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Background
History
Expansion
Diversification
Starting with DVD rentals in the era of VHS cassettes, the company
was slow to grow as compared to its closest competitors which dealt
exclusively in VHS rentals.
During the development phase, Netflix became the largest rental
service provider for DVDs in the US.
From the year 2007 onwards, the DVD rentals started reducing
gradually in volume, as the company moved towards internetdependent business model.
Also in the year 2001, the company started acquiring original
content for its streaming service and began streaming this content
exclusively. It currently has original production of 15 series.
Research Synopsis
We plan to find out the potential user subscription base for Netflix in
India. This shall be based upon various parameters such as
o Internet penetration and adoption in India (This will also deal
with the impact of Geography on ROCE)
o Indian exposure to foreign soap operas / series
o General interest in Mumbai towards Netflix services
We also plan to delve into the potential future development
strategies by Netflix - Native language support and content
development
Further, we also plan to do a competition analysis including threats
from peer-to-peer sharing services.
Design
o We shall be surveying Mumbai based potential customers for
Netflix to judge their reaction to the introduction of Netflix and
the pricing
o We are also planning an exploratory research on the potential
growth and penetration in India
Output
o Report on the existing business model and its applicability to
India
o Analytical Report of Indian response to Netflix
Conclusion / Implications
o On completion, we will have a fair idea about the kind of
response to the service and also to the pricing
o We can also judge the kind of growth Netflix is expecting in
the country
Introduction
Netflix is a company that sits in an ever-changing ecosystem
populated by old and new economy players. On one side, you
have movie and TV studios that produce feature-length
movies and serialized TV shows that are, in many ways,
identical to the movies and TV shows that were produced
when the medium was invented. On the other side, you have
a rapidly-evolving set of computer-enabled devices and data
transmission systems that allow consumers to access the
studios media content in virtually any location with a power
source and a fast Wifi connection. As a distributor, Netflix has
been forced to evolve with these changes, and changes in
content consumption methods have had a major impact on
the home entertainment ecosystem and the profitability and
power of the players involved.
Evolution of Netflix
Evolution of Netflix can be studied in 3 sections. The first
section investigates the circumstances and decisions that
helped Netflix launch successfully in 1998.
The second
section looks at Netflixs approach to and experience in the
internet video streaming business.
These sections were
selected because they offer rich case studies on entering and
managing an evolving ecosystem. The final section considers
the future of the Company and the steps that they can take to
increase value capture in the future.
Section I: Building the DVD-By-Mail Business
Netflixs corporate creation myth starts with, allegedly, a story
about CEO Reed Hastings paying a $40 late fee to a Santa
Cruz video store after renting popular movie Apollo 13. The
real story is much simpler: Hastings co-founder Marc
Randolph looked at the migration of commerce from offline to
online and felt like there was a way to make a business
renting movies through the web. Randolph, who worked with
Hastings at software maker Pure Atria, was fascinated by datadriven marketing like direct mail and saw the internet as
conduit to get more marketing data faster. When Randolph
tells the creation story, he argues that the real Eureka
moment was when he and Hastings realized that they could
mail CDs through the US Postal Service without damaging the
disks. This paved the way for the DVD rental-by-mail business
that put Netflix on the map. Randolph began serious work on
Netflix in the summer of 1997 after Pure Atria was sold. At the
time, the video rental market was dominated by Blockbuster
Strengths
Netflix benefits from a strong and familiar brand, to the extent
that some consumers in markets where Netflix was
unavailable used VPNs to access the service illegally these
subscribers can be directly converted into legitimate
customers.
English-language content is understood in many parts of the
world (and will particularly help Indian expansion), and
Hollywood content will attract younger demographics, such as
those aged 1834, to the service.
Netflix has invested significantly in original content, as well as
worldwide output deals with some studios, which will enable it
to ensure a base level of attractive content selection in new
markets.
Weaknesses
Netflix will not have original content localised to many of its
new markets, and its services will compare unfavourably to
local solutions as a result. Language issues may limit appeal
to the mass market.
Netflix is dependent on high-speed broadband availability
(mobile or fixed), as well as the affordability and reliability of
such services.
Netflix's target audience is relatively limited their subscriber
base primarily includes consumers attuned to international
content, with discretionary spend for OTT video.
Opportunities