Netflix

The competitive forces in the movie rental industry are quite strong, as I will explain through the five forces model. There are a vast amount of substitutes for watching a movie. You can go to a play, sporting event, concert, out the lake/beach, go for a run, watch regular television, go shopping; I could go on and on. Also, torrenting or pirating movies is growing increasingly popular. Buyers have a strong presence in this industry mainly because they are picky about how much they will pay to rent or stream a movie.

With the amount of substitutes and their pickiness, they make this industry more competitive than what it may seem. Suppliers can make this industry very difficult because there is so much red tape in the movie industry. There are copyrights and restrictions on everything. This gives the supplier a lot of leverage and for the most part, they know that they can demand a price of just about anything. I see the potential and threat of new entrants being moderate to strong. First off; many customers have their loyalties whether it be to Netflix, Redbox or a local hometown movie rental.

Secondly; pricing, availability and quality are all key factors. Lastly you have to have a large sum of money upfront in order to get the ball rolling. As I mentioned prior, gaining rights from movie companies is not cheap. The rivalry among the competitors is rather intense as they are battling for the best prices, biggest variety, quickest accessibility for the customer, and quality movies (HD streaming, few scratches and number of blu-rays). With the growing increases in technology and home entertainment, there are major forces pushing for change in the movie rental industry.

In addition to this; we now live in a world where people want something and they want it NOW. I work in retail and this “in the now” era is changing everything and is putting a lot of pressure on almost any company. This has increased the push for expansion of online streaming and or the ease of access to movie rental kiosks. Also in this new world, there is a huge demand for entertainment. Our generation spends more time in front of the TV and now computers, tablets and smart phones than ever before.

The increase in the quality of televisions, surround sounds and filming capabilities is pushing the envelope. People are also always looking for the biggest bargain while maintaining quality. When looking at a strategic map the two variables would be price and how quickly the product can be attained. Netflix and Redbox rank high within each category. On the other hand Blockbuster and Movie gallery would be ranked much lower due to their high prices and the fact that you have to go out of your way to a brick and mortar store.

The biggest key success factor to me over the next 3-5 years will be the capability to stream HD content at home. I understand that this hinders on your internet provider due to bandwidth. But I believe that if a customer can stream HD content it will save them the cost of purchasing a blu-ray player and blu-ray videos. To stem off of this idea, it’s going to depend upon how quickly the customer can obtain the video. After those two factors, I think that price (low) will then come into play. People want things to be as simple and as user-friendly as possible.

Whether this is how it easy is to navigate a website or make purchase at a kiosk machine. Lastly I foresee the variety being a component of success; I don’t know about you but I do miss some of the movies from the 90s. After performing a , the company looks increasingly more popular. First off, lets look at Netflix’s strengths. Overall Netflix has had strong financial stability as they have grown their margins year over year. They definitely have their brand name out on the market; much of this can be attributed to their amount of advertising.

You can say that they have alliances given that their videos can be streamed on virtually any device (phone, tablet, and computer). This also allows their content to be viewed virtually anywhere. The fact that they teamed up with Oracle to work on their website was a very beneficial move as this gives them somewhat propitiatory technology. I personally enjoy their recommendations and it is obvious that with their next arrival that they have strong logistics. They have a big cost advantage too.

If I can stream a whole season of How I Met Your Mother in one day, I feel as though the $8. 9 that I spent was a good investment and yet I still have another 29 or 30 days to go. The two times that I had to deal with their customer service; they quality of service was outstanding and I’ve heard many other wonderful testimonials. When looking at weaknesses, I feel that their inability to provide new releases is a major drawback. In addition to this, they need to amp the selection for online streaming since streaming is expanding rapidly. The issue at hand with streaming is that it can potentially lead to server crashes if there are too many users on at once.

Netflix can also be very enticing to hackers since there is so much personal information stored. I would say that the biggest opportunity for Netflix would to be to make deals with the movie production companies to allow Netflix to offer new releases. To feed off of that, they need to increase their variety; particularly in the selection of indie and international films. With as big as they have become Netflix should try to gain rights to more countries. They could try to test out the video rental industry. This would help them out as gamers can stream Netflix on their consoles.

Since they have software to offer recommendations based off of likes, they could look into developing a music streaming service similar to Pandora. Lastly, they need to set up kiosks in high traffic shopping areas. Maybe they could start this by putting up kiosks in each of the 50 towns in which they have a distribution center. I see the biggest threat being the increasing amount of pirating movies and people performing illegal downloads. The supplier has a lot pulling power as they can quote big prices. If other companies began to enter the online streaming idea; Netflix will have to look for ways to distinguish itself.

Redbox’s SWOT analysis does not make it look as attractive as Netlfix, however it is still pretty strong. Again starting with strengths; Redbox has its kiosks placed in prime locations. It is much more convenient for a customer to pick up a movie as they are walking out of the grocery store or McDonald’s than it is for them to drive to a physical store location. It is good for both the store and Redbox. I feel that their prices give them a large competitive advantage especially when comparing to the price of a rental from Blockbuster or Movie Gallery.

Their smartphone app allows the customer to decide whether or not they can go out and pick up a certain film. I know that many people appreciate the fact that Redbox has many new release films. Moving on to weaknesses; the biggest issue with kiosks is the amount of variety and inventory. There are only 20 to 30 films to choose and I feel that folks enjoy more choices. The other issue with kiosks is that nobody is there to inspect the condition of the disks therefore a customer can potentially rent a scratched up disk.

The beauty of Netflix is that your movie will arrive on your doorstep or you can stream it instantly. With the increasing price in gas, it can be seen as somewhat of an inconvenience to drive out to a kiosk. On a positive note, Redbox has many opportunities available to it. They can start off by offering online streaming. Like Netflix, I suggest that they look into tapping into the video game market at their kiosks. After lifting their lawsuits from Universal and Warner bros, they should renegotiating the length of time that it takes to get their hands on new release films.

