Netflix Cost Analysis

1000 Words 4 Pages
Costs of Production Netflix operating income for 2104 was over $5.5M, which was in part due to the increase to the monthly service fee for subscribers and the increase in domestic and international streaming memberships. The company has a plethora of expenses, streaming content rights, licensing, acquisition of streaming content, streaming delivery expenses customer service, payment processing fees, and advertising. Fixed costs are costs that do not change no matter how much product the company produces or what services are provided. Insurance, rent, salaries, utilities, property taxes and depreciation are some examples of what Netflix fixed costs may be. Other fixed costs include non-cancelable contractual obligations in relationship …show more content…
It also has lease obligations for facilities and streaming obligations that incur at the time they enter into an agreement to obtain future titles. Income taxes are another fixed cost for Netflix. Variable costs for the company include cost of postage to ship DVD from it 's mail order DVD portion of the company which is a major perk to customers because shipping is free and the DVD comes with prepaid return postage. With the continuous rise in postage costs and decline in the amount of customer subscriptions for DVD services, Netflix may have more workers than needed in its DVD distribution centers. The cost of actually purchasing rights to new films and TV shows to offer on the service is also likely a variable cost as different production companies will possibly want more or less for different shows which could be based on popularity. Getting their hands on the content that will drive more viewers would be a big deal …show more content…
The top two competitors for Netflix are Amazon Prime with about 13% of the American household market share and Hulu Plus which has about 6.5% of the American market. With 35% of American households having broadband access and zero streaming services, there is no wonder the giant cable company Tier Warner offers HBO Go as a streaming service. Let 's not overlook the fact that there are still plenty of websites that offer pirated movies and TV shows for free with a quick search engine look. Hulu also offers a free service, along with Veoh, Crackle, and UStream (chat online while you watch live video streams). When Netflix entered the European market it "immediately found itself navigating fierce competition from local streaming services and pressure from new apps that make watching pirated movies and shows easier than ever before." (Heyman,

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