Netflix, Inc. (Netflix) was founded by Reed Hastings and Marc Randolph in Scotts Valley, California, on August 29, 1997. Initially, it sold and rented DVDs, but abandoned the selling a year later to focus on DVD rental by mail and later expanding to Blu-ray rental. Netflix was to introduce streaming media in 2007 (Krengel, Dudek, Momboisse, Paik, & Martin, 2010).
Netflix was then to expand its operation internationally starting with Canada in 2010. It is now available in over 190 countries, with its headquarters being in Los Gatos, California (Kelion, 2016). It has since expanded its operations to include online distribution as well as film and television production, with the latter commencing in 2013. Its debut production was the series “House of Cards”. It has become the largest film and television producer, producing about 126 original series and film in 2016. It now has an online library of film and TV productions that include the “Netflix Original” content. At the start of 2017, it had a subscriber base of 93 million, with nearly 50 million of the customers being in the United States (Netflix, 2017). Notably, a subscriber could be a family or a school, hence catering for more than one person. The company had user interface and customer support in 18 languages as of March 2017.
The following is a customer analysis of Netflix with focus on customer characteristics, market segments and industry trends.
Netflix Customer Characteristics
Netflix is able to cater for customers from all economic groups, from cheap rentals to sale of new Hollywood releases (Masters, 2016). This is because of the increasing ubiquitous nature and low cost of internet for diverse populations. Netflix utilizes this media such that it does not require any storefront to cater for its customers, greatly reducing its distribution costs and passing on the benefits to the customer. In so doing, customers for all economic demographic groups are able to afford Netflix products.
Traditional film libraries had long line ups and due dates. This is unlike the modern movie libraries offered to customers by such companies as Netflix and Blockbuster. Apart from streaming their rented or bought films and series immediately and keeping them for as long as they can, Netflix customers can also easily search and queue their favorite rentals through algorithms inbuilt in the search engine and automatic movie recommendation engine (Krengel, et al., 2010).
Moreover, Netflix caters for the traditional home entertainment customer through mail delivery service. This ensures that the customers are derived from all age groups, rather than from the younger, technologically-savvy group only.
Netflix Market segment
Netflix’s market can be segmented to convenience and needy customers. Technological disruption has made the home entertainment consumer spoilt for choice; with film, television and music being available at the consumer’s convenience. This customer is able to rent or buy and consume such entertainment anywhere, anytime and on any device. Apart from the convenience customer, Netflix also targets the needy customer who cannot easily adapt to technology. The needy customer mostly depends on catalog sales and is typically older than the convenience customer. In addressing the needs of both the convenience and needy customers, Netflix is able to target markets in a wide age group from the young to senior citizens (Krengel, et al., 2010). The following table is a representation of Netflix market segments.
Adapts easily to technology. Has access to online sales and rentals as well as video-on-demand television through various devices.
Over 45 years
Does not adapt easily to technology. Does not have access to speedy internet. Depends on mail-delivery service of physical discs for home entertainment.
Table 1: Netflix market segment
Because of technological convergence and changing demographics, the physical rental or sale disc customer is gradually shifting to online rental. Broadband connected computers, set-top boxes and game consoles means streaming of the content is easier, interactive and readily available (Masters, 2016). This trend of switching to online rental from physical rental was initially detected at Netflix in the first quarter of 2011 when DVD and Blu-Ray sales and rentals dropped by 35% and packaged discs dropping by 20%, while subscriptions of online rentals increased in the same period.
Success of Netflix has been a catalyst for entry into the online film and television rental business. This include by such companies as Walmart via Vudu, Blockbuster and Amazon Video.
Netflix pioneered film and rental online distribution before venturing into film and series production. It has captured a majority of the home entertainment market through pricing, original content and convenience. Though many competitors have since entered the market to offer similar or slightly varying products, Netflix remains the dominant player in the marketplace (Masters, 2016).