Netflix faced challenges in 2022 as it encountered strong competition from rivals like Disney and Amazon Prime, while also dealing with subscriber losses and a drop in share value. However, the company has successfully turned the tide in recent times.
One crucial factor in Netflix’s rebound was its crackdown on password sharing, which discouraged the use of a single password by multiple households, prompting many to become legitimate subscribers.
However, the company quickly rebounded. In the third quarter of 2023, Netflix added 8.8 million new subscribers, following a gain of 5.9 million in the previous quarter, bringing its total global subscribers to 247.2 million.
Netflix also introduced a membership option that includes occasional advertisements at a reduced monthly fee, which has gained popularity, with around 30% of new members opting for it.
Beyond these recent initiatives, Netflix’s success is underpinned by its deep understanding of the global nature of the streaming industry. Over 70% of its subscribers come from outside the United States, and the company has heavily invested in producing content from various countries, such as South Korea and the UK. This localized content attracts local subscribers and resonates with international audiences.
Moreover, Netflix’s foreign language series, like “Lupin” and “Money Heist,” have found significant popularity abroad, and its South Korean dramas, including “Squid Game,” have traveled well internationally, motivating additional investments in these markets.
While Netflix is often perceived as operating a “vertical integration model,” it primarily relies on third-party service infrastructure for its media delivery, having moved away from operating its own data centers in 2016. This outsourcing approach allows Netflix to focus on its core mission of engaging members across markets.
Netflix’s “originals” are produced by external film and TV producers, giving the company flexibility in a rapidly evolving industry. In contrast, competitors like Disney+ are more reliant on in-house production.
Netflix’s one potential weakness is that it lacks a large enterprise ecosystem like Amazon or Apple, which can achieve economies of scale through the integration of various business operations.
Nonetheless, Netflix’s global outlook, outsourcing model, and investment in diverse content position it well to navigate the challenges and opportunities in the streaming industry, allowing it to thrive as the market leader.