Analysis of Netflix
presented by Vince Wang
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Agenda
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Introduction
 What is Netflix?
 How Netflix Works?
 How Much Does Netflix Cost?
 Comparing Netflix to its Competitors
Role of IT at Netflix
 Porter’s Competitive Forces Model
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Agenda (continue)
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Advantage of Internet
 CRM (Customer Relations Management) Strategy in
Netflix
SWOT Analysis
 Netflix Strengths
 Netflix Weakness
 Netflix Opportunities
 Netflix Threats
Conclusion
 Financial Status
 The Future of Netflix
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What is Netflix?
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Founded in 1997 at Scotts Valley, CA
Founder of Netflix: CEO Reed Hastings pioneered the
subscription movies-by-mail model from his own
personal frustrations
Largest online DVD movie rental service
3 million members
40,000 movie titles
CEO predicts that Netflix will boast five million
subscribers and one billion in annual revenue by 2007
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How Netflix Works?
•Receive selection of DVD’s from customers
•Process DVD’s at one of 30 shipping centers
•Send DVD’s straight to customers within one-day
•Return DVD’s in one of Pre-Paid Mailer
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How Much Does Netflix Cost?
Plan
3 DVDs
at-a-time
Rental/
Month
Price /
Month
Free
Trial
Length
Unlimited
$17.99
2 Week
Free Trial
Per month
2 DVDs
at-a-time
$14.99
Unlimited
Per month
2 DVDs
at-a-time
Limit 4
per month
$11.99
Per month
2 Week
Free Trial
2 Week
Free Trial
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Comparing Netflix to its Competitors
Netflix
Wal-Mart
Blockbuster
Movie Selection
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Subscription
Plan Selection
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Movie Search
Interface
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Movie
Availability
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Speed Of
Delivery
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●●●●● best
Statistics from: http://www.online-dvd-rental-reviews.com
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Porter’s Competitive Forces Model
Low Cost
 Differentiation
 Innovation
 Develop Alliances
 Promote Growth
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Speedy Delivery
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Netflix CRM Strategies
Customers can access services through the
web site
 Communication and feedbacks from
Netflix’s customers
 Customer service center is open seven days
a week
 Phone support
 Netflix Affiliates Program
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Netflix Strengths
Subscription style e-commerce service
 Unlimited access to world’s largest DVD
library
 No lineups and no late fees
 Excellent customer service
 Easy website navigation
 Preview movie before renting
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Netflix Weakness
Customers slowly adapt to change from
movies-by-mail model
 High quality in customer service is not
easily achievable
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Netflix Opportunities

Cross promotion program
 Promotional
relationship with Amazon.com
Allow customers to download movies
 Extend into video games rental business
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Netflix Threats
Strong competitive market with other
movie rental stores such as Blockbuster,
Wal-Mart and Comcast Pay-per-view
 Older or newer media formats are not
supported currently
 Lower price and promotions of
competitors
 Cost of postal service
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Financial Status
Revenue up 86% from $272.2 million in
2003 to $506.2 million in 2004
 Subscribers rose from 1,487,000 in 2003
to 2,610,000 in 2004
 After Blockbuster and Wal-Mart went into
the market in 2004, growth rate dropped
from 77% to 2%
 Failure to expand to UK with a net-loss of
$3 million
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Conclusion
 Netflix
is at its maturity
 Expanding and growing slower
than before
 Loss in revenues from competition
 The diminishing future of Netflix
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