In this final paper, my group and I use SWOT analysis to understand the problems that Netflix is facing in its business strategy and uncover how to combat these issues. We propose solutions based on our analysis to give Netflix a competitive advantage.

1. Michigan State University
Increasing Netflix’s Revenue
Issue, Analysis, and Recommendation
Team 4
MGT 409, Section 742
Professor Micelli
April 17, 2022

2. Team 4
MGT 409
Executive Summary:
Netflix is a top, global media company that provides its consumers with access to
premium and original entertainment. The company has grown to set new standards in the world
of streaming. The platform provides subscribers with endless entertainment between movies and
television shows. Its overall success has stemmed from its binge-worthy original content and its
pricing strategy. Additionally, Netflix uses localization to meet the demand conditions in
different regions. By producing original content and providing different movies and television
shows in different countries, Netflix has learned to adapt to the wants and needs of niche
audiences. This, along with other strategies, has differentiated them from other streaming
services in the market and led them to be the largest streaming service in the world. Furthermore,
Netflix has remained the top provider by constantly changing the content provided, and by
letting the customers know when they will be removing or adding shows and movies. With its
wide range of genres, Netflix gives many options that reach a variety of audiences.
While growth remains a top priority for the company, the growing market of streaming
services has challenged Netflix to change its highly imitable strategy. In an attempt to create and
retain content to remain competitive with other services, Netflix feels pressured to increase
subscription prices to its consumer base. The decision to increase its prices in recent years has
slowed the company’s growth at an increasing rate. Specifically, within the first quarter of 2022,
the company saw an average growth of 2.5 million subscribers, compared to 4 million
subscribers in the first quarter of 2021 (Richter). While the creation of original, premium content
and the retention of different production titles is important to Netflix and its consumers,
increasing subscription prices has not been a favorable decision. To retain its current customer
base, enhance the growth of new subscriptions, and continue to provide premium streaming
2

3. Team 4
MGT 409
content, Netflix must develop new, differentiated strategies that allow them to reduce consumer
subscription prices.
We recommend three different solutions that we feel will combat the consumer pricing
strategy that Netflix faces. Our first recommendation is to add advertisements to the homepage
of Netflix. The inclusion of advertisements will allow Netflix to fund its studio original content,
retain other production titles, and maintain consumer subscription prices. Our second additional
strategy is adding a live streaming option. Other competitive streaming services offer the option
to purchase a live television package along with the purchase of all regular subscription titles.
We would like to do something a little different, with Netflix as the largest streaming service and
creating the most original content. What we would like to do is allow customers to pay a higher
monthly fee and have access to watch Netflix Original TV shows and movies at an earlier date
live before they come out. While this option would be more costly to the consumer, we believe
the wealthier subscribers would pay the additional fee to watch their favorite tv shows and
movies earlier. This would allow them to remain competitive as well as increase their overall
differentiation strategy. Our third and final solution to combat competitive challenges is to offer
mobile-only subscription options with limited shows and movies in impoverished countries with
more diverse language options. With a lot of streaming occurring more and more on mobile
devices, releasing a mobile-only option at a reduced price from typical television-based
subscriptions, Netflix could enter a new niche market that its competitors haven’t experimented
with before.
Each solution described not only combats Netflix’s current pricing challenge but also
builds upon the platform's overall growth. By entering new markets and reaching new audiences,
3

4. Team 4
MGT 409
Netflix will continue to set new standards in innovation. The streaming giant will be able to
remain a top competitor in today's entertainment world.
Issue Statement:
Netflix was one of the world’s first streaming services. They started by shipping movies
via mailbox to customers. As discs became obsolete, Netflix needed to change its product to
better-fit customer needs. Eventually, they looked to streaming as an overall solution. Streaming
services have now taken off and become a huge part of how people watch their favorite TV and
movie entertainment. How will Netflix try to find ways to maintain its top spot in the streaming
market and continue to shift the paradigm of streaming innovation? That is the question the
company is trying to answer as it combats these industry issues.
The first issue is that the market for streaming services has become saturated. As Netflix
has moved into the maturity stage of the product life cycle, it has to find a way to differentiate
itself from the competition. Low costs, which started the platform's growth success, are a key
factor in these issues. But, the constant addition of new streaming services in the market has
forced Netflix to reconsider its pricing strategy as well as title retention to specific TV and
Movies shows. By putting these price demands on consumers, Netflix found itself growing its
subscription services as well as retaining current users. This leaves them in a tough strategic and
tactical position.
The increasing competition from other streaming services finds Netflix also having to pay
more money to produce their own Netflix Originals. Each movie and show that Netflix produces
costs a significant amount of money, causing Netflix to plateau in the number of new subscribers
it creates. Recent data from 2021 shows that Netflix currently spends 46.5% of its content budget
4

