edatasource netflix insight may-july 2012

Netflix Insight Report May - July 2012

eDataSource Proprietary & Confidential 2

Contents

Summary ............................................................................................................................................................ 3

Methodology ...................................................................................................................................................... 4

About eDataSource ............................................................................................................................................ 4

Disclaimer ........................................................................................................................................................... 5

Netflix Subscriber Acquisition: One Year Weekly Trend ................................................................................. 6

Netflix Joins and Cancels Performance ............................................................................................................. 7

Netflix Free Trial Subscribers Performance ...................................................................................................... 8

- Free Trial Subscribers Index................................................................................................................... 8

- Percentage of Free Trial Subscribers Converting to Paying Subscribers ............................................... 8

Plan Chosen by New Subscribers ...................................................................................................................... 9

- Type of Plan New Subscribers Choose .................................................................................................. 9

- Monthly Percentage of Type of Plan Chosen by New Subscribers........................................................ 9

Plan Switching by Existing Subscribers ........................................................................................................... 10

- Monthly Plan Switched Index .............................................................................................................. 10

- Type of Plan Existing Subscribers Switched To from May-July ............................................................ 11

- Monthly Percentage of Type of Plan Switched To by Existing Subscribers ........................................ 11

Netflix Top 20 DVD Rentals ................................................................................................................... 12

Netflix Facebook Performance .............................................................................................................. 13

Netflix Twitter Performance ................................................................................................................. 14

Appendix: Netflix Plan Types Defined ...................................................................................................... 15


Summary

Once the up-and-coming contender of the DVD rental business, Netflix has changed the home movie

market forever. Their once ubiquitous red envelopes were a secret weapon in knocking out the reigning

movie rental champion, Blockbuster, and they aggressively pursued flat-rate online streaming for the mass

market. Their early gambles paid off, and in early-2012, the company boasted over 24 million U.S.

subscribers, and their online streaming service represented over 30% of all U.S. Internet downstream

bandwidth traffic during peak periods (October 2011, Sandvine).

Despite their enormous success, Netflix has struggled in the past year.

In July 2011, Netflix announced a price hike and the split of their online streaming and DVD subscription

services. Additionally, they announced they would establish an entirely new brand, Qwikster, to handle the

DVD subscription service. Customers were outraged and took to social media to vocalize their discontent.

Netflix backtracked, but the damage was done. In the quarter following, Netflix lost over 800,000

subscribers, and, even more dramatically, the stock lost 80% of its value from July 2011 to August 2012.

What is happening today?

As the world’s largest paid Internet subscription service, it’s worth following closely.

This eDataSource report focuses on the details and intricacies of the Netflix business. Through an innovative

panel-based process, eDataSource has estimated a wide variety of business indicators, including:

- Number of joins and cancels trended over the past year

- Overall growth by month (index)

- Free trial subscriber acquisition performance and conversion rate to paid

- Type of plan chosen by new subscribers

- Trend of subscribers switching subscription plans

- Top DVD rentals in the past six and three months

- Social media performance of Netflix on Facebook and Twitter

Please note: this report focuses on the U.S. business only.

For more information on eDataSource’s products and services, including

customized eCommerce monitoring reports and data, please contact us at

[email protected], or via phone at 800-761-6580.

Visit our website at www.edatasource.com

mailto:[email protected]


Methodology

eDataSource utilizes its proprietary email analytics capability and a panel of ~800,000 consumers to provide

unique insights into consumer purchasing trends by examining online purchase confirmations delivered by

email.

eDataSource has conducted detailed analyses of the sales and subscription rates at Amazon.com,

Walmart.com, iTunes, Barnes & Noble, Netflix, Staples, Office Depot, Gilt, Ideeli, PayPal, OpenTable and

others using anonymized data from more than half a million online purchase and subscription

confirmations over the past six months.

The following Netflix report is based on the analysis of nearly 8,000 anonymized Netflix Join, Cancellation

and Account Update emails from eDataSource’s proprietary panel during the May through July 2012 time

period.

The primary analyses contained in this report include a whole year weekly trend of Netflix joins and cancels, monthly joins and cancel performance, free trial subscription performance, type of plan chosen by new and existing subscribers, top rented movies, as well as Netflix performance on Facebook and Twitter.

In order to obtain the conversion rate of free trial subscribers to paid subscribers, we monitored over 1,000

free trial subscribers who joined between April through June and tracked their cancellation date through

July.

In order to obtain Netflix’s performance on Facebook and Twitter, we utilized our proprietary tool, EDS

Analyst, to monitor Netflix’s Facebook and Twitter accounts from May through July 2012.

About eDataSource

Founded in 2003, eDataSource (www.edatasource.com) is the worldwide leader in competitive intelligence

for email, social media and ecommerce activity, based on active monitoring of more than 800,000

consumer inboxes and 9,000 brands. The company provides strategic analytics products and services for

online marketers, publishers and their service providers.

