VALUE PROPOSITION AT NETFLIX - Theseus
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Bachelor’s thesis
International Business
2021
Rebeka Csalló
VALUE PROPOSITION AT
NETFLIX
BACHELOR’S THESIS | ABSTRACT TURKU UNIVERSITY OF APPLIED SCIENCES International Business 2021 | number of pages: 42, number of pages in appendices: 5 Rebeka Csalló VALUE PROPOSITION AT NETFLIX The thesis is a case study about Netflix and its position in the streaming industry. The goal is to introduce Netflix as a company and analyse whether Netflix could be considered as a forerunner on the global market. Lastly the goal is to receive opinions from customer and assess Netflix’s value proposition on the Hungarian market. The methods used are theoretical research and a survey sent out to different social media platforms. Theoretical research is used to introduce Netflix as a company and its company culture and also to compare Netflix to its competitors on the global level. The survey is used to get insight to the value proposition to the Hungarian users. Based on the survey answers and author’s own knowledge finally a value proposition canvas was created about Netflix. From the theoretical research it is clear that on a global level Netflix still could be considered as a forerunner, the company’s main advantage is the offered and produced wide range of movies. From the survey the result is that the surveyed Hungarian users prefer Netflix. Survey participants mentioned the technological aspects when they were asked what they like about Netflix. However, when they were asked about what could Netflix improve in the services, the most common answer was the range of movies available on the platform, which is a contradiction to the results on a global level. To conclude, Netflix has been still growing significantly in 2020, and they are proposing values both on the global and the Hungarian market. KEYWORDS: netflix, value proposition, platform, ict, movie, streaming, value proposition canvas
CONTENT
LIST OF ABBREVIATIONS (OR) SYMBOLS 6
1 INTRODUCTION 6
2 NETFLIX 7
2.1 History of the company 7
2.2 Streaming and on-demand services 7
2.3 Netflix as a platform 8
2.4 Stakeholders 9
2.4.1 Shareholders 9
2.4.2 Users 9
2.4.3 Movie production companies 10
2.4.4 ISP, payment processing services, TV channel providers 10
2.4.5 Employees 11
2.4.6 Directors and management 12
2.4.7 Employee resource groups / trade unions / national regulatory bodies 12
2.5 Company Culture 12
2.6 Culture according to management 13
2.7 Culture according to employees 14
2.8 Netflix in 2020 15
3 VALUE PROPOSITION 17
3.1 Did Netflix pursue a Blue Ocean strategy? 17
3.2 Netflix’s competitors 18
3.2.1 Disney+ 18
3.2.2 HBO Go & Max & Now 19
3.2.3 Hulu 19
3.2.4 Amazon Prime Video 20
3.2.5 Youtube TV 20
3.2.6 Others 21
3.3 Share of the industry 21
3.4 Value proposition 22
3.4.1 Pricing 22
3.4.2 Content 24
3.4.3 Availability (offline, devices) 24
3.4.4 Employee satisfaction 25
3.5 Conclusion 26
4 VALUE FOR USERS 27
4.1 Method 27
4.2 Analysis of the survey 27
4.3 Conclusions of the survey 31
4.4 Value Proposition Canvas 32
4.4.1 Customer Jobs and Netflix’s products and services 32
4.4.2 Customer Pains and Pain Relievers 33
4.4.3 Customer Gains and Gain Creators 35
5 CONCLUSION 38
REFERENCES 39
APPENDICES
Appendix 1. Questions in the survey with translations
FIGURES
Figure 1: Number of Netflix employees from 2015 to 2020 (Stoll, 2021) 11
Figure 2: Weekly Global Paid Net Adds (Netflix.com, 2020) 16
Figure 3: Original TV shows by platform (Wheelwright, 2020) 24
Figure 4: Distribution of participants’ sex 27
Figure 5: Distribution of participants’ age 28
Figure 6: Other streaming platforms used by participants 28
Figure 7: Main reasons participants have chosen Netflix 29
PICTURES
Picture 1: Eliminate – Reduce – Raise – Create grid in the initial stage (Blackfiskers,
2020) 17
Picture 2: Customer Profile visualized. Template from www.strategyzer.com 36
Picture 3: Value Map of Netflix visualized. Template from www.strategyzer.com 37
TABLES Table 1: Revenues in 2020 and subscriber count compared 22 Table 2: Pricing plans available at Netflix and its competitors 23 Table 3: Available devices for each streaming service 25 Table 4: Employee review for the streaming services 26 Table 5: Pros of Netflix according to users 30 Table 6: Improvement suggestions from survey participants 31
LIST OF ABBREVIATIONS (OR) SYMBOLS ICT – Infocommunication Technologies VoD – Video on Demand HD – High Definition UHD – Ultra High Definition ISP – Internet Service Provider
6 1 INTRODUCTION Netflix and streaming platforms are a popular topic nowadays, there has been several of theses and papers written about them. One good example is that the Harvard Business Journal has made several case studies about them (McCord, 2014.) Netflix is a popular example in the Machine Learning topic as well, as Netflix has a famous recommendation algorithm. (Kasula, 2020.) However, Netflix is an advanced company in every aspect, therefore they are worth to analyze furthermore. In this thesis Netflix is analyzed from the aspect of value proposition. Netflix is analysed in the global market compared to its competitors, it is being assessed whether Netflix can be considered a forerunner company in the global streaming industry. Value proposed to Netflix’s hungarian users is analyzed with a questionnaire. Based on the questionnaire answers the Value Proposition Canvas was created in the last chapter. The main research questions were the following: - How is Netflix working as a company? What is the company culture at Netflix? - If Netflix started at a Blue Ocean, are they still a forerunner on the market? - What values is Netflix proposing to the Hungarian users? These research questions are in these order answered in the thesis. The second chapter introduces Netflix as a company, how the company has been affected by the COVID pandemic and Netflix’s company culture. The third chapter gives an overview to Netflix and its biggest competitors and they are analyzed from different aspects. The goal in this chapter is to analyze Netflix pros and cons compared to its competitors and determine whether Netflix can be considered a forerunner in the global market. The last chapter processes the questionnaire, which was sent out to different social platforms. The questionnaire was answered mainly be young adult (college student) women, therefore the chapter analyzes Netflix’s value proposition to this special target group and lastly based on the given answers Netflix’s Value Proposition Canvas has been created. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
7 2 NETFLIX 2.1 History of the company As Netflix states on their official website (Netflix, 2021), they are a subscription-based streaming service company and Netflix’s uniqueness is that the users can watch TV shows and movies without commercials on an internet-connected device from anywhere anytime. The company was created in 1997, Netflix started by mailing out rented DVDs and the website finally launched in the next year. In 1999, the membership subscription opportunity started. In 2000 the personalized movie recommendation system was already available and in 2002 Netflix was listed in the NASDAQ. (Netflix.com, 2020) Netflix’s website with the possibility to stream the movies was introduced in 2007, ten years after the company’s official launch. The first Netflix owned productions appeared in the streaming services in 2013, for example with the well known series “House of Cards”. In 2016 Netflix have expanded with 130 new countries, meaning that the services became available in 190 countries. This was the year, when Netflix have entered the Hungarian market as well. In 2017 they have reached the 100 million subscribers. (Netflix.com, n.d.) 2.2 Streaming and on-demand services Streaming video is a term applied to the compression and and buffering techniques that allow one to transmit and view video in real-time through the Internet, and also streaming means that instead of having to wait to download a media, a video can start as soon as it has started to download, and while playing it is still being downloaded from the server. (AboutVideoEditing, n.d.) VoD (Video on Demand) dedicates a single channel to each user and enables the video to be started at any time with controls, for example the video can be paused, rewinded or fast-forwarded. (Thouin & Coates, 2007) Netflix is offering their services as streaming the video content online (from different devices) and to download them on devices for later use. Netflix offers movies in different TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