Redbox’s biggest threat would if/when other companies also begin to offer rentals via kiosk locations. The advances in technology may one day lead us away from using discs and virtually everything will be done online. They also face uncontrollable threats such as snow days. It is much easier for the customer to stream a video with Netflix than it is for them to bundle up, clear off their vehicle and risk their lives in hazardous driving conditions. Financially Netflix has been quite sound since its creation.

I am rather impressed with how well its gross profit and net income have steadily increased year over year. On the other hand, it does somewhat bother me that their stockholder’s equity has decreased each year since 2005. Recommendation: Netflix: I recommend to Netflix that they look into adding kiosk locations in attempt to drive out Redbox as much as possible. This will pull in any more customers because not everyone enjoys being on a subscription and paying monthly rates. By the time everything turns completely towards online streaming, you will be leaving Redbox in the dust with almost nothing.

To further help with pulling customers away from Redbox, Netflix needs to look into gaining access to new release films. With their powerful software, Netflix should look into a streaming service similar to Pandora and or create something like iTunes where customers can purchase and download music. Redbox: Redbox has got to get with the program and offer online content. Along with this, they should offer some sort of subscription service to ensure that they are holding onto their customer base. They could also look into having a rental service via online so that they can offer their customers more variety in movies.

Within the past year, Netflix has undergone many strategy changes. One of the most recent familiar changes was when they split their business into a visual and virtual model. Many consumers protested and had mixed feelings regarding this strategy change. However, they did not get it all wrong. In fact, the company has regained stability and continually looked for more innovative routes to take their business. The most current strategy alteration that is creating a media buzz-binge is Netflix’s new strategy. The original Netflix business foundation was based around the idea of being a leader in mailing DVDs.

In 1999, to compete with the video rental market, especially Blockbuster, they launched a subscription service which allowed their subscribers to rent an unlimited number of DVDs at one low monthly price. However, as consumers taste changed so did Netflix’s business model. To incorporate those changes Netflix started to include streaming from personal computers. Within the past year, Netflix completely changed their model by splitting into two businesses. In recent years, DVD rentals are continually starting to reach maturity and the steaming market has continued to take off.

This time period has allowed Netflix to capitalize on an opportunity to execute a new strategy, enter as a new market player, all while maintaining profitability. The strategy in which Netflix is now pursuing entails that of binge viewing. On February 1st, Netflix launched a complete season, all 13 episodes, of ‘Houses of Cards. Ultimately, is Netflix trying to revolutionize the way we watch TV? Some of the most recent changes in television include a shift from primetime television, to DVD rentals, to the most recent streaming. Due to the continued change in television, Netflix has found a need to serve each unique segment.

This in turn has increased the continued success rate of the company because they have not become complacent with their original model. For example, when Netflix changed their business strategy and split into two units under one corporate umbrella, they went after new competition. With the demand curve declining in the visual segment or rentals, they faced fierce competition against Hulu and Amazon in the streaming segment. Again, the binge is now engaging in is because they saw a potential in a different business unit as the streaming market faces saturation.

The competition that they are pursuing with their binge strategy consists of HBO and Showtime. The new strategy hopes to go after a new market base and keep subscribers from going to the competition. The attitude or mindset of many consumers today is one of which includes getting things right when they want them. Essentially, it comes down to getting things our way. For instance, Netflix is now seeking out these consumers who have this type of attitude, making the assumption based on current consumer demand. However, through continued research and monitoring of its clientele base, Netflix found supporting evidence.

This shows a trend that those users who continually watch different television series’ or episode blocks over short time periods. The change of viewing habits supports their alterations in the traditional network release. In addition, this strategy change provides a backing for their reputation of innovative business practices that change the way their subscribers watch television. Overall, Netflix has felt the need to enter into these new markets and continually change their strategy because of careful analysis and consideration.

Both major strategy changes that Netflix has exemplified are due to a formal planning process. As previously mentioned, Netflix prides themselves on having and innovative business model. As far as can be seen, each release of a new business model has increased customer utility by bringing in new customers from different industries they have entered like rentals, streaming, and currently binge viewing. Not only have they brought in new customers, but they have been able to continually leverage their operations over their competitors in each market and be profitable.

Nonetheless, all the planning involved in the strategy changes provides benefits that Netflix anticipates. The bold moves of Netflix create many advantages that foster future growth opportunities. Furthermore, bringing in new customers and the possibility of expanding services for those who already subscribe to Netflix includes other benefits as well. Overall, the hopes are to hold customers longer and increase their viewer retention rate. On the other hand, one of the things Netflix had struggled with earlier on but was addressed and enhanced was the content gap.

Airing a binge of episodes at once compensates for the viewer gap between primetime television and internet streaming. This is due to the fact that primetime television stations and internet companies that stream television episodes do not offer this type of viewer experience at this point in time. Having a larger customer base, that is satisfied with their account spending ultimately increases revenue for Netflix. In addition, Netflix also anticipates increased revenues when they begin to receive payments from those internet companies who want to piggyback off of their broadband-access and offer binge services such as theirs.

Being a first mover requires a great deal of risk that the company must take on but, do the advantages outweigh the cost? Netflix can be seen as an innovative leader because of the focus placed on changing their business strategies. The company has done a great job at finding gaps in current marketplaces and potential in other business units. However, the vast changes in their strategy are due in part to careful planning and analysis. Having a thorough analysis allows Netflix to foresee anticipated benefits from these changes.

I. Viewpoint: CEO We used the CEO Reed Hasting view point, because he is the current CEO and primarily responsible for the main ideas for this company. II. Problem Statement: How should Netflix enter the online video market? Any decision made on this issue would impact not just the Netflix existing business model but its ability to sustain its position as a giant in the media industry. III. Key Objectives Make Netflix more engage in technology generation now a day. To increase revenue incomes for the company and at the same time make the company brand more globally to all.

