Reference no: EM133203639 , Length: Wrod Count: 2000 words.

Assignment: Competition in A Saturation Market

Case: Netflix & Co: Competing in a heavily saturated market

The South Korean survival drama series Squid Game snapped the video on demand provider Netflix out of its funk. After a slump which Netflix blamed on pandemic production delays, it had scored a major hit. About 140 million subscribers watched at least a few minutes of the dystopian thriller. Walmart even began selling Squid Game T-shirts. Netflix's stock soared to record highs. However, in the US and Canada, all this success translated to only 70,000 new customers. Out of the 4.4 million people who signed up for Netflix in the third quarter of 2021, less than 2 per cent came from its largest market, while about 50 per cent came from Asia. This matters for Netflix since the average price people pay in Asia is only $9.60 a month, compared with $14.68 in the US.

Streaming, or watching television online, has reshaped the media industry and the US has led the way with the rise of Netflix - founded as a video rental business in 1997 - over the past decade. But in recent months, streaming sign-ups have dried up. As the US market matures, it has become harder and more expensive to lure even small numbers of new customers. With more than 100 streaming services to choose from, heavy investment is required simply not to lose existing subscribers.

"It was very easy to add subscribers in the early days of streaming, when it's new and you have superfans," commented one media consultant, "but when it starts to mature, how do you really build this business?"

This dynamic was evident in media companies' third-quarter financial results, triggering analyst questions over whether streaming is a good business. In the digital era, subscriber additions have become the biggest driver of stock market valuation for entertainment companies. These groups are spending tens of billions of dollars to provide a steady stream of TV shows and movies to satisfy both audiences and Wall Street. Netflix is set to spend $17 billion on content this year. During the third quarter alone, Netflix released 824 episodes of programming, while streaming services HBO Max released just over 200 and Disney Plus around 150, according to recent market research.

"The truly breakthrough content like Squid Game or The Queen's Gambit ... is the outcrop of Netflix's willingness and ability to just spend, baby, spend on new content," said another media analyst. "These dynamics create a toxic mix of rising capital intensity and lower ROI [return on investment]." Total US streaming video subscriptions are estimated at 241 million in March 2021. A media consultant believes there are "at least" 25 million more US subscribers to be found. But in order to capture them, he argues "media groups need to go "all in" by offering their most popular programming on streaming, not traditional TV."

Task

• Take the perspective of streaming pioneer Netflix. Critically discuss how Netflix can compete in this saturated market.

• Take the perspective of new competitors like Disney Plus (owned by The Walt Disney Company) or HBO Max (owned by WarnerMedia). Critically discuss how new competitors, owned by established media companies, can compete in this saturated market.