The document analyzes Netflix's entry into the video on demand industry through streaming movies. It provides background on Netflix's history as a DVD rental service. A SWOT analysis finds Netflix's strengths include its early market entry, focus on customer satisfaction, and large movie selection. Weaknesses include limited availability of new releases. Opportunities exist in streaming movies. Threats include competition from Blockbuster and potential new entrants. A six forces analysis examines the video on demand industry's competitiveness and the bargaining power of buyers and suppliers.
This report is a semester report for the course Marketing Management. The case company has been chosen collectively in the group. The repor contains Netflix's marketing strategy analysis, target group analysis and its operating market (micro and macro environment) analysis
This document analyzes the strategy of Netflix using various frameworks. It provides an overview of Netflix, including its founding in 1997 as a DVD rental service and transition to an online streaming platform. A PEST analysis identifies political, economic, social and technological factors. A five forces analysis examines the intensity of rivalry, threat of new entrants, bargaining powers of suppliers and customers, and threat of substitutes. A SWOT analysis outlines Netflix's strengths, weaknesses, opportunities, and threats. The document also includes a market analysis and identifies problems around high competition and recommendations around content creation and live sports streaming.
Netflix is seeing slowing subscriber growth despite increased spending on new content. The document discusses Netflix's business model, history, competitors like Disney+ and HBO Max, and financial information. It also notes that Netflix recently raised prices for its US subscription plans and provides a variety of streaming options and personalized recommendations to users.
The Netflix Marketing Plan Power PointShawn McNail
This document provides a marketing plan for Netflix. It begins with background on Netflix's founding in 1997 and subscription-based business model. The mission and goals are to grow the streaming business globally while improving the customer experience. A SWOT analysis identifies strengths like brand recognition but also weaknesses like privacy issues. The main competitors are identified as Hulu, Amazon Prime, and YouTube. Target markets are college students and families seeking affordable entertainment. The positioning focuses on affordability, accessibility, and variety. The implementation plan starts on January 1st and will measure success through sales data. Promotional efforts include a Super Bowl ad to reach 111 million viewers followed by ongoing social media and traditional advertising.
Netflix failure & marketing strategyAshutosh Sahu
1. Netflix presented their marketing strategy which focused on developing high quality original content to differentiate themselves from competitors.
2. They analyzed their strengths in brand and technology against weaknesses like high debt and easy replication. Opportunities in international growth were noted alongside threats from increasing competition.
3. Netflix's strategy to transition from DVD rentals to streaming was disrupted by the poorly executed Qwikster plan in 2011. However, they recovered by listening to customers and committing to original content development, which helped subscriber growth and stock price recovery.
Netflix lost 800,000 customers after raising prices and segmenting its DVD rental and streaming services. The document analyzes how Netflix can regain market share through strategic changes. It is proposed that focusing on target markets, continuing international and domestic expansion, and introducing video game streaming could help Netflix regain customers and increase revenue. Key tools used in the analysis include the business model canvas, value disciplines model, SWOT analysis, and problem logic tree.
Netflix business marketpresentation_economicsGraysonMeeks
This economics presentation provides an overview of Netflix, including its history, market structure, competitors, factors affecting demand and supply, and revenue streams. Netflix is a multi-platform video streaming service available in over 190 countries. It began as a DVD mailing service in 1997 and launched streaming in 2007. The presentation examines Netflix's subscriber growth over time, current competitors like Disney+ and HBO Max, and projections that Netflix will reach over 300 million subscribers by 2024.
This report is a semester report for the course Marketing Management. The case company has been chosen collectively in the group. The repor contains Netflix's marketing strategy analysis, target group analysis and its operating market (micro and macro environment) analysis
This document analyzes the strategy of Netflix using various frameworks. It provides an overview of Netflix, including its founding in 1997 as a DVD rental service and transition to an online streaming platform. A PEST analysis identifies political, economic, social and technological factors. A five forces analysis examines the intensity of rivalry, threat of new entrants, bargaining powers of suppliers and customers, and threat of substitutes. A SWOT analysis outlines Netflix's strengths, weaknesses, opportunities, and threats. The document also includes a market analysis and identifies problems around high competition and recommendations around content creation and live sports streaming.
Netflix is seeing slowing subscriber growth despite increased spending on new content. The document discusses Netflix's business model, history, competitors like Disney+ and HBO Max, and financial information. It also notes that Netflix recently raised prices for its US subscription plans and provides a variety of streaming options and personalized recommendations to users.
The Netflix Marketing Plan Power PointShawn McNail
This document provides a marketing plan for Netflix. It begins with background on Netflix's founding in 1997 and subscription-based business model. The mission and goals are to grow the streaming business globally while improving the customer experience. A SWOT analysis identifies strengths like brand recognition but also weaknesses like privacy issues. The main competitors are identified as Hulu, Amazon Prime, and YouTube. Target markets are college students and families seeking affordable entertainment. The positioning focuses on affordability, accessibility, and variety. The implementation plan starts on January 1st and will measure success through sales data. Promotional efforts include a Super Bowl ad to reach 111 million viewers followed by ongoing social media and traditional advertising.
Netflix failure & marketing strategyAshutosh Sahu
1. Netflix presented their marketing strategy which focused on developing high quality original content to differentiate themselves from competitors.
2. They analyzed their strengths in brand and technology against weaknesses like high debt and easy replication. Opportunities in international growth were noted alongside threats from increasing competition.
3. Netflix's strategy to transition from DVD rentals to streaming was disrupted by the poorly executed Qwikster plan in 2011. However, they recovered by listening to customers and committing to original content development, which helped subscriber growth and stock price recovery.
Netflix lost 800,000 customers after raising prices and segmenting its DVD rental and streaming services. The document analyzes how Netflix can regain market share through strategic changes. It is proposed that focusing on target markets, continuing international and domestic expansion, and introducing video game streaming could help Netflix regain customers and increase revenue. Key tools used in the analysis include the business model canvas, value disciplines model, SWOT analysis, and problem logic tree.
Netflix business marketpresentation_economicsGraysonMeeks
This economics presentation provides an overview of Netflix, including its history, market structure, competitors, factors affecting demand and supply, and revenue streams. Netflix is a multi-platform video streaming service available in over 190 countries. It began as a DVD mailing service in 1997 and launched streaming in 2007. The presentation examines Netflix's subscriber growth over time, current competitors like Disney+ and HBO Max, and projections that Netflix will reach over 300 million subscribers by 2024.
netflix , netflix way of success , how netflix achieve success , usr of big data , data science , how netflix use its clients data , business decision analysis, decision making , complix decision
Netflix started in 1997 as a DVD rental service by mail. In 2007, it launched its streaming service which allowed users to watch movies and TV shows online. This changed the company's business model to a subscription-based model. The document discusses Netflix's history, customers, competitors in the online video market, and its business strategy of focusing on customers' needs through recommendations and expanding its content library. It analyzes Netflix's strengths in its brand and algorithm, as well as weaknesses in rising content costs and potential threats from competition.
Netflix has grown to dominate the entertainment streaming industry since 1997 through innovative distribution methods and intuiting changing consumer preferences. It faces moderate threats from new entrants and substitute products, and high bargaining power from both buyers and content suppliers. Rivalry among existing competitors is also moderate as many cooperate to share audiences. To remain competitive, Netflix will need strategies to mitigate the effects of future price increases, continue global expansion, create additional revenue streams, and maintain good relationships with suppliers and competitors through collaboration.
This document summarizes Netflix's business strategies. It includes a PEST analysis noting political issues like piracy and content licensing. A five forces analysis finds high threats from substitutes and new entrants. Netflix's core problem is the high threat from all five competitive forces, especially the bargaining power of suppliers and buyers. Netflix's strategy is to pursue market penetration through excellent service and low prices, focus on creating its own content, increase innovation spending, use pricing cautiously, transition fully to streaming, partner to optimize its platform, and maintain high availability distribution.