8 qualities (Standard definition, HD and UHD). Besides streaming the user can create a list called ”My list” on the site, where users can add the movies, they want to watch later on. Users can rate movies with ”thumbs up” or ”thumbs down”, and the algorithm will adjust its recommendations on the site. Netflix has 3 different pricing plans available for its users. The first is the Basic one, which enables one user to use the service and it will not be streaming in HD quality. The second plan is called the Standard, which enables two users to watch Netflix at the same time, and their streaming will be in HD quality. The most expensive plan is called the Premium, which enables 4 users to use their service at the same time and the video streaming will be made in UHD quality. Netflix’s pricing plans will be covered later on with more details when compared with the competitors. 2.3 Netflix as a platform Netflix functions as a platform, which is a usual business model for internet based companies. Platforms are usually working as a marketplace. Platforms are usually websites or applications where different user groups are interacting with each other and exchange services or products. One example is eBay where the two groups connected by the site are the buyers and sellers and the sellers offer products. This also describes Netflix, Netflix owns a platform (the website) where Netflix is managing the content offered by movie production companies and offering them to customers – the viewers. Platforms, such as Netflix tend to have a rapid growth (Anon., 2016.) Usually, platforms are connecting two different user groups and as more users a platform has from one user group, it will attract more users from the other user group. For example at eBay the user groups can be identified as the buyers and sellers. The initial start of a platform service is the difficult part, to get the users to start using the service. The user groups at Netflix are the subscribers/viewers and the movie production companies. Viewers will registrate for the movies and series, and movie companies will produce content for the viewers it has an initial starting dilemma. At first potential customers will not registrate if there is not enough content for them to be worth paying for the service and movie TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
9 production companies will not making exclusive content for a platform if there is not enough users for them to be worth producing that movie. All of Netflix’s competitors are using the platform business model as well. 2.4 Stakeholders Every company’s operation is a combination of the interests of the different parties that have a stake in the company’s operations. Different parties have different interests, some of them are concerned about the company’s well being, others could be worried in a company’s impact (for example unions or civil organizations are protecting other being harmed from a company’s operations). In this subchapter the main stakeholders are introduced and analyzed in order to get a more thorough picture about Netflix. 2.4.1 Shareholders A shareholder can be a person or another company, or fund etc. that legally owns one or more shares of the share capital of a company, they are also referred as a ”member of a corporation”. (Fontinelle, 2003) The shareholders are concerned about Netflix’s financial performance, they want it to be profitable and to grow its revenues. Shareholders are having shares and if the company does well, their shares can be sold at a higher price, thus they can make profit from the company. Shareholders are one of the most important groups for a company, because they have the power to even bankrupt a company (Hayes, 2021.) 2.4.2 Users Users are the ones who are actively using Netflix’s services and they are the ones Netflix is most concerned about. If the users are not liking the service and if the users have a high churn rate, that is always a red flag for a company. Churn rate is measuring the rate how many customers are stop doing business with a corporation. When it is a high rate it means that the company has to do extra steps in order to gain new customers and even more to grow its customer base, therefore every company strive to keep its already paying users (Frankenfield, 2021.) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
10 However Netflix has currently an important issue with some of its users. Many of them are sharing their passwords with some of their friends and thus Netflix is losing a tremendous amount of money on people who could be customers. One estimate says that alone in 2019 they have lost $9.1 Billion on revenues because of this phenomal. (Wespin, 2020) Also it is worth to mention that users are on the receiving end in the platform business model, where the other players are Netflix itself and the movie production companies. 2.4.3 Movie production companies Movie production companies are the ones who make content available on the streaming platform. There are different kind of production corporates when it comes to Netflix. Netflix is making its own content but also buying the licenses for other movies and series. Netflix has been licensing and outsourcing the movie production and then purchasing the rights and selling the movies as a Netflix production, but they are shifting towards in- house producing, which saves them money compared to licensing the content (Levy, 2018.) At the end of 2019 Netflix had put $24.5 Billion to its content licensing, interesting is that Netflix is using data mining for determining the total cost of each licensing agreement (Beers, 2020.) 2.4.4 ISP, payment processing services, TV channel providers Internet service providers (ISPs) are companies providing internet access to users, providing the infrastructure for users to reach Netflix’s services. It is highly depending on the ISPs that what quality the customer will get, whether they can watch movies in HD. There is a relatively new concept called network neutrality which means that now every ISP has to treat all internet communications equally and not to make big corporations a ”VIP” service provider. Without net neutrality ISPs were prioritizing some sites in exchange for money, now that is not possible. (Easley, et al., 2016) Payment processing services are also stakeholders at a company, especially when it is about an online service provider. At Netflix it is possible to pay with Visa, MasterCard and American Express cards, therefore they are interested parties in Netflix’s success. It is also possible to pay through Paypal, and to purchase Netflix Gift Cards at different TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
