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.