Copy of Netflix

At Netflix we are dedicated to expanding content and making it available for family viewing worldwide (1)(3). Netflix provides as ethical way (6) for people to have access to the latest DVD’s and online streaming content (2) of their favorite shows on their own schedules, across a wide range of mediums in a family friendly way (4)(7).

We at Netflix are committed to the recruitment and training. Retention of high performing self motivated and dedicated employees who are committed to the expansion and function of the website and the company as a whole (5)(8)(9).

Section I: Grow and Build

Alternative Strategies:

Backward, forward, and horizontal integration

Market penetration

Market development

Quadrant I

Strong Competitive Position

Alternative Strategies:

Backward, forward, horizontal integration

Market development and Market penetration

Product development and Related diversification

• We recommend that Netflix invest additional resources into the production of original content
• To be aired exclusively through Netflix.com
• This will reduce the large cost of leasing the rights to a specific show
• Provide Netflix with a sustainable competitive advantage as well as a new revenue source

Strengths Weaknesses

1.) Increase in content "1.) Stock price is dependant on

market/economy"

"2.) High customer satisfaction ( 90% of customers

would recommend to a friend)" "2.) Subscription growth increases are

seasonal (Oct-Mar)"

3.) High customer growth - 41% "3.) Market penetration is only 14.5%,

not in top 10 for videos viewed in 2010"

4.) Revenues/Net Income Increasing Annually "4.) Canadian expansion not yet profitable

(1 year)"

5.) Playable with over 200 different devices. "5.) Rely on Amazon for cloud provider,

minimal substitutes."

6.) 1B deal with EPIX for content "6.) Content owners control contract

negotiations "

7.) Physical disks and online content available "7.) Delayed access to current season

content"

"8.) Solid Website / Recommended

For Your selection." 8.) Inventory issues (physical DVDs)

"9.) Individual subscriber acquisition cost has

decreased" 9.) Dependence on physical DVD's

10.) Inhouse Software Engineers 10.) Lost or damaged DVD's

11.) proprietary software for the user interface "11.) Customer base sensitive to price

increases"

12.) Short term investment cost is down

15.) Property/Equipment cost is down

"16.) No due dates, late fees, shipping cost

for customers"

17.) HD/BluRay copies of content available

18.) Exclusivity deals with content owners

SO Strategies WO Strategies

"1.) Expand market share in VOD

(S1,8&9,O3&8) Market Development

" "1.) Create original content. (W6&7, O6&12) Product Development

"

"2.) Create a multi-user interface

(S10-12, O1&2) Product Development " "2.)Move away from physical DVD's

(W8-10 & O4,7,8,10,&11) Divestiture "

"3.) International Expansion will increase

customer growth, expand profitablility (S3&5,O3) Market Developement " "3.) Increase Marketing during

seasonal growth period (W3, O1, 7 &8) Market Penetration"

Opportunities

1.) Customer referrals

2.) Shared Family account

3.) International Expansion (Canada, Europe, China, India)

4.) Smart Tvs

5.) Studios paying Netflix to feature their films in advertising

6.) Pursuing streaming rights for up to date content. (current season)

7.) US: ~80% of households internet access in 2013 (75% in 2010)

"8.) 2/3 (147.5M) of internet users watch online

videos, expected to increase to 193.1M by 2014"

9.) Reduced online release following DVD release (28 -> 0)

10.) Increased Sales of Home electronics

11.) Increasing popularity of VOD

12.) Production of original Content

Threats

1.) US copyright laws (DMCA)

2.) Cable providers low cost pay-per-view

3.) Competitor's content deals

4.) Competitors duplicating Netflix's business model

5.) Growth of online commerce may lead to more regulation

6.) Amazon forcasted to grow 30% annually in next 3-5 years

7.) RedBox joining online streaming business

8.) Barriers to new market expansion

"9.) Amazon has strong brand, online history,

large customer base, greater financial marketing. Amazon Revenue - 34B

..... Netflix - 2.4B"

10.) Movie tickets/Music Video sales expected to increase by .7B in 2014

"11.) Patent, Copyright, Asset infgringment by

competitors may decrease Netflix's brand value"

12.) Vulnerable to Hackers, DDOS

13.) Increased patent right costs, based on customer preference

14.) Cost to acquire sufficient inventory

ST Strategies WT Strategies

"1.) Increase the content discouraging other firms from competing directly

( T11, S1, S8) Backward Intigration

" "1.) Find a new cloud to store content.

(T9&12, W6) Forward Intergration "

"2.) Contract more exclusive content (T3,T10, S8)

Backward Intergration " "2.) Keep price stable (T3&4 W11)

Retrenchment"

"3.) Develop proprietary software

further to create brand differentiation

(S12&13, T2&4) Product Development"

Background

• Netflix started as a DVD rental service in 1997
• Now one of the World’s largest Internet subscription services
• Streaming on many “Netflix ready devices”
• Over 20 million members in Canada and United States
• Pursuing Epix and streaming rights of certain TV shows

The Grand Strategy Matrix

Financial Ratio Analysis

The Internal External (I/E) Matrix

Mission Statement

Components of the Mission Statement:

1. Customers

2. Products or Services

3. Markets

4. Technology

5. Concern for Survival, Growth, and Profitability

6. Philosophy

7. Self-Concept

8. Concern for Public Image

9. Concern for Employees

Vision Statement

Netflix’s vision is to be a worldwide leader in on-demand video entertainment available for multiple devices.

Conclusions/Recommendations

Short Term Strategy

• To work with the networks with which we already have content deals: Showtime, Starz, ABC, ect. to gain access to their up-to date content.

Long Term Strategy

• To acquire rights to as much content as possible
• Implementing the multi-user account
• Minimize attrition rates
• Reducing the cost per subscriber further

The SWOT Matrix

TOWS

The Strategic Position and Action Evaluation (SPACE) Matrix

Revised Mission & Vision Statement

Mission

At Netflix we are dedicated to expanding content and making it available for family viewing worldwide.

Vision

Netflix’s vision is to be a worldwide leader in on-demand video entertainment available for multiple devices.

Netflix provides as ethical way for people to have access to the latest DVD’s and online streaming content of their favorite shows on their own schedules, across a wide range of mediums in a family friendly way.

We at Netflix are committed to the recruitment and training. Retention of high performing, self motivated, and dedicated employees who are committed to the expansion and function of the website.

History

• Netflix was founded by Reed Hasting and Marc Randolph
• Hasting came across Netflix when he was charged a $40 late fee
• Originally offered a seven-day DVD rental costing $4 and $2 for shipping
• Now offer subscribers streaming videos on demand

Timeline

• 1997 founded in Scotts Valley, California
• 1998 officially opened with 925 DVDs
• 2000 new product called "CineMatch"
• 2001 customers started renting DVDs that were referred to them
• 2002 opened new distribution centers in
• 2003 the company hit the mark for one million subscribers
• 2005 more than 35,000 titles
• 2007 offering subscribers streaming videos on demand
• 2009 expanded internationally into Canada
• 2010 CEO“Business Person of the Year”and 30 most respected CEO’s
• 2011 "Family Plan"
• 2012 Keeping up with new technology

Questions

The Boston Consulting Group (BCG)

By: Emily Thomas, Richard Marchetti, Michael Plaskota, Daniel Rodrigues, Dan Baker, Ken Waszynski, Shawn Fortin