11 retail stores. There is a possibility to pay for Netflix through telecommunication companies as well, so far Vodafone is offering this possibility. TV channel providers are the different parties that are helping potential customers reach Netflix, providing access to the Netflix application through their set-top boxes. Microsoft (Xbox), Google (Google Play), Apple (iStore), Sony (PlayStation) are offering Netflix as an application on their own platforms and devices. 2.4.5 Employees Employees are a crucial point for every company, their well-being should be high priority for every firm. As of 2020 Netflix had 9400 employees worldwide, which has increased since 2015 every year. In the Figure 1 it can be seen how Netflix has expanded in the 2015-2020 timeline. Figure 1: Number of Netflix employees from 2015 to 2020 (Stoll, 2021a) In the company culture section,the company culture and employee satisfaction at Netflix is further analysed. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
12 2.4.6 Directors and management Directors and the board or also called management are responsible for the most important decisions in a company’s life. The board is interested in making profit as the members are usually having a bigger amount of shares of the company as well. However their preferences and employees can differ, as the lesser the salaries the more the profit. According to Netflix’s website the leadership is currently 23 people, and the directors consist of 12 people, that meaning about 35 people is responsible for the strategic decisions. 2.4.7 Employee resource groups / trade unions / national regulatory bodies This stakeholder group is usually acting in behalf of a group of people, for example the employee resource groups will be protecting employee’s rights. Netflix’s main conflict was net neutrality mentioned earlier, for that the FCC (Federal Communications Commission) in the USA is responsible. (Easley, et al., 2016) Another union is the SAG-AFTRA (Screen Actors Guild – American Federation of Television and Radio Artists) which made a negotiating with Netflix in 2019 about the earnings of actors and set overtime rules and a general minimum salary, which is independent of the streaming threshold. (Fingas, 2019) 2.5 Company Culture ”Corporate culture refers to the beliefs and behaviors that determine how a company’s employees and management interact and handle outside business transactions” (Tarver, 2021.) In 2014 Netflix executives wrote a deck about their company culture and the important values for the company, in this chapter it will be introduced. That document is from the point of view of Netflix’s management, therefore in this subchapter some statements from the employees or former employees are introduced as well. (McCord, 2014) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
13 In my opinion company culture can be a huge added value to a firm, hence this chapter. When Netflix is offering a better culture than its competitors it will mean that Netflix will be already offering something extra. 2.6 Culture according to management In the beginning the presentation, Netflix is stating that almost every company has ”Integrity, Communication, Respect and Excellence” painted on their walls and displayed as core values, but for example Enron had those as well, whose leader went to jail. Therefore they are stating that they are seeking real values, which are actively seeked at the company. (McCord, 2014) They are seeking nine behaviors and skills, which are the following: • Judgment – making wise decisions, thinking strategically • Communication – listening well, treating people with respect • Impact – demonstrating consistently strong performance • Curiosity – learning rapidly, being broadly knowledgeable about business • Innovation – creating new ideas, discovering practical solutions • Courage – saying what one think, making tough decisions • Passion – inspiring others, caring about Netflix’s success • Honesty – being non-political, being quick to admit mistakes • Selflessness – seeking what is best for Netflix, being ego-less (McCord, 2014) Next they are stating that they try not to offer the corporate ”pseudo-benefits” like coffee and lunches and parties, but they instead hire stunning colleagues and offering generous severance package to adequate performance. Also they are stating that ”We’re a team, not a family” – in contradict with a huge amount of job offerings nowadays. Besides that they state that competing is rare among their team members for better positions and better salaries. Their main goal according to them is to have high performance. (McCord, 2014) The latter from an outsider point of view could be a red flag about a lot of overtime. The next point in the presentation is about employee freedom, their intended goal is to increase their freedom rather than limit it. The presentation is implying that most of the big companies start to limit their employees while growing. At Netflix they try to avoid this consequence, therefore they try to minimize complexity growth as they are growing and TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
14 increasing talent density parallel. At Netflix they have only two rules when it comes to freedom at work, prevening irrevocable disasters and intorelating moral issues. Netflix is trying avoiding bad processes as well, such as too much bureaucracy for every decision. One example they are bringing for this, is that they have avoided 9 am – 5 pm workdays, and also they cleared their vacation policy and their clothing policy as well. (McCord, 2014) In the next part Netflix is introducing their leadership method, which is to giving context to employees and not control. They try to motivate through goals and strategies. Their choice of teamwork is the so-called ”Highly aligned, loosely coupled” method, which means that the strategy and the goals are clear and the team interactions are focused on these. The loosely coupled part means that there are only minimal cross- divisional meetings except just to set the goals, and groups are not waiting on each others approval. (McCord, 2014) In the sixth point Netflix is saying that they are paying top of the market, paying more to employees than anyone else likely would, because as they are saying they want only outstanding people working there. They are trying to avoid the salary issue with no fixed budgets set every year, instead the managers are aligning their people to top of market each year. Employees are also can decide how many Netflix stock options they want to hold. Besides that employees get $10k health benefit per year and they can decide what to do with that, they can instead keep that money or use it for health insurance. (McCord, 2014) In their last point they are speaking about promotions and development by the company. Two necessary conditions are for a promotion at Netflix, the job has to be big enough and the candidate should be a ”superstar” in the current role. Also they are trying to develop their employees with good colleagues and challenging work and they try to avoid formalized development such as rotating etc. (McCord, 2014) 2.7 Culture according to employees All of the before mentioned points and goals at Netflix are sounding very promising, but they are from the point of view of the managers. In this section of the paper employees point of view is looked through. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
15
The source of employee satisfaction was Glassdoor.com. Glassdoor is a website where
employees (current and former) can anonymously review companies. The site has
currently 1,340 reviews for Netflix, and the reviews are aggregated to 4.2 star average
from 5 stars. 76 % of the reviewers would recommend Netflix to a friend and 92% of
reviewers are approving the CEO.
