Netflix Case Study AnalysisPresentation Transcript
NetflixLauren J. Uphouse November 5, 2012
CLICK Analysis Online movie rentals; receive & return thru mail; no late fees. Movies, flexibility, convenience, technology. Lives of consumers keep getting busier. Provides a convenient wayfor them to rent movies without having to worry about traveling to a store, due dates, or late fees. Busy consumers who rent movies.Obtained a Masters of Computer Science from Stanford University. Founded a software company, “Pure Software”, and grew it to be among the 50 largest software companies in the world.
SWOT AnalysisStrengths Weaknesses• Brand recognition • Older titles• Producing original TV series ex: House of Cards, • Expired contracts with Sony & Stars, resulting in with prominent actor Kevin Spacey lost videos• Extensive customer data on file • Lost video provider EPIX to Amazon.• DVD rental cost so low that competitors don’t • Competition has more money bother trying to emulate that part of their • Damaged reputation after attempting to increase business. fees and separate DVD & streaming video• App is on all platforms – even the Kindle (device memberships. made by competitor Amazon) • Revenue is still rising but streaming & subscribers• Partnered with start-up eyeIO as their 1st are slowing = growth is slowing. customer – using their encoding technology to lower bitrate of their HD video streams, which helps them in the mobile marketOpportunities Threats• Collaborate with well-known actors to create • Competitors offering streaming video and bidding more original series for exclusive rights ex: Amazon, HBO, TV networks• Bid for more popular TV titles • Competitor partnerships (ex: Amazon & Epix)• Target/market to kids & young adults • Higher licensing costs• International expansion • Biggest competitor, Amazon, now developing• Partner with companies to develop Netflix original programming programs specific to their platforms that will come • Streaming video increasing; DVD rentals pre-installed on all their devices decreasing• Partner with cable & gaming companies to be an • Movie & TV industry less willing to make exclusive on-demand option for video & games. deals with online video services.• AppleTV Partnership • EPIX provides Disney videos to Amazon; Disney recently acquired Lucasfilm (& entire StarWars franchise).
ADVANTAGES DISADVANTAGES Customers rent DVDs thru mail; Shipping costs for DVD rentals. Redbox – Must rent from kiosks. Redbox has newer titles. More older titles. Redbox offers video game rentals & Offers streaming video service. event ticket printing. Offers TV shows Customers must make a commitment to use service. Low monthly subscription costs & no late fees attractive to customers; Can’t profit from long-term Redbox – DVD rental fee $1/day. rentals/late fees. Website has a more advanced Customers must wait to receive DVDs; customer rating & recommendation Redbox – Can get DVDs same day. system. Company as a whole has more Developing original content. competition. More partnership opportunities.
ADVANTAGES DISADVANTAGES More titles; DVD rental service. Charges fee for all content. Hulu.com offers limited content for free & offers No ads/commercials in video content. more content thru Hulu-Plus for Hulu-Plus – Most videos contain ads. $7.99/month. Content available on all devices. Older titles. Hulu offers current TV Hulu currently doesn’t have rights to shows – new episodes available day make all of their video content after airing. available on all devices. No social media integration. Customer recommendation system. Developing original content. Available on more devices. Hulu.com – PC environment only. Hulu-Plus – Accessible on fewer devices. Available in more countries.
ADVANTAGES DISADVANTAGES More titles; DVD rental service. AmazonPrime membership includes free 2-day shipping & instant access to Monthly subscription that can be e-books (on Kindle). canceled/frozen any time. Amazon Prime - $79/year, paid in full. Revenue only from video services. Amazon – Business model generates Higher quality video playback. revenue many ways. Better customer recommendation Losing exclusive partnerships with system, user interface & organization. online video distributors, some Growth of international expansion. directly to Amazon Prime (ex: EPIX). Focused solely on video services = benefit to customers. Amazon offers additional online videos, including new movies & TV Partnership with Apple; soon possibly episodes, that can be purchased cable companies as well. individually or as a package and are accessed from the same location as Amazon Prime videos.
