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Netflix




Lauren J. Uphouse
 November 5, 2012
CLICK Analysis
  Online movie rentals; receive & return thru mail; no late fees.




           Movies, flexibility, convenience, technology.



 Lives of consumers keep getting busier. Provides a convenient way
for them to rent movies without having to worry about traveling to
                  a store, due dates, or late fees.



                Busy consumers who rent movies.



Obtained a Masters of Computer Science from Stanford University.
 Founded a software company, “Pure Software”, and grew it to be
     among the 50 largest software companies in the world.
SWOT Analysis
Strengths                                                 Weaknesses
•   Brand recognition                                     •   Older titles
•   Producing original TV series ex: House of Cards,      •   Expired contracts with Sony & Stars, resulting in
    with prominent actor Kevin Spacey                         lost videos
•   Extensive customer data on file                       •   Lost video provider EPIX to Amazon.
•   DVD rental cost so low that competitors don’t         •   Competition has more money
    bother trying to emulate that part of their           •   Damaged reputation after attempting to increase
    business.                                                 fees and separate DVD & streaming video
•   App is on all platforms – even the Kindle (device         memberships.
    made by competitor Amazon)                            •   Revenue is still rising but streaming & subscribers
•   Partnered with start-up eyeIO as their 1st                are slowing = growth is slowing.
    customer – using their encoding technology to
    lower bitrate of their HD video streams, which
    helps them in the mobile market

Opportunities                                             Threats
•   Collaborate with well-known actors to create          •   Competitors offering streaming video and bidding
    more original series                                      for exclusive rights ex: Amazon, HBO, TV networks
•   Bid for more popular TV titles                        •   Competitor partnerships (ex: Amazon & Epix)
•   Target/market to kids & young adults                  •   Higher licensing costs
•   International expansion                               •   Biggest competitor, Amazon, now developing
•   Partner with companies to develop Netflix                 original programming
    programs specific to their platforms that will come   •   Streaming video increasing; DVD rentals
    pre-installed on all their devices                        decreasing
•   Partner with cable & gaming companies to be an        •   Movie & TV industry less willing to make exclusive
    on-demand option for video & games.                       deals with online video services.
•   AppleTV Partnership                                   •   EPIX provides Disney videos to Amazon; Disney
                                                              recently acquired Lucasfilm (& entire StarWars
                                                              franchise).
Competitor Analysis
ADVANTAGES                            DISADVANTAGES
 Customers rent DVDs thru mail;         Shipping costs for DVD rentals.
  Redbox – Must rent from kiosks.
                                         Redbox has newer titles.
 More older titles.
                                         Redbox offers video game rentals &
 Offers streaming video service.         event ticket printing.
 Offers TV shows                        Customers must make a commitment
                                          to use service.
 Low monthly subscription costs & no
  late fees attractive to customers;     Can’t profit from long-term
  Redbox – DVD rental fee $1/day.         rentals/late fees.
 Website has a more advanced            Customers must wait to receive DVDs;
  customer rating & recommendation        Redbox – Can get DVDs same day.
  system.
                                         Company as a whole has more
 Developing original content.            competition.
 More partnership opportunities.
ADVANTAGES                              DISADVANTAGES
 More titles; DVD rental service.         Charges fee for all content. Hulu.com
                                            offers limited content for free & offers
 No ads/commercials in video content.
                                            more content thru Hulu-Plus for
  Hulu-Plus – Most videos contain ads.
                                            $7.99/month.
 Content available on all devices.
                                           Older titles. Hulu offers current TV
  Hulu currently doesn’t have rights to
                                            shows – new episodes available day
  make all of their video content
                                            after airing.
  available on all devices.
                                           No social media integration.
 Customer recommendation system.
 Developing original content.
 Available on more devices.
  Hulu.com – PC environment only.
  Hulu-Plus – Accessible on fewer
  devices.
   Available in more countries.
ADVANTAGES                               DISADVANTAGES
 More titles; DVD rental service.          AmazonPrime membership includes
                                             free 2-day shipping & instant access to
 Monthly subscription that can be
                                             e-books (on Kindle).
  canceled/frozen any time.
  Amazon Prime - $79/year, paid in full.    Revenue only from video services.
                                             Amazon – Business model generates
 Higher quality video playback.
                                             revenue many ways.
 Better customer recommendation
                                            Losing exclusive partnerships with
  system, user interface & organization.
                                             online video distributors, some
 Growth of international expansion.         directly to Amazon Prime (ex: EPIX).
 Focused solely on video services =
  benefit to customers.                  Amazon offers additional online
                                          videos, including new movies & TV
 Partnership with Apple; soon possibly   episodes, that can be purchased
  cable companies as well.                individually or as a package and are
                                          accessed from the same location as
                                          Amazon Prime videos.
Business Model Canvas
KP Key Partners      KA Key Activities        VP Value Proposition       CR Customer Relationships CS Customer
                                                                                                         Segments
                                                 DVD Rent-by-Mail          Free trials/sign-up deals
                        DVD Rent-by-Mail         Service – Cost so                                         AppleTV owners
   Apple                Service                  low not worth             Convenient sign-up thru
                                                  competing                  many devices                   Owners of
   RADius-TWC          Online Video                                       Pre-installation on             Windows 8
                         Streaming Service       Extensive customer         devices                         devices
                                                  database, 10+ years
                                                  deep.                     Aggressively working to        Adults, families,
   Twentieth                                                                improve content &               kids
    Century Fox                                  Original content           playback quality
                     KR Key Resources            Partnership with          Recommendation                 Benefits from
                                                                             System
   Hasbro Studios      Experience of            Apple; soon                                                long tail: Classic
                         Management &             possibly cable                                             TV/Movies,
                         Board of Directors       companies
   Warner Bros                                                          CH Channels                         Documentaries,
                        Stockholders            Accessible on                                              Adult Animation,
                                                  greater number of         Online, print, & direct
   Stakeholders,                                 devices                    mail marketing                  Stand-Up
                        Extensive customer
                         database                                           Pre-installation on             Comedy,
    such as Carl                                 Advanced
                                                  technology for             devices                         Romantic
    Icahn, & their                                better quality video      Gift subscriptions              Comedies,
    affiliates                                    playback
                                                                            Offers to friends/family        Action/Sci-Fi
                                                                             of members

