Breaking Bad as a Media Product

Introduction

1. Goals of Netflix as a firm, its products, and customers

Netflix is a subscription-based online media streaming service provider that offers movies, TV series, and shows to over 139 million subscribers worldwide in January 2019. It was founded in 1997 by Marc Randolph and current CEO Reed Hastings, who came up with the idea for the service when he had to pay a $40 late fee at a video store. Netflix's first service back in 1999 was to offer and send DVDs by post with a monthly subscription. Starting with only 30 employees and 925 titles available, it was the first to introduce subscriptions with no due dates or late fees. A huge selection of film titles was available and the shipping of DVDs was as accurate and quick as possible. Being one of the leaders in DVD rental in the U.S.A. with a market share of 24.3%, Netflix announced in 2001 its intention to create a Video-On-Demand (VOD) business, a revolutionary idea to create a platform for online entertainment for every need and every age. In February 2007, the video on demand was live, allowing customers to watch movies or TV series directly from their devices. The company continues to rent DVDs in the US and Canada, but at the same time has extended its online streaming services all over the world. While the DVD rental portion of business is slowly declining, it is replaced by instant video streaming where Netflix is the global leader on the market it created. The online entertainment market is fast-growing and competitive with large players trying to penetrate and take market share from Netflix. However, Netflix through its expansion throughout the world and through its huge investments and selection of new shows is expected to continue consistently to grow over the years.

Netflix, as every business has the same principle objective to maximize its profits and minimize its losses. Netflix is also pursuing other goals, it is trying to keep its market share, keep being at the edge of technology, and keep customer satisfaction high. It also published no vision but a statement. Netflix intends to become “the best global entertainment distribution service”, to “license entertainment content around the world”, to “create markets that are accessible to filmmakers” and to “help content creators around the world to find a global audience”.

Products

Netflix offers is 24/7 access to an almost infinite library of content, wider than every physical store which can also be considered its main competitive advantage. Its movies and series are available everywhere, anytime and at every device, while its content is addressed to all age groups. Its investments in original scripts led to global success and recognition all over the world, acquiring as many subscribers of all ages and preferences. Netflix uses two methods to attract new customers. It acquires original content and produces its own. Some of its successes are House of Cards, La Casa del Papel, Grand Hotel, Marco Polo, Narcos, etc. that became worldwide hits through Netflix.

Netflix acquires a lot of its content from Hollywood and TV shows producers making external transactions that are very costly. This means that it needs to buy licenses and rights while all series and shows are available after a certain period of time after their initial release. At the same time, there is always the possibility that external producers will increase license and right prices at any time in the future. Thus, Netflix is seeking to create new partnerships with well-known studios like Paramount to ensure lower licensing prices.

That is why Netflix spends a lot of money in producing original content investments. That way, it allocates its resources in internal operation and focuses on its own production to have the cost at a minimum. It also makes partnerships with rather unknown producers and scriptwriters all over the world to find new and attractive shows. That way, it is also recognized as a quality producer. Quality productions bring awards and awards bring recognition to the platform and therefore new subscribers.

Another competitive advantage is that it is available anywhere, anytime, and on every device. Netflix's target is to provide its products to as many customers as it can. Therefore, it is not enough to have selected content but to geographically expand the market and be able to address to it to everybody and expand the demand. Netflix launched its service in Canada, Latin America, Oceania, and Europe and plans to be present in Asia operating now in over 190 countries. In order to be able to penetrate is such markets it began to make partnerships to ensure the accessibility of its service and invest sacrificing profitability in the short run anticipating profits in the long run. It also made partnerships with other providers such as Apple TV, Vodafone, etc., and launched applications in the Android Play Store and Apple iOS.

Customers

Netflix had always as its target to ease the customers. Even when it was only a DVD rental service, it showed that it could ease them, from going physically to rent a movie, by mailing the movies to them. It also had lower fees and no due dates or late fees. Putting the customers at the center of its strategy was its first goal and reason of success. By creating a video on demand market, it covered almost all the needs of its customers and movie fans.