IV. Areas of Consideration SWOT Strength: ?the first company that venture into the online DVDs rental retailing ? Netflix offers prepaid subscription service whereby customers only need to sign up and pay a fixed subscription fee a month for unlimited rentals. ?Customers will now have no more worry of returning their movies late, as Netflix has cancelled the late-fee system. ?Netflix made the unsubscription process relatively easy ?dopting the strategy of reclaiming churned customers rather than forcing dissatisfied customers to stay. Offers a web portal with powerful features such as a proprietary recommendation system that was very accurate in recommendations ? Customers are recommended to movies based on their preferences as well as the availability of the movies. ?Gained a good reputation as well as a large base of customers over the years. ?Growing library of more than 5,000 choices that can be watched instantly on their PCs. ?Over 6. 7 million subscribers. ?They have over 55 million discs and ship 1. 6 million a day, on average. Weakness: Prepaid subscription service model do not work with low volume customers. ?High replacement inventory cost will occur since DVDs might get lost or damage during the mail transit. ?Delivery time is still a weakness for Netflix in comparison to brick-and-mortar store like Blockbuster. ?Customers could not get the DVDs they want immediately. Opportunities ?Netflix can easily source for the technology and infrastructure to provide VOD services to its customers. ?Netflix can review on the current competitors in the VOD market to have a safer measure before entering into the market. With VOD, the problems associated with inventory control such as damaged as lost DVDs might be eliminated. ?More people have higher purchasing power since more are buying high-price durable goods like big-screen HDTV. Threats ?Video streaming technologies had evolved drastically over the years to the recent VOD. ?Brick-and-mortar stores like Blockbuster will continue to enjoy its business with customers who want to get their DVDs on the spot and do not consume high volume of DVDs. V. Alternative Courses of Action: Promote a free movie watch from 1-3 pm mid night Ad: To catch up more customers. Dis: No revenue for that timing. ?More benefits for VIP membership Ad: establish customer loyalty. Dis: Less revenue income. ?Engage in HOT /IN website or Apps for advertising Ad: Promoting the brand name. Dis: It’s competitive with other apps for movie. ?Billboard advertising Ad: making the brand more widely Dis: high cost in renting billboard ?Lower cost for Weekend Ad: increase in membership log-in / increase in sales Dis: lower income for that specific days. VII. Recommendation:

As the Internet sources is rapidly growth too fast and the updating of movies is also getting Faster than before, Netflix should try to make a promotion period for memberships. Or even lower price for old movies (10-20 years old movies). They can also make a promotion for watching free within a period of time (1-3pm midnight). References: http://www. techi. com/2011/10/netflix-is-a-case-study-in-poor-decisions-tanking-a-company/ http://blog. kissmetrics. com/how-netflix-measures-you/ http://www. dmnews. com/customer-relationship-mangling-a-netflix-case-study/article/215246/

Questions: 1. As completely as possible, sketch the value chain for Netflix from the production of content to viewer. Ans: 2. How do horizontal and vertical conflict impact Netflix? Ans: There are competitor in the market and the innovative update for the technology now a days conflict impact the improvement of Netflix. 3. How does Netflix add value for cutomers through? Ans:Netflix provide low cost for quality movies that u can watch. They provide more than millions of movies choices for movie lover who can even search for old movies(10 years ago). 4.

What threats does Netflix face in the future? Ans: Netflix will face more technology challenges in coming future and there will also be more and more website for free movies coming out. 5. Will Netflix be successful in the long term? Why or Why not? Ans: Netflix will successful for short term but not long term. Because there are more and more websites providing free movie watching or even software. We can just download it thru the net and watch it for free. Therefore there will be less people willing to pay for watching a movie except for movie house.

Internet streaming: Replacing cable and dish

People are mistaken who believe internet video streaming is a fringe market. Watching television programming through subscription services like cable and dish is becoming increasingly expensive while online video streaming is free or becoming cheaper with more content being added daily.

Streaming is “the process of providing a steady flow of audio or video data so that an Internet user is able to access it as it is transmitted. (Daintith, 2004) In time internet video streaming will replace cable, dish, and over the air broadcasts as the main source of televised programming. It is easy to see that internet streaming is the wave of the future. With more and more people getting online with broadband connections to homes and mobile devices, there is an increasing realization that many are paying too much for cable and dish services when the same programming can be accessed for free or more inexpensively. Snider, 2011) They are also realizing that with video streaming there is no restriction on the time and place they can view the desired programming as long as it is after the original broadcast or in the case of cinematic films, after they are released from theatrical venues; in other words, video on demand.

The convenience of “on demand” programming will allow a busy population to be more productive in other areas of their life when they do not have to schedule a time to watch their favorite shows. Although many shows, particularly live sports are currently being offered free to internet viewers in real time (e. . , ESPN3, NBC Sports, and CBS March Madness on Demand), this just adds to the attraction of video streaming. Clearly then, the entertainment industry is looking closely at the potential of video streaming both as another revenue source and a threat to traditional ad revenues. Hulu Tv is the internet’s leader in providing free premium content to its viewers. “In addition to original backers NBC Universal and Fox, Hulu works with 150 content providers, including all of the major TV production companies with the exception of CBS, which is aggressively developing TV. com. (O’Leary, 2009)

Rating services such as Nielson and comScore are at times at odds with the viewing numbers they are reporting which means gauging the actual numbers of viewers needs revising. Nevertheless, the growth of online viewing is attracting competition for Hulu, and Netflix the leading subscription service providing both films and TV shows. Cable giant Comcast for instance, has launched “Xfinity Streampix, which will give Comcast video subscribers a selection of older movies and prior-season TV shows that they can watch on TVs and Internet-connected devices. (Schechner, 2012)

Admittedly, there are system requirements that need to be met in order to view streaming content on a computer, mobile device, or television set. (Some game consoles, such as Xbox360 and Playstation 3, and some Blu-Ray players can also be used. ) And providers may require certain software to be installed. It can be as little as ensuring the latest Adobe Flash Player and a video out jack are available on the receiving device, to proprietary software; e. g. , Netflix to regulate account access or to view content on Veetle. om- a free public streaming website. Peer to peer streaming and live event streaming are also becoming increasing popular. Individuals, small businesses, and large corporations are taking advantage of direct streaming. There are numerous free streaming sites and companies like Primcast that offer a wide variety of sales and technological services. Consequently, more and more consumers are “cutting the cord” to cable and dish. It only makes sense as budgets remain tight for many families and enterprises, and streaming quality and content continues to improve.

