Netflix Business Opportunity

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Netflix Opportunity to Change the World Some Background For Candidates 1

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Transcript of Netflix Business Opportunity

Page 1: Netflix Business Opportunity

Netflix Opportunity

to Change the World

Some Background For

Candidates

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Page 2: Netflix Business Opportunity

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

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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…

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Next Five Years

1. Huge improvements in choosing, content,

and streaming

2. Global expansion market by market

3. Produce great exclusive original series

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Page 5: Netflix Business Opportunity

Stepping Back 70 Years…

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First Era of Television:

Linear Broadcast Networks

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Few choices

to watch at any

given time

ABC, CBS, NBC, …

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Second Era of Television:

Linear Cable Networks

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~200 choices at

any given time

ESPN, HBO,

Discovery, TNT,

AMC, etc.

DVR adds some on-demand

on top of linear networks

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Third Era of Television:

Internet Networks

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Millions of Choices

Pure On-demand

Apps Keep Improving

All Screens

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Internet Video Networks

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Billions of people getting

high-speed internet

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TV becoming app-centric,

like tablet, phone, and laptop

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Built into TV

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Smart TV Apps

Tiny Affordable Box

or

Game Console

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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

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Page 14: Netflix Business Opportunity

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

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Page 15: Netflix Business Opportunity

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

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Global Market Size

is Large and Growing

600m broadband households

1b Facebook users

6b mobile phones

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Big Market Means

Netflix Has

Many Threats

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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

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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

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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

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Piracy Growth

• Piratebay.se

• Cuevana.tv

• Letmewatchthis

• Hotfile

• And 1000 more…

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Ad-supported & PPV Video

• Free ad-supported TV shows and movies

are popular

• Pay-per-view TV episodes ($2) and

movies ($4) are widespread

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Page 23: Netflix Business Opportunity

The best way to predict the

future is to invent it

-Alan Kay

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Netflix is

innovating at web speed

to create amazing

internet-video experiences

on all internet-connected screens

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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

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Page 26: Netflix Business Opportunity

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

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Netflix Virtuous Cycles

Help Us Stay Ahead

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More

Content

More Members

& Revenue

More

Word of

Mouth

More R&D for Better Service

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Innovators Needed

to Drive Progress at

World’s First and Leading

Internet TV Network

29 Updated: Nov 2012