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Netflix - A Digital Business Under Pressure

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GCSE, AS, A Level, IB, BTEC National, BTEC Tech Award
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AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 28 Sept 2019

In this short video we look at some of the key business metrics for the digital platform business Netflix. It has over 11 million subscribers in the UK alone and more than 150 million paying subscribers globally, but the business is draining cash at an alarming rate and is adding to an already substantial debt pile. How well will it cope with the increasingly contestable market for TV and film online streaming?

Netflix - A Digital Business Under Pressure

Ask for a show of hands in a classroom and it is a fairly safe bet that a sizeable proportion of students will have access to a Netflix account. Netflix is undoubtedly a very fast growing business and in the second quarter of 2019, Netflix had over 11.6 million subscribers in the United Kingdom. In quarter three 2018, 41 percent of the UK population were subscribed to Netflix, an increase compared to the same quarter of the previous year at 32 percent. Netflix has strong brand recognition and regular weekly usage especially among a younger demographic.

But Netflix is now facing significant competitive pressures and their mounting losses are causing the business to haemorrhage cash just as the online streaming market is becoming more contestable. Latest data shows that subscriber growth for Netflix is well below forecasts ahead of a surge in new competition from Apple, Hulu, Amazon Prime, Walt Disney and AT&T-owned HBO.

As the market becomes more contestable, the content libraries of Amazon and Netflix may contract as TV and film makers pull their own content away from these services to place them on their own. Apple TV+ plans to launch on November 1st costing $4.99 per month. Disney’s service Disney+ set to launch November 12th with a price of $6.99 per month. This contrasts with the least expensive Netflix plan which is available for a monthly rate of $8.99.

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