A high definition premium cable package can reach more than $150 per month in contrast to Netflix’s current price of $7. 99 per month. Add the available free programming on Hulu and other sources and the savvy consumer who chooses to cut the cord could save over $1000 a year. That is a powerful inducement for many who are willing and able to embrace this burgeoning technology.

References

1. Daintith, J. (2004). “streaming. ” A Dictionary of Computing. Retrieved from Encyclopedia. com: http://www. encyclopedia. com/doc/1O11-streaming. html
2. O’Leary, N. 2009, May 25). Searching for Life on Hulu. Brandweek. 50 (21) Retrieved from http://www. marketingymedios.com/aw/content_display/special-reports/othereports/e3i15f4e2b3b4a487b3cbb6ddcfb338c9e7
3. Schechner, S. (2012, February 22). Comcast Takes Aim at Netflix. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052970204909104577237321153043092.html
4. Snider, M. (2011, September 12). More Consumers Spurn Cable TV bills. USA Today Retrieved from http://www. usatoday. com/MONEY/usaedition/2011-09-12-Cutcord-0830_CV_U. htm

Movie Rental Industry Netflix and Blockbuster Case Analysis Lydia Floyd Strategic Management MGT422 February 28, 2013 Introduction Netflix competitive strategy In order for Netflix to understand were the business lies as it relates to the competition it is important to seek the correct strategy in order to be and stay competitive. The five competitive strategies are * Low- Cost * Broad Differentiation * Best-Cost * Focused niche based on low cost * Focused niche based on differentiation Since each strategy requires totally a different approached my recommendations will be based on focused niche based on differentiation.

Netflix originally offered DVD’s on a fee per DVD basis and eventually branched off into the monthly subscription service business. The company at one point was forecasted to have over 11. 3 million subscribers by 2009 and 8 million VOD (Video on Demand) customers by 2013. (See Exhibit 1) This exhibit basically shows how the number of video streaming choices has increased over the past several years. So the company is moving in the right direction as far as broaden their differentiation strategy.

The next exhibit shows how Netflix compares to the its main competition and how the company’s net profit margin exceeds a competitor like Blockbuster. The attached SWOT analysis for Netflix mentions some very important points that are associated with a focused differentiation strategy. The company is staying committed to how to service the niche better than the competition and speaks to the areas that appeal to specific customers such as offering services that allow subscribers to go back to pilot episodes of a television series.

This analysis will allow the company to identify areas to concentrate on strategically and to make a final diagnosis to where the company stands overall. Strengths * Increasing competition per member viewing is on the * Customers’ opting out is the lowest it has ever been. * Clearest brand identity “Watch TV shows & movies anytime, anywhere” * Netflix has surpassed the competitions in improving personalization of customer choices because of large membership base * Price $7. 99 per month * Exclusive Content: Of Netflix’s top ten TV shows, six are only on Netflix, and not available with competitors. Netflix’s DVD subscription service is extremely profitable, with contribution margins around 50%. * Services allow customers to go all the way back to the beginning of the first season for TV shows Weaknesses * DVD subscriptions are down 8. 47 million subscribers in Q3, 2012 compared to 13. 81 million subscribers 1 year ago. * Brand suffered when the company changed the pricing * It could take three years for a full brand recovery in order to see noticeable difference to profit margins * Streaming subscription contribution margins are much Opportunities International expansion (global) * Original productions offer a way for the company to connect with customer emotions. Company will be offering 4 TV series this year that will only be on Netflix * Lack of use of debit and credit cards – Latin America. * Internet TV. Threats * As Hastings pointed out, “With big markets comes competition” – There is a clear transition from linear TV to Internet TV and competitors want in on the profits. * Contracts with Disney, Sony, and Universal * Hulu, offers its customers TV shows immediately after they are aired for the first time. Hulu, Amazon, and HBO competitors making more investments in streaming options * United Kingdom is a very competitive “The sought after competitive advantage over other movie rental competitors was to deliver compelling customer value and customer satisfaction by eliminating the hassle involved in choosing rent and returning movies. Grow forward the company has 2 primary strategic objective 1 to continue to grow a large DVD subscription business and to expand rapidly to internet based delivery of content as that market segment developed. (Case page c-102) The company’s revenue has continued to grow substantially over that last couple of years. The next exhibits show the financial position from the end of 2006 to end of 2008 going from 996,660 to 1,364,661 with the net income margin being at 6. 1% by 2008 which shows the company profitability as it relates to expenses and liabilities. The next two slides just give a visual for where Netflix compares to blockbuster as it relates to sales thru 2010

Reference Page Thompson , A. University of Alabama 2008 Case 5 Competition in the Movie Rental Industry in 2008: Neflix and Blockbuster battle for market leadership http://beta. fool. com/danielsparks/2012/10/31/netflix-swot-analysis/15522/ http://www. slideshare. net/only1kiku/techindnetflix Gamble, John E. , Strickland, A. J. , & Thompson, Arthur A. , 2010 Crafting and Executing Strategy McGraw Hill/ Irwin New York New York http://finance. yahoo. com/q? s=NFLX&ql=1

Running Head: NETFLIX ON THE MOVE CHANGES IN THE MOVIE RENTAL BUSINESS Contents Introduction……………………………………………………………………………. 3 Changes Within The Movie Rental Business……………………………………… 4 NetFlix History and Strategies….. …………………………………………………… 6 Analyzing NetFlix Results….. ………………………….. …………………………… 9 Review and Recommendations……………………………………….. …………… 10 Conclusion……………………………………………………………………………. 12 References……………………………………………………………………………. 13 Introduction Impressive is the company that is able to make it to the top of their industry in quick fashion and remain there atop of all the rest of the industries.

