I chose the industry of video streaming and specifically Netflix since they have

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I chose the industry of video streaming and specifically Netflix since they have been in the news quite frequently lately with several changes coming to the streaming industry in the last few years and even more so in the future. I believe that the key drivers of the industry and Netflix are the same and I believe that all five play some part but three that are key are rivalry amongst competitors first and then directly to and new entrants (which in part are very intertwined due to who one of the new entrants will be) and lastly the bargaining power of buyers.

The rivalry aspect is at the top because Netflix and its rivals are all fairly cheap for a monthly subscription and all offer very similar products with more and more programs being created “in-house” versus purchasing (or renting them) them from television networks or movie companies. Netflix’s direct competitors currently are Amazon and Hulu (Investopedia, 2016) but it also has to compete with some companies that are networks with streaming content, like CBS and Fox, some pay cable companies like HBO and one huge new entrant that will be part of the rivalry (and a new entrant) as Disney is starting its own streaming site in 2019. Disney will also pull all of current movies and shows from Netflix in 2018 prior to their site opening which will make it a big player and direct competitor to Netflix (Castillo, 2017). All of these rivalries mean that Netflix has to constantly purchase, rent or create programming that consumers want more than that of its competitors (Investopedia, 2016). The rivalry is affecting the industry in a good way for the consumers due to the price comparisons as mentioned above, with Netflix actually having one of the more expensive monthly fees of $7.99 or $9.99 based on Standard or High Definition and currently Amazon is priced at $99 a year, but that also includes free two-day shipping on their site (Investopedia, 2016). Another part of the rivalry is that Netflix and its direct competitors are becoming more and more involved in creating their own shows instead of being completely reliant on its suppliers (movie companies and television networks) which show how intertwined these five forces can actually be. Not only does it save money in the long run do to have the rights to its own programs, but those rights never leave and the shows can also be shown in any country that Netflix operates in without paying more money to its suppliers (Barrett, 2016). The streaming companies (Netflix, Amazon and Hulu) have also been winning more and more Emmys each year since they starting airing original programming, actually winning 32 Emmys in 2017 and HBO only won 29 (Molla, 2017). The companies in the industry do not seem to be in any huge price war as their prices have been set for some time so a price war for the most part has been averted and that is also based on the fact that they are competing more on the unique content that each one offers (Strategic Management, 2014).   

New entrants to the industry are also another key driver of competition but doesn’t seem to affect Netflix too much as most are different types of services. One being advertising based (actually watching commercials to be able to view shows like Sony’s “Crackle” service, or the “Shudder” service that is strictly horror movies or shows (Willcox, 2017). The new entrant that has not even entered the industry but will in 2019, will be a huge hit to Netflix and that is Disney starting its own streaming service. Just the announcement alone that they will be competing with Netflix directly (and as mentioned above, pulling all of Disney’s content from Netflix by the end of 2018, which includes Marvel and Pixar) caused Netflix’s stock price to drop 5% (Castillo, 2017).

Could someone help me with a reply to my classmate response to the discussion post. They pick Netflx

Here is the topic:Select ONE of the industries below and identify a specific company in that industry and identify the key drivers of competition for that industry and specifically for the selected company. Explain how those external competitive forces are affecting the industry and company and the effect of those forces on the overall strategic planning processes uniquely for that company and generally for that industry. Offer supporting rationale for your explanation and be sure to reference your statements using proper APA formatting.

he bargaining power of buyers is important in this industry and for Netflix because of both the competition and new entrants giving the buyers a big selection to choose from. Buyers have a big say in what company they choose and with prices being very similar for each of the main services (within $5-$10 dollars a month) it is coming down to content on the site and Netflix has upped its investments for original content by spending $6 billion dollars in 2017 and looking at spending nearly $8 billion this year show that Netflix wants to continue to be the leader in streaming services (Gurdus, 2018). The one downside to this and what gives the buyers the advantage is one, the cost with Netflix and other services are pretty minimal so buyers can use more than one service or switch back and forth if they want to as it is a monthly fee for the service, and there is no contact required which drives Netflix to continue to be at the forefront of this industry if they want to stay ahead (Investopedia, 2016).

Explanation / Answer

To say Amazon, Hulu, HBO and other movie/tv show bradcasting companies are Netflix's competition is a very narrow view. If video streaming companies were to simply look at each other as competition it would create marketing myopia.Video streaming companies are in the business of entertainment. Therefore, every form of digital entertainment is a potential competition. In other words, any form of entertainment that keeps a person from watching netflix is its competition, for e.g. ESPN. This makes the market size much bigger than what is being considered. In some markets potential competition has already identified this and are able to charge a premium for the services. An example would be Hotstar in India. Hotstar is the video streaming service from STAR entertainment and is giving stiff competition to Amazon and Netflix. STAR leveraged it's rich portfolio of entertainment channels - TV soaps, Sports,etc and clubbed it with rented entertainment like movies, popular TV series, etc. Now when a Netflix customer wants to watch football, she/he will switch to TV or some other website but a Hotstar customer watches sports, movies, Tv shows all using the same website. This is allowing Hotstar to also charge a premium over Netflix and Amazon Subscription.

To remain as the undisputed leader in the market Netflix has to keep on innovating and reducing dependincies on production houses outside of the company by releasing more and more high quality in-house content . This is a market with very switching cost for customers. Hence, as soon as somebody else comes up with a better value proposition, the customer will switch. The scenario is has both positives and negatives for global players like Netflix and Amazon. As a positive the global players have better negotiating power in terms of leasing content, they can do cross-pollination i.e. use learnings from local players and apply it to other markets where the idea is yet to be used.
On the flip side the local players have a better understanding of the taste of their customers. Especially when it comes to entertainment in vernacular languages. What is considered box-office hit in the US may not be so popular in a country like Bangladesh. Other players are slowly starting to figure out the netflix business model and may team up against netflix. For e.g. Disney plans to pull out its content from netflix by 2018 end but may have a different approach when it comes to a local player in a market which it is not targetting. This will again push Netflix and Amazon to concentrate even more on in-house production. But in-house production involves huge capital expenditure. For its recovery it is essential that the content is liked by customers. The market is in a flux and the winner would be the one with least external dependencies.

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