The advantages of Netflix mentioned at Glassdoor are the following:
• Freedom and responsibility
• Remote working, good pay and friendly staff
• Benefits for the family, free food, extensive training and great work environment
• Smart people and great culture
• Socially conscious company with great benefits
The disadvantages of Netflix are also listed on the website:
• People are let go if they’re not performing
• Bad work/life balance
• Culture of fear
• Long hours and sometimes harsh outdoor environment
• Very few opportunities to move to other roles, especially in upper management
positions
Based on the aggregated reviews pro side what Netflix has stated is mainly true for the
company culture. From the con side my preconception about the long hours are seem to
be true, but Netflix have also stated this in their presentation that they are for high
performance.
Based on all of this informations company culture is communicated honestly at Netflix
and employees are valued but high performance is expected of them and the company
can have a stressful environment with a bad work/life balance.
2.8 Netflix in 2020
Netflix publicly shares the shareholder letter for every business quarter. As of end of Q3
in 2020, Netflix’s financial situation was the following: Netflix have stated, that the first
half of the year held a record. On Figure 2 is noticable that since the lockdown started,
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló16 Netflix had a sizable growth. In Figure 2, it is visible, that since March, Netflix’s weekly global net adds was record high, in their report Netflix have reached $5.768B revenue at the end of Q1, which is estimately 27.58% increase since 2019. (Netflix.com, 2020) Figure 2: Weekly Global Paid Net Adds (Netflix.com, 2020) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
17 3 VALUE PROPOSITION 3.1 Did Netflix pursue a Blue Ocean strategy? As one of the research questions is whether Netflix was a Blue Ocean company this subchapter is focusing on that topic. Blue Ocean is a term created by W. Chan Kim and Renee Mauborgne in their book Blue Ocean Strategy. Blue oceans are all the industries not in existence today – the unknown market space. They are unexplored and untained by competition, blue ocean is creating new demand. A company which has Blue Ocean Strategy is creating uncontested market space, making the competition irrelevant, creating new demand. (Kim & Mauborgne, 2021) There are three characteristics of a good strategy, the first one being focus, a company should put the efforts into certain directions. The company also has to distinguish itself from the competitors and convincing the customers to choose them, and they also need to have a compelling tagline. Netflix’s initial stage is being reviewed with the Eliminate – Reduce – Raise – Create grid to see whether Netflix initially was having a Blue Ocean Strategy. (Anon., 2020) Picture 1: Eliminate – Reduce – Raise – Create grid in the initial stage (Anon., 2020) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
18 Netflix has eliminated the stores where the DVDs could be bought, which compared to the competitors was an important move. When moving to online Netflix had eliminated the storage capacity needed for storing the DVDs, as all of their movies became available online. Besides that the price of licences became lower than the cost of purchasing DVDs. Netflix have also increased the comfort of watching movies, customers could watch movies at home and eliminated the limits of watching movies as for the subscription fee the customers could watch any number of movies. (Anon., 2020) In conclusion Netflix was focusing on his own company and their initiate to offer movies online was a Blue Ocean move. The next Blue Ocean move was when Netflix have started to create their own movies and shows and competitors have been followed Netflix since then. (Anon., 2020) 3.2 Netflix’s competitors Currently there is a large number of streaming services. Therefore all of Netflix competitors can not be introduced in this chapter, but some of the bigger ones will be. For every bigger competitor their short introduction will be stated here and also introduced what makes that special competitor unique, because differentation is what brings real value for the customers. 3.2.1 Disney+ Disney+ has launched its services in the United Stated, Canada and in the Netherlands in 2019 november, it is a relatively new company, especially when compared to Netflix. It is the own service of Disney. Disney+ is growing rapidly. In 2021 March the company hit the 100 million subscriber count and they are currently present in 59 countries. (Duffy, 2021) Disney+ could grow this rapid because of its content, they have the Disney original movies, the Pixar and Marvel contents, also Star Wars and National Geographic and even some from 20th Century Fox productions. Besides these productions Disney+ have promised more original contents in the next years. (Callaham, 2021a) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
19 Disney original contents (and Marvel and Star Wars) can have an impact on a user to switch to Disney+. Therefore I have looked to Netflix how much content can be found in Netflix from the ones that Disney+ offers. For the ”Disney” term only 11 title is coming up, but for Pixar and Marvel the list is bigger. Netflix still has some Marvel productions made for them, but the newer ones will be exclusively available only on Disney+. 3.2.2 HBO Go & Max & Now HBO Go is an older competitor, it was launched in 2010. The company has also released a new platform called HBO Max and HBO Now in 2020, but as they are operated by the same company, and at some countries only one of them is working, somewhere more of them, this paper will look at them together. HBO Now is only used in the United States, HBO Go and HBO Max are available for the rest of the world. HBO has reached 37.7 million subscribers at the end of 2020, which is a smaller number than Disney+, but HBO is also growing rapidly. One of HBO’s main hit was last year the Wonder Woman 1984 movie, which holds probably the same value as Marvel movies at Disney. The content at HBO is consisting mainly of HBO own media, Warner Bros productions and DC comics. (Callaham, 2021b.) Besides the available productions one strong point for HBO is that anyone who is already subscribing for HBO at their television company is able to access HBO’s streaming platforms . Also some telco is offering it as an extra service, such as a built-in application the telco’s set-top boxes. 3.2.3 Hulu Hulu is also an American streaming platform, majorly owned by Walt Disney Company and Comcast, it have been founded in 2007.Currently there are 39 million subscribers to Hulu, and it is available only in the US. However as Disney has launched its own streaming platform Hulu’s future is somewhat questionable. (Curry, 2021) Hulu was starting to create its own media in 2017. They have started with The Handmaid’s Tale which became a hit, this way Hulu was able to rebrand itself as content producers. Before their content was only an aggregation of old television shows and movies. (Curry, 2021) TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
