Netflix case study

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26 April 2016

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Netflix offers online video streaming and DVD rental services for a flat fee to all subscribers. After Reed Hastings, the CEO of Netflix had announced the company’s new strategy of separating its online service and DVD rental services into two accounts for its subscribers, the company’s stock fell to $63 per share from $300 per share and lost 805,000 subscribers in three month. Although facing so many challenges, Reed Hastings choose to continue his new strategies, but with a sincerely apologize for the change and a detailed explanation of why they made this decision and what’s in it for current subscribers. Stock price of Netflix close on yesterday was 312.40.

Problems and challenges Although it seems that Netflix has recovered from the separation strategy, but there still are some problems and challenges are waiting for the company. First of all, Netflix online streaming branch is facing fierce competition from companies like Amazon instant video, YouTube, iTunes store, and Hulu. Second, On-demand TV offering are now hot area, many big-pay TV operator such as Verizon and Comcast Corp are trying to bring on-demand TV to cable users which will offer fresher content than online streaming companies like Netflix. Third of all, The DVD rental branch called Qwikster are now competing with companies like Amazon and Redbox DVD rental. From what we can see in the future, DVD service may finally run out of business and how to minimize the damage to Netflix is a big problem waiting for a solution.

Netflix is offering a flat fee policy, which is cheaper than Amazon and iTunes users and is easier to retain current users. A very distinctive strength Netflix have is that Netflix is also a producer. In this year’s Emmy Awards, Netflix Inc’s groundbreaking political thriller House of Cards
took home an award for directing. As its name shows in Emmy, Netflix may win not only an award, but many potential users. Many people may position Netflix as a company provides high quality shows than other video distributors.

Although the stock price has gone up this year and everyone now thinks Reed Hastings is the one sees the future, the remaining problem is how to survive with a $7.99 monthly flat fee for subscribers and at the same time spending more than $5 billion for the next five years to purchase TV shows and Movie License. Customers always wants more and pay less. Huge amount of spending force Netflix to attract new users in a rapid speed, but attract new users itself will be another big spending. Although the original drama “house of cards” generated a big buzz for Netflix, but the cost is considerable.

New technologies bring opportunities to online streaming video companies. Netflix has mobile app for both Android and ios system and it works well. People want to access to on-demand videos more convenient by using mobile phone and tablets. The trend of globalization gives Netflix the opportunity to grow itself. The fourth quarter of 2012, Netflix gained 3 million new global subscribers.

Competition from Amazon, iTunes, Hulu, Google TV, and cable networks may pose threat to the company. BRAD BEALE, Director of digital video content acquisition of Amazon is known for its ability of picking up successful shows and get the license earlier than other companies. Hulu also spend a lot on bringing new contents in. Although Netflix is cheaper, Amazon offers free instant vedio to prime membership and two-day free shipping for its customers. Also, Amazon, Apple and Google now all offer their own devices for video streaming, such as Apple TV, Kindle Fire. Questions

Q.1. A strong consumer backlash emerged in response to major changes in Netflix’s business model. What are some of the arguments in favor of Hasting’ decision to split the company? What decisions and options are available to Hastings? Were they good decisions? 2- 3 paragraphs Many believe DVD rental business is fading because of new technologies. People no longer want to wait for the DVD to arrive. Instead they want on-demand video services. Slip the company bring price lower for stream only customers and it is fair for them to pay for cheaper price.

Put in account information is easier and benefit is longer. Hastings can choose to change the company back to the old model by listening to customers and close the DVD service a couple years later when the DVD rental industry lost all the business. I think its good decisions because the financial information shows that Reed Hastings made the good decision and wins the game. The revenue grow almost half and subscribers grow even more this year. Works Cited

Laporte, N. (2013, July 1). A TALE OF TWO NETFLIX. Fast Comapny , 177, pp. 31-32. Mint. (2013, September 23). ‘Breaking Bad,’ ‘Modern Family’ win top Emmy Awards. (H. M. Ltd., Producer) Retrieved Septemner 29, 2013, from Mint: Peterson, T. (2013, September 23). 2013 MEDIA MAVENS: BRAD BEALE. Advertising Age , 84 (33), p. 1. Ramachadran, S. (2013, September 20). Cable Fights to Feed ‘Binge’ TV Viewers; Comcast, Verizon FiOS Vie With Netflix, Amazon for Rights to Show Complete Series. (Dow Jones & Company Inc) Retrieved September 30, 2013, from Wall Street Journal:

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