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Netflix and the Global Streaming Video Market A Business Case by Laila Kazmi COM 591 MCDM Spring 2010
The Business Question How will Netflix stay ahead of its competitors as it enters the international market in a rapidly changing technological environment?
The Company Reed Hastings Co-Founded Netflix in 1999 Reached 1 million subscribers by 2004 14 million subscribers by 2010 Revolutionized Video Rental Business Ships 2 million DVDs (56,000 unique titles) per day Has a catalogue of 100,000 titles More than 2500 employees
The Context Economic impact : Motion Picture & Television industry is “a cornerstone of American economy” - (2006 Report)* - Employing 1.3 million Americans - $30.24 billion in wages - $30.2 billion in revenues to vendors and suppliers - $10 billion in income and sales tax Social Impact : Shaping public perceptions * http://universitytoolkit.org/press_releases/mpa%20us%20economic%20impact%20report_final.pdf
The Context Michael Jackson’s memorial service marked the next largest global streaming video event testing bandwidth President Obama’s inauguration prompted 7 million concurrent streams globally, CNN reported 27 million streams throughout the day Increasing number of sites offering streaming video content (YouTube, Hulu, Amazon VOD, Blockbuster, iTunes, IndiemoviesOnline, online film festivals, etc.) The Internet has created a global film market Streaming video audiences increasing (Pew Internet) Web enabled large screen TVs starting to appear on the market (Sony, Vizio, etc.)
The Collaborators Netflix signed deals with major film studios to delay new release rentals by 28 days in exchange for rights to stream more films online, 2010 Shipping 2 million DVDs per day by mail Netflix expected to pay the US Post Office $600 million in 2010
Where are the customers in the international market?
India Nigeria (Nollywood) China Argentina Japan Germany Iran Mexico Sweden World’s Largest Film Industries and Markets India (low broadband adoption rate) Nigeria (Nollywood) Hollywood France Germany France Hollywood UK UK China (low broadband adoption rate) Hong Kong, Taiwan Hong Kong, Taiwan
World Internet Penetration Rates by Geographic Regions - 2009
Internet Users in the World by Geographic Regions - 2009
Internet Users Distribution by World Regions - 2009
Average World Broadband Speeds (2010) http://www.cnn.com/interactive/2010/03/tech/map.broadband.speeds/index.html
Number of broadband users in proposed markets (2009): UK: 17.2 million France: 17.7 million Germany: 22.6 million Japan: 30.1 million (competitions, cost) Most Viable International Markets Compare to United States: 69.9 million broadband users as of June 2009 (14 million netflix subscribers, non-inclusive)
- Modify subscription model
Cost of rights for films
Film rentals rates
Global market for Bollywood films vs. Chinese films
Taiwan: 5.0 million Hong Kong: 1.2 million India: 5.9 million
- “Movies Online, On Call, through SMS, or Walk In rentals”
- Over 10,000 titles
- Provides own mailing system
Price $10/month for 2 movies at a time
iVideo.com.tw ( Taiwan )
MovieFlys.com ( Hong Kong )
Considerations for Approaching Foreign Markets No mailing cost Restricted by bandwidth availability Restricted by technology availability But higher cost of purchasing streaming rights Requires growing the catalogue of foreign titles Local norms and habits for the film watching public
Netflix to position itself as the primary online video rental service for Hollywood films in multiple international markets
Begin with countries in Europe and Asia with largest markets for Hollywood films
Focus mainly on growing streaming catalogue of Hollywood films
Modify subscription plans to allow pay-per-film (unless Netflix provides large catalogue of local language films, e.g. Bollywood for Indian market, consumers may be hesitant to pay large monthly fees for subscriptions)
Research competitors’ catalogues (e.g. www.Lovefilm.com in Europe). Are there others providing bigger catalogue of both Hollywood and foreign films?
Netflix Planned Strategy “ We are focused on entering one country and seeing how we do.” - Reed Hastings Netflix expected to offer service in one European country this year Hastings: After US, the biggest markets for Hollywood films is Europe, then Asia, then the rest of the world