Business Profile of Netflix Inc
- Company Name: Netflix (NASDAQ: NFLX)
- Industries served: Online streaming
- Headquarters: Los Gatos, California, United States.
- Founder: Reed Hastings and Marc Randolph
- Founded: 29 August, 1997.
- CEO: Reed Hastings
- CFO: Spencer Neumann
- CMO: Bozoma Saint John
- Markets served: Global
- Leading markets: United States, Brazil, United Kingdom and Germany.
- Number of employees: 9,400 (2020)
- Global revenues 2020: $25 Billion
- Net Income 2020: $2.76 billion
- Market capitalization: $176 Billion (Jan 2022).
- Research and development expenses: $1.98 Billion
- Marketing expenses: $2.23 billion
About Netflix Inc
Netflix is the world’s largest online streaming services provider.
The company had 213.5 paid subscribers at the end of the third quarter of 2021.
It has experienced sharp growth in its number of subscribers during recent years .
The popularity of the company has increased sharply, driven by an expanding collection of movies, documentaries and TV shows and superior customer engagement.
Netflix is known as an innovative entertainment brand with an organizational culture centered on innovation.
As a leading tech brand that offers its services across 190 countries, Netflix enjoys very strong popularity which reflects in its fast growing subscriber base.
By the end of the third quarter of 2021, its subscriber base had grown to 213.56 million.
Founded by Reed Hastings and Marc Randolph in 1997, Netflix initially served only the United States market.
The company started its international expansion with Canada in 2010 and by 2017, it was offering its services across 190 countries.
Netflix has its headquarters at Los Gatos, California, United States.
The company provides streaming services across the world with the help of cloud technology (AWS).
Its largest market is the United States, from where it generated $3 billion in the third quarter of 2021 and $9 billion during the first three quarters.
While the company has a large user base from across the globe, it is facing increasing competition from Amazon prime and other online streaming channels like Disney Hotstar, Hulu and YouTube.
It has office locations across the globe to run its global operations.
Business operations and key markets:
Netflix is a global entertainment brand that offers its online streaming services across 190 countries.
It mainly uses AWS (Amazon web services) and Open connect to serve its content worldwide.
The company has its headquarters in California, United States.
Its global growth is also based on its focus on technological innovation, which is a key focus area for the company.
Netflix has created an organizational culture whose focus is innovation and customer orientations.
The company also established regional offices across the globe in leading cities to run its global business operations.
For ease of operations, the company has divided its business operations into four leading geographical segments that include EMEA (Europe, Middle East & Africa), Asia Pacific, UCAN (The United States and Canada), and Latin America.
Here is a list of Netflix office locations around the globe:
Europe, Middle East & Africa:
- Amsterdam, Netherlands
- Berlin, Germany
- London, United Kingdom
- Madrid, Spain
- Paris, France
- Rome, Italy
- Istanbul, Turkey
- Stockholm, Sweden
- Copenhagen, Denmark
- Hsinchu City, Taiwan
- Manila, Philippines
- Mumbai, India
- Seoul, South Korea
- Singapore, Singapore
- Tokyo, Japan
- Bangkok, Thailand
United States and Canada:
- Los Angeles, California
- Los Gatos, California
- New York, New York
- Salt Lake City, Utah
- Washington, DC
- Toronto, Canada
- Alphaville, Brazil
- Mexico City, Mexico
- Buenos Aires, Argentina
- Bogota, Colombia
The largest individual market of Netflix is the United states. However, for the purpose of reporting, the company has grouped the United States and Canada together.
The company invests heavily in producing original content, which is a ley factor that differentiates it from the other brands in the online streaming industry.
For several years, Netflix had kept devoting a large part of its net earnings into the production of original programs.
Products and services:
Netflix offers online streaming services globally across 190 countries.
It is mainly an entertainment brand that offers online streaming services to more than 200 million customers across the globe.
Netflix offers a vast range of movies, TV shows and documentaries in various languages.
One of its key sources of competitive advantage is its focus on creating original movies.
It has created originals in diverse categories including drama, comedy, animation, anime and other categories and in several languages including French, English, Japanese and Mandarin.