Netflix faced significant issues in 2011 including losing 800k subscribers, a nearly 500% drop in stock price, and poor public relations. The document analyzes Netflix's strengths and weaknesses using the McKinsey 7S framework. It finds Netflix has a flexible structure but struggles to align short-term strategies with its long-term streaming focus. Strengths include its library, algorithms, and infrastructure, while weaknesses are in marketing, customer service, and content partnerships. The document predicts Netflix will address issues through a new CMO, eliminating DVDs, new partnerships, and leadership changes.
Netflix aims to grow its market share by targeting "complete series seekers" with a new marketing strategy. It will address this segment's need for both past and current episodes by adding next-day access to popular TV shows. Netflix will implement social media, online video, and TV advertisements over six months to promote this new offering. The goal is for Netflix to position itself as better able to serve complete series seekers than competitors like Hulu and expand its total revenues and subscriber base.
Netflix is an American entertainment company that provides streaming media and video on demand. It was founded in 1997 and has since expanded globally to be available in over 190 countries. Netflix uses a subscription-based business model with monthly fees for access to its large library of content. It has been increasing its original content production in recent years. While Netflix has been very successful in growing its subscriber base internationally, its business model relies heavily on content licensing costs which impact profitability.
Netflix launched in India in January 2016. While it initially saw excitement, its launch response was lukewarm as it lacked the content depth of other regions and had pricing not suitable for the Indian context. It also faced challenges of buffering issues and weak broadband infrastructure. Netflix is working to eliminate buffering by enabling streaming at lower speeds and gradually creating more local Indian content. It aims to cater to India which is a fast growing smartphone market but also has some of the world's slowest network speeds.
This document provides an equity research report on Netflix from the QUMMIF Investment Club. It summarizes Netflix's business operations, financial performance, strengths, weaknesses, opportunities, threats, and industry outlook. The report finds that Netflix has positioned itself as the leading online video streaming service and sees future growth prospects as favorable due to expanding internationally and increasing original content production. However, it also faces threats from growing competition in the online streaming market and potential loss of subscribers to free content downloading.
Netflix was founded in 1997 by Reed Hastings and Marc Randolph to create an online DVD rental service. It launched in 1998 offering 900 movie titles for rental by mail. By 2013, Netflix had grown to over 36 million subscribers who streamed 2 billion hours of content per month. Netflix's mission is to become the leading global streaming service through expanding its library of exclusive original content available on any internet-connected device.
An Informative Presentation on Netflix.
Includes
1. History
2. Several business plans of Netflix over the time of its inception to the present scenario
3. S.W.O.T analysis
4. Present Challenges.
Netflix is an American streaming service operating in over 190 countries. The document discusses Netflix's problems in the Indian market, despite its global brand recognition and success. It performs a SWOT analysis, identifying strengths like brand reputation and original content, but also weaknesses such as a lack of local/regional content and higher prices than competitors. Opportunities include increased interest in streaming due to COVID and niche marketing. Threats include regulations, password sharing, and strong competitors like Disney+ Hotstar and Amazon Prime Video. The document proposes strategies like collaborating with ISPs, surveying audiences, creating more local content, and alternative pricing models to help Netflix better penetrate the Indian market.
Netflix’s unique DVD rental service has revolutionized the industry. They successfully took the best of traditional conventions (like physical media, the U.S. Postal Service) and mixed them with new world internet-conventions. They have also effectively managed to discourage competition from both more established businesses and new entrants. The future growth of Netflix as it expands into streaming media, poses challenges in legal, infrastructure/technology, and through additional costs. In order to remain competitive, it is imperative that Netflix partner with companies with global reach to overcome these challenges. This presentation was part of an MBA class assignment to audit and industry in the the technology sector. The presentation has multiple authors listed on the title page. If you would like copies of the executive summary, complete S.W.O.T. analysis, and/or the transcript of the presentation please PRIVATE MESSAGE ME and I will email it to you.
Netflix represents a classical subscription-based video on demand service model where users pay a subscription fee for access to streaming content. Netflix was founded in 1997 as a DVD rental service and transitioned to streaming in 2007. It is now the largest online streaming provider with over 75 million subscribers globally. The document discusses Netflix's industry structure, competitive forces as streaming faces competition from services like Hulu. A SWOT and Porter's Five Forces analysis is presented. The value chain and role of data and algorithms in powering recommendations is also examined. Current and potential strategies like expanding internationally and replacing cable boxes are proposed.
This document provides an executive summary for Netflix's 2011 campaign. The campaign aims to increase sales and brand awareness through advertising. Some key points:
- Netflix offers the largest selection of DVDs for rental as well as low-cost streaming options.
- The campaign goals are to reach more of their target audience and increase customer numbers.
- Suggestions are made to improve internet, TV, and unconventional advertising (QR codes on candy).
- The goal is to spread awareness of Netflix's services and influence more people to subscribe.
Netflix's business model focuses on providing streaming media content through its platform to customers for a monthly subscription fee. It acquires content through licensing agreements with major studios and television networks and produces its own original content. Netflix utilizes partnerships with internet providers and technology development to maintain a strong streaming infrastructure and distribution channels through its website and app.
This panel discussion focused on providing updates to the cannabis banking issue. The panel consisted of an attorney from Emerge Law Group, an attorney from the Law Office of Kimberly R. Simms, and the President and CEO of Guardian Data Systems. They discussed the challenges that cannabis businesses face with banking and accessing financial services due to federal prohibition, along with any updates on potential legislative solutions to address this issue.
The document summarizes a Netflix consulting project report on how Netflix can respond to competition and better serve customers. It analyzes Netflix's industry, competitors like Amazon and Hulu, and provides insights from a consumer survey. The report's key recommendations are that Netflix should offer premium early access to new releases, acquire more current content, pursue cross-promotions, convert remaining DVD users to streaming, and grow its overall user base.
netflix , netflix way of success , how netflix achieve success , usr of big data , data science , how netflix use its clients data , business decision analysis, decision making , complix decision
Netflix started in 1997 as a DVD rental service by mail. In 2007, it launched its streaming service which allowed users to watch movies and TV shows online. This changed the company's business model to a subscription-based model. The document discusses Netflix's history, customers, competitors in the online video market, and its business strategy of focusing on customers' needs through recommendations and expanding its content library. It analyzes Netflix's strengths in its brand and algorithm, as well as weaknesses in rising content costs and potential threats from competition.
Netflix has grown to dominate the entertainment streaming industry since 1997 through innovative distribution methods and intuiting changing consumer preferences. It faces moderate threats from new entrants and substitute products, and high bargaining power from both buyers and content suppliers. Rivalry among existing competitors is also moderate as many cooperate to share audiences. To remain competitive, Netflix will need strategies to mitigate the effects of future price increases, continue global expansion, create additional revenue streams, and maintain good relationships with suppliers and competitors through collaboration.
This document summarizes Netflix's business strategies. It includes a PEST analysis noting political issues like piracy and content licensing. A five forces analysis finds high threats from substitutes and new entrants. Netflix's core problem is the high threat from all five competitive forces, especially the bargaining power of suppliers and buyers. Netflix's strategy is to pursue market penetration through excellent service and low prices, focus on creating its own content, increase innovation spending, use pricing cautiously, transition fully to streaming, partner to optimize its platform, and maintain high availability distribution.
Netflix faced significant issues in 2011 including losing 800k subscribers, a nearly 500% drop in stock price, and poor public relations. The document analyzes Netflix's strengths and weaknesses using the McKinsey 7S framework. It finds Netflix has a flexible structure but struggles to align short-term strategies with its long-term streaming focus. Strengths include its library, algorithms, and infrastructure, while weaknesses are in marketing, customer service, and content partnerships. The document predicts Netflix will address issues through a new CMO, eliminating DVDs, new partnerships, and leadership changes.
