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.

Given Disney+ wide arrangement of friendly tv shows and movies for kids, many households would greatly considering adding Disney+ to their array of SVOD services. According to World Population Review (2019) there are approximately 31,977,542 children between the ages of 0-14 years old. With kid friendly content at a cheaper price than Netflix, many families would consider either switching over to Disney+ or adding Disney+ as a supplement to Netflix.

Unlike other SVOD providers, Disney has the ability to bundle various packages using their parks and recreation/cruises, ESPN/HULU/Disney+ content (Ball, 2019). More specifically, they can offer different types of packages that cater to certain audience groups. For those who love sports and movies, they could pick a bundle that includes ESPN, Netflix, and/or HULU depending on their preference. Furthermore, given these options, it would give Disney a competitive advantage by allowing them attract varying customers to create a solid customer base.

4. Recommend Competitive Strategy

In this section we will discuss various competitive strategies that Disney should use in regards to their upcoming streaming services. First we will start with corporate level strategies and corporate grand strategies. Second, we will look at business level strategies. Lastly, we will look at Porter’s generic strategies and functional level strategies. The unique part of this section, is that Disney’s SVOD service is not in operation currently, and has yet to expand this service to other countries; meaning this is the conversation that has already taken place or currently taking place within Disney right now.

Corporate level strategies look at the “big picture” of how their organization operates and what sectors they operate in (Strategy Levels, 2009). Essentially companies need to have a broader strategy in order to succeed, otherwise there would be no direction. At this level, this is where all decisions related to staffing, equipment and other resources are decided (Strategy Levels, 2009). This is also where diversification is discussed (Strategy Level, 2009). Disney, at the corporate level decided, that they had enough original content, resources and staffing to enter the SVOD market to compete with companies like Netflix and Amazon. Disney is currently in the business of making movies, tv shows, cruise lines, and parks and recreation to spread their brand. Disney’s decision to enter the SVOD market was made at the corporate level in order to compete with SVOD competitors like Netflix, Amazon, and HBO. It can also be argued that Disney foresaw this when they acquired a majority of shares in HULU. The next logical step for Disney was to create their own SVOD services.

The primary corporate grand strategies that Disney is currently undertaking is a growth strategy using diversification into the SVOD market (Strategy Levels, 2009). As mentioned earlier, Disney has been in several different markets, and now is trying to reach even more customers from the comforts of their own home. This is often called conglomerate diversification (Strategy Levels, 2009).

Business level strategies focus on the overall performance (Strategic Levels, 2009). This takes place at the business level, where business level managers have to report numbers accurately to corporate levels, in order for corporate to made accurate decisions (Strategic Levels, 2009). In single-product corporations, both corporate and business level strategies overlap making their strategies united (Strategy Levels, 2019). However, multi-product corporations like Disney operate using strategic business units (SBUs). SBUs are multiple, varying business units within a single corporation to promote a particular service or objective (Strategic Levels, 2009). Essentially these multiple business units are in charge of keeping track of their profitability and reporting them accurately to corporate level. Since Disney is a multi-faceted company, they have experience in creating and operating SBUs to carry out their multiple services and operations.

Porter’s generic strategies include cost leadership, differentiation, and focuses on market niches (Strategic Levels, 2009). Cost leadership strategies aim to reduce cost operations and distributions and producing of products and services. Ultimately, if a company does this effectively, they will be able to offer lower prices within their market. Disney applies this currently by offering deals and packages for their theme parks and cruise lines. Furthermore, they will be implementing further cost leadership by starting their own Disney+ SVOD services. As Ball (2019) points out, Disney+/HULU SVOD services will help Disney cut costs in production of DVDs packaging and shipping costs, and other resources.

Differentiation is simply uniqueness of the service or product you are offering (Strategy Levels, 2009). What is Disney offering that is unique when it comes to Disney+/HULU? Part of Disney’s uniqueness lies in their already current original content and material, which is recognized the world over, particularly among kids. Also as mentioned earlier, Disney acquired Marvel Studios, Lucas Films, ESPN, National Geographic, 21st Century Fox, Pixar Studios, just to name a few (Ho, 2019). Given the extent of current Disney material and plus added acquired material, this puts Disney+ SVOD services as a unique differentiation compared to others in the market. With a steady stream of materials and content, Disney could end up being a competitive business to organizations like Netflix and Amazon.

The third of generic Porter’s strategies is focusing on a market niche (Strategy Levels, 2009). In some sense, Disney is practicing some aspects of this. Disney’s current niche is their original Disney content; however, with their majority acquisition of HULU, and other media and entertainment companies listed above, Disney also seems to be focusing on multiple niches and target customers, from kids, to fans of Marvel Studios, Star Wars, X-Men etc. In this sense, Disney seems to be doing the opposite of focusing on any one particular niche.

Since this is a new market for Disney, it is important that they align their functional level strategies with their business and corporate level strategies. Functional level strategies deal with research, marketing, human resources, finance, production and development (Strategy Levels, 2009). Since entering this new market, Disney needs to re-structure their functional level strategies to support SVOD service by focusing on research, development, marketing, and production. Disney needs to focus on using specialists in the field of SVOD services, advertising, promotions, engineers and market research to further Disney+/HULU (Strategy Levels, 2009). These areas will be important to support appropriately in order to make Disney+/HULU a success within the United States and Mexico.

5. Conclusion

Disney’s expansion to Mexico will be easier for Disney, due to the lack of amount of competitors there. At the same time, Mexico will be a challenging market to enter because Netflix has a majority of market demand there. In short, Netflix will be their primary challenger. Market demand for Netflix in Mexico is 74%. The next highest competition is Amazon and Blim. Amazon is at 9 % market demand followed by HULU and Blim. Each of these competitors have their own unique competitive strengths and weaknesses. Competitive advantages for Disney include amount of original and non-original content Disney owns and possesses, the high market demand for their content with kids, teenagers and young adults, reducing some operations costs of getting movies to theaters and producing individual unit DVDs to for ordering and shipping and their ability to bundle a plethora of options to suit varying demands of customers. Current strategies include diversification, differentiation, cost leadership, utilization of SBUs, and functional level strategies. Ultimately, Disney will have a challenge going up against Netflix, however given their appeal of original and non-original content, Disney could start gaining back some market demand and eventual market share.

6. References

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Villafañe, V. (2018, February 26). Televisa Launches Original Content Unit And Inks Deal With Amazon Prime Video. Retrieved June 20, 2018, from https://www.forbes.com/sites/veronicavillafane/2018/02/26/televisa-launches-original-content-unit-and-inks-deal-with-amazon-prime-video/#7ebc143b4fc3

World Population Review. (2019). Mexico Population 2019. Retrieved June 20, 2019, from http://worldpopulationreview.com/countries/mexico-population/