Netflix Has an Interesting Market Position. Positioned

Netflix has an interesting market position. Positioned as a differentiated provider, Netflix competes directly against companies like Blockbuster but indirectly against a variety of entertainment options. In online video specifically, Netflix is now the market leader with a 44% share, overtaking Apple at 32.3%, a dramatic decline from past results (Pepitone, 2012). The remaining companies in the market have single-digit shares. Content is typically licensed, and those licenses cover specific geographic regions. Therefore, Netflix is limited by its licenses as to where it can expand. The company's primary market is the United States.

The company also has licenses to operate in Canada, the United Kingdom, Ireland, Scandinavia and a number of countries in Latin America (Netflix, 2012). Its positioning in each market is essentially the same, where it focuses on the high quality of its offering, the vast number of titles that the company offers as well. Netflix entered the entertainment business and from the outset proved to be a competitor for offline video outlet Blockbuster.

Netflix was also, in a way, competing against the same companies that provided its content -- the television producers and movie producers. This has created some conflicts for Netflix as it struggles to ensure that it has sufficient content to win competitive advantage (Ha, 2012). As the video streaming market has evolved, Netflix has been able to consolidate its market position. Apple has been the most significant player, through iTunes, but that service has seen steep declines in the past year, something that has created opportunity for Netflix.

Netflix's improvement in competitive position has come with improved financials as well. The company earned $3.2 billion in revenue last year, compared with $1.2 billion five years ago. As Netflix grew, offline provider Blockbuster went into bankruptcy and has been effectively marginalized, though it does have a substantial number of stores still in operation. Today, Netflix is a profitable company. The gross profit is 36.3%, the operating profit is 11.7% and the net profit is 7%. Netflix has grown rapidly, primarily financing its operations through retained earnings.

The company had $232 million in long-term debt five years ago and has $400 million in long-term debt today, highlighting a commitment to maintaining a healthy capital structure. The company is liquid, with a current ratio of 1.39 and a cash ratio of 0.5. The success of Netflix is also reflected in its stock price. The company's stock is currently priced at $81.71, which gives Netflix a market capitalization of $4.54 billion. The stock is roughly in the middle of the 52-week range.

A glance at the five-year chart shows that Netflix stock is down from its stratospheric historic highs.