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Netflix Technological Case Study
Proposed strategies for netflix
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Netflix Case Study The video rental industry began with brick and mortar store that rented VSH tape. Enhanced internet commerce and the advent of the DVD provided a opportunity for a new avenue for securing movie rentals. In 1998 Netflix headquartered in Los Gatos California began operations as a regional online movie rental company. While the firm demonstrated that a market for online rentals existed, it was not financially successfully. Netflix lost over $11 million in 1998 and as a result significantly changed the business model in 2000. The new strategy included focusing on becoming a nationally based subscription model and focusing on enhancing the subscribers experience on their website. The change in strategic focus has allowed Netflix to grow into the largest online entertainment subscriptions service in the United States with over 6.3 million subscribers (Netflix). Netflix first grabbed the attention of many customers when, unlike the local video rental store, they eliminated due dates and late fees charged by traditional video rental stores. The Netflix model allows customers to pay a monthly subscription fee for which they receive as many movies as they want in a month. The subscribers order DVD’s via the firms website and delivered through the United States Postal Service. Subscribers keep the movie as long as they want and when finished return it to Netflix in a postage paid envelop. Netflix’s derives a much of their competitive advantage from their ability to offer each subscriber convenience and a personalized experience. The firm’s CineMatch software gathers data from subscribers’ online profiles, movie rental history and a subscriber’s movie ratings to develop a person... ... middle of paper ... ...iding convenience, selection, personalization and a low cost method for product delivery. Netflix posted gross profits for the fiscal year ending December 2006 of 996.7 million and increase of 314.5 million over the prior year. Net income increased by 16.8% during the same period. On February 25, 2007 the firm, hit a milestone when they delivered the 1 billionth DVD. Sources Datamonitor.com “Netflix” 2007, Jan EBSCOhost. . Laudon, Kenneth C. Traver, Carol. E-commerce: Business. Technology. Society 3th ed. Pearson Prentice Hall. Upper Saddle NJ, 2007. Netflix.com 2007. 18 April 2007 . Netherby, Jennifer. “Pressure on Netflix” Videobusiness.com. 29, January 2007. United States Securities and Exchange Commission. (2006). Form 10-K: Net flixr, Inc. Annual Report. Washington, D.C. Wikipedia.com “Netflix”. 18 April 2007.
Netflix utilizes a number of different advertising methods. Netflix created a coupon in the form of an enlarged movie ticket offering a free month of service. These “movie tickets” are given out at cash registers at all Best Buy stores and are included in packing boxes of most of the major DVD player manufacturers (Sony, Philips, Toshiba, Panasonic, RCA, etc.). Best Buy’s website also has a link directly to Netflix which is under the “DVD rental service” drop down menu. Each DVD mailer sleeve from Netflix includes a tear off “tell a friend” certificate with a promotion code that provides the bearer with a free month of service. At one time, Netflix sold banner ads on their websites. However, they abandoned this strategy after three months because the revenue stream was not sufficient to cover the cost of maintaining the ads. Netflix also has an aggressive affiliate program. The affiliate program encourages other websites to provide links to Netflix and offers a referral fee for linked new members at a range of $9-$12 per member. This fee is dependent upon the number of referrals provided in a month. If a site is successful at delivering greater than 200 new customers in a month, the referral fee is negotiable, up to $30 per new customer. Netflix is a straightforward company. It rents DVDs via the Internet and sends them to you through the U.S. Postal Service. For a flat fee of $19.95 a month, you can build a list of movies at the Netflix.com Web site that you want sent to your home. The company sends you the first three along with prepaid return envelopes. When you're ready to send them back, you put them in the return envelopes and drop them into any mailbox. The minute the return is processed, the next one, two, or three DVDs are on their way. Depending on where you live, the turnaround time is two to five days.
A major strength that Netflix has is their ability to push for such innovation. They have reached new lengths since their start in 1997. From in-mail DVDs, to streaming media on smartphones and tablets, it’s unbelievable to witness this in the making. I think the world is a little shocked on the technological advances of Netflix. What they have done so far is spectacular and it is all because of innovation. New ideas and new strategies developed over the last fifteen years has lead Netflix to where they currently stand today. They currently have a subscriber base of over 700, 000, offering thousands of titles on many different devices. This was made possible because of their ability to innovate and strive for new technological advances. I consider Netflix a very brilliant company. Their strengths are very clear, but this isn’t to say that they have no weaknesses. Netflix has far more competitors now, than they had 15 years ago. I would say that their biggest weakness is not offering enough newer content. Some of their competitors such as Hulu, offer a ridiculous amount of new content. Netflix seems to have a large amount of titles, but majority of these titles are older titles. They need to offer newer titles more often than less. With the company advancing and technology on the rise, the younger population aren’t into the older titles. The younger population now take up a good chunk of the customer base. Netflix must
Netflix is one of the most successful companies in the 21st Century, they have changed the entertainment business is such a profound way that it can never be the same again. It has many utopian effect and interpersonal Netflix brings so much value to the user that it has been set apart in a new category. It delivers to the user any movie or TV show they could ever want at the click of a button, they give more option for entertainment then every before offered at a price that cannot be beaten. Netflix’s extremely inexpensive costs along with their plethora of option blows away all competition and without a doubt makes it the best interpersonal option for all consumers. Netflix is an
Netflix Inc. incorporated in 1997 and made its first public offering in 2002. Netflix is an online movie rental service which provides its 3,000,000 subscribers access to over 40,000 DVD titles. Although Netflix stocks nearly every title available on DVD, it does not stock titles containing adult content. The Netflix program allows subscribers to rent as many DVD’s as they want, and keep them for as long as they want. Three DVD’s can be out at a time, as soon as one is returned the next DVD on the subscriber generated movie list is shipped out. The DVD’s are delivered for free by the United States Postal Service from regional distribution centers located throughout the United States. Netflix can have most titles delivered to 90% of its subscribers within one business day of the shipping date.
