Netflix case study

1. Case Analysis UC Berkeley Extension – Strategic Marke7ng Professor Jim Prost •  Byron Pi/am •  Laura DellaGuardia •  Lisandra Maioli •  Ryan Shi •  Svetlana Fedorova July 17th, 2013

2. Situation Audit

3. Company History q Founded in 1997 q Oﬀered DVD home delivery via snail mail q Very li>le compeAAon for DVD rentals, indirect compeAtors sAll ‘sold’ VHS q Due to complaints about high fees and slow delivery, in 1999 the ‘no late fees policy was launched’ q Leap of faith during dotcom boom, subscripAon model put in place: §  Unlimited rentals, §  Keep 4 DVDs at home q 2001 announced intenAon to create a VOD business 3 -‐ 38

4. Current Situation q $1 billion business and almost $64 million in cash ﬂow q VOD, pay-‐per-‐view, and streaming are gaining in popularity q LimitaAons in computer to TV connecAvity and in access to content, but evolving quickly with technology q SubstanAal Investments in Video-‐on-‐ Demand (VOD): 2006, $10 million, 2007 $40 million (as of 2007) 4 -‐ 38

5. Mission Statement No mission statement, but they have an official ‘vision’ of Ne@lix’s future: q  Becoming the best global entertainment distribuAon service q  Licensing entertainment content around the world q  CreaAng markets that are accessible to film makers q  Helping content creators around the world to find a global audience q  Company values to guide employees’ everyday decisions : §  Judgment §  ProducAvity §  CreaAvity §  Intelligence §  Honesty §  CommunicaAon §  Selflessness §  Reliability §  Passion 5 -‐ 38

6. NETFLIX Evolution 6 -‐ 38

7. SWOT ANALYSIS

8. q SubscripAon Model q Unique RecommendaAon System q Large DVD SelecAon for Online Rental q Fast Delivery Times Strengths 8 -‐ 38

9. Weaknesses q DiﬃculAes providing enough copies of popular new releases to meet demand q SubscripAon plan does not appeal to less frequent movie renters q DVD’s may be damaged or lost in transit q Only operaAng in the DVD segment at a Ame when there is so much potenAal in VOD 9 -‐ 38

10. OPPORTUNITIES q InternaAonal Expansion q VOD Expansion q Original Content q New Product Lines such as video games or educaAonal materials q Oﬀer alternaAve SubscripAon opAons to appeal to less frequent movie renters 10 -‐ 38

11. THREATs q  Blockbuster q Other VOD CompeAtors including: §  Vongo §  CinemaNow §  MovieBeam §  MovieLink §  TradiAonal cable/satellite providers q VOD Content Prices and Availability §  Limited VOD Content due to studios concerned about piraAng and aﬀecAng DVD sales 11 -‐ 38

12. Target Customers

13. Target customer q Males and Females ages 17-‐60; q $30,000 and up; q Diﬀerent racial/ethnic groups; q Psychographics: §  Busy people; §  Movie lovers and frequent renters; §  “All you can eat”; §  Early adopters (DVD players). 13 -‐ 38

14. Competition

15. Competitors (as of 2007) 15 -‐ 38

16. Competitors (current) 16 -‐ 38

17. Positioning

18. q  VALUE q  CONVENIENCE q  SELECTION POSITIONING 18 -‐ 38

19. Pricing

20. PricING Pay per movie ($4) + shipping and handling charge ($2) with late fees Prepaid subscripLon service (4 movies at a Ame and 4 new each month) Unlimited rental (3 movies at a Ame, unlimited exchange) 20 -‐ 38

21. Promotion

22. Promotion q Cross-‐promoAonal programs with the manufacturers and sellers of DVD players; q Theater Ackets; q Commercial and radio spots; q Banners and popups; q Nellix aﬃliate program (free-‐trial promoAon); q Word-‐of-‐the-‐mouth. 22 -‐ 38

23. Problem/ Decision Statement

24. What is the best VOD model and marke7ng strategy for Ne?lix all while keeping the company’s posiGon as a leader in the home video market? 24 -‐ 38

25. Alternatives

26. Alternatives Oﬀer raAngs and recommendaAons system to cable companies 1 Oﬀer online video streaming at no extra cost to exisAng customers 2 Create a standalone online video business 3 26 -‐ 38

27. Critical Issues

28. Critical Issues q  Technology §  VOD compeAAon q  Content acquisiAon & piraAng concerns q  User acquisiAon and adopAon q  Financial Investmen q  Employee’s role in dealing with 2 businesses 28 -‐ 38

29. Analysis

30. RelaLve Weights OpLon 1 OpLon 2 OpLon 3 Technological Improvements 0.3 4 5 5 Emerging CompeAtors 0.2 2 5 4 Content AcquisiAon 0.2 3 5 4 User AdopAon 0.15 1 5 4 Financial PosiAon / Cost Basis 0.15 1 4 4 RelaAve Weight x RaAng 1 2.5 4.85 4.3 Ne@lix Summary Assessment AlternaAves (RaAng) Analysis 30 -‐ 38

31. RECOMMENDATIONS

32. RECOMMENDATIONS q Technology rapidly improving §  Nellix needs to keep up with the Ames §  ConnecAvity will be facilitated in the future q Future Access to Content §  Easier and cheaper (on the business and client side) q For the business side of content acquisiAon §  Ensure your technology is up to par so as to reassure content providers of their copyrighted safety Oﬀer Online Video Streaming at No Extra Cost to ExisLng Customers 32 -‐ 38

33. RECOMMENDATIONS q CompeAtors also doing this, don’t want to be lep behind q DVD’s becoming obsolete q Use strong exisAng customer base and internet savvy forward-‐thinkers from website Oﬀer Online Video Streaming at No Extra Cost to ExisLng Customers 33 -‐ 38

34. RECOMMENDATIONS q Investment in technology q Appeal and promote to exisAng users q Oﬀer one month free trial for VOD q Maintain industry leading suggesAon engine How We Recommend ImplemenLng 34 -‐ 38

35. RECOMMENDATIONS Budget Plan q Invest money in service §  Online service & mail-‐order speed q Technological improvements §  Cloud-‐based opAons q ConAnue working with media outlets §  Improve cost per watch §  Increase library q RecommendaAon engine §  Steer viewers towards cheaper programs 35 -‐ 38

36. Future

37. Future strategy q Improve smartphone app q Technology PenetraAon §  Package with TV’s, Game Consoles, DVR’s q Original Content §  Movies §  TV Shows q Increase internaAonal presence q Diﬀerent pricing policies q Invent iPad 37 -‐ 38

38. Questions?

Netflix case study

Netflix case study

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Netflix case study