20 Hulu is not considered as the biggest competitor, as Hulu is way smaller than Netflix and they are only US based, however Hulu is still a factor in streaming, as they provide access to a lot of shows from the different US major networks and Hulu holds exclusive right to FX’s original series. 3.2.4 Amazon Prime Video Amazon Prime is the own streaming platform of Amazon. It was launched in 2006. Amazon Prime Video has currently about 150 million subscribers and they are operating worldwide, excluding China, Cuba, Iran, North Korea and Syria. They have started to create original content in 2013. They have a broad list to choose from they have got still a smaller quantity to choose from than Netflix. Amazon Prime Video’s advantage is in that they are offering their content worldwide and as Amazon is one of the biggest companies on the world, they will have the resources to maybe get more rights and original contents than Netflix. 3.2.5 Youtube TV Youtube TV is a relatively new competitor, they are owned by Youtube (which is a subsidiary of Google). They have about 3 million subscribers and they are offered right now only in the US. They are offering video on demand but also cloud-based DVR from more than 85 television networks. (Spangler, 2020) There is no original content available at the moment. Youtube TV is too new and has no original content to be considered as the biggest competitor, but they have potential, and they have also produced some original content to their Youtube Premium feature so far, therefore exclusive content probably will appear at Youtube TV as well. Also if a user wants to have on demand and to watch TV, Youtube TV can be a good alternative for them. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
21
3.2.6 Others
There are other streaming platforms available, but lot of them are regional or very small
or new on the market. They could have the potential to later on to be bigger than Netflix,
but so far these streaming platforms are not considered to be the biggest competitors of
Netflix.
The below list is a short one about the other competitors of Netflix:
• CBS All Access
• Peacock
• Apple TV Plus
• Sling TV
• FuboTV
• Sony Crackle
• SHOWTIME
• Crunchyroll
• Showmax
• Curiosity Stream
3.3 Share of the industry
The subscriber count of every streaming platform has been introduced above, but here
they will be showed as share of the industry, with revenue and subscriber count.
Revenues are from the year 2020.
When the platforms are compared, Netflix is only the leading platform in subscriber
counts. Amazon Prime Video gathered slightly more revenue than Netflix, while having
significantly less subscribers. Disney+ has significantly less in revenues but gathering
subscriber count very fast. HBO and Hulu seem to be much smaller, and for YouTube
the company has not even shared the full 2020 numbers. As of these datas worldwide
Netflix seems to me as the leading streaming platform because of their subscriber count,
but considering that Disney+ only launched a year ago but gathered already almost 74
million subscribers, Netflix could be in danger financially.
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló22
Name of the streaming platform Revenue (in Subscriptions (in million people
million dollars)
Netflix 24996 (Dean, 203,66 (Dean, 2021a)
2021a)
Disney+ 4900 (Anon., 73.7 (Stoll, 2021b)
2020)
HBO 6800 (Stoll, (HBO Max) 37,7 (Szalai, 2021)
2021c)
Hulu 4400 (Curry, 39 (Curry, 2021)
2021)
Amazon Prime 25210 (Dean, 150 (Wallach, 2021)
2021b)
Youtube TV NA 3 (Silver, 2021)
Table 1: Revenues in 2020 and subscriber count compared
3.4 Value proposition
Firstly some aspects are being analyzed that could have an important factor when it
comes to value creation, and after the value proposition canvas for Netflix is being
prepared in this subchapter.
3.4.1 Pricing
The pricing plans available are the ones available in the US, as it is easier to compare
them in USD values. All of the pricing information is from the companies own websites.
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló23
As it can be seen Netflix has three different plans, all the three of them is offering the
same service, but with standard it is possible to see the movies in HD quality, and in the
Premium plan in UHD quality.
At Disney+ the monthly fee is $7.99 USD, but there is a possibility to buy it as an annual
plan for the price of 10 month. Besides that there is a bundle together with Hulu and
ESPN for the price of Netflix Standard Plan.
HBO was the hardest to acquire data, as they are offering three different services, and
the price of Go is not set, it depends of the TV provider. They do not have any special
plan, at HBO only the different services’ prices are listed.
Hulu is the cheapest option, what is interesting that their basic plan is not ad-free already.
They have the option for Live TV as well (similar service as Youtube TV).Amazon Prime
has a similar deal like Disney+ as their annual plan is about 9-10 times the monthly price.
According to pricing Netflix is not offering the best deal. Their basic plan is about average
price, but their Standard and Premium plan is not offering too much extra service,
however the Premium is twice as expensive as the Basic one. Based only the pricing
Disney+ bundle seems to be the best option, where Hulu and ESPN is also included.
