Final Netflix Case Study
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Transcript of Final Netflix Case Study
NETFLIX“The Blue Disruptor”
Jason NorenLloyd Ricks
Adam Uchimoto
Pete HaneyLindsey Cassidy
Elisaveta Kristo
SGM 5401:Competitive
Strategy
Summer II2016
The Timeline
1985 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072009/2010
BB Founde
d
Netflix Founde
d
Intro unlimited
subscription
IPO, $4.8B Valuation
Cinematch algorithm adopted
DVD in 13% US
households, up 5% from ‘99
Neg. revenue-sharing agree w/
most major studios
Simplified cancelling process
IPO
Superbowl Ad
campaign, posted $1.6B
loss
Redbox Launches
kiosk
DVD in 37% US
households
Named Netflix a threat
Post first profits, $6.5M
Offered Netflix for
$50M, declined Launched BB
Online service
Launch “No Late Fee” campaign, forgoing $600M
revenue
Post $1B in revenue /
6.3M subscribers
BB Online, 2.2M
subscribers
VOD market attracting
competitors
Enters VOD market w/ $50M cash
Rolls out kiosk
system
Bankrupt, $24M
valuation
Core Competencies“Global leader as a Internet TV network offering commercial-free, unlimited
viewing entertainment on any networked device”
High Quality, Original & Exclusive Content
Personalized UX via Proprietary Recommendation System
Customer Focused Always be prepared to fill the gap Keep on learning
•Keeping personnel focused on one thing•Available cash for partnerships, etcResources•Looking ahead on product development•Hiring the right individualsProcesses•Listening to customers and reacting•Very competitive on cost structureValues
Role of InnovationNetflix the Disruptor
Utilized DVDs over Video Cassettes Mail order vs Brick and Mortar 3-tier Unlimited Subscription Service
No late fees Proprietary algorithm - product differentiation
that increased company value while slashing prices
Distribution Centers expansion, 90% of subscribers within single business day shipping
Entry into VOD market with well established infrastructure and pricing structure
Revenue-sharing agreements
Blockbuster the Sustainer Revenue peaked in 2004; 70% of rentals were
new releases & $600M of revenue in late fees Offered Netflix in 2000 but declined Finally reacted to Netflix in 2004 with the
launch of Blockbuster Online Attempted doing both online and in-store and
was unsuccessful Finally eliminated late fees in 2005 The demise in 2010; Bankrupt despite having
higher revenue than Netflix…why?...no core resources, processes and value to compete!!
Netflix is “Master” Disruptor
The Winning Strategy It’s about “VALUE
INNOVATION” and not technological innovation
Value innovation places equal emphasis on value and innovation
Focus on driving costs down while driving customer value up
New Value Curve
Blue Ocean Strategy
Strategy Canvas: DVD-By-Mail
Crea
te
redu
ce
Elim
inat
eRaise
Strategy Canvas: Video-On-Demand
Crea
te
redu
ce
Elim
inat
e
Raise
The Blue Disruptor Results
BB Express launched
Netflix IPO & changing the playing field
Challenge/Recommendations
How to approach and deal with the online viewing offerings (VOD) and remain one step ahead of the competitors?
Solution #1: Licensing partnerships with cable providers Offer its proprietary recommendation system seeking to enhance their VOD offering.
Familiar deal with that was accomplished with US Postal Service Solution #2: Integrate streaming online video feature into their core offering.
Continue to offer services at the same monthly fixed prices; however, offer premium viewing options with different subscription plans
Solution #3: Building a stand-alone online video business
Current Status and Future of Netflix
2008 – 2015: Developed many partnerships, expanded platform availability and launched to international markets
Present Day: 81 million members across 190 countries enjoying over 125 million hours of entertainment
Creation of Original Content utilizing Algorithm & Data Analytics – i.e. House of Cards