Netflix aims to grow its market share by targeting "complete series seekers" with a new marketing strategy. It will address this segment's need for both past and current episodes by adding next-day access to popular TV shows. Netflix will implement social media, online video, and TV advertisements over six months to promote this new offering. The goal is for Netflix to position itself as better able to serve complete series seekers than competitors like Hulu and expand its total revenues and subscriber base.
Netflix is an American entertainment company that provides streaming media and video on demand. It was founded in 1997 and has since expanded globally to be available in over 190 countries. Netflix uses a subscription-based business model with monthly fees for access to its large library of content. It has been increasing its original content production in recent years. While Netflix has been very successful in growing its subscriber base internationally, its business model relies heavily on content licensing costs which impact profitability.
Netflix launched in India in January 2016. While it initially saw excitement, its launch response was lukewarm as it lacked the content depth of other regions and had pricing not suitable for the Indian context. It also faced challenges of buffering issues and weak broadband infrastructure. Netflix is working to eliminate buffering by enabling streaming at lower speeds and gradually creating more local Indian content. It aims to cater to India which is a fast growing smartphone market but also has some of the world's slowest network speeds.
This document provides an equity research report on Netflix from the QUMMIF Investment Club. It summarizes Netflix's business operations, financial performance, strengths, weaknesses, opportunities, threats, and industry outlook. The report finds that Netflix has positioned itself as the leading online video streaming service and sees future growth prospects as favorable due to expanding internationally and increasing original content production. However, it also faces threats from growing competition in the online streaming market and potential loss of subscribers to free content downloading.
Netflix was founded in 1997 by Reed Hastings and Marc Randolph to create an online DVD rental service. It launched in 1998 offering 900 movie titles for rental by mail. By 2013, Netflix had grown to over 36 million subscribers who streamed 2 billion hours of content per month. Netflix's mission is to become the leading global streaming service through expanding its library of exclusive original content available on any internet-connected device.
An Informative Presentation on Netflix.
Includes
1. History
2. Several business plans of Netflix over the time of its inception to the present scenario
3. S.W.O.T analysis
4. Present Challenges.
Netflix is an American streaming service operating in over 190 countries. The document discusses Netflix's problems in the Indian market, despite its global brand recognition and success. It performs a SWOT analysis, identifying strengths like brand reputation and original content, but also weaknesses such as a lack of local/regional content and higher prices than competitors. Opportunities include increased interest in streaming due to COVID and niche marketing. Threats include regulations, password sharing, and strong competitors like Disney+ Hotstar and Amazon Prime Video. The document proposes strategies like collaborating with ISPs, surveying audiences, creating more local content, and alternative pricing models to help Netflix better penetrate the Indian market.
Netflix’s unique DVD rental service has revolutionized the industry. They successfully took the best of traditional conventions (like physical media, the U.S. Postal Service) and mixed them with new world internet-conventions. They have also effectively managed to discourage competition from both more established businesses and new entrants. The future growth of Netflix as it expands into streaming media, poses challenges in legal, infrastructure/technology, and through additional costs. In order to remain competitive, it is imperative that Netflix partner with companies with global reach to overcome these challenges. This presentation was part of an MBA class assignment to audit and industry in the the technology sector. The presentation has multiple authors listed on the title page. If you would like copies of the executive summary, complete S.W.O.T. analysis, and/or the transcript of the presentation please PRIVATE MESSAGE ME and I will email it to you.
Netflix represents a classical subscription-based video on demand service model where users pay a subscription fee for access to streaming content. Netflix was founded in 1997 as a DVD rental service and transitioned to streaming in 2007. It is now the largest online streaming provider with over 75 million subscribers globally. The document discusses Netflix's industry structure, competitive forces as streaming faces competition from services like Hulu. A SWOT and Porter's Five Forces analysis is presented. The value chain and role of data and algorithms in powering recommendations is also examined. Current and potential strategies like expanding internationally and replacing cable boxes are proposed.
This document provides an executive summary for Netflix's 2011 campaign. The campaign aims to increase sales and brand awareness through advertising. Some key points:
- Netflix offers the largest selection of DVDs for rental as well as low-cost streaming options.
- The campaign goals are to reach more of their target audience and increase customer numbers.
- Suggestions are made to improve internet, TV, and unconventional advertising (QR codes on candy).
- The goal is to spread awareness of Netflix's services and influence more people to subscribe.
Netflix's business model focuses on providing streaming media content through its platform to customers for a monthly subscription fee. It acquires content through licensing agreements with major studios and television networks and produces its own original content. Netflix utilizes partnerships with internet providers and technology development to maintain a strong streaming infrastructure and distribution channels through its website and app.
This panel discussion focused on providing updates to the cannabis banking issue. The panel consisted of an attorney from Emerge Law Group, an attorney from the Law Office of Kimberly R. Simms, and the President and CEO of Guardian Data Systems. They discussed the challenges that cannabis businesses face with banking and accessing financial services due to federal prohibition, along with any updates on potential legislative solutions to address this issue.
The document summarizes a Netflix consulting project report on how Netflix can respond to competition and better serve customers. It analyzes Netflix's industry, competitors like Amazon and Hulu, and provides insights from a consumer survey. The report's key recommendations are that Netflix should offer premium early access to new releases, acquire more current content, pursue cross-promotions, convert remaining DVD users to streaming, and grow its overall user base.
Understand what are the causes and effects of the increased use of “Video on Demand”:
- Internet Access and Audience
- USA Crisis and Cable TV Fee
- Netflix VOD Operation and Content Negotiation
- Cable TV own VOD products and Market competition
CyberFlick is a virtual Box Office, offering on-demand streaming movie service which allows filmmakers in Africa to release or launch their movies online.
Netflix's social media strategy focuses on sharing, recommendations, and nostalgia marketing on Facebook by encouraging users to recommend shows and movies to friends during seasonal periods like holidays. On Twitter, Netflix uses hashtags and article/video links while on Instagram it shares posters, videos, pictures with hashtags and tags to engage audiences and link to actor/director accounts.
This marketing plan summarizes an Android app that allows users to stream high quality movies online. It aims to provide a better movie viewing experience at home than in theaters by offering convenient access to a wide variety of movies at affordable prices. The plan differentiates this app from competitors by primarily focusing on movies rather than a mixture of content. It targets movie lovers looking to watch films in their leisure time and those who don't have time for theaters. The goals are to create a single platform for many movies and provide personalized movie suggestions based on genres viewed. The app will be free to use but offer a premium subscription for offline viewing and multiple device access.
This document provides instructions for finding and integrating video clips and images into educational projects using various software programs like PowerPoint, Inspiration, and Timeliner. It discusses searching online databases and archives for content, downloading and saving files, and embedding, inserting, or hyperlinking the media into projects using the different software options. Steps are outlined for each program.
BIGFLIX is India's largest online movies-on-demand service provider, started in 2008. The objectives of repositioning BIGFLIX were to introduce the concept of 'Second screen', get more website registrations, drive awareness of its catalog and features, and increase fan engagement. The strategy involved a two-fold creative approach using visuals on Facebook and Twitter to attract fans and get registrations through Bitly links, while showcasing the catalog and features and engaging customers through birthday wishes for stars. The results included increased likes, comments, new fans, Bitly link clicks, and Twitter followers.
Netflix has a strong social media presence, posting 4-5 times daily to Facebook and Twitter. Though posts don't always get high engagement, customer service accounts help Netflix interact directly with users. Competition from services like Hulu presents a threat, but Netflix's convenience and large user base are strengths. The document discusses Netflix's social media strategy and competitive analysis.
The document discusses television audience measurement and ratings in India. It outlines the evolution of rating systems from early radio ratings in the 1930s to modern television ratings providers like TAM Media Research and INTAM. It describes the methodology of television ratings, including the use of people meters installed in homes to record viewership data. The document also provides snapshots of television viewership data in India from 2009 to illustrate how ratings are used.
