Netflix and the Industry

Netflix provides a streaming and mailing service of dvds in the movie rental industry. They have a large target market and also a number of competitors including: Comcast On Demand, Direct TV, Apple TV, and Blockbuster to name a few. A lot of commonalities between these companies are that they are able to stream and rent movies online. There is a low product differentiation between these companies because they all basically offer the same service. We are in the digital age where everyone is online, which explains why the streaming media market is expected to grow 135% in the next 5 years. This is a huge opportunity for Netflix and other companies to gain substantial revenue.
Through analyzing Porter’s Five Forces we were able to see that the threat of new entrants was very low. This was mainly due to the high start up cost and high competition between the big companies in the industry. The bargaining power of suppliers is very high due to the fact that movie studios are producing the product that consumers want to see. Netflix acts as a middleman between the movie studios and consumers. This results in movie studios having the power to pick the price and who they want to sell to. The bargaining power of buyers is average being that there are a limited number of distributors. The threat of substitute products is high due to illegal downloads and sites where you can stream movies and shows for free. This can become a big problem for Netflix in the future. The rivalry among competing firms is high and forces companies to be innovative and fast. They need to keep their movie and show selections current and be the first to bring new titles to market. This can be costly but it is necessary for companies to survive in this industry.
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