Netflix began as a DVD-by-mail service, using the web to improve the rental industry with recommendations, queues, and automation.
However, increasingly streaming of video online has become one of
Netflix’s core strategies for delivering content to viewers.
$14m in Q3 2011
Figures based on Netflix Q3 2011 Financial Statements
$21.5m in Q3 2011

Netflix Investment in Streaming vs. DVD Content
700 000
600 000
Netflix is constantly adding new content to its streaming library, including new partnerships with AMC, CBS, DreamWorks, and Warner Bros.
500 000
400 000
300 000
“Our core strategy is to grow our streaming
200 000
100 000 and globally.”
DVD
- Netflix Annual Report
0 today, where it’s a steady decline every year a little bit, but there’s a long-term residual market. And
Q1, Q2, Q3, Q4, Q1, Q2, Q3, Q4, Q1, Q2, Q3, there’s very little fixed cost in the business. So that’s not a material cutoff of its efficiency, it’s almost
2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011
- Netflix 10K
Figures based on Netflix Q3 2011 Financial Statements
1 “Netflix’s CEO Discusses Q3 2011 Results.” http://seekingalpha.com/article/301738-netflix-s-ceo-discusses-q3-2011-results-earnings-calltranscript?part=qanda.

Netflix purchases DVDs or holds content agreements with countless production studios and distribution companies. These are just a few of the partnerships Netflix currently holds.
A constant concern for Netflix is gaining new content and holding onto the content agreements it already has. Just recently, Starz opted not to renew its agreement with Netflix, meaning that in
February Netflix will lose a great deal of its streaming content. This is a growing concern as other companies enter streaming.

Subscription Service
One Price, Unlimited Viewing
Á La Carte
Pay Per View
Advertising Subsidized
Free Viewing with Ads
Freemium
Some Content Free, Other Paid
“I think in the long-run, the long-term margin structure for streaming will be ultimately determined by the competitive space, and how many competitors we have. In the short run, we’ve been aggressively adding streaming content at the same rate of subscriber growth, and we continue to anticipate investing in
2012.” 1
- David Wells, CFO, Netflix
Competitors like Amazon, YouTube, Hulu, Blockbuster (now partnered with Dish
Network), Facebook, and Apple are getting in on the action too. All six companies have revenue generation models based on either selling digital content to consumers or using advertisements to subsidize viewing.
1 “Netflix’s CEO Discusses Q3 2011 Results.” http://seekingalpha.com/article/301738-netflix-s-ceo-discusses-q3-2011-results-earnings-calltranscript?part=qanda.

Rather than just getting content to viewers through DVD players, Netflix has partnered with numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Nintendo Wii Microsoft Xbox 360
Sony PlayStation 3

Rather than just getting content to viewers through DVD players, Netflix has partnered with numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Apple iPad and iPhone
Windows Phone
Google Android

Rather than just getting content to viewers through DVD players, Netflix has partnered with numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Roku Box Tivo
Apple TV

Netflix’s vast array of partnerships allow it to be available on a plethora of platforms, meaning that Netflix’s streaming services can reach just about everyone— either on the computer through a browser, through web-enable televisions, gaming consoles, or mobile devices.
However, a growing concern is the exclusivity of these relationships.
Hulu is already available on many of these platforms, as is access to
Apple content. What exists to ensure that Netflix with continue to enjoy its proliferation?

While its content partnerships are among Netflix’s strengths, they are also one of its weaknesses. The growing standard of exclusivity means that content may soon only be available in one place, rather than across multiple websites.
Will content creators and distributors continue to partner with Netflix and give it the content it needs to exist, or will they find greener pastures, possibly even focusing on their own online distribution to build revenue?

Another area for concern for
Netflix are the platforms that deliver its streaming services.
While browsers on computers will always be able to access
Netflix.com, what about the numerous devices that make
Netflix so easily accessible?
What happens if they decide to partner with Hulu or Amazon exclusively for streaming services? Maintaining partnerships with these device makers is vital—especially considering the numerous connections Apple already holds for content.

700 000
600 000
500 000
400 000
300 000
200 000
100 000
0 library, maintaining a DVD selection that will eventually be slowly phased out.
Because of this need for new content, Netflix has to maintain content rights with a growing variety of content providers. Exclusivity rights
Streaming and opportunities for Netflix.
DVD
Q1,
2009
Q2,
2009
Q3,
2009
Q4,
2009
Q1,
2010
Q2,
2010
Netflix must also keep relationships with platforms that allow Netflix to stream its content via apps. With many new streaming
Q3,
2010
Q4,
2010
Q1,
2011
Q2,
2011
Q3,
2011 name across platforms.