In the United States, the mass media industry has turned into an oligopolistic market. Ranging from newspapers to television to movies; there are a few firms that own the majority of these outlets. The mass media domain is characterized by very little competition because there is not much to choose from. A huge proportion of America’s media outlets are owned by only four organizations; Charter Communications, Walt Disney, Comcast, and AT&T. Recently, Netflix and Amazon have joined the mass media market due to the streaming media’s incline. Of all the streaming networks in the mass media industry, none is quite as popular with viewers as Netflix. This paper explores the undertakings of Netflix in its oligopolistic market.
On April 2022, Netflix revealed that it had lost 200,000 subscribers within the initial quarter of the year. Moreover, the company reports that it anticipates that there will be an additional loss of more than 1.5 million subscribers in the oncoming quarter (GlobalData, 2022). The incline in inflation, as well as growth in the number of competitors within the streaming domain, has led to the company losing its subscribers. Within the same month, Netflix disclosed that its share price had declined to roughly 35%. Netflix attributes its losses to a decreased economic growth rate, elevated levels of inflation, along with geopolitical hostilities like Ukraine being invaded by Russia, which have hindered its progress.
On a positive note, Netflix has been fortunate enough not to require the federal government to bail it out or aid it in restructuring. In 2021, Netflix announced that it had attained its financial milestone, thus rendering its need to borrow money to be obsolete. Within ten years the company was heavily in debt because it had borrowed more than 16 billion dollars to cater to its need to procure more content (Lee, 2021). The huge debt was necessary because it had not generated enough revenue to pay for its business and entertainment production costs. Fortunately, in the last quarter of the year, the firm generated a profit of 542 million dollars with 6.64 billion dollars in sales, which aided significantly in offsetting some of its debt.
Netflix avoids market failure by placing subscriber satisfaction, as its number one priority via the use of algorithms, recommendation software, noncommercial streaming, showing original Netflix series, as well as expanding globally (Martins & Riyanto, 2020). Moreover, Netflix manages to stay afloat alongside its competitors by ensuring that its content streaming prices are minimal, so that its profit margins are not adversely affected. Using the economics of scale to its favor, Netflix can easily ward off any new competitors by significantly lowering its subscription rates.
Conclusively, Netflix as well as other streaming networks do not sternly adhere to primary macroeconomic principles. This is owing to the fact that an electronic service or product cannot be limited in terms of duplication. Generally, demand is based on the attention and interest of viewers. The proportion of interested customers determines the cost of the service that is in turn dependent on the quality of content.
References
GlobalData. (2022, April). Netflix reports loss of subscribers for the first time in a decade. https://www.globaldata.com/data-insights/entertainment-internet-and-media-movies-and-entertainment-technology-media-and-telecom/netflix-reports-loss-of-subscribers-for-the-first-time-in-a-decade/
Lee, E. (2021, January 19). Netflix will no longer borrow, ending its run of debt (Published 2021). The New York Times – Breaking News, US News, World News and Videos. https://www.nytimes.com/2021/01/19/business/netflix-earnings-debt.html
Martins, M. A. J., & Riyanto, S. (2020). The Effect of User Experience on Customer Satisfaction on Netflix Streaming Services in Indonesia. International Journal of Innovative Science and Research Technology, 5(7), 573-577.
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