Netflix strategy final project

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Nettling has three business units: U. S. DVD rentals, U. S. Streaming, and International Streaming. In 2013 U. S. DVD Subscriptions constitute 16% of the price estimate for Nineteen’s stock, U. S. Streaming Subscriptions constitute 57% of the price estimate for Nineteen’s stock, and International Streaming Subscriptions constitute 21% of the price estimate for Nineteen’s stock. The majority of Nineteen’s value is currently on its U. S. Streaming. According to Nettle’s Annual 2013 Report, the DVD subscribers are expected to decline significantly in the U.

S. While streaming subscribers are expected to grow. We named the company Nettling, not DVD’s by Mail because we knew that eventually we would deliver movies directly over the Internet,” -Hastings. The home video market is growing in the U. S. And streaming is the best way to tap it given the proliferation of multiple internet-enabled devices. Secondly, the international streaming business is likely to remain a relatively lower value contributor for several years because Nettling will face high content costs as well as local competition and resistance.

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Moreover, markets such Latin America have lower broadband penetration and per capita income, thereby asking any rapid growth in this region difficult for Nettling. To properly understand the Entitled Business Model we used a Canvas Model (see appendix 1) a) The value proposition or core values include newness of content, convenience/usability, customization/personalization, and pricing. B) The customers that are being targeted are the mass markets, both domestically and internationally. C) The channels that are used to get to the customers are online advertising (social media and web browsing), broad band media such as n. And radio, on the go devices, and mouth to mouth promotion. D) Customer relationships include the acquisition of new bickerers, retention of already existing members, and automated services for the consumers regarding the platform. E) The revenue streams include the monthly no commitment membership fee for online streaming f) The key resources Nettling has are top quality streaming media infrastructure, licenses for content, original own produced content, and servers for storage. G) Their key partners include Internet Providers (PIPS), movie studios, TV’ studios, and hardware manufacturers. ) Their key activities involve providing content, improving the streaming platforms, and marketing. I) Some of the activities presented inside the cost structure include technology and development costs, licensing costs, and marketing expenses. Challenge: Other forms to increase revenue? The margin structure they have chosen is to grow content spending plus marketing slightly more slowly than we grow revenue, and in the USA to target for now about 400 basis points of contribution margin improvement compared to same quarter of the prior year.

A 30% quarterly contribution margin may start being achievable in 2015. The primary forces propelling our growth are their service, content and marketing improvements, and the improvement of Internet networks and devices. The primary forces impeding growth are market saturation and the broad set of competitors-for-time all improving their offerings. To increase revenue, should they have commercials and go into advertising?

Nineteen’s major sources Of revenues are the subscription fees of $7. 99 per month for an unlimited TV shows and movies streamed over the Internet to their TV’s computers and mobile devices. Currently Nettling does not use price discrimination for its customers. A huge concern that arises is if the customer membership fees will be enough as an income generator, given Nineteen’s high cost structure. The company is not pen to the idea of advertising, instead they plan to increase their fees.

But this can have a negative impact with the customers, if they are not properly addressed and the raise in cost isn’t explained, this could decrease the membership numbers and possibly affect the stock price as well. One of the most important customer channels Nettling has is a mix of marketing and public relations programs, including social media (such as Faceable and Twitter). Ted Sarandon, the company’s content chief pointed out that the whole Nettling experience has become about the ability to just sit and watch, whether it’s one episode or a whole season.

Forcing you to wait through some ads is anathema to that. He added that current Nettling licensing doesn’t allow them to run ads on most of their content and that it would cost more to do 1 . Increase margin by taking into account advertisement income Adds on the website D YES place the ads in a neat and elegant way Carefully select the content of ads Pop-ups and commercials while streaming 0 NO Interruptive pop-ups and commercials are not welcome by subscribers Challenges 1 . Intro operation costs Cost of reproductions low-cost but high-quality TV series and movies, acquire content license in discount Content delivery expenses Other costs such as payment processing fees and customer service call centers[l create online forum for discussion or solution to problems Marketing expense ; cut marketing expense domestically ; Focus on seasonal marketing (seasonality of subscription) General administrative 2. Diversification into video games and original TV series and movies as the margin of existing streaming market is low 3. Eve streaming for sports etc. CLC partner with sports games sponsors 4. Partnership with suppliers: providing customer information to suppliers and increase the bargaining power of the company info sharing and info development Should they increase their in-house production and original contents? The ability to provide members with content they can watch instantly depends on studios, content providers and other rights holders licensing rights to distribute such content and certain related elements.

The license periods and the terms and conditions of such licenses vary. If the studios, content providers and other rights holders are not or are no longer willing or able to license content upon terms acceptable to Nettling, their ability to stream content to members will be adversely affected and/or costs could increase. In he coming years, it’s going to get more expensive to obtain great content, either by licensing it from Hold)n. Voodoo studios or paying to produce it directly.

Nettling has to bid against Amazon and Hull for online streaming rights and, as old deals expire, it looks like the quality of Nettling offerings is declining. In the Annual Statement, Nettling recognizes that they face risks, such as unforeseen costs and potential liability in connection with content they produce, license, and/or distribute through our service. By producing their own content, Nettling is not bound to seasons or time slots. It can also release n entire season off show all at the same time.

This year, Nettling took out $400 million in new debt to begin expanding in Europe and investing in more original series. Nettling has gotten into the original content business, producing some critically acclaimed shows last year, including “House of Cards” and “Orange is the New Black. ” But those shows cost far more than licensed content -? Nettling paid $1 00 million for 26 episodes of the “House of Cards” political drama (which made streaming-content history by picking up three statues at the 2013 Emmy awards). Content costs can be so high they aerial otherwise reasonable web TV projects.

Around three years ago, Nettling realized it had a problem: was paying large sums to license other people’s content -? TV shows and movies produced by other companies -? in order to then show them to you, the Nettling subscriber, at home. This initially proved successful, but there were two troubling aspects to this model: 1) It left Nettling very vulnerable to competition, since the shows and movies it licensed could, theoretically, be licensed by anyone willing to outbid them, and 2) the most popular TV shows, episodic dramas like “CSS” and sitcoms like “The Big Bang

Theory,” were already being sold for huge deals into syndication at basic cable channels like TABS and ASSAI. That’s why Nettling launched “House of Cards” and “Orange Is the New Black” -? they’re both the type of show that people will watch on-demand when they have a free day, but cannot dip in and out of if they were syndicated in fixed timeless on cable TV. Recommendations When your business is heavily based on your subscribers, you really want, first of all, to establish an acquisition-relation type and then to retain them by making loyal to your service.

Having in mind that the value Nettling delivers is a o-commitment one, they have to make great efforts to always bring exclusive high-quality content, so that the subscribers would become attached to their content. However, by the convenient and easy-to-use online platform they put at their customers disposal, Nettling creates an automated- services type of relation. Hence, the company needs to focus on continuous service improvements that will enhance subscribers’ satisfaction and retention rate. Nettling has to couple its pricing strategy with technology to compete competitors providing different services including VOID and free streaming.

New content can be priced on a different monthly flat fee rate (higher than normal content) and old content can be used as add on with monthly flat fee or monthly subscription with a flat fee for customers who prefer old classics than new releases. Nettling can make multiple interfaces rather than having multiple websites where each user would login into his own login access and go into his particular section for example HOBO GO has multiple interfaces one for TV series one for movies etc. Nineteen’s greatest opportunity lies with the continuation and creation of original in house content.

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