Netflix is a leading media-service provider operating in more than 190 countries with 148 million subscribers worldwide. Netflix started online DVD rental and sale operations with only 30 employees and 925 titles. In 1999, Netflix started subscription services that allowed its customers to watch unlimited DVDs with One monthly payment. In 2007, the company taken an initiative to move away from its DVD rental business and start streaming services via internet.
The company has 148 million paid subscribers and offering its streaming services in more than 190 countries. In this article we will perform Netflix pestle analysis to find out how political, economic, socio-cultural, environmental, legal and technology factors affect the company.
why not to read SWOT Analysis of Netflix.
Table of Contents
How Political Factors Impact Netflix
The first political factor that poses an immediate effect on Netflix’s usage is a petition filed by AT&T to the Federal Communications Commission. This petition aims to limit the usage of online streaming platforms such as Netflix. If the Communication Commission agrees to this petition then the Congress may pass a law that will increase the price of internet usage and therefore reduce the usage of online streaming platforms, namely Netflix.
The EU has chosen to pass a different law that affects the content of Netflix. This law states that any media content provider within the EU will have to produce at least 30% content that is strictly European in nature. The law further implies that Netflix will be charged the same amount of tax as a traditional media provider, which is 26%. As a result, Netflix users in EU will have to pay a higher price to use the platform.
How Economic Factors Impact Netflix
The primary economic advantage that Netflix enjoys is its competitive pricing model. The price for using Netflix is much lower than other traditional media services, and thus users are more attracted towards using Netflix. However, the currency exchange rates along with tax laws of different countries and states, for example, Chicago has imposed tax on digital media service providers, force Netflix to increase its price for different subscription plans.
Piracy is a serious threat to Netflix. Torrent sites allow it user to freely upload and download tv shows and movies. Not only Netflix but other streaming media providers like Amazon, Hulu, HBO and many more are also dealing with the same issue. Even together they are unable to stop piracy.
How Socio-Cultural Factors Impact Netflix
In both US and UK markets the success of Netflix is primarily owed to the change in media usage patterns of the people. Both countries show a massive surge towards online streaming platforms, mainly Netflix, rather than traditional media services. Almost one third of the UK population has made the switch and US has shown record numbers which has left devastating effects on cable service providers.
Another cultural factor that is affecting Netflix usage is the switch from bigger screens to smartphones and tablets as the primary content watching device. Since traditional cable does not extend its services to such devices, Netflix is becoming the most used streaming platform by users. This number is also facing a constant growth implying that Netflix usage will be on the rise in times to come.
How Technological Factors Impact Netflix
4K television purchases have increased majorly in the US and all over the world as well. To make sure that Netflix users can avail their content in 4K quality, the company has put into place mechanisms that will provide the necessary quality. But the challenge they face right now is ensuring that a huge amount of data is not consumed in order to stream 4k content. Other recent technological developments from Netflix include the new translator rating mechanism.
How Environmental Factors Impact Netflix
All tech companies are expected to take active steps to reduce their carbon footprint. The amount of data centers that Netflix puts to use is huge and thus their need of the hour is to ensure that they cause less damage to the environment. Various environmental groups have petitioned Netflix to use renewable energy to run its data centers, especially in North America.
How Legal Factors Impact Netflix
Netflix was faced with a class action lawsuit regarding PR confusion. This confusion was based on the fact that the company wanted to raise the price of subscription, but they did not clarify as to how it would affect existing customers. Netflix had to also put in place various technical blocks to ensure that their international clients were not using various hacks to stream content meant for other countries. This was done to ensure that they do not face copyright lawsuits from owners of the content on their platform.