Netflix Basic - Standard - Premium - $17.99/month
$8.99/month $13.99/month
Disney+ $7.99/ month Yearly $79.99 Hulu + ESPN + Disney+
($6.66 / month) bundle - $13.99 /month
HBO Go Now Max
$5-25/month $14.99/month $14.99/month
Hulu Basic Ad-free with Live TV
$5.99 /month $11.99/month $64.99/month
Amazon Prime $12.99/month Yearly - $119 -
($9.91/month)
Youtube TV $64.99/month - -
Table 2: Pricing plans available at Netflix and its competitors
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló24 3.4.2 Content For this subchapter the idea is to compare the number of original TV shows available at the services. As it is seen in the figure 3, Netflix has produced by far the most original TV Shows in the market. The second is Amazon Prime and the third is Hulu. However, Disney+ is also worth mentioning as they are a new service and they have already produced 17 originals. If value creation is only seen by original content creation Netflix is definitely offering the number one service in the market. Figure 3: Original TV shows by platform (Wheelwright, 2020) 3.4.3 Availability (offline, devices) In Table 3 is the availability for the different streaming platforms. The sources for the table are the streaming platforms’ own websites. My original hypotheses was that the TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
25
newer ones will be available for less devices, but as it can be seen almost every one of
them is offering the same devices.
For Netflix and Amazon Prime the Set-Top Boxes and Blu-ray Players are available as
well, which can have some advantages for them, but besides that none of the companies
offers something unique.
Name of Android iOS Windows PlayStation Xbox Smart Offline Set- Blu-ray
the TV (download) Top Players
streaming Boxes
platform
Netflix x x x x x x x x x
Disney+ x x x x x x x
HBO x x x x x x x
(Max)
Hulu x x x x x x x
Amazon x x x x x x x x x
Prime
Youtube x x x x x
TV
Table 3: Available devices for each streaming service
3.4.4 Employee satisfaction
For this subchapter the idea was to gather the reviews for every company from
Glassdoor, as for creating value, happy employees are a key. Also the conscious
customers tend to use services where they know that the employees are satisfied.
In Table 4 are the results. All of them tends to have approximately the same results, HBO
has a lesser overall rating. Based on employee reviews all of these companies could be
a good choice, none of them seems to be outstandingly good or unacceptably bad.
Name of the streaming Stars (/5) Recommend Approve Number
platform to a friend of CEO of
reviews
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló26 Netflix 4,1 75% 90% 1351 Disney+ 4 71% 91% 86 HBO 3,7 65% 83% 654 Hulu 3,9 73% 89% 591 Amazon 3,8 74% 82% 72527 Youtube 4,3 84% 86% 500 Table 4: Employee review for the streaming services 3.5 Conclusion The streaming industry on the global level has numerous companies, thus Netflix is no longer operating at a Blue Ocean. Based on the analysed aspects in this chapter Netflix could still be considered as a forerunner on the global market. Netflix’s advantage to the customers is the content offered and created by Netflix and the fact that Netflix is reachable from a wide range of devices. Netflix also offers a unique company culture and employees are satisfied to work there. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
27 4 VALUE FOR USERS In this part the value creation of Netflix and its competitors is being assessed as well, but from the Hungarian customers point of view, based on the survey results. 4.1 Method This survey was shared on different social media platforms. It was shared on my own social media accounts, therefore the user group is filtered to Hungarians so the survey will not hold the criteria of representativeness. The goal with the survey was to get some insights about what Hungarian customers think about Netflix. The survey was conducted in hungarian language, the exact questions are found in the appendix, with the translations. 4.2 Analysis of the survey The survey was answered by 217 people. 171 of the surveyees were female and 46 were male. Based on the results, the survey gives the point of view of Hungarian young- adult females. Figure 4: Distribution of participants’ sex For the age there were five categories available. There were 7 people, who were under 18 years old. 128 of the participants were 19-24 years old, and 66 were between 25 and 35 years old. 9 people were 36-50 and 7 of them were over 51 years old. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
28 Figure 5: Distribution of participants’ age From the participants 184 people have responded that they are using Netflix. 5,9% of these users have started using Netflix in 2016, which was the year Netflix started its operations in Hungary. 40,9% of the participants registered between 2017 and 2019 and 53,2% of the users since 2020. The reason behind the 2020 numbers could be the lockdowns and the Covid-19, but it is showing that Netflix’s popularity has grown during the years. 94 people have answered that they are using other streaming platforms, from Figure 6 shows that besides Netflix, HBO Go was the most frequent answer. Figure 6: Other streaming platforms used by participants TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
29
122 participants are only using Netflix.They have answered why did they choose Netflix
in particular, the most frequent answers were the price, the quantity of the movies and
series, the quantity of hungarian subtitles / dubbings and the movies created by Netflix.
In Figure 6 it is showing, that the most important factor was the quantity of movies and
series and the quantity of Netflix productions.
Movies produced by Netflix
Hungarian subtitles / dubbing
Quantity of Movies and Series
Price
0 20 40 60 80 100 120
Figure 7: Main reasons participants have chosen Netflix
There was a question for the participants who use Netflix and another platform asking
which one do they prefer. It was an open question, the exact question can be found in
the Appendix as question 8. 87 people responded to that, from which 62 people
answered that they prefer Netflix, and 8 participants answered that it depends or they
equally like Netflix and the others.