Taking away market share from other established companies is a feat that does not occur by accident. NetFlix is a company that was born in 1997 and by 2007 had revenues exceeding $1 billion. Not all competitors were prepared to handle the new strategies being employed by NetFlix and some fell quickly. Strategies and changes within the movie rental business that allowed NetFlix to accomplish such a quick business success story and others to fall just as quickly will be explored to give a clear picture of some of the external factors that were relevant in the NetFlix movement.

By reviewing and analyzing some of the business decisions by NetFlix over the past 10 years, it will provide a better understanding of the effects of these decisions. Although NetFlix has obtained some great results over these years, there are also lessons to be learned and recommendations that can be given so that some of the less beneficial business decisions will not be repeated. This exploration of the and the results from executing their strategies will help gain insight on how important it is to stay involved with the customer and satisfy the needs of the market.

Changes Within the Movie Rental Business The video rental industry has reinvented itself often and in impressive fashion. Providing entertainment in the most convenient and cost-effective fashion has become the motivator for multiple changes within the industry. The video industry began to take off in the 1980’s with larger chains like Blockbuster and Movie Gallery rising over the previous smaller shops. These new avenues are providing videos granted a better selection and often better pricing for the common video consumer.

The popularity of these chains became more popular around the world and the businesses kept adding buildings and locations and became very popular for their wide selections, reasonable prices, and membership perks. Before long, these businesses added the increasingly growing gaming rentals as well making it convenient to now rent games for a much lower cost than purchasing the games. Convenience was impacted once again as NetFlix came on the scene in the late 1990’s. No other businesses had made efforts to use the unorthodox method of mailing DVDs to their customers.

Rather than jumping in the car and heading to the nearest video store, NetFlix capitalized on bringing the videos to the customer using their mailbox. Not only was it convenient, NetFlix allowed customers to hang on to the DVD without incurring late fees until the customer was ready to return and pick a new movie to be shipped out. Rather than a charge for each movie as the traditional method was for all other players, NetFlix charged in a monthly fee structure that allowed movie watchers to continue to watch videos as quickly as they could watch and send back with a request for a new movie.

Although NetFlix was at first looked at as a non-threat with their entrance into the market, it was not long before others began make efforts to copy the methods that NetFlix had brought to life. “Further fueled by convenience, hassle-free Redbox kiosks offering $1 new releases at your local grocery store or gas station came on to the scene in 2004 and had grown to more than 25,000 kiosks by the year 2011” (Sunderland, 2011). Redbox began as an adventure with McDonald’s in order to add more convenience for the McDonald’s customers.

In 2004, the concept of Redbox really started gaining steam. “With the majority of locations at McDonald’s restaurants, early headlines read, “Would you like a DVD with your fries? ” and “Order Your Big Mac and DVD to Go” (The History of Redbox). And what are the newest trends in making video rental even more convenient? Video streaming has taken movie watching to a new level as there are multiple companies competing in this method of delivering a wide selection of movies and TV episodes over the internet.

However, NetFlix has had a start on its competition by emerging as the world’s largest subscription service for movie watchers with over 15 million subscribers in 2010 (Gamble, Thompson, Peteraf, 2013). NetFlix has enjoyed being at the top of the industry until recently. Over the past 10 years, NetFlix stock has increased 1700% (Wofford, 2013). The difference today is that other businesses have caught on to the successful NetFlix strategies and methods. Competition has risen significantly in the internet streaming method of delivering movies conveniently to home watchers.

Amazon Prime is one of NetFlix’s recent competitors in both the DVD rental and the streaming internet video. Amazon Prime is another company that has significant and impressive growth in the past 10 years as stocks have soared over 1,100% (Wofford, 2013). Although Amazon Prime had not reached the heights of growth as NetFlix has accomplished, the ride for Amazon Prime has been at a steadier pace. And there are others that have entered the DVD and internet streaming movie distribution as well. Even Walmart has begun to enter the internet streaming market to share in this growing method of convenient movie watching.

DirecTV, Time Warner, DISH Network, AT&T, and Verizon are all companies that have created more competition in the market by utilizing existing or newer technology allowing for more opportunity of movie and TV entertainment by providing convenient movie selections while sitting at home. NetFlix History and Strategies NetFlix was formed and incorporated in 1997 by two “new technology” entrepreneurs Reed Hastings and Marc Randolph (Funding Universe). The two entrepreneurs set out to sell and rent the recently created DVD over the internet and deliver to the renter’s mailbox.

Few stores in 1997 carried DVDs which was new format that was new technology as compared to the video tape. Although the DVD players were expensive as they entered the market, the two entrepreneurs set their strategy that the DVD would soon replace the video tape and began to figure how to best get it to the movie watcher. Experimentation with different mailers ended with a package that would successfully be sent to and from the renter for the price of a postage stamp. The company began to purchase copies of the nearly 1,000 available titles available on DVD and with 30 employees opened for business on August14, 1998 (Funding Universe).

Pricing and discounts were created to invite the consumer to rent more while giving ample time to watch the movies and return. Soon after opening, promotions were given through sweepstakes and additional free DVDs with the purchase of some brand name DVD players. Not only could movie watchers rent but they also could keep and purchase that same DVD if it was to their liking to do so. NetFlix was not born, however, to only send DVDs through the mail. As the name implies, the founders had a vision and strategy to expand further into the access that the internet would provide.

With year after year major growth, in 2006 NetFlix ended the year with over 6. 3 million members (NetFlix). In 2007, NetFlix introduced to it’s members the ability to stream and watch movies and TV shows right on their personal computers. Now the challenge for the NetFlix team was to invent a way of getting streaming movies into everyone’s homes. And the strategy began new life again creating and experimenting with devices to attain this. After several ideas and some failed concepts, NetFlix strategy changed once again.