Let Us Entertain You! Analysis of Consumer Entertainment Choices Across Conne...John Feland
Recent analysis presented at the Telecom Council's Deep Dive on Entertainment examining consumer entertainment activities across connected devices, including Smartphone, Tablets, Laptops, and All-In-Ones. The presentation details which behaviors are top of mind for consumers among Doing Work, Surfing the Web, Watching Movies, Playing Games or Listening to Music. The presentation also dives deep into how consumer entertainment behaviors differ between smartphone and tablet brands.
Argus Insights is a new type of market intelligence company, founded by tech industry veterans looking for better ways to connect the dots between technology innovation and consumer adoption. Argus Insights sits between traditional research firms, and Social Analytics companies, to provide focused and actionable analysis on where consumers are taking the market, who is winning and why. More than just a buzz meter, proprietary consumer demand metrics have beaten Wall Street estimates on iPhone unit sales 10 of the last 12 quarters. Global coverage of Smartphones, Wearables, Tablets, Home Automation, Internet of Things and more lets Argus Insights bridge intelligence gap between the quarterly forecasts. Real-time analytics cut through the branding buzz to expose how technology and innovation are driving consumer adoption.
Beyond DevOps - How Netflix Bridges the GapJosh Evans
Operating a massively scalable, constantly changing, distributed global service is a daunting task. We innovate at breakneck speed to attract new customers and stay ahead of the competition. Simultaneously improving service quality and enabling rapid, continuous change seems impossible on the surface.
At Netflix, Operations Engineering is a centralized organization whose charter is to accomplish just that by applying high-leverage software engineering practices like continuous delivery. real-time analytics, and automation to solve operational problems. It's well established that many traditional IT Operations teams struggle to bridge the gap with software engineering. Operations Engineering is no exception. And while DevOps as a construct seeks to address this gap, it doesn't go far enough. It does not explain how to bridge the gap or even why it's important to do so.
In this talk we’ll use Netflix Operations Engineering as a case study to address these questions. We'll explore common challenges faced by operational teams and strategies to overcome them.
Netflix is analyzing strategies for entering the video-on-demand (VOD) market as its DVD rental business declines. There are three main impediments to VOD adoption: connectivity, content availability, and technology adoption. Netflix has strengths like its large customer base and recommendation system, but weaknesses like slower DVD delivery versus instant streaming. The alternatives are licensing content, standalone streaming, or a separate online video business. The recommendation is for Netflix to pursue licensing agreements to build an online movie library for streaming. This should leverage Netflix's brand while the DVD business declines slowly. In the long run, as bandwidth and devices improve, streaming partnerships may decline but licensing will remain important.
Netflix began as a low-end disruptor in the video rental market, mailing DVDs to customers. It transitioned to online streaming, which disrupted Blockbuster's business model. Netflix's streaming service targets the low-end market, providing an inexpensive entertainment option. It has grown to become a mainstream provider as it improved its variety, speed and quality over time. The document recommends Netflix strengthen its processes to retain customers and gain new subscribers. Leaders should also develop competencies to continue innovating and pursue partnerships to expand content offerings.
One More Episode An Industry and Competitive Analysis for Netfl.docxhopeaustin33688
One More Episode: An Industry and Competitive Analysis for Netflix
David Bazile
Abstract
This study is to provide a thorough analysis of Netflix as a corporation. Netflix shows their competences such as their brand image and their leadership in the streaming industry as well how they take consumer opinion into what goes on their website. The following paper will demonstrate an overview of Netflix and the video streaming service industry. This paper will then focus on the external and internal analysis of the company using matrices such as Porter’s Five Forces, External Forces Evaluation (EFE), Internal Forces Evaluation (IFE), and the SPACE tool. These matrices has been analyzed but strengths, weaknesses, opportunities and threats have been identified used in the TOWS matrix. Focusing on different alternative business strategies, the paper shows possible solutions for different identified problems of Netflix. Some of the Problems that Netflix will be facing is the saturation of the Industry but through the use of Market Penetration and Development Netflix can make it out okay. The paper will then be concluded with how the implementations of the proposed solutions can strengthen Netflix’s position in the streaming industry.
______________________________________________________________________________
1. Introduction
Netflix was co-founded by both Reed Hastings and Marc Randolph in 1997. The goal was to offer online movie rentals in Scotts Valley, California. Hastings wanted to be able to rent movies on the internet. There was also an old discredited story that claims that “Hastings had the idea after Blockbuster charged him a $40 late fee for ‘Apollo 13.’” In 1999, Netflix begins to use the subscription service that allows consumers to rent unlimited movies for one low subscription. In the year 2000, Netflix launches the personalized movie recommendation system that uses member’s ratings to predict choices for Netflix’s customers as well as recommend newer content to the same customers. In May of 2002 Netflix announces its IPO offering 5,500,000 at the price of $15.00 per share under the name NFLX. In 2005 Netflix reaches 4.2 million people. Netflix first introduces streaming which allows members to instantly watch television shows and movies from their computer in 2007 making them a pioneer in this industry. A year later Netflix partners with consumer electronic companies to stream on Xbox, Blu-ray disc players and TV set up boxes. PS3, internet controlled televisions and other internet connected devices came a year later in 2009. In 2010 it is available on Apple devices, the Nintendo Wii and they launched in Canada. The next year, in 2011, Netflix launched in Latin America and the Caribbean. In 2012, Netflix launches in Europe and they won their first Primetime Emmy Engineering Award. The year after Netflix expands to the Netherlands and Netflix also received 31 Emmy and wins 3 of them for its original content. Finally, last year, Netflix .
This document provides an analysis of Netflix. It discusses that Netflix is the world's largest subscription-based streaming service with over 16 million subscribers. It offers various subscription plans without due dates, late fees, or shipping fees. Approximately 2 million DVDs are shipped daily and more than 66% of subscribers streamed over 15 minutes of content last quarter. The document also examines Netflix's business model, including how it acquires content through various agreements, its packaging and distribution systems, marketing strategies, and financial performance. It concludes with a SWOT analysis and recommendations for Netflix to expand internationally and prepare for potential threats from internet service providers.
The document provides statistics about Google, Wikipedia, and YouTube as well as information about online video rental services. It discusses how online video rental works, the types of plans offered, and major players in the industry such as Netflix. Netflix is discussed in depth, including its history and services. The competitive advantages and disadvantages of Netflix compared to Blockbuster and Amazon are outlined. The market scenario for online video rentals in India is also summarized, along with some of the top competitors in that market.
The document provides statistics about Google, Wikipedia, and YouTube as well as information about online video rental services. It discusses how online video rental works, the types of plans offered, and major players in the industry such as Netflix. Netflix is discussed in depth, including its history and services. The competitive advantages and disadvantages of Netflix compared to Blockbuster and Amazon are outlined. The market scenario for online video rentals in India is also summarized, along with some of the top competitors in that market.
The document summarizes statistics about Google, Wikipedia, and YouTube. It then discusses how online video rental services work, the types of plans offered, and major players like Netflix. Netflix is discussed in depth, including its history and services. The document also covers Netflix's competitive advantages and disadvantages compared to Blockbuster and Amazon. It provides an overview of the online DVD rental market in India and some of the top competitors in this space.
The document provides statistics about Google, Wikipedia, and YouTube as well as information about online video rental services. It discusses how online video rental works, the types of plans offered, and major players in the industry such as Netflix. Netflix is discussed in depth, including its history and services. The competitive advantages and disadvantages of Netflix compared to Blockbuster and Amazon are outlined. The market scenario for online video rentals in India is also summarized, along with some of the top competitors in that market.
The document provides statistics about Google, Wikipedia, and YouTube as well as information about online video rental services. It discusses how online video rental works, the types of plans offered, and major players in the industry such as Netflix. Netflix is discussed in depth, including its history, services offered, advantages and disadvantages compared to Blockbuster and Amazon, and the market scenario in India. Major competitors in India are also outlined. In conclusion, opportunities for growth in the online video rental industry in India through improved logistics, social media, anti-piracy efforts, and corporate partnerships are discussed.