                                                                                 R$ Revenue Streams
                                                           DVD Rent-by-Mail Plans (per month)
    C$                                                     • 1 DVD: $7.99 or $9.99 with Blu-Ray
    Cost                                                   • 2 DVDs: $11.99 or $14.99 with Blue Ray
    Structure                                              • 3 DVDs: $15.99 or $19.99 with Blue Ray
                                                           • 1 DVD (2 max per month): $4.99 or $5.99 with Blue Ray
                                                           Video Streaming Plans (per month)
                                                            Unlimited: $7.99
                                                            Limited:      $4.99
                                                                     FIXED PRICING STRATEGY; FREE TRIAL OFFERS
Alternative Business Models




  Bundle             Customers          Partner        Develop
 services            sign up for     with gaming        “HBO
with pay-tv            service       companies         quality”
packages.            directly on     to offer on-      original
Less money from      AppleTV &         demand          content.
more customers =    pay through      video game        Lure & retain
 Revenue boost
Less competition
                       iTunes.         services.      customers with
                                                      content that’s
= Lower licensing     Reach more      New customer    untouchable by
       fees           customers =       segment =      competitors =
                     Revenue boost    Revenue boost   Revenue boost
References
Roettgers, J. (2012, February 01). Eyeio: Netflix's secret weapon against bandwidth caps?. Retrieved from
      http://gigaom.com/video/eyeio-video-encoding-netflix/

Martin, S. (2012, October 12). Netflix rivalry with amazon heats up. USA today, Retrieved from
      http://www.usatoday.com/story/tech/2012/10/11/amazon-netflix/1621579/

Bedigian, L. (2012, October 31). Netflix lost star wars 13 months ago. Retrieved from
       http://community.nasdaq.com/News/2012-10/netflix-lost-star-wars-13-months-ago.aspx?storyid=185982

Holmstrom, M. (2012, October 31). Why you should not buy netflix. Retrieved from
     http://seekingalpha.com/article/964251-why-you-should-not-buy-netflix

Warren, C. (2012, March 09). Netflix's apple tv deal could signal new business model.
     Retrieved from http://mashable.com/2012/03/09/apple-tv-netflix-subscriptions/

(n.d.). Netflix_large_verge_medium_landscape. [Web Photo]. Retrieved from
        http://cdn0.sbnation.com/entry_photo_images/3279699/netflix_large_verge_medium_landscape.jpg

(n.d.). netflix-branded-xbox-360. [Web Photo]. Retrieved from
        http://learnfrenchsoftwarereview.org/wp-content/uploads/2012/01/netflix-branded-xbox-360.jpg

(n.d.). Applenetflix. [Web Graphic]. Retrieved from
        http://1.bp.blogspot.com/-_iUTPj8GBuA/UEeY1qwdxcI/AAAAAAAAATo/2Htm5N8CQzA/s1600/AppleNetflix.jpg

