Netflix subscriber numbers soar - is 'video streaming' still a highly contestable market?

Here at tutor2u we've often quoted the video streaming market as one that could be classed as a good example of a highly contestable market. This is on the grounds that the market contains some of the characteristics of contestability such as relatively low sunk costs, low customer loyalty and the market has a highly credible risk of new firms entering.

In recent years, Netflix has become one of the world’s leading providers of video streaming. Concern that their growth was faltering has now reduced as new figures show that the number of new subscribers has increased by 3.2m worldwide between July and September 2016. One key to their growth, however, is the broadened use of their own programmes – many subscribers have shifted across to Netflix to consume their original content. The cost of such bespoke shows can be considerable and, as such, suggest that it may put off new entrants to the market who are unable to compete with the quality of shows or invest in production of original content when it has little guarantee of success. It could be argued that this level of development in the market is reducing the threat of new-firm entrants and making the market less contestable.

Here is a short news cast outlining recent announcements about Netflix’s success.