The widespread adoption of broadband connections to the internet had taken place in consumer’s homes and Microsoft and NetFlix strategies met up. Microsoft had already put out the Xbox and had envisioned it to be more than just a serious gaming system. Microsof t found NetFlix’s ideas of streaming movies over the Xbox device to the screen to be a good fit. Soon, many other devices and TVs were built with a chip and the NetFlix application to stream thousands of movies and TV shows right to the living room. NetFlix continued to grow and be the leaders in this industry while taking away market share rom other “traditional” methods of renting and watching videos. NetFlix management believed that the subscriber consisted of three types of customers: those who liked convenience of home delivery, bargain hunters who liked a good priced movie, and movie buffs who wanted a wide selection of movies (Gamble, Thompson, Peteraf, 2013). The content was a weak spot for NetFlix, however. Despite having a now large movie rental business, NetFlix did not have the contacts it needed to bring the wide selection of Hollywood movies to the consumer’s screens.

Although access to NetFlix may be cutting edge, few would watch if it only had older videos and TV shows (Roth, 2009). NetFlix began to search out ways to combine forces with other businesses that would give them access to more content. Not only was it lacking in content, but also needed to somehow gain access to the movie blockbusters much sooner. In many cases, hit movies would not be available to NetFlix for months and in some cases it would be years before these would be able to be watched by NetFlix subscribers.

In 2008, NetFlix found agreement with Starz enabling the addition of 2,500 fresh videos to NetFlix’s services (Roth, 2009). Underlying NetFlix’s great success from the years 2007 – 2011 was the understanding that they had to deliver additional content and make more available for streaming. Another strategy emerged in September 2011. Hastings announced that the company would charge separately for DVD rental and streaming video and that a new company named Qwikster would be formed to handle the DVD rental portion (Funding Universe).

With substantial increases to consumers and issues like separate billings, users began to voice their displeasure with this strategy and many subscribers began to cancel their subscription. New subscriptions began to suffer as well with the new format and the price increase that was introduced. NetFlix reasoned that the change was needed due to the increase costs in licensing and streaming videos (Seeking Alpha, 2013). It was not long before the outcry of the customer and the loss of subscribers made Hastings rethink this strategy.

By the end of 2011, Hastings admitted that strategy was not appropriate and dropped the division of the DVD and streaming making them once again one entity. But by then, damage had been done and the poor strategy had taken its toll on the business while its stock had dropped by 75% (Funding Universe). The current strategy being pursued by NetFlix is one of moving to International expansion. Though many countries may not have the infrastructure in place to be able to stream from the internet, many countries do and this may be a unique opportunity for NetFlix to continue to grow.

NetFlix has gained over 6 million subscribers within two years of its launch into International markets (Forbes, 2013). Although NetFlix seems to be leading now in the movie streaming industry just as it did with its strategy to mail deliver DVDs, competition is already on its way in the streaming movie business. Competition will continue to come up with their own unique strategies in their efforts to steal away some of the market share and success that has enabled NetFlix to continue to be successful. Analyzing NetFlix Results

The successful results of NetFlix over the years since its beginning can be seen in many statistical views. Focusing on the customer to tell us how NetFlix has performed would show us that from 2002 it grew from 600,000 members to over 6,000,000 members in 2006 (NetFlix). Each year after, NetFlix has gained a substantial quantity of members and in 2010 had over 20,000,000 members (NetFlix). Although there was a loss of subscribers in 2012 due to the Qwikster strategy of about 1 million subscribers, 2013 is estimated that NetFlix has over 33,000,000 subscribers in 40 different countries (Market Watch, 2013).

The rebound has definitely made up for the loss of a year ago. This is amazing growth in a short amount of time and NetFlix has done well to keep ahead of its growth with its infrastructure and planning. Many of the new subscribers every year were customers to local video outlets which have now suffered the reduction in business due to NetFlix’s success. The opposite effect of NetFlix’s success can be seen in businesses like Movie Gallery and Blockbuster as they have taken a large hit even to the extent of bankruptcy.

Although it may be a short trip down to the video store, consumers have definitely shown by the numbers of subscribers that they enjoy the benefit and value of being able to have the movies come to them. Revenues are another way to show the success of NetFlix over the past 15 years. Like many other startup companies, the early years were not profitable. In 1999, the coming had to swallow $30 million in losses on only $5 million dollars of revenue (Funding Universe). However, by 2005 revenues had exceeded $600 million with net income of $42 million (Gamble, Thompson, Peteraf, 2013).

By 2008, these amounts had doubled (Gamble, Thompson, Peteraf, 2013) and in 2012 NetFlix reported $3. 6 billion of revenue which was increase from the prior year by about 12% with $226 million net income (Bloomberg Business Week, 2013) . 2011 saw about a large growth of about 48% when compared to 2010 and while there was some growth of competitors in the recent years, many have seen negative growth in revenues partly due to the success of NetFlix. NetFlix has dominated market share in the digital on-line viewing of movies. According to a report by Sandvine Inc. in 2012, Netflix had captured 33% of prime-time web viewing (Edwards, 2012).

As well, NetFlix has gained over 61% of all movie watching in the United States and with its aggressive strategy marches on to increase that as well as move aggressively internationally. Although international business continues to grow in subscribers, it is not yet profitable and currently is erasing much of the profits of the US business. It will take some time to get established internationally and provide profits. Stock prices for NetFlix had escalated significantly from the 2009 level of about $30 per share to the peak high value of $300 per share in 2011, but began a sharp downward trend in 2011 after the introduction of Qwikster.