For the open question ”What do you like about Netflix?” the participants gave the
following answers:
Category Answers
Content • Quality and quantity of movies
produced by Netflix
• Quantity of hungarian dubbing
• Trailers
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló30
Video player / Website • The recommendation algorithm
• Design
• Ad-free
• Episodes starting automatically
and Netflix remembers where the
users have stopped watching a
movie / series
• The My list feature
• Video player works well without
crashes
• Easy to use
• Skip intro feature
• Different users can use it and have
their own lists and viewing history
• Preview videos can be turned off
on the main site
• Movies can be downloaded
• The 10 second forward / rewind
button on the player
• Compression algorithm (high
quality video with lower bandwith
availabe)
Other • Notifications
• Can be used on mobile phones /
SmartTV
• Price / Family price package
Table 5: Pros of Netflix according to users
The last question was about what Netflix could do to improve its services. The answers
were the following:
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló31
Category Answer
Content • Offering the same selection as in
the US version (in Hungary less
movie is available)
• Improving quality of movies
• More hungarian subtitle / dubbing
(this was the most frequent
answer)
• Trailers could contain less spoiler
• Less political correct content
• Improve quality of subtitles
Video Player / Website • Improving the interface
• New rating system
• Improving search engine, more
filtering option
• Work better in every browser
• Creating a sleep mode option
• Allow users to create more lists
Other • Video quality could be good in
every pricing plan
• Less expensive
Table 6: Improvement suggestions from survey participants
4.3 Conclusions of the survey
According to the survey Netflix is the most popular option among the participants and
from Netflix’s competitors HBO Go is the other widely used streaming platform.
According to the survey the answerers who subscribe to more than one provider, prefer
usually Netflix, because of its price, the range of selection and the quantity of movies
available with Hungarian subtitles and dubbing.
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló32 Based on the answers, Netflix has more advantages than disadvantages based on the results Netflix seem to be creating value and offering valuable services to its users. 4.4 Value Proposition Canvas The proposition canvas has two parts, the first is the customer profile and the second is the value map. Part of the customer profile is the customer jobs, pains and gains. The value map is the answer for the customer profile, it consists of the product and services a company is offering, and their pain relievers and gain creators. (Osterwalder, et al., 2014) The canvas is created by the author of the Thesis based on the author’s own knowledge and experience and the answers of the survey, so it reflects the opinion of Hungarian young-adult women about Netflix’s value proposition. 4.4.1 Customer Jobs and Netflix’s products and services For the customer profile it is needed, to decide which customer jobs a customer wants to fulfill, and to get to know the customer gains and pains (Osterwalder, Pigneur, Bernarda, Smith, & Papadakos, 2014.) The products and services are the answer from a company to the customer jobs specified. A customer job can be functional, when the customer is trying to perform or complete a specific task. (Osterwalder, et al., 2014) Functional jobs, in this case, are to find good movies to watch online. Also to have a good recommendation system and to be able to access the content on many devices and to be able to download the movies for watching them offline later. From this functional jobs Netflix is offering all of these as services. A customer job can also be social, to look good or gain power or status. (Osterwalder, et al., 2014) In this case a social customer job could be to get to know the popular movies. As Netflix is offering popcultural productions, customers can use it to look good, to know the ”important” and ”cool” movies or TV shows, also to be able to bond with their friends or to look movies together. Another type of customer jobs are the personal/emotional jobs, which means that the customer is seeking an emotional state, for example feeling good or secure. One personal customer job is to enjoy themselves while watching movies whenever the TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
33
customers want. (Osterwalder, et al., 2014) As Netflix is offering experiences with its
movies, the customers can feel better after a movie watched on the platform.
The last kind of customer jobs are the supporting jobs, which arise in different roles. One
can be the cocreator of value, which are reviewing or giving feedback for a service, and
this is an existing job at the streaming platforms. Customers want to be able to review
the movies they have watched. Another role is the so-called transferrer of value, which
are related to the end of a value proposition’s life cycle, for example canceling
subscription. (Osterwalder, et al., 2014) At Netflix this is present as cancelling the
monthly subscriptions, also the reviewing is an existing service. However, at Netflix the
customer is only able to say whether they have liked or not the movie, in the survey
improvement suggestions there were several answers about improving the rating system
as well.
To summarize the customer jobs wanted at Netflix are the following, with their
importances in the parentheses:
• watch movies online (Important)
• searching movies (Important)
• rating movies (Important)
• Saving them into personal list (Important)
• Having relevant recommendations (Important)
• Reach content on a lot of devices (Important)
• Download content (Important)
• get to know the important movies (Insignificant)
• bond with the friends through movies (Insignificant)
• enjoy themselves while watching movies / feel better after (Important)
• cancel subscriptions (Important)
4.4.2 Customer Pains and Pain Relievers
”Customer pains describe anything that annoys your customers before, during and after
trying to get a job done or simply prevents them from getting a job done. Pains also
describe risks, that is potential bad outcomes, related to getting a job done badly or not
at all.” (Osterwalder, et al., 2014)
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló34
Customer pains are also described in more groups, they can be either undesired
outcomes, or obstacles or risks.
The undesired outcomes are in the case of video streaming for example that the video
player works badly (crashes, stops unexpectedly etc.). Some undesired characteristics
could be for example that the customers need high quality internet to watch the movies
online.
For these concerns above the pain relievers from Netflix are the following ones. The
video players are easy to manage with only a few buttons, and a help center available
with a high number of existing answers for issues. For the concern of needing high speed
internet, the answer from Netflix is the option of downloading movies and watching them
offline later.
Obstacles are the pains that are preventing the customers from starting with a job. This
can be for example if a customer is not sure that a streaming platform is suitable for their
needs. Netflix’s answer for this obstacle is to offer a one month free subscription, so
customers can try out Netflix’s services.
The third type of pain is a risk, which lists everything that could go wrong. For example
if a customer is afraid to pay with credit card online, because of security issues could
happen. Netflix’s answer for that pain is the option to pay with PayPal or gift cards
purchased in shops.
