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Netflix Case Presentation
- 1. NETFLIX Presented by Max Wasserman,Brett Miller Jake Ciotola, Kayla Salant, Sara Miller Mike Muchnikoff
- 2. Agenda NETFLIX COMPANY OVERVIEW ANALYSIS OF COMPETITIVE ADVANTAGE PROFITABILITYOF THE INDUSTRY FORMULATION OF STRATEGY STRATEGIC IMPLEMENTATION FUTURE CONSIDERATIONS
- 3. The science of todayis the technology of tomorrow 1997 Rent DVDs 2007 World of Streaming 2015 – Now Household Name
- 4. History of Netflix Founded by Reed Hastings 1997 in Las Gatos, California DVD by mail rental service IPO 2002 at $15.00 per share: 82.5 Million in shares Challenged traditional movie rental business model Blockbuster and Rental stores demise
- 5. Netflix company overview BusinessModel • Online VOD streaming subscription service • Original and leased content • Differentiation Business strategy • Transnational strategy Financial Profile • Maret Cap: 156.9 Billion • Revenue 2018: 15.79 Billion • Net Income 2018: 1.211 Billion
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- 7. Media Lanscape • Complex networkof companies and services • Large diversification of scope
- 8. Rivalry among existing competitors- High $14.99 $8.99 $5.99 $8.99 $11.99 $15.99 MONTHLY SUBSCRIPTION COSTS Basic Standard Premium Content is King!
- 9. Threat of new entrants- Moderate Capital Technology Infrastructure Content Industry network Licensing content Original content Regulation Vary by country Can change
- 10. Threat of substitution Very High “Winningthe moments of truth”
- 11. Bargaining power of buyers- High Low cost to switch Abundance of alternative’s Media & Entertainment industry dynamic
- 12. Bargaining power ofsuppliers - High
- 13. SWOT Analysis Strengths - Increasingamount of international subscribers - Geographically diverse markets - Exclusive licensing agreements and partnerships Weaknesses - US profits dropping - US operations represented ⅔ of Netflix revenue (relative to expenses) - Non-diversified source of income → Primarily from subscriptions - Only 20 languages - Limited content internationally
- 14. SWOT Analysis Opportunities - Globalexpansion - Improvement of streaming services - Use and advantage of loyal subscribers due to original content (OITNB) - Further develop region specific business models Threats - Slowing growth in domestic market - Advertising - Video file sharing websites (piracy) - New entrants - Legal regulations - Adapting to all markets - Competition in other countries - Internet availability and AWS reliance
- 15. VRIO analysis Capability Valuable?Rare? Inimitable? Organized for Value? Netflix CineMatch algorithm Yes No Yes Yes Original content Yes No Yes Yes Quality of Internet streaming Yes No No Yes Lack of Ads Yes No No Yes Netflix brand Yes Yes Yes Yes
- 16. Competitive Advantage Creationof: • Utilization, incorporation of Internet/Technology • Piggy-backing onto technology advances • Turn of the century • Instant, Convenient • Flat fee Sustainable: • Original content • No advertisements • Recommendation algorithm
- 17. Challenges to international market expansion •Competition in Global Markets • Regulatory Issues • Local Adaptation • Financial Cost
- 18. Competition in global markets •Competition with established, local video streaming providers • Japan: Local “Rakuten Showtime” and Hulu Japan were competing already • Underdeveloped infrastructure
- 19. Regulatory Restrictions • Subject toUS regulations and imposed sanctions • Syria absent from January 2016 expansion announcement • Difficulty in entering the Chinese market • Censorship
- 20. Local Adaptation Difficulties • 22languages offered, streams in over 190 countries • Explored partnerships and joint ventures w/providers in these markets • $5 billion on international content creation in 2016 • Preference for local language and services • Cultural differences/preferences between customers
- 21. Financial Costs • Investmentrelated costs with global expansion • Pricing too high for most global markets • Premiums for licensing in the international market • Q3 2015 $68 million loss in the international business segment • FX currency exposure • $94m in lost international revenue in 2018
- 22. Recommendations to Overcome Challenges •Research infrastructure and capabilities before market entry • Expand/maintain relationships with translation services • Partnered with over 45 different companies • Allocate resources toward improving controllable costs • Hedge currency risk
- 23. Strategic insights “Our focus isnot on Disney+, Amazon or others, but on how we can improve our experience for others.” - Netflix “We are more in competition with Fortnite. Goal is to become the one source of entertainment media.” - Netflix
- 24. Strategic insights • Tighteruser subscription controls • ⅔ users share accounts • Leverage unique Netflix capabilities • Aspirational self vs. Revealed • Predict unstable consumer demands • Expansion into international markets • Cost management? • Strategic Alliances local SVoD companies This Photo by Unknown author is licensed under CC BY-SA.