Basic earnings per share rose from a 2009 level of $2. 05 to that of $4. 28 in 2011 (NetFlix Investor Relations). It has taken some time to rebound from the events that surrounded the Qwikster disappointment, but stocks now seem to be continuing to increase as they appear to be reaching toward the $175 per share level. Review and Recommendations Over the short existence of the NetFlix company, it has done a good job at giving the customer what it has wanted and more. Over 90% of subscribers have indicated that they would recommend the NetFlix service to a friend (Gamble, Thompson, Peteraf, 2013).

NetFlix has been able to stay ahead of the rest of the movie rental industry by staying in touch with their customers and providing the services and movie selections that are important to them. The software that NetFlix has developed has made it easy for the customer to choose movies by categories and provides detail for each movie that helps subscribers make their decisions as to what to watch. The NetFlix software is also able to personalize the movie selection experience by capturing what the viewer has chosen before and what likes and dislikes the viewer has recorded after watching their selection.

This personalization brings to the subscribers attention other movies that they may want to watch based on their preferences and likes in the past. NetFlix has given the opportunity for first time users to use the NetFlix services for an entire month for free. This allows the customer to feel like they are getting a real bargain as well as gives them ample time to try out the service before paying for it. The pricing structures that NetFlix has instituted gives the subscriber options as to how many DVDs can be rented at a time along with unlimited streaming.

The $8. 99 membership is a bargain as unlimited DVDs and unlimited streaming of movies is included. The largest interruption to the NetFlix business was in 2011 when it decided to split the DVD portion of the business separately from the internet streaming portion. This move was not along the same lines as their customers were wanting. Qwikster was the new company that would handle all of the DVD rentals and NetFlix would continue to provide the streaming video. The two companies would not be separate and charge separately as well for their services.

With this change, a large price increase would be incurred as well as subscribers would pay separately for each service. It almost seems as though in this instance that NetFlix was not interested in what their customers wanted. The strategy to break these services into two distinct companies was not born from what would satisfy the customer but was rather an internal strategy to satisfy what the owners of NetFlix thought to be advantageous. Along with the change, the communication to the subscribers was ineffective and poorly distributed.

This poor decision did not sit well with about 1 million lost customers and stock prices fell dramatically during this period. After the fact, NetFlix heard the voices of the customer and decided to abandon this strategy and go back to the original format, but the damage had been done. The recommendation here is to find out what the customer views as important before fully developing and implementing new changes. NetFlix had been following this well until the 2011 Qwikster event.

Now they have learned the hard way how important it is to know what the customer views as valuable in their services. Even with the loss of 1 million customers, NetFlix began to rebound and grow with additional subscribers, but how much more could they have accomplished without this major set- back. Conclusion I have enjoyed the services that NetFlix has provided related to DVD rentail and streaming movies and TV shows over the internet right to my living room. NetFlix has worked hard to ensure that their customers have many selections at a reasonable price.

The company has grown substantially year after year with more customers, revenues, and profits and has taken and maintains the lead in this industry. Although this success has come quickly, it has not come easy. NetFlix has had to effectively plan, implement, and successfully change its strategies to satisfy its customers and stay in the industry lead. It has done well in implementing these strategies and the results speak for themselves. References The History of Redbox. (n. d. ). Retrieved from http://www. edbox. com/timeline Sunderland, N. (2011). Convenience: The past and future of movie rentals. Retrieved from http://www. tetonvalleynews. net/entertainment/movies/convenience-the-past-and-future-of-movie-rentals/article_d88d5148-5000-11e0-8a97-001cc4c03286. html Gamble, J. E. , Thompson, A. A. , & Peteraf, M. A. (2013). Essentials of strategic management (3rd ed. ). pp. 277-303. Location: Mcgraw-Hill Irwin Wofford, T. (2013). How these companies are streaming money. Retrieved from http://beta. fool. om/tlwofford/2013/01/13/online-video-streaming-performing-well/20918/ Funding Universe. (n. d. ) Retrieved from http://www. fundinguniverse. com/company-histories/NetFlix-inc-history/ NetFlix. (n. d. ) Retrieved from https://signup. netflix. com/MediaCenter/Timeline Roth, D. (2009). Netflix everywhere: sorry cable, you’re history. Retrieved from http://www. wired. com/techbiz/it/magazine/17-10/ff_netflix? currentPage=all Seeking Alpha. (2013). Domestically funding international growth: the NetFlix strategy. Retrieved from http://seekingalpha. om/article/1293701-domestically-funding-international-growth-the-netflix-strategy Forbes. (2013). Sizing up NetFlix’s international subscriber growth potential. Retrieved from http://www. forbes. com/sites/greatspeculations/2013/03/05/sizing-up-netflixs-international-subscriber-growth-potential/ Market Watch. (2013). NetFlix to announce first-quarter 2013 financial results. Retrieved from http://www. marketwatch. com/story/netflix-to-announce-first-quarter-2013-financial-results-2013-04-02 Bloomberg Business Week. (2013). Retrieved from http://investing. usinessweek. com/research/stocks/earnings/earnings. asp? ticker=NFLX Edwards, C. (2012). Bloomberg. NetFlix dominates streaming rivals in web-video market. Retrieved by http://www. bloomberg. com/news/2012-11-07/netflix-dominates-streaming-rivals-with-growing-web-video-share. html O’Neil, M. (2011). Social Times. NetFlix owns 61% of US digital movie market share. Retrieved from http://socialtimes. com/netflix-infographic_b73597 NetFlix Investor Relations (n. d. ) 2011 Annual report. Retrieved from http://ir. netflix. com/annuals. cfm

Netflix Inc. ,: Streaming Away From DVD’s Case Study: Emily Heath Part 3- Alternative Solutions To ensure the company will achieve stability by maintaining customer appreciation and satisfaction, Netflix must invest their time and finances into new alternative solutions. The solutions are based on what problems have presented themselves and are in best interest of the customers and the company. The main concerns at the moment seem to be the unreliability and instability of the company as the guidelines for prices and methods of delivery are constantly changing.

