Netflix Opportunity

to Change the World

Some Background For

Candidates

1

Netflix Snapshot

• Netflix has nearly 38 million members in

40 countries enjoying more than one

billion hours of TV shows and movies per

month, including original series

• Domestic profits fueling global expansion

• Improving choosing, content & streaming

to win more share of member viewing

• Streaming is the future of television

2

Successful Expansion

• Netflix expanded from DVD to become

leader in streaming TV shows and movies

• It’s so hard that most companies fail: • AOL shrank with dialup access

• Yahoo didn’t drive search or social

• Kodak and Blockbuster went bankrupt

• But we did it!

– even if it wasn’t as pretty as we wanted…

3

Next Five Years

1. Huge improvements in choosing, content,

and streaming

2. Global expansion market by market

3. Produce great exclusive original series

4

Stepping Back 70 Years…

5

First Era of Television:

Linear Broadcast Networks

6

Few choices

to watch at any

given time

ABC, CBS, NBC, …

Second Era of Television:

Linear Cable Networks

7

~200 choices at

any given time

ESPN, HBO,

Discovery, TNT,

AMC, etc.

DVR adds some on-demand

on top of linear networks

Third Era of Television:

Internet Networks

8

Millions of Choices

Pure On-demand

Apps Keep Improving

All Screens

Internet Video Networks

9

Billions of people getting

high-speed internet

10

TV becoming app-centric,

like tablet, phone, and laptop

11

Built into TV

12

Smart TV Apps

Tiny Affordable Box

or

Game Console

Netflix Is:

Wide-ranging selection of TV shows and movies

Pure on-demand choosing and viewing with the

highest video quality possible

Personalized, social, intuitive, evolving UI on all

internet screens

Inexpensive, $8/month, unlimited viewing

No commercials, no commitments, no contracts

13

Netflix is Not:

• Not: Pay-per-view new movies

– like Apple, Amazon, Google, Microsoft, Sony,

Walmart, Best Buy, …

• Not: Ad-supported free content

– like YouTube, Crackle, Hulu

• Not: Sports, contestant, news, porn, music

video, instructional, or user-gen video

• Not: All movies and TV shows in one place

14

USA Market Size for Netflix

• Linear HBO is about 30m USA subs

• But Netflix has broader appeal:

– Only $8/month and unbundled

– More content including kids, anime, family, and

thousands of shows and movies

– Pure on-demand

– On tablets, laptops, phones in addition to TV’s

– Enjoyed through personalized social UI

• Netflix market size: 60-90m USA members

15

Global Market Size

is Large and Growing

600m broadband households

1b Facebook users

6b mobile phones

16

Big Market Means

Netflix Has

Many Threats

17

TV Everywhere

• Great internet apps (HBOgo, etc) on all

screens for all existing networks, at no

extra consumer cost, could mean:

– less watching of Netflix

– less desire by networks to license prior-

season to Netflix, because they can self-

monetize

18

Other Subscription

Internet Networks • Hulu+, also at $8, but with commercials

• Amazon Prime Instant Video

• Lovefilm Instant in UK

• Large new entrants willing to invest heavily

in content, marketing and technology

19

ISP Market Power Issues

• ISPs can give their own video data special

treatment, violating net neutrality principles

• ISPs can refuse us, or try to charge us for,

sufficient entry ports to their network for the video

data their subscribers are requesting from us

• ISPs can charge consumers per-gigabyte, even

though off-peak usage has zero marginal cost

20

Piracy Growth

• Piratebay.se

• Cuevana.tv

• Letmewatchthis

• Hotfile

• And 1000 more…

21

Ad-supported & PPV Video

• Free ad-supported TV shows and movies

are popular

• Pay-per-view TV episodes ($2) and

movies ($4) are widespread

22

The best way to predict the

future is to invent it

-Alan Kay

23

24

Netflix is

innovating at web speed

to create amazing

internet-video experiences

on all internet-connected screens

Fantastic Customer Sat

By Democratizing Innovation

• Our many internal innovators constantly

try to improve our service, for a random

100,000 members

• Then we compare member satisfaction

• Only changes that actually improve

satisfaction get published to all members

• A/B testing enables many people at Netflix

to have ideas and learn what pleases most

25

Our Simple Strategy

• Improve our service faster than competitors

– Better choosing: improve and simplify

personalized social UI to generate more

viewing and satisfaction from existing content

– Better content: license more content, and

expand into original series

– Better streaming: ever better audio video

quality and less buffering

26

Netflix Virtuous Cycles

Help Us Stay Ahead

More

Content

More Members

& Revenue

More

Word of

Mouth

More R&D for Better Service

Innovators Needed

to Drive Progress at

World’s First and Leading

Internet TV Network

29 Updated: Nov 2012