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  1. 1. Richa Arora & Shiya Hsu <br />GMBA 5885<br />23rd March, 2011<br />
  2. 2. Agenda<br />Background<br />Company Intro & Facts<br />Business Model<br />Innovations / Differentiations<br />CineMatch & Benefits<br />Customer Services & Impacts<br />SWOT & Future Threats<br />Solutions<br />Long-Term Strategies<br />
  3. 3. US DVD Market (as of Sep. 2010) <br /><br />
  4. 4. Introduction <br />Reed Hastings (among 100 most influential global citizens)<br />Origin: $40 dollar late fee?<br />Initial flop (Sep. 1999)<br />Success came… <br />Streaming (Jan. 2007)<br />
  5. 5. 20 million subscribers as of 2010 (nearly 20% of US household)<br /> (cite: Netflix Business Opportunity)<br />
  6. 6. (cite: Netflix Business Opportunity)<br />
  7. 7. Company Facts <br />Biggest source of streaming web traffic in America.<br />Netflix’s customer volume is growing at the rate of 50% each year. <br />Accounts for more than 20% of all Internet download traffic during peak evening hours.<br />Over 17 million subscribers watch Internet-streamed video each month. <br />
  8. 8. Facts Contd….<br />Over 17 million subscribers watch Internet-streamed video each month.<br />Online catalog includes over 20,000 movies.<br />Agreements and partnerships with :<br /> Nintendo Wii, Xbox. PS3, blu-ray, ipad and other internet TV companies.<br />
  9. 9. Long Tail Business Model <br />
  10. 10.
  11. 11. Company Innovations <br />Low subscription fee with instant watch and mail-in.<br />No late fee and mailing expenses.<br />One month free trial.<br />No contract , can cancel anytime.<br />Third party applications<br />Business Development Page (<br />
  12. 12. Netflix vs. Blockbuster<br />
  13. 13. Netflix vs. Redbox<br />
  14. 14. CineMatch<br />A proprietary recommendation technology <br />Direct customers to preferred titles with collaborative filtering<br />Customize to individual needs<br />Personalized experience<br />DATA is key<br />
  15. 15. Benefits of CineMatch<br />Better cost analysis<br />Better inventory control<br />Advantage on strategic planning & decision-making<br />Lower carrying cost<br />Higher subscription growth with lower SAC and churn rate<br />
  16. 16.
  17. 17. Customer Service <br />Building Brand<br />Movie recommendation system<br />Saturday processing (added in 2009)<br />58 distribution centers close to USPS<br />8 hrs turnaround time<br />Top satisfaction rating<br />DVD delivery in 1-2 business days<br />
  18. 18. Impacts of Customer Service<br />
  19. 19.
  20. 20.
  21. 21. “Netflix attempting to second-guess a mysterious, perverse and profoundly human form of behavior: the personal response to a work of art.”(Time Magazine)<br />
  22. 22.
  23. 23. Strengths<br />Subscription, no late fee<br />Competitive advantage (early mover)<br />Lower fixed cost<br />Largest DVD selection<br />Fast processing and ordering.<br />Online streaming or VOD<br />Serves a large geographic area.<br />
  24. 24. Weaknesses<br />Delivery delays<br />Small collection of instant plays<br />Difficult inventory control<br />Expensive cost per DVD<br />Competitors access to same contents<br />
  25. 25. Opportunities<br />Canada- New destination<br />More International expansion<br />Branding<br />Movie downloading in future<br />Extending video game rental<br />Netflix set-top box with Blu-ray player<br />
  26. 26. Threats<br />Hulu and Youtube, streaming threats<br />Big competitors<br />Increasing Price & spending<br />Technology shift<br />Irreversible subscription service decline around 2014<br />
  27. 27. Long-Term Threats<br />Decline of Current Core Business: DVD-By-Mail subscription<br /> (cite: Netflix Business Opportunity)<br />
  28. 28. Long-Term Threats<br />Competition on markets for online streaming (Video On Demand) <br />Huge array of competitors<br />AT&T’s new bandwidth cap<br />Piracy <br />Tricky streaming licensing<br />Windowing<br />
  29. 29. Threats from Internet Service Provides <br /><ul><li>ISPs charge consumers more per gigabyte above a low cap making internet video more expansive for consumers
  30. 30. ISPs can refuse to let in all the data their subscribers are requesting from Netflix by not providing Netflix enough entry ports
  31. 31. ISPs can slow or block Netflix bits within their network or favor other bits to protect their video business or to try charge Netflix a toll to avoid slowdown.</li></li></ul><li>New prices (Nov.2010)<br />
  32. 32. Solutions?<br />
  33. 33. Decline of Current Core Business<br />Reposition as Online Streaming Company<br />“We are a North America Streaming companyThat is becoming a global streaming company<br />That also has a great DVD-by-mail supplemental option in the USA.”<br /><br />
  34. 34. Competition on markets for online streaming (Video On Demand) and PPV<br />Ubiquitous availability through diverse services and platforms<br /> From computer-only consumptions to mainstream experience<br />
  35. 35. (cite: Netflix Business Opportunity)<br />
  36. 36. Huge array of competitors<br />Find Niche segment <br />Consumer-Paid Subscription <br />Older TV shows and movies<br />
  37. 37. (cite: Netflix Business Opportunity)<br />
  38. 38. Obstacles<br />Competitive advantage (from atoms to bits)<br />Content quality & quantity<br />Content delivery – ISPs<br />Going International (Piracy)<br />
  39. 39. For Now…<br />Web movie downloads will not become an imminent threat <br />Online streaming gaining attraction<br /> (cite: Netflix Business Opportunity)<br />
  40. 40. Long term strategies<br />Adds ABC shows for net viewing.<br />Agreements with film distributors<br />Focus less on new DVDs and more on older TV shows and movies.<br />Push latest releases for online streaming<br />
  41. 41. The future is uncertain, but currently Netflix is making the right moves to be in as many places as it can.<br />
  42. 42. Thank you<br />