Netflix case study
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Group project for UC Berkeley Extension - Strategic Marketing class. Case from the Harvard Business Review, dated from 2007.
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Netflix case study
- 1. Case Analysis UC Berkeley Extension – Strategic Marke7ng Professor Jim Prost • Byron Pi/am • Laura DellaGuardia • Lisandra Maioli • Ryan Shi • Svetlana Fedorova July 17th, 2013
- 3. Company History q Founded in 1997 q Offered DVD home delivery via snail mail q Very li>le compeAAon for DVD rentals, indirect compeAtors sAll ‘sold’ VHS q Due to complaints about high fees and slow delivery, in 1999 the ‘no late fees policy was launched’ q Leap of faith during dotcom boom, subscripAon model put in place: § Unlimited rentals, § Keep 4 DVDs at home q 2001 announced intenAon to create a VOD business 3 -‐ 38
- 4. Current Situation q $1 billion business and almost $64 million in cash flow q VOD, pay-‐per-‐view, and streaming are gaining in popularity q LimitaAons in computer to TV connecAvity and in access to content, but evolving quickly with technology q SubstanAal Investments in Video-‐on-‐ Demand (VOD): 2006, $10 million, 2007 $40 million (as of 2007) 4 -‐ 38
- 5. Mission Statement No mission statement, but they have an official ‘vision’ of Ne@lix’s future: q Becoming the best global entertainment distribuAon service q Licensing entertainment content around the world q CreaAng markets that are accessible to film makers q Helping content creators around the world to find a global audience q Company values to guide employees’ everyday decisions : § Judgment § ProducAvity § CreaAvity § Intelligence § Honesty § CommunicaAon § Selflessness § Reliability § Passion 5 -‐ 38
- 6. NETFLIX Evolution 6 -‐ 38
- 8. q SubscripAon Model q Unique RecommendaAon System q Large DVD SelecAon for Online Rental q Fast Delivery Times Strengths 8 -‐ 38
- 9. Weaknesses q DifficulAes providing enough copies of popular new releases to meet demand q SubscripAon plan does not appeal to less frequent movie renters q DVD’s may be damaged or lost in transit q Only operaAng in the DVD segment at a Ame when there is so much potenAal in VOD 9 -‐ 38
- 10. OPPORTUNITIES q InternaAonal Expansion q VOD Expansion q Original Content q New Product Lines such as video games or educaAonal materials q Offer alternaAve SubscripAon opAons to appeal to less frequent movie renters 10 -‐ 38
- 11. THREATs q Blockbuster q Other VOD CompeAtors including: § Vongo § CinemaNow § MovieBeam § MovieLink § TradiAonal cable/satellite providers q VOD Content Prices and Availability § Limited VOD Content due to studios concerned about piraAng and affecAng DVD sales 11 -‐ 38
- 12. Target Customers
- 13. Target customer q Males and Females ages 17-‐60; q $30,000 and up; q Different racial/ethnic groups; q Psychographics: § Busy people; § Movie lovers and frequent renters; § “All you can eat”; § Early adopters (DVD players). 13 -‐ 38
- 14. Competition
- 15. Competitors (as of 2007) 15 -‐ 38
- 16. Competitors (current) 16 -‐ 38
- 17. Positioning
- 18. q VALUE q CONVENIENCE q SELECTION POSITIONING 18 -‐ 38
- 19. Pricing
- 20. PricING Pay per movie ($4) + shipping and handling charge ($2) with late fees Prepaid subscripLon service (4 movies at a Ame and 4 new each month) Unlimited rental (3 movies at a Ame, unlimited exchange) 20 -‐ 38
- 21. Promotion
- 22. Promotion q Cross-‐promoAonal programs with the manufacturers and sellers of DVD players; q Theater Ackets; q Commercial and radio spots; q Banners and popups; q Nellix affiliate program (free-‐trial promoAon); q Word-‐of-‐the-‐mouth. 22 -‐ 38
- 24. What is the best VOD model and marke7ng strategy for Ne?lix all while keeping the company’s posiGon as a leader in the home video market? 24 -‐ 38
- 25. Alternatives
- 26. Alternatives Offer raAngs and recommendaAons system to cable companies 1 Offer online video streaming at no extra cost to exisAng customers 2 Create a standalone online video business 3 26 -‐ 38
- 27. Critical Issues
- 28. Critical Issues q Technology § VOD compeAAon q Content acquisiAon & piraAng concerns q User acquisiAon and adopAon q Financial Investmen q Employee’s role in dealing with 2 businesses 28 -‐ 38
- 29. Analysis
- 30. RelaLve Weights OpLon 1 OpLon 2 OpLon 3 Technological Improvements 0.3 4 5 5 Emerging CompeAtors 0.2 2 5 4 Content AcquisiAon 0.2 3 5 4 User AdopAon 0.15 1 5 4 Financial PosiAon / Cost Basis 0.15 1 4 4 RelaAve Weight x RaAng 1 2.5 4.85 4.3 Ne@lix Summary Assessment AlternaAves (RaAng) Analysis 30 -‐ 38
- 31. RECOMMENDATIONS
- 32. RECOMMENDATIONS q Technology rapidly improving § Nellix needs to keep up with the Ames § ConnecAvity will be facilitated in the future q Future Access to Content § Easier and cheaper (on the business and client side) q For the business side of content acquisiAon § Ensure your technology is up to par so as to reassure content providers of their copyrighted safety Offer Online Video Streaming at No Extra Cost to ExisLng Customers 32 -‐ 38
- 33. RECOMMENDATIONS q CompeAtors also doing this, don’t want to be lep behind q DVD’s becoming obsolete q Use strong exisAng customer base and internet savvy forward-‐thinkers from website Offer Online Video Streaming at No Extra Cost to ExisLng Customers 33 -‐ 38
- 34. RECOMMENDATIONS q Investment in technology q Appeal and promote to exisAng users q Offer one month free trial for VOD q Maintain industry leading suggesAon engine How We Recommend ImplemenLng 34 -‐ 38
- 35. RECOMMENDATIONS Budget Plan q Invest money in service § Online service & mail-‐order speed q Technological improvements § Cloud-‐based opAons q ConAnue working with media outlets § Improve cost per watch § Increase library q RecommendaAon engine § Steer viewers towards cheaper programs 35 -‐ 38
- 36. Future
- 37. Future strategy q Improve smartphone app q Technology PenetraAon § Package with TV’s, Game Consoles, DVR’s q Original Content § Movies § TV Shows q Increase internaAonal presence q Different pricing policies q Invent iPad 37 -‐ 38
- 38. Questions?