Hulu operates in the video streaming industry. Hulu competes in multiple industries against various competitors. Hulu is competing in the Over-The-Top (OTT) video streaming against Amazon video, youtube and Netflix at its most superficial level. Hulu is also competing with a bigger streaming subscriber market against cable giant HBO and music streaming services like Apple. It is also eying to compete with big players in video content production such as Fox, Warner Media, Disney, and NBC Universal. To examine the effectiveness of the industry, Porters’ five forces will be used. The sector will be assessed based on the threats of new entrants, the threat of substitute products, and competition from the existing companies, buyer power, and supplier power.
The Threat of New Entrants
This refers to a situation where the emergence of new firms into the market threatens the survival of the existing firms. It implies that the less capital and time required for competitors to enter the firm’s market and be effective competitors, the more existing firms’ position in the market is weakened. In contrast, firms that operate in an industry with solid entry barriers have a higher chance of surviving because they can negotiate better terms and charge higher prices. In this case, we can see that the threat of new entrants is high. From the point,” regulations on the importation of distant signals were relaxed” (p.84). For a very long time, broadcast network companies such as ABC and CBS had successively lobbied the United States government to restrict and limit the growth of cable TV. However, in the 1970s, the restriction was relaxed, paving the way for the entry of new firms.” The new satellite distribution technology and further deregulation stimulated rapid growth in the industry” (P.84).
The Threat of Substitute Products
This refers to the alternatives to the existing services or products available that consumers can quickly shift to. In this case, the threat of substitute products is lower because few firms in the market offer comparable or similar products. The data on the OTT video services by viewers, 2016-2021 ranks YouTube, Netflix, Amazon Video, and Hulu respectively from the platform with highest video viewer to the lowest (p.96). YouTube accounts for the most considerable proportion of total video viewing, with 201.7 million views in 2021. Hulu accounted for the most downward view with 39.5 million video views (p.96). Hulu has successfully differentiated its brand from other firms in the market. Through innovation, the firm struggles to set itself as a different firm from other players in the streaming industry. With the traditional broadcast television on the decline, especially among young people who are shifting to subscription video services, the threat of a substitute product is low for Hulu
Competition from Existing Companies.
In an attempt to dominate the market, companies in the same industry have the propensity to compete. However, the competition level is dependent on the number of firms within the same market and the extent to which they collaborate. In this case, the competition from the existing firms is high. It was estimated that by 2021, Netflix would have 59 million subscribers in North America (p.59). Besides, Hulu faces completion from cable and broadcast networks. While competitors such as Netflix can offer additional services for customer’s subscription fees, Hulu is also facing competition from its founder companies who are offering other streaming services
This refers to the ability of the customers to influence a firm’s decision-making process. Consumers have the powers to force prices down or request firms to add more value to the service or products offered to the market. In this case, the power of viewers will continue to increase because of the increasing number of streaming services being launched. With different streaming companies available in the market, such as Netflix, YouTube, and Amazon Video, viewers have a lot to choose from, which makes them powerful in determining the firm’s success (p.86). For instance, if a viewer cannot find a program they desire from Hulu, they will look on a competitor’s site for that content. From this case, it can be argued that the power of viewers will be high because they can quickly join or cancel a subscription from any firm.
Power of Suppliers
This refers to the pressure suppliers can exert on firms in the market. When there are few suppliers in the industries, firms will be more reliant on the suppliers. Consequently, suppliers will have more power and can raise input costs and push for other benefits in the business. However, when there are many suppliers in the market, firms can easily switch from one supplier to another and keep the input cost lower, thus improving their profit margins. The supplier power, in this case, is moderate. Hulu, a joint business between NBCU, FOX, ABC, and Disney, offers high content and content from other suppliers (p.87). Since Hulu depends on the supplier for meaningful content, any threat by suppliers to pull out of the deal can quickly affect its supply. However, firms in this industry struggle to mitigate supplier power by investing in original content creation.
Without competitive strategies, firms may find it challenging to compete with rivals and attract more customers. Since each business faces unique challenges, developing a universal strategy can be challenging for enterprises. In the video streaming industry, many firms compete for similar services and product distribution. To attract as much viewer’s time and money as possible, each firm has to develop strategies to compete with each other. Hulu pursues a mixture of differentiation and cost leadership strategies. In 2017, Hulu’s CEO announced the launch of a new service that was developed strategically to shift the firm’s position in the television landscape. Unlike its rivals, Hulu introduced Hulu live TV, which allowed the firm to provide streaming to ABC, CBS, NBC, and Fox and packages for some cable television networks such as CNN and ESPN. Unlike other streaming service providers, Hulu allows users to select the commercials they would watch, rate them, and sometimes participate in interactive games during commercials. This strategic move enhanced the firm’s relationship with consumers, allowing it to gain a significant number of subscribers and followers.
Although Hulu’s business model is not wholly developed around the coast leadership, the firm has used competitive pricing to expand its customer base. In addition to its free model, Hulu introduced a premium subscription for $9.99/month (p.88). This new product provided a great assortment of content and featured few advertisements. From the case study, it can be argued that Hulu offers both basic and premium services. The competitive pricing has allowed the firm to expand its customer base faster. Apart from developing products that ensure increased user convenience, Hulu has focused on creating a variety of original content that is not available across other platforms. In this case, the firm has also partnered with several different suppliers such as ABC, CBN, FOX, and other vendors (p.88).
Pages: 8 Double spaced(2200 words)
Style and sources: APA7, 1 source
Free extras: Outline/Title page/Bibliography / Reference page
Study level: Bachelor
Assignment type: Case Study
Subject: Business and Economics