For more information on eDataSource’s products and services, including customized eCommerce

monitoring reports and data, please contact us at [email protected], or via phone at 800-761-6580.

mailto:[email protected]


Disclaimer

All material contained in this report is property of eDataSource, Inc. (“eDataSource”) unless otherwise

indicated. This report is proprietary, confidential and provided for the exclusive use of the recipient. No

portion may be directly or indirectly copied, published, reproduced, modified, displayed, sold, transmitted,

or redistributed in any medium without the express prior written consent of eDataSource. Any

unauthorized use of the content of this report is strictly prohibited.

This report is intended for informational purposes only. eDataSource provides the information and data

presented herein on an “as is,” “as available” basis, without representations or warranties of any kind

whatsoever, expressed or implied. All statements and figures in this report are eDataSource estimates. The

information in this report may be incomplete and may not contain all material information relating to the

subject matter of the report. eDataSource does not provide any information or make any representation or

warranty on behalf of the companies that are the subject of this report and this report has not been

authorized or approved by said companies.

This report reflects the results of our research as of the date of this report. Our research results are subject

to change at any time as new or additional data and information is received and analyzed. eDataSource

undertakes no duty to update this report, or to provide supplemental information to any client receiving

this report, absent a specific arrangement to the contrary between eDataSource and individual clients,

which arrangement may specify different frequency and depth of analysis and update commitments based

on levels of service and fees selected by clients.

This report is provided solely to clients of eDataSource, each of whom assume all risk and liability with

regard to any use or application of the data included herein. In no event shall eDataSource or its officers,

directors, affiliates, shareholders or employees be liable for any damages that are directly or indirectly

related to this report.


Netflix Subscriber Acquisition (Weekly Trend)

Key Announcements

July 12, 2011 – “Netflix Raises Price of DVD and Online Movies Package by 60%” (The New York Times).

Sep 18, 2011 – “Netflix Apologizes, Renames By-Mail Business 'Qwikster' -- But Keeps Price Hike” (Reuters).

Oct 31, 2011 – “Redbox Price Hike Could Dodge Nexflix Outrage” (TheStreet.com).

Feb 16, 2012 – “Now You Can Sign Up Directly for a DVD Only Plan” (Netflix US & Canada Blog).

July 24, 2012 – Netflix announces “24 million domestic streaming members”

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Joins and Cancels Index

Joins Cancels

* Index Baseline: Average number of cancellations for the entire year.

Price Increase Announcement July 12, 2011

Redbox price increase announced and put into effect Oct 31, 2011

Have an extra DVD on us and Give the Gift to Netflix campaigns Dec 13 & Dec 15 2011

Price increase goes into effect for existing customers. Sept 1 "Apology" and Qwikster announcement broadcast to customers. Sept 18, 2011

Directly Sign up for a DVD only plan Feb, 16 2012

Netflix reaches 24MM domestic streaming members


Netflix Monthly Joins and Cancels Performance

Month Joins Index

% Change from Previous Month

Cancels Index % Change from Previous Month

Net Growth Index

May 1.03 -5.8% 1.02 24.8% 0.07 June 1.16 13.1% 0.96 -6.3% 2.23 July 1.08 -6.9% 1.02 6.4% 0.69

For the entire period, Netflix is adding 2.2% more new subscriptions than cancelations. With both

higher join rates and lower cancelations, June was the strongest acquisition month of the previous

three.

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May June July

Monthly Joins and Cancels Index Joins Cancels

0.07

2.23

0.69

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May June July

Net Growth Index

52.2% 50.2% 54.8% 51.5%

47.8% 49.8% 45.2% 48.5%

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May-July May June July

Percentage of Joins vs. Cancels

% of Joins % of Cancels


Netflix Free Trial Subscribers Performance

Join Month Free Trial Subscriber Index Conversion Rate (%)

April 1.04 89.7%

May 0.97 86.0%

June 1.05 90.4%

July 0.94 -

Over the previous three months, Netflix has maintained the number of free trials in a relatively

tight range of ~+/- 5%, and has maintained a high conversion rate to paying subscribers of

between ~85-90%.

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Free Trial Subscriber Index and Conversion Rate

Conversion Rate Index


Plan Chosen by New Subscribers

Value ($) Plan May June July May-July

$7.99 Unlimited Streaming plan OR 1 DVD out at-a-time (Unlimited) plan

92.6% 94.8% 94.4% 94.0%

$15.98 Unlimited Streaming + 1 DVD out at-a-time (Unlimited) plan

7.4% 5.2% 5.6% 6.0%

New subscribers start out with the basic offered plan--either unlimited streaming or 1 DVD out at-

a-time—94% of the time.