The document provides statistics about Google, Wikipedia, and YouTube as well as information about online video rental services. It discusses how online video rental works, the types of plans offered, and major players in the industry such as Netflix. Netflix is discussed in depth, including its history and services. The competitive advantages and disadvantages of Netflix compared to Blockbuster and Amazon are outlined. The market scenario for online video rentals in India is also summarized, along with some of the top competitors in that market.
Video Conferencing, The Enterprise and YouVideoguy
This eBook provides an introduction to video conferencing for enterprises. It discusses the benefits of deploying video communications such as reduced travel costs and increased productivity. It also covers some of the basics of video conferencing including what is required to deploy it within an organization and how to test a network's capabilities. The eBook includes additional chapters on technical topics such as video coding techniques and codecs.
Is there a correlation between Netflix and Adobe Creative Cloud? We think so. Adobe recently shifted to a cloud-based subscription model. They realized that b2b software was changing and they needed to adapt. It's not all that different to Netflix, which turned the entertainment industry on its head and blew Blockbuster out of the water. The question is, will you adapt like Adobe and move to Creative Cloud, or refuse to change and face the same fate as Blockbuster?
This document provides an overview of Netflix's business strategy and performance from 1997-2012. It discusses Netflix's founding and original DVD-by-mail business model. The company later added streaming services and expanded internationally. By 2012, Netflix had over 23 million streaming subscribers and 120,000 titles available. The document also analyzes Netflix using Porter's Five Forces model, identifying intense industry competition and high threat of substitutes as major challenges.
Netflix began as a DVD rental service in 1997 and transitioned to online streaming in 2007 in response to declining DVD sales and changing consumer trends. It now has over 86 million subscribers worldwide and a large library of exclusive original content. The online streaming industry is highly dynamic and competitive with low barriers to entry. While Netflix faces threats from new entrants, substitutes, and bargaining suppliers and buyers, it maintains advantages through exclusive contracts and its recommendation algorithm.
[The Impact of the Internet on the Video Rental Industry.docxdanielfoster65629
[The Impact of the Internet on the Video Rental
Industry: Blockbuster vs. Netflix]
2
Table of Contents
INTRODUCTION 3
VIDEO RENTAL INDUSTRY ANALYSIS 5
BLOCKBUSTER BUSINESS DESCRIPTION 7
BLOCKBUSTER BUSINESS MODEL 7
BLOCKBUSTER HISTORY 8
BLOCKBUSTER SWOT ANALYSIS 10
NETFLIX BUSINESS DESCRIPTION 14
NETFLIX BUSINESS MODEL 14
NETFLIX HISTORY 15
COMPETING ONLINE SERVICES 16
FINANCIAL ANALYSIS 18
THE FUTURE OF THE VIDEO RENTAL INDUSTRY 24
CONCLUSION 25
REFERENCES 26
3
The Impact of the Internet on Video
Rentals: Blockbuster vs. Netflix
Could Brick and Mortar Video Rental Stores be a thing of the past? The Internet has
challenged the way movies are rented in the United States. Blockbuster, one of the
biggest video rental companies, has completely restructured its operations to meet the
market demands due to the emergence of the Internet and companies like Netflix. The
first impact the online video rental industry made on Blockbuster was making late fees
obsolete. Blockbuster enacted a “no late fees” policy in 2004 to remain competitive in the
industry. The company gave up about $450 million in late fee revenue and $250 million
to $300 million in operating income the first year the policy was enacted (Halkias). This
is not counting the increased number of new releases the company needed to purchase to
meet customer demand due to the policy. Under the "no late fees" program, a customer
was charged the purchase price for a movie if it was kept longer than 14 days. The charge
was dropped if it was returned within 30 days, and the customer was then charged a $1.25
restocking fee (Halkias). Blockbuster then created Blockbuster Total Access in attempts
to compete in the online video rental market. With Blockbuster Total Access, customers
would pay a subscription fee of $24.99 a month and rent up to 2 movies online at a time.
4
Netflix, the online DVD rental pioneer, sold a similar service for $21.99 a month.
Company CEO, John Antioco, said the overall online subscriber market is about 3
million to 5 million households, and he believes Blockbuster can attract a 30 percent
market share (Halkias). Blockbuster spent between 70 and 90 million dollars on the Total
Access program in hopes of reinventing itself. Program costs and continued decline in
rentals caused the company’s 2004 earnings to fall about 10 percent below the $1.48 a
share earned in 2003 (Halkias). The company will have to continue developing in this $8
billion dollar a year industry as it continues to change. Within another four years,
customers are expected to spend about $1.7 billion getting movies from cable to watch at
their convenience (Cohen). The video rental industry is also moving to legal downloading
sites such as CinemaNow Inc. Founded in 1999, the service lets people download movies
as a rental with a viewing window, or buy the film outright and burn it on a di.
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Netflix: Entering the Video on Demand Industry through Providing Streaming Movies
1. NETFLIX
Entering the Video on Demand Industry through Providing
Streaming Movies
Rico Chiu Sherwin Doroudi Travis Haussler Aditya Khosla
Sean Mattingly
March 7, 2007
1
3. 1 Introduction
Netflix is the world’s largest online movie rental service with over 6.3 million members and a collection of
more than 75,000 titles. They are known for both their excellent customer service and their convenient and
user-friendly interface on their award-winning website. Though Netflix has received many criticisms, it has
continually grown and thrived in the movie rental market. New technology has enabled Netflix to provide
high quality streaming videos directly to their subscribers’ PCs. This service is being rolled out over the first
six months of 2007, free of charge, to Netflix’s current subscribers. In order to maintain its superior position
in the in home filmed-entertainment, Netflix must enter the Video On Demand (VOD) market immediately.
By entering the VOD market through offering streaming videos, Netflix will be able to differentiate itself from
its competitors, and reduce the likelihood of price competition. Offering a movie streaming service as opposed
to a movie downloading service will further aid it in differentiating itself. For the short run, Netflix needs to
incorporate the service of streaming movies to complement its DVD rental service. In the long run, after the
popularity of streaming movies has grown and the technicalities of this service are fixed, Netflix can separate
the DVD rental and streaming movies services, offering two different sets of plans. Pursuing this strategy is
vital to Netflix’s future, because as new innovations in technology become popular, the DVD-rental subset
of the home movie market will shrink, while the downloading and streaming of movies will eventually come
to dominate the majority of this market. Therefore, the correct implementation of Netflix’s entry into the
VOD market, will serve as a bridge strategy, aiding Netflix in its evolution from a DVD rental service to a
distributor of digital entertainment.
2 A Closer Look at Netflix’s History
Reed Hastings and Marc Randolph founded Netflix in 1997. DVDs were a relatively new technology, with
less than a thousand titles available at the time, but Hastings and Randolph believed it had potential to
replace the VHS format. The company began operating in April 1998, offering 7-day rentals for about $6.
Netflix, along with Magic Disc, DVD Express, and Reel.com, were the first few companies to rent DVDs by
mail. Netflix differentiated itself by spending heavily in promotions. It created partnerships with companies
selling the most vital complementary good, a DVD player. It offered free rentals with the purchase of DVD
players from Toshiba and Pioneer and computers with DVD drives from HP and Apple. However, Netflix
was in direct competition with Amazon.com in selling DVDs so they came to a compromise in December
1998: Netflix would stop selling DVDs in exchange for being heavily promoted on Amazon’s website[2].
Netflix began to partner with online movie information providers and promoted more features on its website
to attract more customers. In September 1999, it began the Marquee Program, offering 4 DVDs rentals
per month with no late fees or due dates for a monthly subscription fee[2]. In February 2000, it introduced
CineMatch, a program that evaluates the rental patterns of customers, identifying which movies customers of
similar tastes would enjoy[3]. Both programs were highly popular and soon Netflix did not rent out individual
DVDs, relying fully on the Marquee Program.
