Netflix and the Global Streaming Video Market - A Business Case - By L. Kazmi

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
Local issues
Taiwan: 5.0 million Hong Kong: 1.2 million India: 5.9 million
Foreign language films catalogue
Cost of rights for films
- Japan: expensive, rigorous competition

Competitors in the international market?

Global Competitor
YouTube is the world’s largest provider of Internet video content
Comprised mainly of user-generated content and television shows
It is a free service, ad-supported, lesser quality of video
Recently launched a premium quality online video rental service to consumers in the US - selection is very limited so far

Global Competitor
Launched in 2008
Currently provides premium quality television and film content for free
Partners with over 190 content providers, including major film and television studios
Offers service only to US consumers but there are plans for international expansion
Also plans to begin charging monthly fee for content

Competitor in Canada

Competitors in Europe
LoveFilm.com:
Over 65,000 titles
Over one million subscribers
Delivers DVDs and Online films
Blockbuster UK ( Company’s future is uncertain - selling its UK DVD rental stores ):
Over 65,000 titles
Delivers DVDs and Online films
- Cheapest monthly plan £14.99 ($21 US)

Competitors in Asia
Cinesprite.com ( India ):
- “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

Proposed Strategy - A
Netflix to position itself as the primary online video rental service in multiple international markets
Begin with 2-3 countries in Europe and Asia
Determine specific markets after assessing market potentials for: Bollywood films; Chinese films; French Films; German Films
Build a large streaming film catalogue including Hollywood as well as foreign film
Obtain rights to stream in multiple European and Asian countries simultaneously

Proposed Strategy - B
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

Bibliography
World Internet Statistics Charts from: Internet World Stats, http://www.internetworldstats.com .
Average World Broadband Speeds Graphic:
http://www.cnn.com/interactive/2010/03/tech/map.broadband.speeds/index.html .
Yu, Eileen. Asia's broadband subscribers to hit 170M. ZDNet Asia. July 2008. http://www.zdnetasia.com/asia-s-broadband-subscribers-to-hit-170m-62043606.htm.
Slide background images from: http://www.sxc.hu (Free stock photo site).
Netflix company statistics and background image, slide 3: http://www.netflix.com .
Franco Sacchi Ted Talk on Nigeria’s booming Nollywood: http://www.ted.com/index. php /talks/franco_ sacchi _on_ nollywood .html , 2008.
Zeidler, Sue, Reuters Netflix strikes new deal for Warner Bros titles. http://www.reuters.com/article/idCNN0620994420100106?rpc=44 . Jan. 2010.
Keating, Gina. INTERVIEW-Netflix CEO eyes int'l markets amid record growth. Rueters March 16, 2009. http://www.reuters.com/article/idUSN1645825320090316 .
Average World Broadband Speeds Graphic:
http://www.cnn.com/interactive/2010/03/tech/map.broadband.speeds/index.html .
The Economic Impact of the Motion Picture and Television Production Industry of the United States: http:// universitytoolkit .org/press_releases/ mpa %20us%20economic%20impact%20report_final.pdf .
Zip.ca - Canada’s video rental company, founded 2004.
SpeedTest.net, http://www.speedtest.net/global.php#0 .

Netflix and the Global Streaming Video Market - A Business Case - By L. Kazmi

by L. Kaz on Jul 19, 2010

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