Saving Netflix: Planning to Turn Around a Steep Decline Joel Samen – IS 714: Mastering IT Strategies – Fall, 2011
Netflix Took a Hit…On July 12, 2011, Netflix announced a price increase for its users. Not only wereprices jumping 60% for all services, but streaming and DVD-by-mail were separated.Stock prices dropped 35% over the next 42 days.
…And Then it Fell Over a CliffOn September 18, 2011, Netflix announced that it would be spinning off itsstreaming video service into another company: QwiksterEven after a retraction, Netflix’s stock has dropped more than 60% since
Failures Adding UpWith other strong, diversified competition in the streaming video market, likeAmazon and Apple, Netflix can’t afford missteps. Otherwise, five years from nowit might not be around…
How Netflix Can Save ItselfSubscription or Subscription Subscription Subscription À La CarteÀ La Carte? and À La CarteNew Releases No Only TV Yes YesStreaming?Right now, Netflix’s streaming services only cover non-recent releases under asubscription service.By expanding into recent releases and À la carte streaming, it can access new markets.
The Five Year PlanSign exclusive contracts with contentproviders, including access tostreaming new releases.Create À la carte streaming optionswith different prices for new releasesand older options.Continue to allow access to Netflixstreaming on a variety of platforms,also expanding into new areas to reachthe consumer on all screens.
The End ResultExclusive content for subscribers thatApple, Amazon, and Hulu won’t have.Access to new releases via Netflix pay-per-view for an additional charge overmonthly subscription fees and captureof non-subscribers as À la cartecustomersUbiquity of Netflix streaming acrossall entertainment platforms, givingusers access to their contentanywhere, anytime they have internetconnectivity.
What it Will Take to Get TherePeople: Netflix will need technology visionaries with foresight to see trendsand get Netflix in on the ground floor with emerging hardware.In order to be successful moving forward, Netflix streaming must be easilyaccessible on smartphones, tablets, web enabled televisions, video gameconsoles, web-connected television hardware (ex. Boxee) and whateverelse comes next.
What it Will Take to Get ThereTechnology: In order to capture this new market of people who want to eitherpurchase video rentals individually (rather than via subscription) or spend ontop of their monthly subscriptions to view new releases, different payment andcharging options need to be implemented. Subscription À La Carte Members Customers $ $ $ Subscription Extra Pay Pay Per Content Content View
What it Will Take to Get ThereGovernance: Developing exclusive contracts with content providers will be tough.Why would content providers want to Because Netflix is willing to pay asell exclusive rights to content rather premium to have exclusive access tothan selling content to everyone? content.Why will Netflix pay more than market Because then customers who wantvalue in order to get exclusive rights to to view that content will need tocontent? come to Netflix.What will stop Amazon and Apple from Nothing, which is why Netflixalso arranging exclusive contracts for needs to get there first. Oncecontent, outbidding Netflix with their content licensing contracts are up,resources? Netflix needs to initiate its strategy.
Content is King“Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.” - Bill Gates, “Content is King”Each of the content streaming sites has the processes in place and abilityto get content to its consumer. The real questions are where will thatcontent come from and how will it be delivered.By signing exclusive contracts for valuable content—as it already hasdone for the eagerly anticipated new season of Arrested Development in2013—Netflix has necessitated that people use their site to watch thecontent they want to see. Continuing to build these relationships andcutting the competition’s access to content will strengthen Netflix’sposition.Additionally, by assuring that any member with internet connectivity canaccess Netflix on any device, the company will remain dominant.