It is why its appeal among the global audiences has kept increasing.
Netflix generates substantially all of its revenues from paid memberships.
In the United States, Netflix offers three types of plans that include basic, standard and premium.
The basic plan is priced at $9.99, the standard plan is priced at $15.49 and the premium plan is priced at $19.99.
USers with the basic plan can stream Netflix programs on any one device at a time only.
The standard plan allows users to watch and download on any two devices at a time and the premium plan allows users to watch and download on any four screens at the same time.
Netflix has priced its services competitively to grow its user base faster.
Netflix Customer Segments and distribution channels:
Netflix offers its services to a global customer base.
Users across 190 countries stream Netflix programs online from mobile devices, PCs, laptops, tablets, and televisions.
Internet is the main distribution channel the company uses to distribute its content worldwide to users.
However, Netflix members can also download programs to watch on their devices later.
While Netflix offers content for diverse customer segments from all age groups including as young as seven years old to programs that suit the preferences of youth or older customers.
The largest customer segment Netflix is made up of young customers that belong mainly to the millennial and Gen Z segments.
According to a survey carried out in August 2021, Netflix programs were most popular in the 18 to 44 age group.
Results from the survey showed that 75% of 18-34 year old people in the United States, which is the largest market of Netflix had a menbership.
In the 35-44 years old group, 72% people had a Netflix membership.
Netflix has priced its services competitively in order to serve a large base of customers that mainly belong to the middle class.
Netflix distributes its content online.
Any person with an internet enabled device and a membership can stream Netflix programs online.
However, the company uses AWS and open connect to stream its programs online.
Competitive Environment of Netflix Inc:
Netflix is operating in a hypercompetitive industry environment.
Apart from the other online streaming channels like Amazon Prime, Disney Hotstar, Apple Tv+, Hulu and several more regional streaming services providers, the company also competes with social media networks, and video sharing services like YouTube, Daily Motion, Vimeo, Meta cafe, Facebook, Instagram, and gaming services providers.
Amazon Prime and Disney owned Hotstar are among the leading competitors of Netflix Inc.
Apart from these two, there are several regional and local online streaming brands including those operated by the telecommunication networks that compete with Netflix for users.
Google’s YouTube is also a significant competitor of Netflix.
YouTube also offers a large collection of videos, Movies and other programs.
There are several more video sharing services and gaming streaming services like Twitch that compete with Netflix for users.
Social media channels like Facebook, Instagram and other channels that allow video sharing are also competitors of Netflix.
Overall, the streaming industry has evolved very fast and is advancing continuously.
Netflix invests a huge sum each year in research and development and marketing to maintain its competitive edge and grow its user base.
Financial performance of Netflix in 2020: A brief analysis
Over the previous three years, Netflix has experienced solid growth in its user base and net revenues.
The company has been enjoying continuous growth in its user base from around the world over the past several years.
As smartphone and internet usage have grown around the world and Netflix has enjoyed growth in brand awareness and popularity, its revenues have climbed steadily.
The company experienced 24% growth in its net revenues in 2020 compared to the previous year.
Its total net revenues in 2020 reached $25 billion, rising from $20.16 billion in 2019.
The company generates substantially all of its revenues from the paid memberships.
A small portion of its net revenues, which was close to one percent only in 2020, comes from DVDs.
Its streaming revenues in 2020 climbed 25% compared to the previous year, while its DVD revenues remained 19% less compared to 2019.
Streaming revenues of Netflix grew to $24.76 billion in 2020 compared to $19.86 billion in 2019.
There was also a small increase of 1% in its average revenues per paid subscriber in 2020 compared to the previous year.
Its number of paid memberships at the end of the year 2020 was 203.66 millions.
There was a sharp growth in the company’s operating income in 2020 compared to 2019.
Its operating income jumped by 76% compared to the previous year and reached $4.6 billion in 2020 compared to $2.6 billion in 2019.
In 2020, the company realized positive free cash flows worth $1.9 billion.
Netflix has also experienced sharp growth in its profitability in 2020 compared to the previous year.
Its operating margin in 2020 jumped by 385 compared to the previous year.
Its operating margin for 2020 was 18% compared to 13% for 2019.