When evaluating Netflix’s business model, investors should consider the company’s recent pricing changes. The company’s subscribers have historically been conservative when it comes to changes to the price of the streaming service. Consequently, when Netflix has increased the price, it has received a backlash. For example, the company increased its subscription price in 2004, only to see a significant drop in sales. The resulting lack of sales resulted in a financial decline of almost 2.5 million subscribers.
In addition to surviving the competitive environment, Netflix is faced with the challenges of competing with so many new players in the streaming space, as well able TV providers and well-funded companies. As it is not a broadcast network, it must negotiate with Hollywood studios and other providers for rights to distribute films. It also faces fierce competition from tech titans and cable companies. The biggest challenge, though, is maintaining a strong presence in the streaming market. So, what can Netflix do to keep up with the competition?
One of the main problems with Netflix’s business model is that it does not offer ad-option or a blank check on content. Netflix will need to look into partnerships and aligning with complementary businesses to increase its revenue. One strategy that will help Netflix to stay competitive is to offer live events programming to its users. While there are many ways to monetize this content, it is not likely to be as simple as increasing subscribers.
