External Analysis of Netflix Company

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Table of Contents

  • Political-legal Forces
  • Technological factors
  • Social factors
  • Competitive Forces

Netflix is a US company that offers, mainly, a service Video on demand available in more than 190 countries. Your income model is based on the subscription with monthly flat rate through which you have access to audiovisual content (movies, series and documentaries) in a way unlimited. Subscribers can instantly see an audiovisual title from any device with a screen that is connected to the internet. The content digital multimedia reaches users through streaming, that is, the file of video and audio is not downloaded or stored, it is visualized as It is transmitted.The company has 3 segments: national streaming, international streaming and, available only in the United States, DVD movie rental by mail Ordinary. This work focuses on the streaming service. In 2002 the company had 1 million subscribers, at the end of 2015 it had with almost 75 million subscribers. Netflix began its journey in Spain on October 20, 2015.

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Political-legal Forces

Netflix must adapt to the legal regulation of each country in which it operates so should take into account the legislation of the various governments on networks of cable and wireless and on aspects related to internet referred to 5 operators, websites, platforms, applications, devices … in short, must consider all regulations referring to media that can impact positively or negatively on the economic performance of the company.Economic factorsThe audiovisual sector is also affected by changes in the consumption of users, changes that depend on the disposable income of the consumers. This variable is important because it involves the increase or decrease in the number of subscribers.

Another important economic variable to consider in any company international are the fluctuations of change that affect the different contracts that have an impact on expenses and income.One aspect that also worries Netflix, which directly affects the decision to hire their service, are the cultural differences that exist in the different countries and, specifically, the degree of acceptance of the payment that, for example, in Latin American countries is very low.

Technological factors

The technological development of the internet and the increase in the penetration of broadband favors the use of streaming and therefore increases the use of video on demand services that is increased by the use of devices such as smartphones, tablets, etc.

According to the INE, in 2015 in a survey on equipment and use of technologies of information and communication, 78’7% of Spanish households were connected to the internet and 96’7% had mobile telephony.

Social factors

In Spain, according to a study carried out by Barlovento Comunicación from data of Kantar Media, the spectators spent in 2015 an average of almost 4 hours watching television and 47% of the time spent watching television is performed individually. The online marketing and communication agency 2.0 We Are Social, made a work in 2015 to know the internet penetration around the world and the 6 result was that there are 3.419 million active users who have access to Internet, that means that almost 46% of the world’s population is connected. These figures are similar to those provided by the US Census Bureau, Eurostats.

In another study on the habits of Internet users in relation to the consumption of Internet in mobility, carried out by the Association for Media Research of Communication (AIMC), it is reflected that users consume an average of 3h and 85 minutes on the internet for non-professional topics, of which 93% of the respondents used it to watch television online and offline.

Competitive Forces

The rivalry between competitors is high. A study conducted in the USA by Nielsen noted that 36% of American households have hired Netflix while only 13% is with Amazon Prime and 6’5% are subscribed to Hulu. The study pointed out that the video on demand market was 90% controlled by Netflix. The possibility that there are new competitors in the services sector Video on demand is medium-low since it requires a large investment to start and acquire content.

Although Netflix is a well established company that allows you to negotiate long-term contracts with producers and distributors should not rule out the entry of new competitors that can be associated with other companies.

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