The coronavirus outbreak has caused major problems for most businesses and industries, and has been disastrous for the majority of the world, but one business stands to benefit heavily from stay-at-home orders: Netflix.
Netflix is an online streaming service that allows its members to watch unlimited entertainment (TV shows, movies, documentaries and etc) online at a low price. In this day and age, Netflix has quickly become a household name and is often used as a means to connect with other people including family, spouses and friends. As of now, Netflix has about 190 million paid subscriptions leading to a revenue of more than $20 billion – majority of which is used to fund costs for production of original Netflix content.
Netflix reportedly gained 16 million new users in the first quarter of 2020 breaking the previous record of new users set in the first quarter of 2019 (9.6 million). This significant upsurge in new subscribers is associated with lockdown enforcement in most nations around the world. The lockdown due to COVID-19 has meant that most people including much of the youth, who are unable to attend school or university, are staying at home.
To keep themselves occupied, people are opting to view more online content whether it be social media apps or streaming services like Netflix. The crucial factor in increasing new user registrations has been the youth staying at home. Most states have closed schools and universities to curtail the spread of SARS-CoV-2 which has meant the most active age group (18-34) of Netflix is spending most of their time at home – nearly 45% of all Netflix users lie in this age bracket. In addition to this, many movies set to release this year have had to cancel their theatrical runs or cut them short and have instead been rushed to online services like Netflix. This has given Netflix access and rights to new movies and comic movies that no other streaming services can stream – a temporary competitive advantage.
Although the COVID-19 crisis has substantially increased Netflix’s subscriber base, the outbreak has caused several issues for Netflix. Firstly, production of new content has come to a standstill due to safety reasons with some of the content being produced by Netflix themselves. Upcoming seasons of popular shows such as Lucifer, The Witcher and Stranger Things have been postponed – all shows are original Netflix shows.
Furthermore, due to increased internet traffic leading to lower speeds and increased strain on internet service providers, Netflix has had to reduce its content video quality in order to facilitate a reduction of internet traffic. To make matters worse, declining global currencies has meant that subscription fees outside of US are now worth less giving rise to lower expected revenues. Regardless of these concerns, Netflix’s share price has soared as investor confidence in the company has grew owing to its ability to outcompete other online streaming services.
Netflix had a head start over its competitors when it comes to the online streaming industry. Very few companies besides Netflix realised the potential of online streaming until it was too late for them to enter the market and those that have opted to enter the market late (Disney, Amazon, Hulu) have found it difficult to outcompete Netflix’s brand.
Although Disney Plus (Disney’s online streaming service) and Amazon Prime (Amazon’s online streaming service) have also gained significant amounts of new subscribers, they have not been as successful as Netflix. Besides Netflix’s more recognisable brand (thanks to successful marketing campaigns such as the ‘Netflix and Chill’ campaign), Netflix is ahead of its competitors when it comes to both original and acquired content. The newly released original docuseries Tiger King has been viewed by more than 65 million accounts over the past month, while other original shows like Mindhunter have gained plenty of popularity due to high production value.
Additionally, Netflix has created original content catering to international audiences allowing it to dominate the international market. Spanish TV shows Money Heist and Elite have become an integral part of popular culture globally with Money Heist winning an Emmy in 2018 and having a viewership in excess of 80 million, while Elite being viewed by more than 20 million people within its first month of release. German TV shows ‘Dark’ and ‘How to Sell Drugs Online (Fast)’ have also been well received by both audiences and critics. Netflix’s ability to relate more to international audiences and various cultures has allowed it to penetrate the international online streaming markets.
A regular user of Netflix Muhammad Zaid told Crux, “I’ve been using Netflix for 9 months and never once have I thought about switching to another brand. Netflix’s current pricing plans are perfect; they are affordable and cater to different needs of the customer. Besides their excellent prices, their content is of much higher quality and much more diverse than other streaming services. I mean what is the best original Amazon Prime show or movie you have heard of? On the other hand, Disney seems to be simply putting old content on their streaming services which I am not interested in. I’m interested in what’s new and relevant to today’s world and Netflix provides just that through several movies and tv shows like Sacred Games which become trending”.
The COVID-19 outbreak has certainly helped Netflix gain plenty of new users, but now the company must work to retain these customers. Many experts are suggesting that the sudden increase in subscription may be temporary rather than permanent but that is yet to be seen, as many of the new Netflix users may like their services enough to remain loyal to it. However, increasing competition from Hulu, Amazon, Apple and Disney, who have pulled out their original content from Netflix, means that Netflix’s future could very well be uncertain.
Right now, Netflix is banking on their strategy to produce more original content in order to satisfy viewers with roughly $15 billion being spent every year to produce original content. Netflix has taken many loans and continues to take loans to finance the high cost of original content production. Experts have stated that the strategy is risky, but it is the only viable option for Netflix to continue surviving in a highly competitive market. The coronavirus outbreak has given Netflix a big boost but whether they can make the most use of it is something everyone will be keeping an eye on.
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