There are a few possible suggestions that are up for experimentation to resolve Netflix’s problems. 1. Incorporate commercials before and after everything that is viewed on Netflix. One of the greatest features about Netflix is the commercial free streaming that is available. However, to generate more income, including commercials before and after each video and movie will assist with that. Doing it at the beginning and the end still keeps that commercial free feel, as its not interrupting what’s being watched every five minutes the way regular TV does.

Also, keeping the commercials to a minimum will allow for a quick message from the advertiser to the viewers. Although commercials are reoccurring and usually disruptive, if the customers know they are getting a better movie selection, they will be satisfied. By airing these quick commercials, we are generating more income from advertisers. Solution: Seek potential advertisers that will pay to advertise their products briefly before and after viewing videos.

Advantages: Generating income for the company, potentially the reason Netflix may be able to expand its selections Disadvantages: Netflix will not be considered commercial free. 2. Expand the target market. Netflix is directed towards younger viewers (not by choice, due to the selection available, a target market was formed). By adding in a variety of older selection movies and TV shows that may appeal to different age groups will broaden the customer base. Also, extending the variety to younger markets.

As of now, the limited variety of movies and TV shows do not accommodate extremely young and older potential subscribers. If there is more selection incorporated, we can include all age groups. By incorporating cartoons and shows for young children, we are opening up a door for new customers. Young children will be able to tune in and watch their favorite shows, making it a favorite for parents. By adding in older movies and TV series like Coronation Street that target the older market, we are opening the door to potential customers in an older age group.

Solution: Incorporate more variety for a broader age group. Include child friendly TV shows and movies, to increase viewers at a younger age. Incorporate some of the older, less common TV shows and movies that target the elder customer base. Advantages: Opens the door for even younger and older customers Disadvantages: May be costly for the company to initially start and will rely completely on the outcome. Netflix must be sure they will gain this extra customer base before making the investment. 3. Create a Customer Base (Expand Social Network) to improve the services of Netflix.

The entire business relies on subscribers. If they don’t feel as if they are important, they will hesitate to continue paying their fees. Also, being able to communicate with the customers will create a more friendly and personal atmosphere. Starting up a chat room on Netflix to discuss what movies and episodes the subscribers want is a great option to explore. Also, by doing this we can get first hand information and opinions from the source. Letting the customer know we care about them will improve the bond they have with the business.

With a way to communicate to the customers, Netflix will be able to expand their customer appreciation and make better decisions to satisfy the consumers. Solution: Create a chat room to incorporate customer feedback. Advantages: This will create a bond with customers, will allow for opinions based completely on the consumer and will allow for Netflix to make accommodating changes to any issues affecting the subscribers. Also this may save some potential investments down the line because with a better understanding from the customers, the company will know which areas to splurge on. Example: knowing what the customers want, allows Netflix to purchase more of the popular demands rather then take the risk with less popular options. Disadvantages: It may be costly to start up. Also, it will require someone always on hand to review the feedback. 4. The biggest problem that is associated with Netflix is the unstable price and payment plan. The reason Netflix is so popular is because that is what the people love. The fact there is a flat rate to watch unlimited movies is the greatest selling point for consumers.

Every time Netflix announces a change to their flat rate, the amount of viewers decline along with the reputation of the business. It is the smartest idea to combine everything into one flat rate. A slight increase may allow for a newer and greater selection on Netflix. If customers are aware of the slight price change and understand it will be beneficial for them rather then the company, they will be a lot less hesitant to pay it. Solution: set a fixed price rate and plan for the customers. Advantages: With a straightforward price and plan, it becomes easier to account for.

Consumers enjoy simplicity and are more willing to invest/continue paying for something that seems organized and permanent. Disadvantages: Loosing the separate effect of DVD’s and TV shows. Rather then support what Reed wants by keeping it separate, the company must support what the customer wants as it relies on consumer satisfaction. 5. Creating a rewards program for customers will encourage viewers to continue using the service and will potentially increase the time spent on Netflix by the consumers.

By incorporating a reward for using the product, it will increase daily views by already existing customers and will open the door to a large amount of new ones. If consumers know that their time spent is valuable to the company, they will be more willing to continue subscribing and potentially increase their viewing times. Solution: Create a reward system that is based on views. (The more videos viewed, the better the reward) For example, if customers view over 30 hours a week on Netflix, a 5% decrease on the monthly payment may take effect. Not an actual set price and reward system for Netflix). Advantages: This increases weekly views and will assure the company a certain amount of views is always being accounted for. This also encourages people to spend more time using the product and attracts new customers. Disadvantages: a potential loss in the beginning for the company if they don’t have the sufficient funds. This is also time consuming for the company and will require attention to be spent primarily on rewarding the customers. Fixing Netflix With the 3 P’s (Conclusion)

Price: Solution 1 and 4 (above) focus on the price. Netflix must erase competition by fixing a competitive price. Also, they need to make sure they are offering the most for the cost. Promotion: Solutions 1, 3 and 4 (above) focus on the promotion. By promoting itself with a new approach, Netflix can gain new customers and continue building relationships with the previous ones. Distribution: Solution 2 and 5 (above) focus on the distribution. Netflix must make sure its available to everyone and that it is a high demand.

Using the solutions suggested will expand the customer base and improve distribution, allowing Netflix more control than other companies. Netflix has the capability to be a great dependable DVD rental and online video streaming service. A few slight changes and improvements made will ensure the business will stay striving for years to come. Netflix must settle on a fixed rate to offer customers. As a completely customer reliable business, it is necessary to involve them in every way possible. As a company, it should and will be Netflix’s goal to show the customers what they want to see.

By opening this two-way road, company workers and everyday customers will be able to discuss and potentially vote for what shows and movies they would like to see more of. Another thing to take into account are the opportunities for advertisements. The more advertisements Netflix can show throughout a day without interruption will improve the variety of TV shows and movies that they can air due to a budget increase. Netflix needs to become dedicated to its customers in order for it to be successful. Following these suggested solutions may help increase overall yearly sales and customer satisfaction.