Customers, especially millennials, watch series when they can, even in public transport or when waiting at a queue on their smartphones. They value easy and immediate access and portability. Thus, customers are switching from classic TV or DVD watching to Netflix as it is accessible 24/7 on any device such as Xbox, PlayStation, tablets, smartphones, smart TVs, TV boxes, and stand-alone computers and most importantly it provides an ad-free environment.

Netflix’s strategy is based on monthly subscriptions and not advertisements that can annoy watchers and make them leave. Customers can enjoy watching original content, anytime without advertisements and breaks. Even without them, Netflix lets customers watch all the movies and TV shows as they want at a monthly fixed fee between $8 and $15 which is almost as renting 2 DVDs.

Netflix provides parameterized content according to each customer’s needs. It collects a huge load of information from customers, their contact details from social networks, age, reviews, watched content and preferences and choices. From this information gathering, it can parameterize its content according to each specific customer and project the trend of demand per gender or age etc. so as to be always innovative and provide what customer needs.

2. Demand for Netflix’s product

It seems that Netflix has a strong brand name, produces quality series and being in trend for a long time. Furthermore, subscriptions are continually increasing from all over the world but also from US which is at the moment the largest market in video streaming. High-quality shows are proved to make customers to sit in front of their screens until they finish their preferable TV series and look for the next series to start. On the contrary, its competitors do not have at the moment the same quantity and quality compering to Netflix which makes it difficult for customers to change streaming services and cancel Netflix subscriptions. This could mean that if Netflix tries to increase subscription prices, there will not be an important impact on the number of its customers. Subscriptions will keep increasing and revenue for Netflix will increase as well. Therefore, Netflix could increase its pricing without losing a significant number of customers. Thus, demand for Netflix service in regards to subscription fee seems inelastic, since a significant change in price can only have a minor impact on demand.

3. 5G adoption in many countries and supply & demand

Broadband and 4G networks bandwidth around the world is being stressed as the demand for video streaming and exchanging videos and large files is increasing and is estimated to reach 70% by 2025. Netflix is one of the main reasons where bandwidth is consumed for both downstream and recently upstream. During peak evening hours, Netflix can often account a massive 40% of all download traffic on the entire internet. Netflix added recently interactive movies and series where the viewer can decide the outcome by sending back to loads of data. As Netflix wants to provide more and more video content and better picture quality, this heavy download traffic is assumed to be increased.

The adoption and use of 5G networks is expected to ease the pressure on bandwidth, increase transmission speed, quality, and reliability and also open opportunities for more usage of high consuming activities through the internet. While Netflix has a $6.5 billion long-term debt, it will take the financial risk and in the short run will increase its leverage by 2 billion dollars more for investments, allocating resources to research and development, it is expected that it will produce many new expensive original series and it will also exploit the 5G technology to offer high-quality videos even better than 4K. That way, it will increase its number of customers and market share compared to its competitors. An economic point of view, Netflix could increase its subscription fee offering better service over 5G network and taking advantage of the lack its competitors have. In the long run and as demand is expected to stay high, the competition such as YouTube, Hulu, HBO, and Amazon will be tougher to invest more in this market. Newcomers also may appear and could change the game with new ideas, technology, and shows, and traditional TV will decline. Also, in the long run, it is expected that speed will not be restrictive while quality will be improved. Then customers will be more impatient taking speed as granted and looking for more quality and better content. An economic point of view, it is expected prices to be lower for customers as more players will enter the market and customers will have more bargaining power.

4. Breaking Bad case

Before analyzing the Breaking Bad possibility of continuation, as a consultant, I would firstly include the demand trend and projection for video-on-demand technology in general for the next years and the estimation for the increase of future subscribers. As these crucial factors seem that they will be increased in the coming years I would measure the opinion of the fans about this through social media and TV series platforms in order to see their first impression. Breaking Bad had many seasons and it was an expensive production so I would want to double-check how the fans would take it before starting filming again the show. I would measure fans’ opinions compared to other possible remakes to see if it is worth it and compare it to other Netflix plans for the future. I would also measure how many they watch the old episodes as all the five seasons are still available in the platform and Netflix collects such information. Breaking Bad has so many fans but as new subscribers come in, it would be difficult for them to keep up with the new episodes or start over watching season one trying to catch up with the new episodes. I would measure also the possibility to launch a new series in a similar concept so as to attract the old fans and add the new ones.

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