The recent announcement made by
Netflix in agreement with Comcast, about directly interconnecting their
networks, have gathered reactions and anger from organized social groups and
other companies. And I believe that it is also a great time to enlighten our
audience about the “interconnection” thing.
Critics viewed it as a direct threat
to the principles of net neutrality, which had prohibited internet providers
from prioritizing content. But these responses may underscore the lack of
technical understanding of how internet
infrastructure works. Internet is not
actually a cloud that oversee the technology world. It is a collection of networks
that technically meet, conjoin or interconnect and exchange traffic based on
negotiated business arrangements known as peering or transit. And this is the type of agreement sealed by
Netflix and Comcast. Interconnection is not the same as prioritizing content
over other content. That is why their
press release states “Netflix receives no preferential network treatment under
the multi-year agreement.”
Netflix Business Model
Netflix started in 1997 by offering
online movie rental. In 1999, Netflix’ strategy of introducing a subscription
service and offering unlimited video rental for one low monthly subscription
fee was quite a good job for it was able to acquire a stable share with 857,000 subscribers in 2002 to 4.2 million subscribers in 2005,
which eventually urged the company to stream its video content to directly
serve its market.
Sources of Revenue
Sources of Revenue
Netflix generate income from
subscribers through membership. It is very popular in its “no commitments,
cancel online anytime” policy. In economic perspective, cost is reduced when
there’s an increase in the number of production output. Thus, Netflix registered
an increase in income when there’s an increase in the number of subscribers. To
achieve an increase in the number of subscribers, Netflix invest more in streaming
content to keep its customer delighted, and also to differentiate itself from
the competition.
Customer base
Customer base
Netflix have 40 million subscribers (globally)
in 2013 which is approximately 33% higher than the prior year, and is expected
to increase more. It is said that approximately 27% of premium cable
subscribers are also streaming video customers. Netflix service 41 countries; the
U.S., Latin America, Carribean, United Kingdom, Ireland, Nordics (Northern Europe
and North Atlantic), and in Netherland last 2013.
Product and Services
Product and Services
With the objective for continuous service
improvements, from mere movie rental to movie streaming, Netflix partners
with various network for media infrastructure and streaming platform, and Netflix
movies can now be accessed on a broad spectrum of devices such as PS3, Wii, Xbox, PC, mobile, tablet and more. Its improved
interface and more customer-controlled viewing keep Netflix on top. Netflix also offer Free Trial for 1 month!
Details of their financing
Details of their financing
Netflix reported a net income of $112,403 thousands for 12 months ended December 2013 and is spending for continuous improvement
for international streaming content and platform. The installation of streaming infrastructure
in other region for expansion further conclude that Netflix is financially well
and their model is keeping them as the world’s leading internet television network.
Pricing Model
Pricing Model
Netflix streaming plan
costs $7.99 a month (which is almost half price of a movie ticket in New York),
which allow user to watch video on up to 2 screens at once, including TVs and
mobile devices, while a $11.99 a month allows user up to four (4) shows at
once.
Any move to offer a
cheaper service tier, may be surprising to some analyst who expect that the company
will raise prices to eventually pay for the service content.
Human Needs fix by Netflix
Human Needs fix by Netflix
·
Netflix keep us away
from unbearable cold; it provide us means to enjoy movies and manifest our love
and closeness with our families and friends. It also boost our self-esteem and
confidence; being privileged to choose and view movie on our most convenient
time wherever we may be.
Proof of success or failure
Proof of success or failure
This article aims to
enlighten the audience on internet and peering works. Also, It further describe
Netflix’ successful strategy to achieve continuous increase in the number of
subscribers. These data can also be
found in Netflix site, and for further information on net neutrality issue, you
may reference the Federal Appeals Court decision.