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- 26. As we rampup our original content production, we are building out expertise in a number of disciplines, including creative, marketing, legal, finance, licensing, merchandising and other resources related to the development and physical production of content. If we are not able to manage the growing complexity of our business, including improving, refining or revising our systems and operational practices related to our streaming operations and original content, our business may be adversely affected. – from 2018 10K
- 27. Works cited NetflixStrategic Analysis https://www.academia.edu/31853219/Strategic_Analysis_of_media_industry_INTERNET_STREAMING._NETFLIX_INC Current Financial Data: https://www.nasdaq.com/symbol/nflx/financials?query=income-statement https://www.cnbc.com/2019/01/17/netflix-more-scared-of-fortnite-and-youtube-than-disney-and-amazon.html https://www.comparitech.com/blog/vpn-privacy/netflix-statistics-facts-figures/ https://medium.com/datadriveninvestor/the-golden-age-of-streaming-tv-612a4bbd23b8 https://slator.com/demand-drivers/why-netflix-shut-down-its-translation-portal-hermes/ https://www.netflixinvestor.com/financials/sec-filings/sec-filings-details/default.aspx?FilingId=13177032 https://medium.com/spokkz/the-big-brands-that-dominate-the-media-industry-62e63afe0c8d https://www.quora.com/How-many-movies-and-TV-shows-are-in-the-Netflix-streaming-catalog/ https://www.ethnologue.com/guides/how-many-languages http://www.businessofapps.com/data/netflix-statistics/ https://www.google.com/search?q=netflix+subscribers&tbm=isch&source=iu&ictx=1&fir=Ui4U65ZuEE3B5M%252CxBQGMvOnKlAa0M%252C_&ve t=1&usg=AI4_- kR84DjelaV9sjn46yGcngqFcDPiMA&sa=X&ved=2ahUKEwjotuf4lKPhAhVkmK0KHbWtCVAQ_h0wFnoECAsQCA&biw=1366&bih=657#imgrc=Ui4U65Z uEE3B5M:&vet=1 https://www.google.com/search?biw=1366&bih=657&tbm=isch&sa=1&ei=RuabXP3BHca8sAWP66- ABQ&q=netflix+money&oq=netflix+money&gs_l=img.3..0l4j0i8i30l6.27858.29874..30190...0.0..0.151.1044.8j3....3..1....1..gws-wiz- img.......0i30j35i39j0i5i30.fdoCgLLFRC8#imgrc=Fa_6p8I7uTqVCM:
- 28. Works Cited • http://blog.dvd.netflix.com/new-dvd-releases/20-year-milestones •https://www.google.com/search?q=netflix+subscribers&tbm=isch&source=iu&ictx=1&fir =Ui4U65ZuEE3B5M%252CxBQGMvOnKlAa0M%252C_&vet=1&usg=AI4_- kR84DjelaV9sjn46yGcngqFcDPiMA&sa=X&ved=2ahUKEwjotuf4lKPhAhVkmK0KHbWtCVA Q_h0wFnoECAsQCA&biw=1366&bih=657#imgrc=Ui4U65ZuEE3B5M:&vet=1 • https://www.google.com/search?biw=1366&bih=657&tbm=isch&sa=1&ei=RuabXP3BHca 8sAWP66- ABQ&q=netflix+money&oq=netflix+money&gs_l=img.3..0l4j0i8i30l6.27858.29874..3019 0...0.0..0.151.1044.8j3....3..1....1..gws-wiz- img.......0i30j35i39j0i5i30.fdoCgLLFRC8#imgrc=Fa_6p8I7uTqVCM: