
The annual revenue is not the only factor that decides which is the most successful streaming platform for movies and series nowadays, also the number of users and members is crucial. The users are very important for the revenue of a company, but they also show the awareness level of the streaming platform and which company convinces the target audience best with their content. The number of users also accounts for this revenue comparison, where Hulu has the least with only 67 million in the United States in 2016 (eMarketer, 2017). This number is smaller compared to Amazon and Netflix’s but still represents 20% of the total population in the United States (IMF, 2017). Amazon takes second place with 73.2 million users in the U.S. in 2016. Netflix leads the ranking by far with 120 million (eMarketer, 2017). This is almost the sum of Amazon’s and Hulu’s numbers and demonstrates the power of Netflix in the streaming market.
Originals:
In the last years, it has been established that not only production companies like Warner Bros. Studios, 21st Century Fox or Lions Gate Entertainment produce movies and series. Amazon, Hulu, and Netflix started to create their own content in 2014 to focus on the user preferences and offer them additional benefits for using their network. The “Originals”, self-produced content, are extraordinary because you can only watch this type of movies and series on the particular streaming platform. This gives the users of Amazon and Netflix an advantage adverse to them. The effort of this user-generated content compared to Amazon and Netflix is on the same level with a percentage of thirty-one and thirty-two for the customers who watch the original content most often in the United States in 2016 (451 Research, 2017). it equals one-third of the thousands of movies and series the streaming platforms offer to their user. It shows that “Originals” create a big advantage compared to other streaming platforms.
Pricing Model:
Why Netflix uses AWS:
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In August 2008, Netflix began to use Amazon Web Services (AWS) as their cloud provider. In January 2016, the cloud migration was completed and Netflix could operate in its entirety. It had several advantages to use the AWS. Firstly, Netflix was able to increase eight times their number of streaming members with overall viewing growing by three orders of magnitude in these eight years. Secondly, the elasticity of the cloud allowed for thousands of virtual servers and data storage to be added, which couldn’t be handled with their own servers otherwise. Thirdly, AWS allowed Netflix to increase their service availability to repair failures in the cloud infrastructure and within their own systems. Hence it would have no impact on the customer experience (Izrailevsky, 2016).
As a result of this, the use of the Amazon Web Service has several technical advantages for Netflix, but it could also have disadvantages to put the trust and the whole system in the hands of their biggest competitor. In February 2017, the AWS went down unexpectedly, which caused many websites like Netflix to be inaccessible to the customers for four hours (Weise, 2017). If a failure like this happens more often, it can cause damage to the customer experience of Netflix users, and eventually the revenue of the streaming platform. Another disadvantage for the use of the Amazon Web Service could be that Netflix gives Amazon all their information and data they use. Hence Amazon could use this knowledge and improve their own streaming platform to create a better customer experience and gain more awareness level.