Strategy and Organizational Structure

What potential risks and obstacles are there that can hinder Netflix’s future success and how can it avoid them?

This article is relatively dated, and Netflix has been in the news quite a bit regarding the reduction in revenues and loss of market share. This last quarter is the first time that Netflix has ever lost subscribers. With more competitors emerging into the streaming space, saturation is occurring. Consumers are rethinking which media subscription services they genuinely want and are not just default selecting Netflix because it is the only option. Much as Louis Brennan’s article discussed Netflix’s three-stage expansion process, I would like to share the fourth stage to ensure viability in the market. Reduce content.

This might seem counterintuitive in 2022, as “content is king.” However, Netflix has so much content that people do not even know exists, yet, they are still producing volumes of new media. Netflix can stretch out its content so every piece of media they create, or purchase the rights to stream, can be seen by its viewers. No one can watch all the content on Netflix- there are not enough hours in the year. Slowing down and stretching out the content will allow Netflix to adapt to the increased competition and decrease in viewership. By reducing expenditures, they can be more profitable. The goal of this next stage should be to find that equilibrium of what is enough content that will still keep current subscribers engaged with the platform.

I have an additional thought. Disney+ offered their streaming service for an introductory rate of $6.99/month because it is one of many revenue channels for the organization. And by increasing the users on the Disney+ platform, you are feeding customers into the ecosystem of spending money on those other Disney revenue streams- parks and merchandise. Netflix needs to create more revenue streams. Beyond a few Squid Game Halloween costumes in 2021, we haven’t seen much merchandising. I believe this is a crucial growth opportunity Netflix must explore with its original programming.

What has been the key to Netflix success in international expansion so far?

In 2018, Netflix’s international success could be attributed to a three-stage expansion process. The first stage was to select which global markets to enter. They would look to move into markets similar to the U.S., so Canada was an easy choice. After learning from successes and failures, they ramped up the speed of their expansion and extended their footprint into 50 countries. They continued to expand into similar international markets. In the third phase, they accelerated into 190 countries in an accelerated manner. The point of this was to gather insights before attempting to enter the most challenging markets. Netflix could perform these rapid expansions through the emergence of translation technology and by adding voice-dubbing to new markets so that language wasn’t a hurdle to viewership.

Lastly, Netflix worked with and responded to the needs and wants of the markets they were entering. Whether adding Netflix buttons on remotes or being sensitive to the social and political conditions of new markets, Netflix mitigated much of the risks of exponential globalization by implementing these thoughtful strategies.