93.96%

6.04%

Percentage of Plan Chosen by New Subscribers in May-July

Unlimited Streaming planOR 1 DVD out at-a-time(Unlimited) plan

Unlimited Streaming + 1DVD out at-a-time(Unlimited) plan

90.0%

92.0%

94.0%

96.0%

98.0%

100.0%

May June July

Unlimited Streaming plan OR 1 DVD out at-a-time (Unlimited) plan

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

May June July

Unlimited Streaming + 1 DVD out at-a-time (Unlimited) plan


Monthly Plan Switched Index

Month Index Growth from Previous Month

May 1.08 9.17%

June 1.00 -6.87%

July 0.92 -8.20%

Over the period, the number of subscribers switching their plan has steadily decreased. This is further

evidence that Netflix is making headway toward a single, simplified service offering of unlimited online

streaming.

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May June July

Plan Switched Index


Type of Plan Switched To by Existing Subscribers

Value ($) Plan May June July May-July

$7.99 Unlimited Streaming plan 47.3% 53.3% 42.9% 47.9%

$15.98 Unlimited Streaming + 1 DVD out at-a-time (Unlimited) plan 13.0% 15.6% 17.0% 15.1%

$7.99 1 DVD out at-a-time (Unlimited) plan 9.9% 9.0% 8.9% 9.3%

$19.98 Unlimited Streaming + 2 DVDs out at-a-time (Unlimited) plan 6.1% 5.7% 8.9% 6.8%

$11.99 2 DVDs out at-a-time (Unlimited) plan 6.1% 4.1% 8.0% 6.0%

$4.99 1 DVD out at-a-time (2 a month) plan 1.5% 1.6% 6.3% 3.0%

- Other Plans 16.0% 10.7% 8.0% 11.8%

When subscribers switch their plans, nearly 48% opt for unlimited streaming without a DVD

component.

47.9%

15.1%

9.3%

6.8%

6.0%

3.0% 11.8%

Percentage of Plan Switched To in May-July

Unlimited Streaming plan

Unlimited Streaming + 1 DVDout at-a-time (Unlimited) plan

1 DVD out at-a-time (Unlimited)plan

Unlimited Streaming + 2 DVDsout at-a-time (Unlimited) plan

2 DVDs out at-a-time(Unlimited) plan

1 DVD out at-a-time (2 a month)plan

Other Plans


Top 20 DVD Rentals

Feb-July 2012 May-July 2012

Rank Movie Rank Movie

1 Mission: Impossible - Ghost Protocol 1 Mission: Impossible - Ghost Protocol

2 Contagion 2 We Bought a Zoo

3 Tower Heist 3 Tower Heist

4 Real Steel 4 Immortals

5 Hugo 5 The Iron Lady

6 Bridesmaids 6 Abduction

7 We Bought a Zoo 7 Red Tails

8 Immortals 8 Contraband

9 Abduction 9 J. Edgar

10 The Iron Lady 10 Real Steel

11 Drive 11 The Whistleblower

12 Cowboys & Aliens 12 Sherlock Holmes

13 Water for Elephants 13 Hugo

14 50/50 14 Tinker, Tailor, Soldier, Spy

15 The Help 15 Jack and Jill

16 Sherlock Holmes 16 Gone

17 The Ides of March 17 In Time

18 The Descendants 18 Extremely Loud and Incredibly Close

19 Midnight in Paris 19 My Week with Marilyn

20 Friends with Benefits 20 The Smurfs

DVD customers gravitated toward big-budget Hollywood action and adventure titles over the past

six months with Mission Impossible – Ghost Protocol, Tower Heist, Real Steel, Immortals and

Abduction all residing in the top ten for the past three and six months.


Netflix Performance on Facebook

Month FB Post Index

Average Like per Post

Average Comment per Post

May 0.86 1458.20 226.70

June 1.16 1047.26 120.85

July 0.99 1827.91 176.48

Netflix maintains an active Facebook presence. In June, though the number of posts was the

highest, the average likes and comments per post fell to their lowest point over the three month

period.

1458.20

1047.26

1827.91

226.70 120.85

176.48

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Netflix Facebook Performance

Average Like per Post Average Comment per Post FB Post Index


Netflix Performance on Twitter

Month Tweet Index

Monthly Growth of Twitter Followers (%)

May 0.90 3.39%

June 0.90 4.87%

July 1.20 7.32%

On Twitter, Netflix showed an accelerated growth of followers, with sequential gains of 3.4% to

4.9% to 7.3% on a monthly basis.

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Netflix Twitter Follower Trend

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Netflix Twitter Performance

Monthly Growth of Twitter Followers (%) Tweet Index


Appendix

Netflix Plans Defined

Monthly Subscription Fee ($) Plan

$29.98 Unlimited Streaming + 4 DVDs out at-a-time (Unlimited) plan

$15.99 3 DVDs out at-a-time (Unlimited) plan


$17.98 Unlimited Streaming + 1 DVD out at-a-time (Unlimited) (including $2.00 for Blu-ray) plan


$22.98 Unlimited Streaming + 2 DVDs out at-a-time (Unlimited) (including $3.00 for Blu-ray) plan





$5.99 1 DVD out at-a-time (2 a month) (including $1.00 for Blu-ray) plan


$52.99 8 DVDs out at-a-time (Unlimited) (including $9.00 for Blu-ray) plan

edatasource netflix insight may-july 2012

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