3
4. Continuing its aggressive marketing and networking campaign, Netflix signed a deal with major DVD produc-
ers, such as Warner Home Video and Columbia Tri-Star. In exchange for cheaper prices on large quantities
of DVDs, the movie studios received a portion of the rental receipts[2]. As the success of Netflix grabbed
the attention of the media, competitors began to respond. In the summer of 2002, Blockbuster started its
own unlimited rentals and no late fee subscription plan and bought out an online DVD rental company.
Wal-Mart and Columbia House also tried to amass large volumes of DVD titles to compete with Netflix.
However, Netflix already had a solid foothold in the market, fending off these major competitors. In re-
sponse, it announced the opening of more distribution facilities. Five years after its debut, Netflix finally
began to produce profits[2].
On January 16, 2007 Netflix issued a press release regarding a “New Feature Will Be Included in Subscribers’
Monthly Membership at no Extra Charge.” For every dollar a user pays for their subscription, they will be
able to view one hour of streaming video from a selection of about 1,000 movies and TV series on their PCs.
Netflix also announced that they plan to expand the technology to reach “every Internet-connected screen,
from cell phones to PCs to plasma screens”[10].
3 SWOT Analysis
3.1 Strengths
Entry timing
Netflix entered the market for DVD rentals at a time when there were few other competitors in the market,
allowing them to establish their brand name and image for providing a unique service. They were the first to
offer DVD rental by mail and this allowed them to offer a greater variety of DVDs to consumers as compared
to their competitors at the time, as DVDs were relatively new to the market. Combined with its successful
business model, Netflix’s early entry has allowed it to maintain a high relative market share in the online
DVD rental industry.
Understands weaknesses of competitors: Customer Satisfaction
From the start, Netflix understood what irritated many video rental store customers: late fees. Usually after
renting and watching a movie from a store such as Blockbuster, the customer has to rush to return the movie
on the subsequent day (before midnight) or pay a late fee comparable to the price of the rental. Although
Blockbuster does get an estimated 18% of its total revenue from late fees, it leaves the customer annoyed,
frustrated, and unsatisfied. On the other hand, Netflix lets the customer keep the DVD until the customer
wants to see the next one in their queue, allowing the fredom to return the movie at one’s convenience[1].
4
5. Networked connections with many partners and even potential competitors
From the very beginning of its entry into the market, Netflix understood the importance of making partner-
ships with the movie industry, the electronics industry, and retailers[1]. Netflix’s name was spread widely
through promotions with complementary products, such as DVD players and movie websites. When it saw
Amazon.com as a competitor, it stopped selling DVDs to cease all tensions in exchange for being promoted
on their website. Additionally, quality leadership has enabled Netflix to stay afloat despite the advent of
powerful competitors like Wal-Mart. Not only was Reed Hastings able to fend off Wal-Mart’s attempt to
bankrupt Netflix, he was able to convince Wal-Mart to encourage customers to switch to Netflix after the
Wal-Mart service fell through[3]. By staying strong but cooperative, Netflix ended up profiting from many
threats.
Award-winning website
Netflix’s website boasts many features. Netflix’s CineMatch implements an award-winning algorithm that
can predict with surprisingly consistent accuracy what movies someone would prefer given their previous
rental history, planned future rentals, and ratings of movies they’ve seen in the past[4]. Furthermore, they’re
constantly trying to improve the CineMatch program: Netflix is offering a prize of $1 million for a better
algorithm[18]. Netflix’s large subscription base has allowed a small type of network externality to take shape.
More Netflix subscribers means more people rate movies, write reviews for movies, and recommend movies
to one another. This also helps fine-tune the accuracy of the CineMatch program.
Unique and very large selection of DVDs
Netflix has the largest and most diverse collection of DVDs out of any competitor. They have more than
75,000 titles, including foreign films and independent films that are usually not carried by other distributors
such as Blockbuster Video and Wal-Mart[7]. Foreign films such as those from India’s “Bollywood” are
particularly successful at attracting customer attention[2]. This selection of movies taps into the underserved
population of consumers who are solely with Netflix because the unique titles Netflix has to offer cannot be
found for rent elsewhere in the United States.
3.2 Weaknesses
Like most brick-and-mortar rental businesses, Netflix often has trouble providing enough copies of new,
popular movies. As a result, a main cause of customer dissatisfaction is Netflix’s inability to completely
satisfy the initial rush for a new movie. However, the company knows it would be unprofitable in the long
run to buy more copies just to serve the rush when a movie first becomes available, because the copies will
not be rented with nearly as much frequency soon after the rush. Customers have caught on to the fact that
Netflix only purchases a limited quantity of new releases right away, opting to wait a few weeks to buy the
5
6. bulk of its supply at lower costs. While this might save Netflix money, it also has the tendency to drive away
current and potential customers. Finally, Netflix does not have a direct connection to any movie studios so
it must purchase its entire media through the consumer market[5].
One disadvantage of Netflix’s rent-by-mail business model is that customers have to wait (often for several
days) for the next movie on their queue to arrive in their mailbox. In many cases, by the time the subscriber
receives the DVD, he or she may no longer be in the mood to see that particular movie. Likewise, a Netflix
subscriber may feel like watching a movie on a night where all of the DVDs that are part of their plan are
currently on route to or from a Netflix distribution center. In such a case, the customer will likely leave the
home and rent a movie from a brick-and-mortar retailer, or perhaps order a movie from a service such as
Pay-Per-View or iN DEMAND.
3.3 Opportunities
Netflix is in a position to expand right now. Previously, sending movies to customers through the mail was
a novelty in the rental industry. Now, delivering movies straight to computers of customers is likely to be
the next revolution in how consumers view movies in their homes[6]. Luckily for Netflix, this service is only
available as a per-viewing basis. Netflix can seize this opportunity if it is successful in efficiently providing
streaming content to a customer on a time usage basis rather than a per-viewing basis. In addition, active
management could possibly enable Netflix to absorb current providers of this service, such as Movielink, in
a way similar to how it absorbed Wal-Mart’s DVD division.
3.4 Threats
The clearest threat to Netflix is Blockbuster and other established rental businesses. Beyond this, customer
satisfaction is the only aspect of this business that can make or break a company. If Netflix were to lose its
wholesome, reliable image, it might not be able to retain enough of the market to survive. Also, companies
like Apple can potentially harm Netflix if they are able to provide services through one’s computer that can
be easily ported to one’s TV[6]. Netflix is less suited to compete with hardware innovations such as Apple TV
because it has little to no experience in this area, though such innovations may eventually be complementary
rather than competitive. Moreover, there is always the threat of entry by another firm, especially into the
VOD industry, a closely related industry, which Netflix is about to enter.
4 Six Forces Analysis of the Video on Demand Industry
By offering streaming movies through its website, Netflix is entering the Video on Demand (VOD) industry.
This industry, along with DVD rentals (both from online providers such as Netflix, and cable services such as
On Demand and Pay-Per-View), is part of the larger industry of “watching movies in the home.” However,
since Netflix is already positioned in this market, with its online DVD rentals, we will examine the smaller
6
7. portion of the market that is streaming online movies. This business is too closely related to the movie
downloading service to be considered as a separate market.
4.1 Entry
The Video on Demand industry requires a significant level of capital, so potential entrants face the large
sunk costs of acquiring licenses to the movies they want to provide. Moreover, it is too expensive for a firm
considering this market to merely test the waters. An established video rental retailer already has experience
in marketing movies to people, giving them an experience advantage over potential entrants. Netflix, for
example, invested over $40 million to launch its “Watch Now” streaming video service, shocking many
shareholders[6]. These shareholders’ reactions only highlight the risk involved with such sunk costs. Netflix’s
“Watch Now” feature will be fully integrated with its normal online DVD rental website. A firm without
the technological advantage of a website with movie-recommendation algorithms like Netflix’s CineMatch
program is at a significant disadvantage. Moreover, Netflix’s website alreay has reams of user reviews and
input, that a new firm would be unable to match for years. The technology to offer high-quality downloads is
also a barrier to entry, but this barrier is small because such technology is available for licensing from third
parties. In this market, product differentiation takes the form of varying quality in the downloaded movies,
yet it should be noted that all firms will at least have to offer quality that is very close to DVD quality
in order to ensure that discerning customers continue to use their service. Besides quality, differentiation
exists in the type of service offered by a company: streaming movies, permanent downloads, or limited time
downloads. In sum, this is an industry where entry is difficult for all but the most experienced firms with
already established online movie rental/sale experience. These firms are more likely to thrive in this market
due to their experience, reputation, and recognizable brand names.