5. Team 4
MGT 409
of $18.92 billion on originals (Lebow). This means just under $9 billion is funded towards
originals. If Netflix can not find a way to continue gaining and retaining customers, they will be
unable to fulfill the cost to produce new original content as well as retain other production titles.
This will likely result in a loss of customers to other streaming services that offer a wider array
of products and services.
Currently, Netflix offers three different types of plans. The first plan allows for one
streamer to be watching at the same time in standard definition. The second plan allows for two
streamers to be watching at the same time in high definition. The third plan allows for four
streamers to be watching at the same time in HD and 4k Ultra Hd. The plans do not account for
specific customization or product differentiation. Many customers find that they only want to
watch a select couple of shows and movies and find it hard to pay full price for the titles they are
not interested in consuming.
Overall, Netflix is faced with different issues. The first issue is the loss of viewers to
other competitors due to the lack of differentiation within their platform. Secondly, Netflix’s
recent price increases are driving away both current and potential consumers. If Netflix continues
to make its customers bear price increases for its growing content library, the company will fail
to retain a reputable share in the growing streaming market.
Analysis:
As we analyze the firm to give the best recommendations, we will look closely at external
and internal factors that are affecting Netflix’s strategies, as well as the international strategy
they are pursuing. Utilizing these tools to better understand the company as a whole, relative to
5

6. Team 4
MGT 409
the industry, allows us to gather all of the necessary information so that we can ensure continued
growth and success for Netflix.
Netflix has grown significantly due to the strengths and competitive advantage that they
have built over the years as a leading streaming platform. One helpful tool that is very commonly
used by firms is SWOT analysis, which is “a framework for analyzing a company’s internal and
external environments” (Dess). Using SWOT analysis, we can understand the internal factors
which are contributing to the firm’s strengths and weaknesses, while also analyzing the external
factors which influence new opportunities and competitive threats. The purpose of this analysis
is to identify these factors and give direction to Netflix in terms of how to build upon strengths,
overcome weaknesses, capitalize on opportunities presented, and defend the firm from
competitors (Dess). This analysis of the internal and external factors will guide us in our
recommendations as to what Netflix should do to increase revenue and grow within the
competitive environment.
Although we are primarily concerned with giving solutions to the issues within the firm’s
current strategy, it is equally important to identify which aspects of the strategy have led to
growth and success. If we do not understand which tactics have worked for Netflix thus far, we
risk losing these aspects of the brand that set it apart from the competition. Within the context of
the streaming industry, some of Netflix’s greatest strengths that we have identified include large
market share, high brand equity, and the implementation of original films and shows. Netflix’s
large market share and high brand equity are due in part to its first-mover advantage. The firm
pioneered the online streaming industry and has benefited greatly in maintaining its popularity
among consumers, even as the market saturates (Moore). The size and power of the firm within
the industry have allowed the company to introduce movies and series known as “Netflix
6

7. Team 4
MGT 409
Originals.” Original content creation began in 2013 when Netflix released House of Cards,
which was “the first major TV show that ran exclusively on a streaming service” (History.com).
Therefore, in addition to collecting revenue through its streaming services explicitly, Netflix has
made the most out of its original content over the years. In 2018, Icarus was the first Netflix
original to win an Oscar (History.com). The company has profited greatly from the introduction
of original content, however, this strategy is very imitable, as is seen in some of Netflix’s
weaknesses.
To better understand Netflix’s internal environment, it is crucial to look at the weaknesses
of the company that have affected its performance within the industry. The most noticeable
weakness is the imitability of its business strategy. Building upon the idea of the highly saturated
market, we have seen competitors such as Hulu, HBO Max, Amazon Prime Video, Disney Plus,
etc. all take on similar strategies. Although Netflix has been able to remain the dominant player,
it is no secret that other streaming services have been able to easily imitate its business model.
Thus, Netflix has lost the right to stream many popular movies and TV shows because these
content producers have entered the industry. This reveals yet another significant weakness: the
dependence on third-party producers. The increasing popularity of video streaming has exploited
this weakness greatly and caused many producers to let their contracts with Netflix expire. One
memorable example is the loss of Friends from the streaming platform which caused an uproar
in the Netflix community. According to the Hollywood Reporter, WarnerMedia (HBO Max)
outbid Netflix in a battle to secure rights to the popular 90’s show, paying $425 million in total
for five years of streaming. There have been numerous other examples of expired contracts and
loss of third-party content over the years, which has severely hindered the success of the business
model and exposed its weaknesses.
7

8. Team 4
MGT 409
In addition to the internal elements that have influenced Netflix’s strategy, there are also
many external forces acting upon and impacting the success of the firm. Within the external
analysis of the streaming company, we must investigate the opportunities and threats Netflix
faces. In terms of opportunities, we will touch upon one broad opportunity that we have
identified to preface our strategic recommendations. Essentially, new market penetration is the
main opportunity that has the potential to grow the brand. Whether this is reaching new
demographically or geographically segmented markets, there is a great opportunity to diversify
Netflix’s targeted audiences. Now that we have identified the strategic growth opportunity to
access new sectors of the market, we can give specific recommendations to Netflix on how to
accomplish the task of penetrating new markets. The bulk of this investigation resides in the
recommendation and action plan sections.
The final component of SWOT Analysis is the threats that occupy the industry. New
threats are constantly entering the market, especially because Netflix has proven the high
demand for online streaming services. The threat of new entrants and market saturation, as well
as entertainment piracy, jeopardize the success and growth of Netflix. We have previously
identified the imitable business model that Netflix has pursued, which has consequently led to
new streaming platforms entering the market with similarities to its operations. Competition is a
severe external threat that has greatly affected the company’s share within the online streaming
industry and will continue to do so as time goes on. In its fourth-quarter 2021 earnings report,
Netflix admitted that streaming competition is indeed a concern for the company (Sherman).
While the increased competition may be the firm’s largest threat at this point in time, content
piracy— whether it be through illegal streaming services or the usage of other consumers’
accounts—is affecting profit margins every day. It is estimated that Netflix is losing $192 million
8

9. Team 4
MGT 409
in revenue each month from piracy (Perez). Ultimately, this is a threat that should be seriously
considered, on top of the imitations from competitors. Now that we have conducted a thorough
SWOT analysis of the firm, we will go on to analyze the international strategy that Netflix has
pursued to expand its reach across the world.
Netflix’s international strategy consists of global expansion and international market
communication, incorporating cultural similarities, internet accessibilities, consumer affluence,
etc. There are a handful of movies and tv shows originating from different countries and cultures,
and because of a sudden increase of international programs, Netflix is starting to build a record
of non-English word subtitles or speaking titles. For example, Spanish Netflix productions are
huge hits with customers/clients from people not in their country of origin. Having non-English
content on Netflix increases global expansion and the growth of diverse cultural stories. Netflix
was able to add 7.7 million new users outside of Canada and the United States. Statistically, 4.46
million of those new users are originating from Europe, Africa, the Middle East, or EMEA,
regions (Howley). Because of the international market growth of the company, consumers are
truly wanting to utilize Netflix’s content. For example, South Korea’s “Sweet Home” and
Germany’s “Barbarians” are the types of shows that originally drew in those international
consumers. With the use of an international strategy, Netflix uses the knowledge in its primary
markets when adapting to foreign markets. Localization helps Netflix reach niche audiences, and
keeps them coming back for more.
Furthermore, the Q3 subscriber growth was mainly caused by the Asia-Pacific market.
Netflix has uploaded multiple international hits, which resulted in increased engagement and the
growth of expanding ideas, such as the introduction of podcasting. Since competition is more on
the forefront of what Netflix is mostly facing. Due to said competition from other streaming
9

10. Team 4
MGT 409
platforms (HBO Max, Hulu, and Amazon Prime), Netflix decided to expand into podcasting.
This gives their users a wider variety of options when using their streaming services. There may
be customers who do not watch television shows or movies, so having the option to stream
podcasts will reel in customers from various audiences. This is a brand category extension where
Netflix uses its credibility in one category to move into another without having to rebrand.
Without having Netflix rebrand, it still allows customers to construct their own experiences, no
matter what streaming services they decide to utilize. Netflix’s brand itself has a reputation that
puts its name above others. Therefore, when Netflix extends its brand into different categories,
the loyal customers will continue to use the products and services that Netflix will continue to
provide.
With all of this being said, Netflix uses so many different approaches to expand its
platform and localize its brand in many markets. These strategies differentiate Netflix in so many
ways that it leads the other competitors to not even get close to what they have done, such as
producing their original content, instead of using content from third-party streaming services.
There are still many more things that can change the way that Netflix approaches the market, but
as of right now they are the number one leading streaming service in the world, alongside being
the market leader with 200 million global subscribers.
Recommendation:
After conducting our analysis we believe that there are a few things that Netflix can do to
increase the number of subscribers, therefore increasing their revenue. As stated previously,
Netflix’s main issues are the increasing number of competitors in the market and their current
solution of increasing prices for current customers to maintain revenue. We believe that there are
10

11. Team 4
MGT 409
a few solutions that we can take that will increase the number of current subscribers, build on our
reputation, and allow us to not increase the current price that customers are willing to pay.
Our first recommendation is that Netflix can add advertisements to its home page.
Normally, when you are looking for a show on Netflix they advertise their upcoming shows and
movies. While this is effective for current customers finding out what new shows are coming out,
we believe that Netflix can increase their revenue by allowing other companies to advertise their
products during the time spent customers are looking for new shows. Although these ads would
not be run during the actual shows and movies there is the possibility that it will still upset
current subscribers and we could see a loss in current subscribers or a decrease in subscribers
growth annually.
The next recommendation that we believe would best target the issue of maintaining
viewer growth would be to add more diverse languages to shows and movies which would allow
us to expand to even more countries. The benefit of this recommendation would be that we could
expand globally. Along with this recommendation, we also believe that we should add a fourth
plan for Netflix customers. The fourth plan would be a more affordable option that would be for
mobile phones only or a limited plan that only has shows and movies that are directed for their
target audience. These two solutions combined would allow Netflix to strengthen its brand
reputation and allow for an increase in revenue from impoverished countries.
The potential risks of these two options include the difficulties of adding a variety of
languages and shows to our platform that have the desire to be watched in these countries. We
will have to form new marketing groups or partnerships in these countries to figure out what
shows and movies will be popular. If this plan fails it could cost our company hundreds of
thousands of dollars in failed advertising and streaming rights of shows and movies.
11

12. Team 4
MGT 409
Lastly, our final solution would be for Netflix to add a live option for an increased cost in
monthly payments. This option would contain new movie releases being shown live before they
are released on Netflix. With the addition of Netflix Originals being able to be watched before
they are released, customers who have the money to do so would be able to. This increased price
would result in more revenue monthly and would allow customers who are not urgently waiting
for the release of a show or movie to watch it when it releases and continue paying their current
price.
Action Plan:
Our goal is to be able to implement all of the recommendations over the course of the
next year. We will start by reaching out to companies, offering to air their ads on our homepage
during the movie or tv show picking process. We believe that we will be able to implement this
within a few months without losing any customers. Our customers are happy that they can view
their shows and movies without interruptions and with the implementation of ads during the
picking process they will still be able to watch their shows and movies free of disruptions.
The next step will be for us to introduce shows and movies that are popular in
impoverished countries in their native languages. We believe that this will be the longest step to
implement as we will have to find movies that want to be watched in foreign countries. We will
also have to dive deeper into how much money these movies and shows will cost to put on this
fourth plan on Netflix. As a company, we have already offered a variety of television shows and
movies from different countries, but we want to further the selection and allow the customers to
customize their profiles. We want to do crowdsourcing for a few months and see how many
people are interested in this fourth plan. If after three months we see that a revenue increase is
12