(n.d.). Prime_vs_netflix-650x163. [Web Graphic]. Retrieved from www.gadgetreview.com

(n.d.). Hulu_vs_netflix_big-650x541. [Web Graphic]. Retrieved from
        http://www.gadgetreview.com/wp-content/uploads/2012/01/Hulu_vs_netflix_big-650x541.jpg

(n.d.). Redbox_vs_netflix-650x129. [Web Graphic]. Retrieved from
        http://www.gadgetreview.com/wp-content/uploads/2012/01/Redbox_vs_netflix-650x129.png

www.netflix.com
www.hulu.com
www.redbox.com

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Netflix Case Study Analysis

  • 1. Netflix Lauren J. Uphouse November 5, 2012
  • 2. CLICK Analysis Online movie rentals; receive & return thru mail; no late fees. Movies, flexibility, convenience, technology. Lives of consumers keep getting busier. Provides a convenient way for them to rent movies without having to worry about traveling to a store, due dates, or late fees. Busy consumers who rent movies. Obtained a Masters of Computer Science from Stanford University. Founded a software company, “Pure Software”, and grew it to be among the 50 largest software companies in the world.
  • 3. SWOT Analysis Strengths Weaknesses • Brand recognition • Older titles • Producing original TV series ex: House of Cards, • Expired contracts with Sony & Stars, resulting in with prominent actor Kevin Spacey lost videos • Extensive customer data on file • Lost video provider EPIX to Amazon. • DVD rental cost so low that competitors don’t • Competition has more money bother trying to emulate that part of their • Damaged reputation after attempting to increase business. fees and separate DVD & streaming video • App is on all platforms – even the Kindle (device memberships. made by competitor Amazon) • Revenue is still rising but streaming & subscribers • Partnered with start-up eyeIO as their 1st are slowing = growth is slowing. customer – using their encoding technology to lower bitrate of their HD video streams, which helps them in the mobile market Opportunities Threats • Collaborate with well-known actors to create • Competitors offering streaming video and bidding more original series for exclusive rights ex: Amazon, HBO, TV networks • Bid for more popular TV titles • Competitor partnerships (ex: Amazon & Epix) • Target/market to kids & young adults • Higher licensing costs • International expansion • Biggest competitor, Amazon, now developing • Partner with companies to develop Netflix original programming programs specific to their platforms that will come • Streaming video increasing; DVD rentals pre-installed on all their devices decreasing • Partner with cable & gaming companies to be an • Movie & TV industry less willing to make exclusive on-demand option for video & games. deals with online video services. • AppleTV Partnership • EPIX provides Disney videos to Amazon; Disney recently acquired Lucasfilm (& entire StarWars franchise).
  • 5. ADVANTAGES DISADVANTAGES  Customers rent DVDs thru mail;  Shipping costs for DVD rentals. Redbox – Must rent from kiosks.  Redbox has newer titles.  More older titles.  Redbox offers video game rentals &  Offers streaming video service. event ticket printing.  Offers TV shows  Customers must make a commitment to use service.  Low monthly subscription costs & no late fees attractive to customers;  Can’t profit from long-term Redbox – DVD rental fee $1/day. rentals/late fees.  Website has a more advanced  Customers must wait to receive DVDs; customer rating & recommendation Redbox – Can get DVDs same day. system.  Company as a whole has more  Developing original content. competition.  More partnership opportunities.
  • 6. ADVANTAGES DISADVANTAGES  More titles; DVD rental service.  Charges fee for all content. Hulu.com offers limited content for free & offers  No ads/commercials in video content. more content thru Hulu-Plus for Hulu-Plus – Most videos contain ads. $7.99/month.  Content available on all devices.  Older titles. Hulu offers current TV Hulu currently doesn’t have rights to shows – new episodes available day make all of their video content after airing. available on all devices.  No social media integration.  Customer recommendation system.  Developing original content.  Available on more devices. Hulu.com – PC environment only. Hulu-Plus – Accessible on fewer devices.  Available in more countries.
