In its ongoing attempts to expand its content, the online streaming service Netflix has become a property owner. It has purchased a film and television studio in New Mexico, where it already produces several of its entertainment titles.
The site, home to ABC Studios, is already operational and has produced quite a few popular movie titles before, including The Avengers and The Lone Ranger. Netflix will rely on the studio to facilitate the production of some existing series, such as its Chambers and Messiah television series, and it plans to move
more production of films that it will stream on its channel to the location.
In addition to expanding its capacities, the deal gives Netflix various economic incentives, offered by the state of New Mexico to lure the company there. In turn, the company predicts it will add around 1,000 jobs and $10 billion in investments. This move represents Netflix’s first foray into owning its own studio, and it plans to hire a management company to take charge of daily operations. Thus it hopes it can control various elements in the supply chain for entertaining content, effectively and profitably.
1. Is this example of vertical integration in the supply chain a good idea for Netflix?
2. Could Netflix expand its control of the supply chain in other ways too?
Source: Maria Armental, “Netflix to Open New Production Hub in New Mexico,” The Wall Street Journal, October 8, 2018; Maria Armental, “Netflix to Buy Studio Complex, Open Production Hub in New Mexico,” The Wall Street Journal, October 8, 2018