4.2 Rivalry
The movie download industry, like the online DVD industry, is not very concentrated[20], and so the few
market leaders that share the market may engage in rivalrous price competition. A key example of this is
Netflix’s and Blockbuster’s recent price war[8], which lasted until both resolved to settle on a higher price
through tacit collusion. A variety of services are being offered in the online movie industry. Amazon Unbox
sells movies that one can download and keep on one’s harddrive for one to two days[9]. Netflix’s “Watch
Now” feature ties in its streaming movie service with its online DVD rental service. Current Netflix customers
will get this service for free, which will cost significantly less than Amazon Unbox. Because the product is
not easy to differentiate, the competition focuses more on the services provided with the product than the
price. An existing variety of movies is essential in this market because consumers will frown upon not finding
a movie they want to see. The entry barriers mentioned in the previous section will prevent small and
undifferentiated firms from entering the market, practically ensuring that the prices will not be competitive.
With a low concentration of firms and emerging differentiation, this industry will not likely be especially
rivalrous.
7
8. 4.3 Supplier Power
Netflix and its competitors buy their movies from the movie studios that create the films. The major studios
have marginal supplier power in the online movie download market because they are the exclusive source of big
name movies that customers desire. These highly popular movies have practically no substitutes in the rental
market. However, buyer concentration in this new market is relatively high[20], so suppliers tend to want to
sell their product to all of the companies in the market to maximize their revenue. This reduces competition
for supply and therefore prevents supplier power from being very high. In this particular market, studios
may be concerned with “cannibalizing their own product”[6]. By making inexpensive movie downloading
available to customers, they may lose sales on the more profitable hard case DVD sales. Therefore, large
studios may be more willing to withhold licensing agreements to movie download providers such as Netflix,
thus strengthening their own supplier power. Overall, the suppliers to this market have only enough power
to slightly control prices, but not enough power to influence the evolution of the market as a whole because
they must sell their product to survive.
4.4 Substitutes
The main substitutes to streaming movies are brick-and-mortar rental stores, online rentals, pay per view
TV and theatres. Brick-and-mortar rental stores provide the same service with possibly a better selection
of movies as compared to movies available for download by Netflix, but they do not provide the instant
gratification of downloading or streaming them whenever a customer desires[3]. Furthermore, the streaming
movies service provided by Netflix is more cost effective than these other substitutes because Netflix plans
to allot its users a total amount of stream time. For instance, if a customer decides after 20 minutes of
watching a movie that he does not want to watch it anymore, switching to another movie incurs no extra
cost. Substitutes such as buying per download or traditional renting do not offer this convenience. For this
reason, these are weak substitutes to streaming videos.
4.5 Buyer Power
Buyer power is very low in this market because one customer’s decision to buy the service or not will not affect
the overall market at all. Similarly, one customer’s dissatisfaction will not influence a significant amount of
other customers. The source of dissatisfaction would have to be concerning an inferior product or service
to incite such a widespread response. Clearly, this is not something an independent customer can control.
There are substitutes for movie rentals, but these are weak substitutes. Buyers can rent movies from local
brick-and-mortar businesses, but this is not nearly as convenient as the instant-gratification downloading of
movies. In a broader aspect, a customer always has the option to not spend their free time watching movies,
no matter what the source, so the price of rental services cannot climb much higher than they currently
are. Overall, individual customers do not hold bargaining power over the price of products in this market;
however, the prices themselves are regulated by the substitutes and preferences of customers as a whole.
8
9. 4.6 Complements
Technology is the main complement to streaming videos offered by Netflix. The basic complement required
is high bandwidth. According to Netflix, a consistent bandwidth of 3 megabits per second is required[10]
to watch streaming videos online at DVD quality. This bandwidth is already present in over 47% of US
households, which means over 50 million households have broadband service available[14]. Because the
required infrastructure is already well developed, Netflix has access to a large customer base. This figure is
projected to grow to 55% by the end of 2007, making it a dependable complement. Apart from bandwidth,
another possible complement is a product similar to AppleTV that allows users to watch streaming videos
directly on their big-screen televisions[15]. Currently, users with S-Video capability can connect their desktops
to their televisions but this does not provide the simple and elegant solution the average Netflix customer
is looking for. With easy methods to view streaming videos on the television, physical media (CDs, DVDs,
etc.) would be much less functional in the movie rental industry.
5 Netflix’s Entry into the VOD Industry via Streaming Movies
In our analysis below we will examine Netflix’s current business model to find that their business can suc-
cessfully incorporate such VOD offering. Netflix’s choice of providing streaming content as opposed to
downloadable movies allows it to differentiate its service from others in the market, thus aiding Netflix in its
strategic positioning. There are both advantages and disadvantages in tying in this new service with Netflix’s
current subscription plans as opposed to offering the services separately, but the two can complement one
another at this early stage in Netflix’s entry. These proposed strategies will place Netflix in a strong position
in the newly developing market of VOD, and can act as a bridge to allow Netflix to leave the DVD rental
industry as physical media becomes obsolete.
5.1 Business Definition
The question arises, however, as to how streaming videos and DVD rentals can both fit within Netflix’s
business definition. There exist scale economies associated with the offering or bundling both of the services,
as Netflix’s good relations with the movie studios will help enable it to negotiate better prices for its streaming
movies. Much of Netflix’s existing infrastructure, including its award-winning website cited to be one of
Netflix’s keys to success, will also apply to streaming movies. The same page that allows one to add a movie
to their queue will have a “Watch Now” button allowing the user to begin streaming the movie immediately.
Moreover, a substantial proportion of customers who rent movies online will be open to watching streaming
movies, as both are ways of watching movies at home. Streaming videos may be used as a way to sift through
movies they are considering to watch on DVD. Since these two somewhat different services have a similar
consumer base and share benefits in cost structure, they can both be successfully integrated into the same
business model. On the downside, however, it should be noted that many of the elements that allowed Netflix
to succeed in renting out DVDs via mail, will not carry over to the digital distribution market. For example,
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10. superior logistics in mailing out DVDs and processing receieved DVDs will not aid Netflix in addressing
bandwidth problems. The business model will have to undergo some changes if Netflix decides to offer a
stand-alone streaming plan in the future (see Tying-in DVD Rentals and Streaming Movies below).
5.2 Netflix’s Choice of Streaming Video over Movie Downloads
The Online Video on Demand industry has consisted of services such as Amazon Unbox and Movielink which
allow users to download a movie for a fixed cost of about $3 and have 24 to 48 hours to view it. Recently,
Starz launched Vongo, which allows users to download and watch movies for an unlimited amount per month,
but are only allowed to choose from a catalog that is mostly representative of movies currently airing on one
or more of Starz’s cable television channels[11]. Therefore, Netflix’s immediate entry into the VOD market
will mark the arrival of one of the first monthly payment-based content providers that will allow viewers to
watch their movies via streaming video files, similar to the format that has been popularized on websites
such as YouTube and Google Video with higher quality.
Perhaps the greatest advantage to streaming video is that it offers an even greater “instant gratification”
incentive than downloadable VOD movies, as one can get the former up and running within a couple minutes
with a modest connection speed, whereas a full movie download will often take about a half hour or more.
A disadvantage of Netflix’s business model has been the waiting times associated with the turn-around
between DVDs. Netflix’s competitors have been quick to make use of their infrastructure to exploit this
disadvantage. Blockbuster frequently gives monthly in-store movie rental benefits to its online subscribers
such as a “speedier gratification” bonus, where the customer can drive to the store and rent a DVD for free
to watch for the night while the DVDs previously requested online are still in transit[12]. Now, Netflix can
take the lead again in offering the fastest way to watch a movie in one’s home.
