Provide an economic analysis of Netflix Essay Example | Topics and Well Written Essays - 500 words

Provide an economic analysis of Netflix - Essay Example Netflix drives its revenues from two sources: monthly subscriptions from users who can instantly stream TV shows and movies over the internet and delivery of DVDs and Blu-ray discs to customers’ homes. The major cost components or Netflix include fixed-fee licenses, revenue shared and direct purchases made from studios and other content providers. The company also has to spend money in maintaining its streaming services through Amazon Web Services and Content Delivery Networks. There are many factors that impact the supply and demand of the company’s business. One of the primary factors determining demand is the economic situation. The demand also depends on the quality of content produced. As can be seen from the list of competitors, all the competitors have a different unique characteristic in the way they are providing entertainment video to the customers. While cable providers and direct-to-home service providers offer a fixed list of entertainment videos on a monthly fees, internet based content providers provide customers which is more similar to Netflix. The other competitors are retailers which provide entertainment videos to customers through brick and mortar shops. This can be said to be a monopolistic competition. Monopolistic competition can be defined as the market structure where there are many sellers of the same commodity but there is a slight difference in the way the service is provided (Jain & Ohri, 249). Although there are many companies that provide similar service to customers, however, none of the companies providing online companies have been able to come close to Netflix in areas of market share or revenue. Thus, the company is having significant market power and drives the market. The company has been very successful in increasing its subscriber base over the period of time. It had a total subscriber base of 20 million at the end of 2010. The company’s revenue was $2.16