  • 7. ADVANTAGES DISADVANTAGES  More titles; DVD rental service.  AmazonPrime membership includes free 2-day shipping & instant access to  Monthly subscription that can be e-books (on Kindle). canceled/frozen any time. Amazon Prime - $79/year, paid in full.  Revenue only from video services. Amazon – Business model generates  Higher quality video playback. revenue many ways.  Better customer recommendation  Losing exclusive partnerships with system, user interface & organization. online video distributors, some  Growth of international expansion. directly to Amazon Prime (ex: EPIX).  Focused solely on video services = benefit to customers.  Amazon offers additional online videos, including new movies & TV  Partnership with Apple; soon possibly episodes, that can be purchased cable companies as well. individually or as a package and are accessed from the same location as Amazon Prime videos.
  • 8. Business Model Canvas KP Key Partners KA Key Activities VP Value Proposition CR Customer Relationships CS Customer Segments  DVD Rent-by-Mail  Free trials/sign-up deals  DVD Rent-by-Mail Service – Cost so  AppleTV owners  Apple Service low not worth  Convenient sign-up thru competing many devices  Owners of  RADius-TWC  Online Video  Pre-installation on Windows 8 Streaming Service  Extensive customer devices devices database, 10+ years deep.  Aggressively working to  Adults, families,  Twentieth improve content & kids Century Fox  Original content playback quality KR Key Resources  Partnership with  Recommendation  Benefits from System  Hasbro Studios  Experience of Apple; soon long tail: Classic Management & possibly cable TV/Movies, Board of Directors companies  Warner Bros CH Channels Documentaries,  Stockholders  Accessible on Adult Animation, greater number of  Online, print, & direct  Stakeholders, devices mail marketing Stand-Up  Extensive customer database  Pre-installation on Comedy, such as Carl  Advanced technology for devices Romantic Icahn, & their better quality video  Gift subscriptions Comedies, affiliates playback  Offers to friends/family Action/Sci-Fi of members R$ Revenue Streams DVD Rent-by-Mail Plans (per month) C$ • 1 DVD: $7.99 or $9.99 with Blu-Ray Cost • 2 DVDs: $11.99 or $14.99 with Blue Ray Structure • 3 DVDs: $15.99 or $19.99 with Blue Ray • 1 DVD (2 max per month): $4.99 or $5.99 with Blue Ray Video Streaming Plans (per month)  Unlimited: $7.99  Limited: $4.99 FIXED PRICING STRATEGY; FREE TRIAL OFFERS
  • 9. Alternative Business Models Bundle Customers Partner Develop services sign up for with gaming “HBO with pay-tv service companies quality” packages. directly on to offer on- original Less money from AppleTV & demand content. more customers = pay through video game Lure & retain Revenue boost Less competition iTunes. services. customers with content that’s = Lower licensing Reach more New customer untouchable by fees customers = segment = competitors = Revenue boost Revenue boost Revenue boost
  • 10. References Roettgers, J. (2012, February 01). Eyeio: Netflix's secret weapon against bandwidth caps?. Retrieved from http://gigaom.com/video/eyeio-video-encoding-netflix/ Martin, S. (2012, October 12). Netflix rivalry with amazon heats up. USA today, Retrieved from http://www.usatoday.com/story/tech/2012/10/11/amazon-netflix/1621579/ Bedigian, L. (2012, October 31). Netflix lost star wars 13 months ago. Retrieved from http://community.nasdaq.com/News/2012-10/netflix-lost-star-wars-13-months-ago.aspx?storyid=185982 Holmstrom, M. (2012, October 31). Why you should not buy netflix. Retrieved from http://seekingalpha.com/article/964251-why-you-should-not-buy-netflix Warren, C. (2012, March 09). Netflix's apple tv deal could signal new business model. Retrieved from http://mashable.com/2012/03/09/apple-tv-netflix-subscriptions/ (n.d.). Netflix_large_verge_medium_landscape. [Web Photo]. Retrieved from http://cdn0.sbnation.com/entry_photo_images/3279699/netflix_large_verge_medium_landscape.jpg (n.d.). netflix-branded-xbox-360. [Web Photo]. Retrieved from http://learnfrenchsoftwarereview.org/wp-content/uploads/2012/01/netflix-branded-xbox-360.jpg (n.d.). Applenetflix. [Web Graphic]. Retrieved from http://1.bp.blogspot.com/-_iUTPj8GBuA/UEeY1qwdxcI/AAAAAAAAATo/2Htm5N8CQzA/s1600/AppleNetflix.jpg (n.d.). Prime_vs_netflix-650x163. [Web Graphic]. Retrieved from www.gadgetreview.com (n.d.). Hulu_vs_netflix_big-650x541. [Web Graphic]. Retrieved from http://www.gadgetreview.com/wp-content/uploads/2012/01/Hulu_vs_netflix_big-650x541.jpg (n.d.). Redbox_vs_netflix-650x129. [Web Graphic]. Retrieved from http://www.gadgetreview.com/wp-content/uploads/2012/01/Redbox_vs_netflix-650x129.png www.netflix.com www.hulu.com www.redbox.com