Trends and technology advancements over the years have impacted the way people perceive, access, and consume what is made available to them. While the glorious days of the movie industry are over, there seem to be resurgence in movie consumption led by technologies that have enabled people to “bring the movies home”. Today, the home entertainment industry remains a trademark in the United States where it generated “18.3 billion dollars in consumer spending on Blue-Rays, DVDs and electronic copies of films and TV shows” in 2013, as to make it the number one country in the world in terms of media and entertainment consumption (Lang, 2014). Redbox Automated Retail, LLC built its success by bringing entertainment and convenience together. The company based in Oakbrook Terrace, Illinois, was able to penetrate major retail channels and to link the rental industry to high-traffic stores such as McDonald, Wal-Mart and 7-Eleven. Since 2004, Redbox has imposed itself as a leading player of the entertainment industry.
Netflix Revenue strategy is to charge recurring monthly subscriptions and since Netflix offers great products/services that customers want, people are willing to pay a little extra each month. In addition, Netflix was able to make partnership with companies like Apple to access Apple’s large customer base.
When using Netflix, the client has the option to watch movies online at their convenience, an option that Redbox does not offer. Receiving movies in the mail is optional while using Netflix services. Unlike Redbox, Netflix offers more than just movies, they also offer television shows and Netflix Original series. Redbox is strictly movies and games for now. Netflix even allows their clients to access their movies or television show on mobile devices, using the app. This service is more appealing to the younger generation and less mobile movie watchers. The Netflix user can watch their favorite movie or television show while traveling, something Redbox users cannot do. The Netflix user can even access the Netflix app through their home entertainment system. If the Netflix user wants to have family movie night at the spare of the moment it would be more convenient rather than going to a local Redbox location to rent a movie. Netflix offers a wide variety of new and old hits. If a person has limited mobility Netflix will be the best choice for them. If a person is bad about not returning movies on time, or simply just wants to watch the movie more than once, Netflix will be a life
A critical SWOT analysis of Netflix’s social media techniques clearly shows they are ahead of the game and not backing down from rising competitors like YouTube which is gaining viewers by increasing the amount of online content.
Netflix has been able to ask better questions and make informed business decisions based upon superior data, data visualization tools, as well as a business culture that entrenches both. Through business analytics, Netflix delivers personalized services to each of its customers by aggregating data about customers, trends, viewing habits, and genres. Therefore, data analytics has helped Netflix to answer crucial questions that most companies still grapple with. The company has utilized analytics to gather and use intelligent information in its business thus making it more
The movie rental industry is now moving from just DVD’s and getting into the streaming and movies on demand system which makes them to be marketable and have a firm corporate survival with profit maximization. By saying this, I believe this industry is a good industry to enter into using the right strategies to gain competitive advantage. With the use of business intelligence via effective CRM, the needs and preference of customers can be identified and capitalized on. This would enable movie rental industry to move from into a competitive advantage position by making available what customers are actually calling for and not what they think is good for the customers. An example would be the streaming of movies directly into customer homes which enables their service to be customer driven.
Companies like Amazon and Netflix are very effective in predicting what customers normally buy and watch. Knowing what your customers are or are not buying will allow you to position products that they are statistically likely to purchase based on recent transactions and activity. This is a powerful tool for Netflix because it keeps users engaged and actively using the service but also allows them to tailor their investments in content towards items that are more likely to keep users active on their site.
When Blockbuster finally realized they needed to modernize operations and change with an ever developing industry they were unable to because of their enormous debt and negative cash flow. Senior management failed to see how advances in technology would lead to changes in how consumers rent and purchase movies. During Blockbuster’s prime they squandered their earnings on bonuses and lavish meetings. Their arrogance led them to feel invincible and that no one could ever catch them. Blockbuster management, in the end, failed to see the need to evolve to meet their customer’s needs while other companies rushed to fill this void.
Netflix, Inc., is an Internet television network, engaged in the internet delivery of television shows and movies on various Internet-connected screens. There are three segments: Domestic streaming, International streaming, and Domestic DVD. It offers members the ability to receive TV shows and movies streaming content, including series, documentaries, and feature films. These features can be watched through TVs, video players, mobile devices, etc. The company also provides DVDs-by-mail membership services.
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
Netflix and movie theaters each have their advantages, but when it comes to the four factors discussed Netflix is the clear winner. Netflix has a larger variety for a better price, while being convenient for the viewer. While