NETFLIX CONSULTING PROJECTThe Battle to Control Entertainment in the Living Room

Kris Chamrernlaksa, Tysen Cole, Eric Le Duc, Teo Tertel

Agenda

• Introduction• Problem Definition• Industry Analysis• Competitive Analysis• Consumer Analysis• Recommendations

Introduction

• Launched in 1998 by CEO Reed Hastings• Originally very similar to brick and mortar• Patented its envelope delivery system and

business model• Launched ‘Watch Instantly’ in 2007• Today: More than 16 million subscribers

Problem Definition

• Who is Netflix’s biggest competition?• How should Netflix respond to competitors?• What do customers like/dislike about Netflix?• How can Netflix convert its DVD-by-mail

customers to streaming users?• What should Netflix’s future strategy be?

Industry Analysis

• Drivers– Distribution Channels– Platforms– The Internet– Consumer Behavior

Industry Analysis

• Trends– Automation– Physical Stores– Complementing Hardware & Software– Instant– No late charges

Industry Analysis

• Porter’s Five Forces– Supplier Power: High– Buyer Power: Strong– Threat of New Entrants: Low– Threat of Substitutes: High– Competitive Rivalry: Intense

– Complementors: Favorable

Competitive Analysis

Competitive AnalysisCURRENT COMPETITORS

Pricing Plan Archive(TV shows/Movies)

Interesting Fact

$7.99/Month, Stream$9.99/Month, Mail

100,000 20 % of bandwidth during peak hours

$7.99/Month TV Show Episodes Full Series Runs but still watching ads?

$.99 - $1.99/TV show$4.99-$9.99/Movie

75,000 Disc+ On Demand digital copy

$4.99 ($1+ HD)/ 2-day Rentals

100,000 1st TV provider with mobile app manager

$1.99 - $3.99/Rent$7.99 - $15.99/Buy

95,000 Viewable on 100 different devices

$3.99 - $4.99/Rent$7.99 - $17.99/Buy

25,000 Comcast cable box subscription= Free?

$2.99 - $3.99/Rent$9.99 - $19.99/Buy

10,000 Download content using BestBuy.com

$4.99 - $5.99/Rental,Subscription plans

400 new releases 4,000 TV shows and movies free

Competitive Analysis

FUTURE COMPETITORS

Pricing Plan Archive Interesting Fact

Free 400 Full-length movies

2 billion people watching videos each day

Rentals:$.99/TV Show $3.99-$4.99/Movie

Extensive collection Access to Netflix, iTunes, and YouTube

Free (commission on ad sales)

Collaborating with Studios/TV networks

Netflix available on Google TV, Android Remote Control

Subscription TV shows (new/old) and movies

Bundled with Amazon Prime

$3.95/Monthly unlimited streaming

200 new releases 1 billion DVDs rented

Consumer Analysis

• To learn about Netflix consumers– Usage and perceptions of ‘Watch Instantly’– Detractors/Enticers of ‘Watch Instantly’

• Questionnaire in– Supplemented with personal interview data

• Survey link distributed in team networks– Contacts, Facebook, Class forum– Netflix Community forum, Netflix Topix forum

Results

• Balanced Sample, 51 responses– 43.5% Male, 56.5% Female– 61.7% of ages 26-35– 82% from CA, 80.9% have at least a Bachelors Degree– 91.5% have adequate internet connections

• Key Findings– 82% have used ‘Watch Instantly’– ‘Good Quality’ ratings, avg 4.17 of 5– Attracted to convenience, Detracted by lack of content– Average user streams 12 times per month– Average users rents 5 DVDs per month– Average users rents less than 1 Blu-Ray per month– 29% are willing to pay $10 premium for earlier releases

Categories of Adopters

Conclusions

• Most subscribers have used ‘Watch Instantly,’ and they use it a lot

• Nearly all subscribers have a capable device and internet connection

• Subscribers like the convenience and quality of ‘Watch instantly’

• Subscribers want fresh content, and nearly 30% are willing to pay extra for it

Kano Map

Recommendations

1. Premium Pricing for New and Early Releases• Content is a “must have” factor• 30% of polled subscribers are willing to pay more• Survey current customers

2. New Content• Current season television programming• Leverage existing relationships• Video games

Recommendations

3. Cross-Promotions and Referrals• Airlines and airports• Streaming-capable devices• Scholarships to film schools and contests• Customer referral program

4. Converting DVD Users to Streaming• Only 5.28% of existing subscribers are unaware of

‘Watch Instantly;’ Laggards• Grow overall user base

THANK YOU!

Any questions?