Blim vs netflix 2018

Executive Summary

This paper focuses on top 3 competitors- Netflix, Amazon, and Blim and looks at their competitive advantages and weaknesses. Followed by this, we will look at Disney’s unique competitive advantages in Mexico. After this discussion, we will look at recommended strategies that Disney may be currently deploying or should be deploying to compete in Mexico. When we look at the current market demand of Mexico, Netflix leads the pack, followed by Amazon, HULU and Blim. Netflix has a market demand on 74%, Amazon has 9%, HULU is at 7%, followed by Blim. Furthermore, Netflix is also global leader in the SVOD movement. Netflix has a unique mix of non-original content and original content, which has helped gain them international demand for their services. Amazon, also has a large selection of material targeted towards certain populations, not to mention third party subscription services with showtime, HBO, CBS and other channels. HULU also offers similar services to Amazon in this sense. Televisa’s Blim, a local competitor, started out offering their shows on Netflix. Eventually Televisa split off and started their own streaming services. However, recently Blim has made a deal with Amazon to provide their shows on Amazon, signaling their possible demise in Mexico.

Disney has a few competitive advantages, starting with a large library of non-original and original content. Adding to this, Disney is world-wide recognized with world-wide appeal and demand for their material. Given Disney’s traditional business model, starting a SVOD service allows Disney to cut some costs from their cost operations. Adding to this, they have a unique ability to offer multiple kinds of packages regarding theme parks, cruises, ESPN, HULU, and Disney+ services to varying customer demands.

Competitor Analysis and Competitive Strategy

Table of Contents

1. Introduction

2. Assessing Competitors Strengths and Weaknesses

2.1. Netflix

2.2. Amazon

2.3. Televisa’s Blim

3. Disney’s Competitive Advantages

4. Recommended Competitive Strategies

5. Conclusion

6. References

1. Introduction

For this business plan, our group will recommend that Disney should expand its’ streaming services to Mexico. Disney was founded in 1923 and is now one of the world’s largest entertainment and media companies in the world. It owns theme parks, cruise lines, feature films, and television shows. Since 1923, Disney has only grown larger by acquiring companies like ESPN, ABC, Marvel Studios, Pixar, Lucas Films, National Geographic and owning a majority share in HULU (Ho, 2019). Disney will hope to couple their new Disney+ streaming service with HULU and expand them to Mexico.

There are a lot of facts to support Disney+ expansion to Mexico. As far back as 2013, under 40% of the population had internet access. It is projected by 2019, 68% of the country is expected have internet access (Statista Internet Usage, 2019). Furthermore, the SVOD segment in Mexico is predicted to grow to USD $268 million (Statista Video Usage, 2019). A factor that led directly to these outcomes was when Mexico spent USD $300 billion to improve country infrastructure (Diaz, 2013). Keeping these factors in mind, our group believes expanding into Mexico is our client’s best option.

First, this paper will assess strengths and weaknesses of three competitors. Second, we will identify Disney’s competitive advantages. Lastly, we will recommend a competitive strategy for how Disney should proceed into the Mexican maket.

2. Assessing competitors Strengths and Weaknesses

In this section, we will discuss three competitors, two of them international and one local. This paper will analyze strong and weak points for competitors that have already entered the Mexican marketplace. We will look at two international SVOD services- Netflix and Amazon. Lastly, for this section we will look at a local SVOD service- Televisia’s Blim.

2.1. Netflix

Netflix has been a strong company within the United States and internationally. Due to a majority of its’ customers being international, it is clear why they are so popular. Currently Netflix is operating in over 190 countries (Brennan, 2018). This is currently no different in Mexico. According to Parrot Analytics (2019), demand for Netflix is 74% of the SVOD services in Mexico. Based on this high demand for Netflix, it has been difficult and will continue to be difficult for other companies such Amazon and HBO to increase their demand size. High demand for Netflix is attributed to their high selection of both original and non-original content- action and drama titles. Demand for action genre videos is 77% followed by drama which is 67% (Parrot Analytics, 2019).

There is no doubt, Netflix adapted as they expanded. They did not expand all at once, it took them 7 years to do so (Brennan, 2018). Netflix started with adjacent markets and continued to expand to other similar markets as they solidified market shares in those originating countries. Another key strength Netflix acquired over time was adapting their service’s content to different countries (Brennan, 2018). As they expanded to international countries with foreign language, they added adequate subtitles services and even created local regional content language films and tv series. A good example of this, is Netflix’s show Sacred Games filmed in India and spoke in Hindi. Furthermore, as demand for original content continues to grow, so will Netflix’s overall demand.

Netflix’s current primary weakness are other competitors. As popularity of SVOD rise, so will the popularity of other international services like Amazon, HULU, and HBO. Adding to this local SVOD services that are popping up all over the world. A good example of this is happening in India right, with over 35 local SVOD services in operation there (Singh, 2019). International SVOD services combined with local SVOD overtime will chip away at Netflix demand and overall profit margins.

Given Netflix’s vast expansion, they decided to raise rates, which were not popular with customers. So given Netflix’s dominance in the international market, it will be easier for international and local SVOD services to undercut those prices. Currently Netflix still runs their DVD service on top of their streaming services. Netflix expects their DVD rentals and sales to eventually decrease to USD $0; but can be considered an unnecessary cost (Nemcick-Cruz, 2013). Another weakness this section will discuss is Netflix’s over-spending and outbidding to acquire original content or content for other networks (Nemcick-Cruz, 2013). This practice has consistently kept Netflix in the red for several years despite rises in subscribership and revenues. The problem with over-spending on these items is that many of them will only be “one hit wonders”, meaning one day they are popular, but the next day, not so much. It is also important to note two points for Netflix’s weaknesses-1. After Disney pulls their content off Netflix, showcases them on Disney+, Netflix viewership will drop moderately; 2. HULU currently has 7% market demand in Mexico (Parrot Analytics, 2019), and when combined with Disney+ content, could make competitive alternative to Netflix.

2.2. Amazon

Amazon has been around much longer than Netflix, however, their SVOD services are much more recent. Amazon was founded in 1994, starting out in internet retail. Overtime, Amazon continued to grow and expand. Amazon Prime SVOD service is unique because is coupled with other perks such as 2-day shipping, free streaming of movies, tv shows and music, extra cloud storage space, and access to Kindle reading. Currently, Amazon Prime SVOD services share 22% of the market (second place), where Netflix comes in at 43% in the United States (Uenlue, 2019). Despite lagging behind, Amazon Prime has a few competitive advantages.

Unlike Netflix, Amazon Prime uses their own content delivery infrastructure (CDN) all over the world (Uenlue, 2019). CDNs allow Amazon to be able to stream content at powerful speeds to customers. Instead of relying on partnerships to spread their content, Amazon built their own. This allows Amazon to have more control over how they operate their CDNs and servers.

Amazon’s content library is also extensive, having over 20,000 items subscribers can watch for free, buy, rent, and purchase through other connected channels like CBS or HBO (Uenlue, 2019). Amazon also has access to both original and non-original content like HULU, giving them a competitive advantage in overall content being offered.

Followed by Netflix, Amazon seems to have the biggest market demand of 9% in Mexico (Parrot Analytics, 2019). Compared to Netflix’s 74% market demand, that is a huge margin. Disney+/HULU will have to be innovative, if they want to overtake Amazon Prime Video and Netflix. There are a few reasons why Amazon Prime Video lags behind Netflix. In most countries, in order to get Amazon Prime Video, you must be an Amazon Prime member, which include- 2-day shipping, free streaming of music and tv shows, Kindle, Audible and other perks. This is why Amazon charges extra money per year from customers. This leads to another branding problem, that some customers do not know the difference between Amazon Prime Video and Amazon Prime (Shanbhag, 2018). Cost coupled with customer confusion on Amazon Prime Video vs. Amazon Prime is cause for concern. If Amazon wants to truly compete against Netflix in the United States and Mexico, it needs to consider offering Amazon Prime SVOD service separately from their main business of internet retail.

2.3. Televisia’s Blim

Televisa is a media cable giant in Latin America. Televisa’s Blim was launched in 2016 in order to compete with Netflix when they expanded to Mexico. Blim witnessed how Netflix drew people to their platform and convinced many of them to “cut the cord” (Spideo, n.d.). According to Spideo (n.d.), Televisa operates in all of Latin America. When they saw Netflix profitability, Televisa withdrew all content they had on Netflix, and started Blim SVOD, in order to draw subscribership. Unfortunately, not as many locals started subscribing to Blim (Villafañe, 2018). Despite Blim having a plethora of material catering to the local market, there was still a higher demand for Netflix. According to Villafañe, (2018), Blim has struck a deal with Amazon Prime Video to have all of their content played on Amazon. Many believe this is a signaling of Blim coming to an end. It seems that Blim is not able to compete with Netflix in the Mexican market.

3. Disney’s Competitive Advantages

Disney+/HULU have a few competitive advantages. Disney has spent the last decade acquiring other media companies and content. As Ho (2019), points out they have acquired companies like ESPN, ABS, Marvel Studios, Pixar, Lucas Films, National Geographic, 21st Century Fox and a majority of HULU. This is Disney’s primary advantage, because Mexico has already shown a strong demand for Netflix; with the content listed above coupled with HULU, Disney+/HULU could become a major competitor in the Mexican market.

Due to the demand of Disney produced material, people will follow wherever it ends up. Adding to this, Disney will be able to eliminate a lot of costs associated with running a traditional non-online business (Ball, 2019). Instead of selling DVDs, releasing movies in traditional theaters, and making materials available on varying platforms like Netflix (currently); they can put all their content on their Disney+ SVOD. This eliminates costs associated with producing Disney original content like packaging and shipping (Ball , 2019). Netflix is currently going through a similar transition with their DVD services vs. SVOD service.