5.3 One Subscription: Tying-in DVD Rentals and Streaming Movies
Netflix’s “Watch Now” will be available at no additional cost to all subscribes within the first half of 2007;
there is no plan offering only the streaming download service without DVD rentals. The bundling of these
two services is a necessary component of Netflix’s strategy. By doing so, Netflix will differentiate its service
from the services offered by its competitors and use these complementary goods to reinforce one another (as
mentioned above in Business Definition). Netflix simply needs to consider this new bundled feature as just
another method of delivering their product.
Movie studios who supply films to Netflix are afraid that this “Watch Now” feature will contribute to
cannibalization of their own DVD sales market. They are also concerned with the potential piracy of streaming
and downloaded videos[6]. Due to the studios’ unusual supplier power in this particular matter, the catalog
of movies that can be streamed with Netflix is much smaller than the size of their total DVD catalog. If
Netflix offered a separate streaming plan, it would have a library of only about 1,000 films and television
series to offer to its subscribers, making it difficult to satisfy a wide range of consumers. Variety of selection
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11. has always been one of Netflix’s keys to success, so spinning off a half-hearted stand alone service could
potentially harm its brand name. Tying the two services together allows consumers to see that Netflix is
expanding its features since it offers it at no increase in price. It is providing existing subscribers a greater
value and giving potential subscribers more incentive to try Netflix’s services.
By offering the new product as a tie-in, consumers are presented with a unique service that they can only
get from Netflix. Consumers are given the opportunity to see a movie precisely when they want to, but can
still order a DVD they feel like watching later. This gives consumers the opportunity to see more movies for
a relatively lower cost than using only rental services or only temporary download services. The threat of
price competition is reduced because the bundle of services makes Netflix appear to be less of a direct threat
to download-only VOD services. The only firms able to replicate Netflix’s bundling structure are those with
an established DVD rental infrastructure.
However, Blockbuster is such a firm capable of imitating Netflix’s bundling model, especially as it has
recently entered negotiations to acquire Movielink, a movie downloading service that offers both downloadable
purchases and temporary downloads[13][20]. Blockbuster’s interest in Movielink suggests that it will more
specifically attempt to integrate movie download rentals and sales into its online subscription plans[13],
as opposed to streaming content. Should Blockbuster acquire Movielink, it will be able to offer a similar
subscription plan to that being offered by Netflix. This apparently small difference reduces the threat of
price competition because it will present consumers with a dilemma of “preference,” rather than an obvious
choice of choosing the cheaper of two seemingly identical services.
At this early stage in Netflix’s attempts in the VOD industry, it is important that Netflix ties in its VOD
offerings with its existing, time-tested DVD rental service. This ensures Netflix offers a unique and differen-
tiated good, while not risking Netflix’s brand name due to the lack of selection in the movies being offered,
potential problems that may arise due to Netflix’s lack of experience in the industry, and the relatively new
and untested technologies being put to use to offer these services.
5.4 Positioning for the Future
Over time, Netflix’s bundling of DVD rentals with streaming movies will enable them to work out any kinks
they have with their ability to distribute movies digitally, while continuing to build a large customer base
of subscribers. Traditionally, Netflix has relied on a combination of word-of-mouth suggestions from their
existing subscribers and an aggressive marketing campaign[1]. Should they continue to market their services
effectively, their subscriber base will grow steadily, and Netflix will be able to collect more personalized user
data and become even more proficient at being able to “personalize [their] library to each subscriber by
leveraging [their] database of user preferences”[17]. Netflix’s compilation of this data and their subsequent
understanding of their customer base will serve a vital part in aiding their positioning in the coming future.
However, the future of the DVD rental industry is very unclear as newer forms of media are developed.
There are several factors that could hurt the industry that Netflix and other DVD rental outlets have been
paying attention to. It is predicted that DVD and its successor formats (Blu-Ray and HD-DVD) will be
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12. more prevalent than digitally distributed movies in the short term[6][19]. Yet as complementary technologies
grow that will allow for streaming of high definition movies directly to HDTV, VOD will continue to gain
popularity and will eventually unseat DVD and other physical forms of media as the dominant format for
watching rented movies at home[17].
Technology, however, is not the only barrier to the inevitable prevalence of VOD. As previously mentioned,
the studios are wary of allowing the legal digital distribution of films to take place on a major scale, as they
rely on DVD sales for a large portion of their revenues. Moreover, if the studios start reducing the window
of time in which a movie is exclusively available on DVD after its major theatrical run or allow movies
to be distributed in the home in other formats before they can be distributed on DVD, Netflix and other
DVD rental firms will be adversely affected[17]. They will no longer have a significant advantage in allowing
consumers to view new releases first through their services and more substitutes emerge for viewing those
new releases (Pay-Per View, iN DEMAND, etc.). The fate of the DVD rental industry largely depends on
factors outside of the hands of Netflix and its competitors.
In order to prepare for the demise of the DVD industry, Netflix must make its streaming services available
under a separate subscription plan of its own. This point will likely come at a time when the penetration
of technology allowing for viewing streaming content on high-end TVs is substantially high. The technology
already exists in some ways; the Apple TV is used to wirelessly connect to one’s computer and retrieve movies
downloaded from the iTunes store onto the computer, then play those movies on one’s television[16]. However,
it will be some time before this expensive technology is adopted by the mainstream population to such an
extent that the digital distribution of movies onto those TVs will return large profits. It is also at this time
that Netflix’s experience with streaming under the previous tie-in structure will aid it in completely changing
its business model toward eventually becoming a digital distributor of filmed entertainment as opposed to a
DVD rental outlet. The one important factor it will maintain from its rent-DVDs-by-mail days will be the
aforementioned “personalized library” available to its subscriber. Netflix will continue to benefit from the
advantages associated with its superior understanding of its customer base through their databases, which
they have acquired over the years and will continue to develop. Clearly, Netflix’s competitors will be trying
to do the same. As mentioned before, Blockbuster’s acquisition of Movielink only serves to signal that it is
also pursuing a similar strategy in trying to survive beyond the death of physical media[20]. Yet, Netflix has
historically been more adept at understanding its consumers and delivering easier to use content, so it will
have the right tools to experience a growing relative market share as this new market begins to take shape.
Since Netflix has been able to market itself successfully even to the less tech-savvy consumers, this should
not pose much of a problem for Netflix, and will give it a likely advantage over other firms in the future of
this emerging market.
The importance of Netflix’s position in the VOD market in the future only serves to highlight that it is
essential for Netflix to enter this market immediately, although initially only through the tie-in structure
described in the section above. If Netflix hesitates in its entry or does not gain sufficient experience in this
market today, it will only see diminishing market shares, especially as DVD and its successor formats begin
to lose popularity in favor of purely digitally transmitted media.
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13. 6 Conclusion
Netflix’s business model has allowed it to thrive in the DVD rental market, but the development of technologies
complementary to Video on Demand services are heralding the outdating of DVDs and its successor formats
in the distant future. Netflix can prepare to eventually make a full transition from the DVD rental market
to the VOD market by entering the streaming movie market today. By implementing its present entry in
limited form, namely by offering streaming videos exclusively as a tie-in to its DVD service, Netflix will be
able to differentiate itself from its competitors, and reduce the possibility of hurting its brand name due to
any potential shortcomings with their new service. Meanwhile, its streaming service will act as a complement
to its DVD rentals for several years to come. Ultimately, the experience Netflix gains while offering this
bundle of services, combined with Netflix’s reputation for providing user-friendly interfaces, will put Netflix
in an ideal position to evolve into one of the major players in the VOD market in the last days of physical
media. Taking advantage of the opportunity to enter the VOD market now is essential to Netflix’s future
growth and survival.
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