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
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Brand recognition
Producing original TV series ex: House of Cards,
with prominent actor Kevin Spacey
Extensive customer data on file
DVD rental cost so low that competitors don’t
bother trying to emulate that part of their
business.
App is on all platforms – even the Kindle (device
made by competitor Amazon)
Partnered with start-up eyeIO as their 1st
customer – using their encoding technology to
lower bitrate of their HD video streams, which
helps them in the mobile market
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Older titles
Expired contracts with Sony & Stars, resulting in
lost videos
Lost video provider EPIX to Amazon.
Competition has more money
Damaged reputation after attempting to increase
fees and separate DVD & streaming video
memberships.
Revenue is still rising but streaming & subscribers
are slowing = growth is slowing.
Opportunities
Threats
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Collaborate with well-known actors to create
more original series
Bid for more popular TV titles
Target/market to kids & young adults
International expansion
Partner with companies to develop Netflix
programs specific to their platforms that will come
pre-installed on all their devices
Partner with cable & gaming companies to be an
on-demand option for video & games.
AppleTV Partnership
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Competitors offering streaming video and bidding
for exclusive rights ex: Amazon, HBO, TV networks
Competitor partnerships (ex: Amazon & Epix)
Higher licensing costs
Biggest competitor, Amazon, now developing
original programming
Streaming video increasing; DVD rentals
decreasing
Movie & TV industry less willing to make exclusive
deals with online video services.
EPIX provides Disney videos to Amazon; Disney
recently acquired Lucasfilm (& entire StarWars
franchise).
Competitor Analysis
ADVANTAGES
 Customers rent DVDs thru mail;
Redbox – Must rent from kiosks.
 More older titles.
 Offers streaming video service.
 Offers TV shows
 Low monthly subscription costs & no
late fees attractive to customers;
Redbox – DVD rental fee $1/day.
 Website has a more advanced
customer rating & recommendation
system.
 Developing original content.
 More partnership opportunities.
DISADVANTAGES
 Shipping costs for DVD rentals.
 Redbox has newer titles.
 Redbox offers video game rentals &
event ticket printing.
 Customers must make a commitment
to use service.
 Can’t profit from long-term
rentals/late fees.
 Customers must wait to receive DVDs;
Redbox – Can get DVDs same day.
 Company as a whole has more
competition.
ADVANTAGES
 More titles; DVD rental service.
 No ads/commercials in video content.
Hulu-Plus – Most videos contain ads.
 Content available on all devices.
Hulu currently doesn’t have rights to
make all of their video content
available on all devices.
 Customer recommendation system.
 Developing original content.
 Available on more devices.
Hulu.com – PC environment only.
Hulu-Plus – Accessible on fewer
devices.
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Available in more countries.
DISADVANTAGES
 Charges fee for all content. Hulu.com
offers limited content for free & offers
more content thru Hulu-Plus for
$7.99/month.
 Older titles. Hulu offers current TV
shows – new episodes available day
after airing.
 No social media integration.
ADVANTAGES
 More titles; DVD rental service.
 Monthly subscription that can be
canceled/frozen any time.
Amazon Prime - $79/year, paid in full.
 Higher quality video playback.
 Better customer recommendation
system, user interface & organization.
 Growth of international expansion.
 Focused solely on video services =
benefit to customers.
DISADVANTAGES
 AmazonPrime membership includes
free 2-day shipping & instant access to
e-books (on Kindle).
 Revenue only from video services.
Amazon – Business model generates
revenue many ways.
 Losing exclusive partnerships with
online video distributors, some
directly to Amazon Prime (ex: EPIX).
 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
Apple
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DVD Rent-by-Mail
Service
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RADius-TWC
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Online Video
Streaming Service
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Twentieth
Century Fox
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Hasbro Studios
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Warner Bros
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Stakeholders,
such as Carl
Icahn, & their
affiliates
KR Key Resources
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VP Value Proposition
CR Customer Relationships CS Customer
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Stockholders
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Extensive customer
database
Extensive customer
database, 10+ years
deep.
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Original content
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Partnership with
Apple; soon
possibly cable
companies
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Accessible on
greater number of
devices
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Advanced
technology for
better quality video
playback
Experience of
Management &
Board of Directors
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DVD Rent-by-Mail
Service – Cost so
low not worth
competing
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Free trials/sign-up deals
Convenient sign-up thru
many devices
Pre-installation on
devices
Aggressively working to
improve content &
playback quality
Recommendation
System
CH Channels
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Online, print, & direct
mail marketing
Pre-installation on
devices
Gift subscriptions
Offers to friends/family
of members
Segments
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AppleTV owners
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Owners of
Windows 8
devices
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Adults, families,
kids
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Benefits from
long tail: Classic
TV/Movies,
Documentaries,
Adult Animation,
Stand-Up
Comedy,
Romantic
Comedies,
Action/Sci-Fi
R$ Revenue Streams
C$
Cost
Structure
DVD Rent-by-Mail Plans (per month)
• 1 DVD: $7.99 or $9.99 with Blu-Ray
• 2 DVDs: $11.99 or $14.99 with Blue Ray
• 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
services
with pay-tv
packages.
Less money from
more customers =
Revenue boost
Less competition
= Lower licensing
fees
Customers
sign up for
service
directly on
AppleTV &
pay through
iTunes.
Partner
with gaming
companies
to offer ondemand
video game
services.
Reach more
customers =
Revenue boost
New customer
segment =
Revenue boost
Develop
“HBO
quality”
original
content.
Lure & retain
customers with
content that’s
untouchable by
competitors =
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/
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www.netflix.com
www.hulu.com
www.redbox.com