When thinking of what industry to focus my paper on, I couldn’t help but think of an industry that I use almost on a day-to-day basis: online video streaming. I felt it was a suitable choice for representing the different areas of Porter’s Five Forces Model because it seems as though there is always some different development happening within the industry. An article I found on The Economist’s online site addressed some of the main industry developments quite well. This particular article, titled “Net Flicks, Original programming hits the web”, mainly deals with the online video streaming company Netflix and their recent activity of producing and releasing original programming, which seems to be reshaping the industry as it stands.
According to Porter’s Five Forces Model, the first force that shapes competition within an industry is the risk of entry by potential competitors. This force is ever so present in the article’s topic of original programming hitting the web for a number of reasons. First, there is an extremely high entry barrier for the market. Netflix is the first large online video streaming website to offer their own exclusive high-quality series of shows, which is a big step from just being a strictly online streaming service that offered movies along with shows that originally aired on television. The high-quality original online programming market was non-existent before Netflix became involved, mainly due to the very large costs that come with acquiring the content needed for streaming television shows, as well as producing original shows. According to the article, Netflix spent over $4.8 billion on streaming content in 2011-12, and another $100 million for 26 episodes of Netflix’s exclusive new show “House of Cards”. Spending that kind of money definitely limits the market entry for small firms, but for some streaming sites, such as Hulu and online retail juggernaut Amazon, the money is not an issue for them to enter the market. Brand loyalty...
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