13. Team 4
MGT 409
possible through adding customization to our movies through a fourth plan we will slowly add
movies and television shows.
Lastly, we would like to add a fifth plan to Netflix that allows viewers to watch new
releases live before they are released on Netflix. This option will be the quickest to implement as
all we will be doing is releasing new shows and movies early to members that are paying the
increased fee. We do believe that utilizing this option will increase streaming volumes as well.
This option will not be very costly as we just need to spend the money to create the new plan and
add the live watching feature. Our final recommendation comes with the potential to upset
customers who can not afford the more expensive option and do not like the idea of other
streamers being able to view content before them. However, we feel that we have a strong
enough brand that viewers will continue to pay for our service to see our Netflix Originals even
if they have been seen prior by higher paying customers.
Overall, our recommendations have a high potential to increase revenue without having
to increase the cost for all members. These new plans will allow for our brand to continue having
the good reputation that it currently has, while also allowing us to differentiate our product
compared to our competitors. Since we already have a credible brand, when moving into these
next categories and providing these options our customers will continue with their loyalty. Our
plan also allows us to have a low-cost option and movie and tv show options for customers who
do not want to watch American movies and tv shows. This will reach a wider variety of
audiences which will be beneficial in the long run.
Evaluation / Conclusion:
13

14. Team 4
MGT 409
We will measure the success of our recommendations by firstly accounting for total
subscriptions across the entire Netflix platform. Current statistics from Q4 of 2021 show that
Netflix sits at about 221 million paid subscriptions (Statista). We can use these statistics to
compare viewership from the previous year and determine if there is a positive pattern of growth
on the platform. To measure the success of our live TV plus subscription and ad-based
subscription, we can specifically account for how many subscribers signed up for each option.
While there is no current company data to account for growth in the live TV market on the
Netflix platform, the company can look to competitors such as Hulu to compare where the
market value stands in comparison. Looking at Hulu’s statistics, we can verify that its live TV
package sits at 4.3 million current subscriptions (Stoll). If Netflix can average a subscription
count similar to Hulu, the live TV package will measure as successful. The same measurement
can be applied to an ad-based subscription package.
We will follow a similar plan to measure the number of mobile-only subscribers. Since
there is little to no data on mobile-only plans, Netflix will become first-movers within this new
target market. With Netflix’s loyal customer base, we are predicting a first-mover advantage
within this market. Netflix will be able to maintain and grow its brand and reputation by reaching
new audiences with a more affordable subscription. To reference measurable statistics for this
recommendation, the company can explore mobile device statistics to determine a specific
consumer to target. We can look at age, device usage, screen time, etc. These measurements will
be crucial in determining how to market our mobile-only subscriptions.
In terms of financials, another factor that must be measurable to determine the success of
our recommendations is revenue comparison. Netflix currently stands as the top streaming
platform in the world, with $26.7 billion in U.S. revenues (Stoll). While this statistic is positive
14

15. Team 4
MGT 409
when compared to competitors, Netflix must understand that retaining the top spot is a
competition in itself. Therefore, when these recommendations are put in place, comparing the
revenue of the past five years to forecasted revenues for the next five years will be important to
determine if the company's new endeavors are profitable.
A second financial factor that should be considered is the subscription service cost. With
the implementation of ad-based, live, and mobile-only subscriptions, Netflix must determine the
costs in marketing, technology, and overall pricing of its subscription package options. The
company should look to other streaming services to determine their subscription costs with ads,
live TV, etc. The mobile-only subscription price can be negotiated, as it is not currently a part of
the streaming market. Determining these costs will allow the company to recognize in future
years if each subscription package is creating profit for the company.
Additionally, when focusing more on the international implementations of our
recommendation, we must be able to accommodate these strategies to adapt to different markets.
The idea of adding mobile-only subscriptions will not only allow us to reach mobile users but
will also allow us to further reach foreign areas that experience lower incomes. The addition of
increased original content in foreign languages will also help gauge foreign users to the platform.
These two elements that factor into our recommendation can easily measure the success of more
diverse content as well as our mobile-only plan being successful. Success can be measured by
region, class, the number of original foreign titles being watched, etc.
All of the measurements described above are crucial to the retained success of Netflix.
Using past company data in order to forecast the future profitability of the company is necessary
to determine consumer pricing. Comparing company data to other competition is useful for
determining growth and innovation. With these measurements in mind and the success of our
15

