Memo: Solutions to Netflix’s Problems
memorandum
Date:
To: Stake Holders
From:
Subject: Solution to Netflix’s Problems
Since its creation, Netflix has not had to fight for its clients. This is because it experienced a monopoly in the entertainment and media industry in the United States and most other parts of the world. Nonetheless, this has changed with the increasing entrance of new companies in the sector, making it complicated for the company to maintain and ensure their existing consumers remain loyal to the brand. Furthermore, poor relationships with internet service providers have added more problems denting its competitive advantages, as noted from the negative revenue collection witnessed by the company from the year 2016. From an adequate analysis, it is problems the company needs to engage the internet service providers to ensure high-quality internet for the streaming of the movies. Furthermore, this solution, coupled up with the development of high-end films and television shows, provides a solution to the increased client turnover rates.
Netflix has enjoyed an undeniable success rate over the past couple of years. Still, the fight for content acquisition just got tough since the entrant of new companies such as Amazon, Apple, Disney, YouTube, red, and Google. These are companies with the will and zeal for having downloadable digital content together with streaming services. Since the joining of these new companies, Netflix’s subscription rates have dwindled, losing approximately 15% of its stock valuation (Haigu, 2018). This is a disappointing number, especially for the investors and shareholders. The reason for this reduction is because the competitors provide low priced services and in a fast and efficient way. Previously, Netflix opted for the acquisition of the production content, producing most of its products and services, in turn, reducing the cost of its products. However, the increased completion has further shifted the cost of contents further higher distorting the prices for customers prompting the customer turnover rates.
Another issue that that has bombarded Netflix is the increased wrangles with internet service providers. It is noteworthy that Netflix relies on the internet speed for the high-end delivery of the entertainment it promises its clients. Nonetheless, recently many of its clients have complained of the poor quality of movies, which is brought about by the poor internet service provided by its partners in the networking and telecommunication sector. The quality of videos that people streamed deteriorated with the because of the deterioration of internet speeds from network providers. Netflix’s content delivery is comprised of four parts, each with separate servers for video playing and streaming, and each implicates the Netflix ISP speed index outcomes (Bottger et al., 2018, 29). Due to the increased traffic the company experienced, it shifted its content delivery systems from Akamai to open connect CDNs to connect its contents to the internet. This process was also left dependent on communication companies such as middle mile and cogent communications (Bottger et al., 2018, 29). The forging of these relationships was essential to ensure the delivery of high-quality streams for the company’s clients. Nevertheless, to Netflix’s shocker, the companies did not have sufficient capacities to service Netflix’s huge load and video performance levels. This accounts for the reduced number of clients who site the increased congestion of broadband, especially in the European nations. Additionally, this attributes to the current poor performance of the company, people who stream the company’s movies and videos pay high bucks to be accorded best quality videos a thing that Netflix has faltered in due to the reduced internet speeds. A new entrant in the industry offers consumers several choices, which in turn damage Netflix’s subscription growth, given the competitors’ cheap content scale coupled up with loyalty. Many online viewers subscription with more than one streaming company, leaving Netflix to battle for the same consumers. With the inclusion of new companies offering cheap and other services, making it difficult for Netflix to keep hold of their customers while finding new ones. Apart from an increase in customer competition, the new entrants have also dented the rate of content creation. This is mainly because the companies own and have bought major entertainment producers like Disney and Warners brothers’ production group (Bottger et al., 2018, 30).
The owning of the significant producers has led to a decrease in Netflix’s content, consequently leading to a reduction of subscription rates. Previously, Netflix had resulted in the production of its contents to reduce the total cost of production and push the subscription rates lower. It has further become unreliable for Netflix to be over-dependent on only one source of content. From this over-reliance, Netflix has few movies and contents, drawing clients further from subscribing for more months. This is visualized from the subsequent number of subscriptions following its competitors. Hulu, Amazon, and Apple have several contents enticing new subscribers in search of new content to watch.
Poor service delivery is another factor leading to Netflix’s poor performance. Due to the increasing low-quality streaming witnessed by clients from the poor services accorded to Netflix by the internet service providers, clients have unsubscribed from Netflix for greener pastures. All these factors are seen as poor customer services from Netflix, although it is a problem accrued from other people’s negligence. Additionally, it has been requested of Netflix to ensure that its contents are accessible from different devices, including smart televisions, android phones, and computers, which is yet to be accorded to them.
Netflix has lost several of its clients from the poor quality content offered to the clients due to the unsatisfactory internet services. This is for one, not the company’s fault, but the clients purchased high-quality products, and it is what is due to them. Furthermore, Netflix offers no solution to the clients’ requests for an easily accessible website to allow them to stream content in their own free will.
It is, therefore, necessary for the company to embark on the reduction of the videos bitrates. This ensures the first streaming of videos. The main reason for this reduction preys the fact that low-quality videos ease the strain on fixed ISPs and other mobile service providers. Nonetheless, this offers no solution for the people who pay handsomely to stream high-quality videos. On the other hand, Netflix can offer to communicate with its current internet service providers seeking a solution to the problem at hand. With communication with several communications services ensures that the company finds the right partner with the required resources to host its ideas and connect them to the internet. This solution offers an expensive way out but with the best outcomes. It also considers the general company’s clientele, who pay for high-quality videos. Similarly, with the solution, the company can maintain its brand’s identity as a premium entertainment company. Likewise, this reduces the number of complaints launched against the services provided by Netflix
To maintain its customer numbers and ensure the company increases its market base, an axing on the subscription prices should occur to a more competitive price. This offers a competitive edge since its competitors will have a hard time convincing its loyal clients to shift for Netflix provides a more reliable and cheap brand. Nonetheless, this will see the reduction in the quality of videos streamed and will dent the company’s financial stability due to the increased cost of content creation. However, this problem is solvable by the introduction of high-quality content. Netflix should ensure that they continue with their original and entertaining shows guaranteed at high-quality streaming. This allows the premium brand to be in existence and offers a solution for its clients who demand high-quality products.
The increased content prices have dented the subscription rates experienced by Netflix. Additionally, it has decreased the number of content shared for its clients to stream. Many of these movies and television shows have become too common and monotonous. Clients are in search of new and fresh content. They are looking for more content to binge watch and keeping themselves glued and entertained. Netflix’s competitors offer this from the wide variety of movies they get from their partners in the product sector. It is, therefore, essential to opt for the inclusion of older movies to increase the content range offered to clients. Nonetheless, this only provides a short-term solution since the old movies will run out, and the production of new ones is slow. It is, therefore, advisable for Netflix to sign a contract with other reliable content writers and providers to ensure the creation of new content on time for viewers. Nonetheless, Netflix should couple this up with the use of old movies to capture the old as new subscribers. Netflix should offer the creation of a more accessible website, which allows clients to access it easily from different devices. This provides a solution to the clients’ complain of poor service delivery but provides an opening of fraudulent logins.
References
Bottger,T., Cuadrado,F., Tyon, G., Castrol, I and Uhlig, S., 2018.Open connect everywhere: A Glimpse at the Internet Ecosystem through the lens of Netflix cdn. ACM SIGCOMM Computer Communication Review, 48(1), pp. 28-34.
Hagiu, A., 2018. The Best Way For Netflix to Keep Growing. [Online]
Available at: http:/hbr.org/amp/2018/08/The-Best-way-For-Netflix- to-Keep-Growing [Accessed 3 May 2020].