Business Model CanvasKP Key Partners KA Key Activities VP Value Proposition CR Customer Relationships CS Customer Segments DVD Rent-by-Mail Free trials/sign-up deals DVD Rent-by-Mail Service – Cost so AppleTV owners Apple Service low not worth Convenient sign-up thru competing many devices Owners of RADius-TWC Online Video Pre-installation on Windows 8 Streaming Service Extensive customer devices devices database, 10+ years deep. Aggressively working to Adults, families, Twentieth improve content & kids Century Fox Original content playback quality KR Key Resources Partnership with Recommendation Benefits from System Hasbro Studios Experience of Apple; soon long tail: Classic Management & possibly cable TV/Movies, Board of Directors companies Warner Bros CH Channels Documentaries, Stockholders Accessible on Adult Animation, greater number of Online, print, & direct Stakeholders, devices mail marketing Stand-Up Extensive customer database Pre-installation on Comedy, such as Carl Advanced technology for devices Romantic Icahn, & their better quality video Gift subscriptions Comedies, affiliates playback Offers to friends/family Action/Sci-Fi of members R$ Revenue Streams DVD Rent-by-Mail Plans (per month) C$ • 1 DVD: $7.99 or $9.99 with Blu-Ray Cost • 2 DVDs: $11.99 or $14.99 with Blue Ray Structure • 3 DVDs: $15.99 or $19.99 with Blue Ray • 1 DVD (2 max per month): $4.99 or $5.99 with Blue Ray Video Streaming Plans (per month) Unlimited: $7.99 Limited: $4.99 FIXED PRICING STRATEGY; FREE TRIAL OFFERS
Alternative Business Models Bundle Customers Partner Develop services sign up for with gaming “HBOwith pay-tv service companies quality”packages. directly on to offer on- originalLess money from AppleTV & demand content.more customers = pay through video game Lure & retain Revenue boostLess competition iTunes. services. customers with content that’s= Lower licensing Reach more New customer untouchable by fees customers = segment = competitors = Revenue boost Revenue boost Revenue boost
ReferencesRoettgers, J. (2012, February 01). Eyeio: Netflixs secret weapon against bandwidth caps?. Retrieved from http://gigaom.com/video/eyeio-video-encoding-netflix/Martin, S. (2012, October 12). Netflix rivalry with amazon heats up. USA today, Retrieved from http://www.usatoday.com/story/tech/2012/10/11/amazon-netflix/1621579/Bedigian, L. (2012, October 31). Netflix lost star wars 13 months ago. Retrieved from http://community.nasdaq.com/News/2012-10/netflix-lost-star-wars-13-months-ago.aspx?storyid=185982Holmstrom, M. (2012, October 31). Why you should not buy netflix. Retrieved from http://seekingalpha.com/article/964251-why-you-should-not-buy-netflixWarren, C. (2012, March 09). Netflixs apple tv deal could signal new business model. Retrieved from http://mashable.com/2012/03/09/apple-tv-netflix-subscriptions/(n.d.). Netflix_large_verge_medium_landscape. [Web Photo]. Retrieved from http://cdn0.sbnation.com/entry_photo_images/3279699/netflix_large_verge_medium_landscape.jpg(n.d.). netflix-branded-xbox-360. [Web Photo]. Retrieved from http://learnfrenchsoftwarereview.org/wp-content/uploads/2012/01/netflix-branded-xbox-360.jpg(n.d.). Applenetflix. [Web Graphic]. Retrieved from http://1.bp.blogspot.com/-_iUTPj8GBuA/UEeY1qwdxcI/AAAAAAAAATo/2Htm5N8CQzA/s1600/AppleNetflix.jpg(n.d.). Prime_vs_netflix-650x163. [Web Graphic]. Retrieved from www.gadgetreview.com(n.d.). Hulu_vs_netflix_big-650x541. [Web Graphic]. Retrieved from http://www.gadgetreview.com/wp-content/uploads/2012/01/Hulu_vs_netflix_big-650x541.jpg(n.d.). Redbox_vs_netflix-650x129. [Web Graphic]. Retrieved from http://www.gadgetreview.com/wp-content/uploads/2012/01/Redbox_vs_netflix-650x129.pngwww.netflix.comwww.hulu.comwww.redbox.com