To summarize the customer pains are the following, with their severities in the
parentheses:
• video player is not working (Extreme)
• Lack of high speed internet (Extreme)
• Customer is not sure if streaming platforms are suitable for them (Moderate)
• Customer does not want to pay with credit card (Moderate)
• Not being able to find good enough movies (Extreme)
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló35 4.4.3 Customer Gains and Gain Creators ”Gains describe the outcomes and benefits your customers want. Some gains are required, expected or desired by customers.” (Osterwalder, et al., 2014) Required gains from a streaming platform are for example, that movies can be played, searched and rate. It is possible to subscribe, unsubscribe, be available to make payment in different ways, change language, change users. The expected gains are the ones that the customers are expecting from a solution, but the solution would work without these gains as well. Given this case expected gains are to reach the platform from different devices, to have a high video quality, be ad-free, have an easy interface. Netflix offers almost all of those, except the high video quality, which is only available in a higher price plan. Desired gains are what go beyond even the expected gains, but customers would love to have it. Desired gains from a streaming platform are relevant recommendations. Desired gain could be also to have a wide range of movies available, or to have a wide range of movies available with Hungarian subtitles/dubbing. Netflix is using machine learning based recommendations to the users based on their previous watching history and ratings. To summarize the customer gains are the following, with their relevances in the parentheses: • Movies can be played (Essential) • Movies can be searched (Essential) • Subscribe / Unsubscribe (Essential) • Make a payment (Essential) • Change language / users (Essential) • Reaching from different devices (Nice to have) • High video quality (Nice to have) • Ad-free (Nice to have) • Easy interface (Nice to have) • Relevant recommendations (Nice to have) • Wide range of movies available • Wide range of movies available with Hungarian subtitles and dubbings TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
36 Netflix is responding to the customer jobs, gains and pains, therefore Netflix is creating value for the customers. Picture 2: Customer Profile visualized. Template from www.strategyzer.com TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
37 Picture 3: Value Map of Netflix visualized. Template from www.strategyzer.com TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
38 5 CONCLUSION Netflix started as a DVD rental company in the US and turned itself into a worldwide known brand. Netflix managed to grow measurably during the COVID-19 pandemic as well. During the last few years Netflix got some competitors, Disney+ seems to be the biggest one of them. As more and more streaming platforms are starting and the market is fragmenting the future of streaming platforms seems questionable. My prediction is that some of the bigger companies will survive and share the market among themselves or that the companies will start collaborating. The research work used in this thesis was the survey. The questions were closed and open ones as well, it was easy to aggregate the answers and the open questions gave good insight into the opinion of Netflix’s users, also they have reflected my findings on the Value Canvas. Some following research topics after my research could be the future of Netflix or streaming in general. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
39 REFERENCES AboutVideoEditing, n.d. About VideoEditing. [Online] Available at: https://www.aboutvideoediting.com/articles/web-streaming-video.shtml [Accessed 07 03 2021]. Anon., 2020. Blackfiskers. [Online] Available at: https://www.blackfiskers.com/post/how-netflix-disrupted-tv-industry-using- the-blue-ocean-strategy [Accessed 27 03 2021]. Anon., 2020. yahoo!finance. [Online] Available at: https://finance.yahoo.com/news/walt-disney-company-reports-fourth- 210500682.html [Accessed 29 04 2021]. Anon., 2021. macrotrends. [Online] Available at: https://www.macrotrends.net/stocks/charts/NFLX/netflix/revenue [Accessed 29 04 2021]. Beers, B., 2020. Investopedia. [Online] Available at: https://www.investopedia.com/articles/investing/062515/how-netflix-pays- movie-and-tv-show-licensing.asp [Accessed 12 03 2021]. Callaham, J., 2021a. [Online] Available at: https://www.androidauthority.com/disney-plus-movies-tv-shows-1040529/ [Accessed 27 03 2021]. Callaham, J., 2021b. Android Authority. [Online] Available at: https://www.androidauthority.com/hbo-max-movies-tv-shows-1123768/ [Accessed 27 03 2021]. Curry, D., 2021. BusinessofApps. [Online] Available at: https://www.businessofapps.com/data/hulu-statistics/ [Accessed 02 04 2021]. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
40 Dean, B., 2021a. Backlinko. [Online] Available at: https://backlinko.com/netflix-users Dean, B., 2021b. Backlinko. [Online] Available at: https://backlinko.com/amazon-prime-users [Hozzáférés dátuma: 29 04 2021]. Duffy, K., 2021. Insider. [Online] Available at: https://www.businessinsider.com/disney-plus-100-million-subscribers-16- months-launching-netflix-2021-3 [Accessed 27 03 2021]. Easley, R. F., Guo, H. & Kraemer, J., 2016. From Net Neutrality to Data Neutrality. Information Systems Research, 2(29), pp. 253-272. Fingas, J., 2019. engadget. [Online] Available at: https://www.engadget.com/2019-07-21-netflix-sag-aftra- deal.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guc e_referrer_sig=AQAAAAq2- 7gnNzhYkOtgiactphT5s1ojQJtpA9qwhOp9i6fD9d6hcmsv4PD3CHIQnWv3aGGXdvWx 0UKpTHTJRmhydedt05EZPHPtVdhTLlWzY2ka24 [Accessed 26 03 2021]. Fontinelle, A., 2003. Investopedia. [Online] Available at: https://www.investopedia.com/terms/s/shareholder.asp [Accessed 12 03 2021]. Frankenfield, J., 2021. Investopedia. [Online] Available at: https://www.investopedia.com/terms/c/churnrate.asp [Accessed 12 03 2021]. Kim, C. & Mauborgne, R., 2021. Blue Ocean Strategy. [Online] Available at: https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/ [Accessed 27 03 2021]. McCord, P., 2014. Harvard Business Review. [Online] Available at: https://hbr.org/2014/01/how-netflix-reinvented-hr [Accessed 26 03 2021]. TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Rebeka Csalló
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