16. Team 4
MGT 409
recommendations, we hope to see Netflix grow its profits as well as its consumer market to new
heights.
16

17. Team 4
MGT 409
Works Cited
Carolina, et al. “Netflix SWOT Analysis 2022: SWOT Analysis of Netflix.” Business Strategy
Hub, 27 Feb. 2022,
https://bstrategyhub.com/swot-analysis-of-netflix-2019-netflix-swot-analysis/.
​
​
Dess, Gregory G., et al. Strategic Management: Text & Cases. McGraw-Hill Education, 2021.
Goldberg, Lesley. “'Friends' Officially Leaving Netflix for WarnerMedia's Streaming Service.”
The Hollywood Reporter, The Hollywood Reporter, 9 July 2019,
https://www.hollywoodreporter.com/tv/tv-news/friends-officially-leaving-netflix-warner
medias-streaming-service-1223151/.
“‘House of Cards," Netflix's First Original Series, Starts Streaming.” History.com, A&E
Television Networks, 1 Dec. 2020,
https://www.history.com/this-day-in-history/house-of-cards-netflix-first-original-series-st
arts-streaming.
“How Netflix Expanded to 190 Countries in 7 Years.” Harvard Business Review, 30 Aug. 2021,
https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-in-7-years.
Howley, Daniel. “How Netflix's overseas expansion fueled its explosive growth in subscribers.”
Yahoo Finance, 20 January 2021,
https://www.yahoo.com/video/netflix-international-expansion-fueled-subscriber-growth-2
25708669.html.
17

18. Team 4
MGT 409
Moore, Amelia. “Netflix's Generic Strategy, Business Model & Intensive Growth Strategies.”
Rancord Society, 10 Nov. 2019,
https://www.rancord.org/netflix-business-model-generic-strategy-intensive-growth-strate
gies-competitive-advantage.
Perez, Sarah. “Netflix May Be Losing $192m per Month from Piracy, Cord Cutting Study
Claims.” TechCrunch, TechCrunch, 27 Feb. 2019,
https://techcrunch.com/2019/02/27/netflix-may-be-losing-192m-per-month-from-piracy-c
ord-cutting-study-claims/.
Richter, Felix. “Infographic: Netflix Sees Slowest Growth in Years Following Pandemic Spurt.”
Statista Infographics, 21 Jan. 2022,
https://www.statista.com/chart/21465/global-paid-net-subscriber-additions-by-netflix/
https://www.emarketer.com/content/netflix-throws-itself-further-original-content.
Sherman, Alex. “Netflix Quietly Admits Streaming Competition Is Eating into Growth.” CNBC,
CNBC, 20 Jan. 2022,
https://www.cnbc.com/2022/01/20/netflix-quietly-admits-streaming-competition-is-eating
-into-growth.html.
Weerasundara, Ruwan. “See What's next... Overview of Netflix Strategy.” LinkedIn, LinkedIn, 8
Aug. 2021,
https://www.linkedin.com/pulse/see-whats-nextoverview-netflix-strategy-ruwan-weerasu
ndara/.
18

19. Team 4
MGT 409
Stoll, Julia. “Netflix: revenue in 2021.” Statista, 21 February 2022,
https://www.statista.com/statistics/272545/annual-revenue-of-netflix/.
Stoll, Julia. “Subscribers to selected vMVPD services in the US 2021.” Statista, 30 March 2022,
https://www.statista.com/statistics/805276/mvpd-service-subscriber-us/.
Lebow, Sara. “Netflix throws itself further into original content - Insider Intelligence Trends,
Forecasts & Statistics.” eMarketer, 3 November
2021,https://www.emarketer.com/content/netflix-throws-itself-further-original-content.
19