Unit 3: IB BM Real world news: Netflix cost cutting with AI

Real world news meets IB Business Management
Netflix’s use of AI visual effects highlights innovation in operations management while raising ethical concerns. This aligns with IB BM topics such as technological change, stakeholder conflict, and sustainability.

Netflix has taken a bold step by using generative artificial intelligence (AI) to create visual effects in one of its original TV shows for the first time. This milestone illustrates how investment in technological innovation (research and development) can create opportunities for businesses to reduce costs, enhance productivity, and potentially gain a competitive advantage in a crowded market. Such moves can prolong product lifecycles or open entirely new markets, yielding benefits such as increased profitability, first-mover advantage, and operational efficiency.

The AI technology was deployed in The Eternaut, a science fiction series set in Argentina, to create a complex scene of a collapsing building. According to Ted Sarandos, Netflix’s co-CEO, AI helped the production team complete the scene ten times faster and at a fraction of the traditional cost. For smaller-budget productions, such efficiencies could be the difference between feasibility and cancellation.

This technological leap coincides with a 16% surge in Netflix’s revenue, climbing to $11 billion for Q2 2025. Profits also jumped from $2.1 billion to $3.1 billion, driven by the massive success of Squid Game’s final season, watched by over 122 million people. These financial results suggest that Netflix’s strategic decisions in operations management and investment in AI tools are paying off—at least for now.

However, the use of generative AI raises concerns that resonate deeply in the entertainment industry. Critics argue AI undermines the artistry of human creators and uses others’ intellectual property without consent. This tension was central to the Hollywood strikes of 2023, where unions demanded tighter AI regulations to protect jobs. Notably, Tyler Perry postponed an $800 million studio expansion over fears AI might displace creative workers.

For Netflix, this presents both an opportunity and a threat. On the one hand, AI adoption may enable the company to achieve cost leadership and enhance creative output. On the other, it risks damaging stakeholder relationships, including with employees, unions, and audiences who value authenticity. Stakeholder conflict and ethical considerations, central themes in IB Business Management, are at the heart of this development.

Industry experts like Davier Yoon, co-founder of CraveFX, argue that AI is simply another tool for artists, suggesting that the creative vision still lies with humans. “It feels like a matter of time. AI opens the gate for smaller studios to produce big-budget visuals,” Yoon commented.

As Netflix pioneers AI in its production processes, the company must balance the benefits of innovation with the ethical and social responsibilities demanded by stakeholders. This raises broader questions about how technological disruption affects industries and the people within them.

Read the original article: Netflix uses AI effects for first time to cut costs – BBC

Linking theory to the real world IB Business Management style questions

Q1. Define the term “research and development” (R&D). [2]
Q2. Define the term “stakeholder conflict” in the context of Netflix’s AI adoption. [2]
Q3. Explain two benefits of using AI in operations management for Netflix. [4]
Q4. Analyse with a BMT model of your choice the potential advantages and disadvantages of using AI in the production of content [5]

Why read IB Business Management related news?

Reading IB Business Management related news helps to build your vocabulary, broaden your understanding of the syllabus and prepare you for the IB BM exam. It’ll help you achieve that elusive Level 7 on the IB BM course, help you write like a top student, master the theory and deepen your course knowledge! Stay tuned for more IB BM related news to get you in the best shape for your IB BM exams!

IB BM key terms, concepts and linkages

• Research and development (R&D)

• Operations management

• Stakeholder conflict

• Ethics and corporate social responsibility (CSR)

• Innovation (incremental vs disruptive)

• Cost leadership strategy

• Technological change

• First-mover advantage

• Change management

• Sustainability (triple bottom line: people, planet, profit)