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Netflix Business Strategy

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by

Rannah Heagan

on 1 May 2013

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Transcript of Netflix Business Strategy

Management Netflix's Business Model and Strategy in
Renting Movies and TV Episodes Reed Hastings Kelly Bennett Tawni Cranz Jonathan Friedland Bill Holmes Neil Hunt David Hyman Ted Sarandos David Wells Company Values The Basics - Founded in 1997 by Reed Hastings and Marc Randolph
- Headquarters in Los Gatos, CA
- Subscription service launched in 1999
Became efficient alternative to Blockbuster
- Makes IPO May 22, 2002 with 5.5 million shares on Nasdaq
- From 2001 to 2002, Netflix increased membership by 88% - By July of 2010, Netflix had:
15 million subscribers
48% of those subscribers watching movies online.
- Stock Price High = $170.83
- 97% of customers were able to receive titles in one business day Netflix in 2010 Business Model for 2010 - 8 subscription plans
- $8.99/month - 1 title at a time
- $13.99/month - 2 titles at a time
- $16.99/month - 3 titles at a time
all include unlimited DVDs each month and unlimited streaming
- Subscriber base/target market consisted of:
- Movie Buffs, Convenience Seekers and Bargain Hunters Competitive Strengths -Wide Selection
-Extensive information about each movie in library
-Easy to find and order movies
-No late fees or due dates
-Postage-paid return envelope provided
-Easy to order online and stream on devices Supply Chain Supply Chain Supply Chain Supply Chain Current Multipronged Strategy
A Comprehensive Library of Movies and TV Episodes
New Content Acquisition
Netflix's Convenient, Easy-to-Use Movie Selection Software
A Choice of Mail Delivery versus Streaming
Marketing and Advertising
Transitioning to Internet Delivery of Content Industry Environment Consumers opportunities to watch movies has multiplied since 2000
85% of U.S. Households own a DVD player as of 2010
Greater variety of distribution channels for movie DVDs and TV episodes
- Purchasing
- Renting (Online, Brick and Mortar, Kiosks)
- Video on Demand
- Subscriptions to movie-only channels
- Internet movie and TV content providers (YouTube, Hulu.com)
- Pirating and illegal file-sharing software
Brick and Mortar begin losing share of rental market Competitors Blockbuster Hasting's Goal for Netflix: "to build the world's best Internet movie service and to deliver a growing subscriber base and earnings per share every year." What Our Implemented Strategy Needs to Achieve Should aim to meet Hasting's goals:
1. Build the world's best Internet Movie Service
World's Leading Internet Television Network
2. Deliver a growing subscriber base and earnings per share every year
Subscriber base has grown to 33 million, growing every year since its launch
Earnings per share has not seen consistent growth Our Implemented Strategy SWOT Analysis Strengths
1 - First mover advantage
2 - Brand Value on the Rise
3 - Unique Value proposition
4 - Size of content Library
5 - Service

Weaknesses
1 - Segment- people using
streaming instead
2 - Price Conscious Consumers
3 - Dependent on Suppliers for
the content
4 - Virtuous Cycle Might End Opportunities
1 - International markets
2 - More Original movies and shows
3 - More technology to view TV and movies
4 - New subscribers
5 - Other rentals (Video Games)

Threats
1- Content Prices- companies try and outbid each other
2 - Competitive environment
3 - New entrants into rental market Leader in the movie rental industry in 2010
2009-2010 - Strategic Initiatives to save company - did not help outlook Movie Gallery Closing stores after filing for Chapter 11 bankruptcy in February 2010
Entire business set to be liquidated by May 2010 Video On Demand VOD is expected to be dominant movie rental channel by 2015 Online Streaming Easy to order and no pay-per-view
Increasing number of devices with streaming capability 1. Subscriber chooses titles from online inventory to be shipped to their home. Maintain the low-cost provider strategy
Transition away from DVD inventory to online streaming
Video Games
Slow Global Spread
New content acquisition
Maintain leadership in TV shows (11% to 19%) Netflix in 2013 - 33 million subscribers
61% of those subscribers streaming online.
- Stock Price April 2013= $215.55
- 98% of customers are able to receive titles in one business day Potential Problems Account sharing
- Now limit log-ins to two at a time per account
-New line activation for each account could come with additional charges
Cost of content will go up as the industry becomes more competitive in video streaming
Hurt reputation? - Loss of subscribers and low stock price in 2011 and 2012 2. Nationwide network of distribution centers finds titles at nearest distribution center to customer. 3. Title is shipped and arrives to 98% of customers homes within one business day. 4. Customers return DVD using prepaid envelope provided by Netflix with each DVD rental. 2013 Financials First Quarter 2013 Revenues = $1,023,961,000
- Up from $869,791,000 in Q1 2012 and $788,610,000 in Q1 2011

37% increase in investments in technology and development from Q1 2011 to Q1 2013

International streaming members increased from 803,000 in Q1 of 2011 to 7,142,000 in Q1 2013
Domestic streaming members increased to 29,174,000 in Q1 2013 from 21,448,000 in Q3 2011

Domestic DVD membership has decreased by nearly 50% from 2011 to 2013 Questions? Judgment
Communication
Impact
Curiosity
Innovation
Courage
Passion
Honesty
Selflessness Taylor Kreider, Jon Markel, Hannah Reagan
Full transcript