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Changing Rules of the Game

APO Rituraj Sen 190103115

Kumar Sambhav Jagnani 190103073

Sheetal Kumari Prasad 190101136
Charanjeet Singh Ahluwalia 190103045
Dipayan Das 190101045
Abhishek Chhikara 190101010
Evolution of Netflix

Entry into Subscription

Online DVD fee model • Cinematch
Rental Business • Red Envelope
• Netflix Friends

• Online Streaming
• DVD + Stream
• Unlimited streaming
& DVD rentals

Range of Subscription Plan choices-

• 2 rentals per month
• 4 simultaneous rentals
• Unlimited monthly rentals
Cinematch - Recommendation Engine
Netflix Friends – Communities of Movie Watchers
Evolution of Netflix

Project Griffin and • Quickster; Netfix

Roku -Set-top box to • Price Hike • Big 5 Contracts
stream directly to TV • Netflix Kids

• Increase in expense
on Original Content
(50 million $ on HOC)
• Contract with
(300 hours)
• Exclusive agreement
with Disney
(First-run rights)
Contracts with Big Five Disney Contract

Vast Library of Unoriginal Content First-run rights

Expensive Originals DreamWorks

50 million $ on HOC 300 hours of Programming

Point of Differences with

Netflix came into DVD rental business, when Blockbuster was a

Market Leader with a market share of 24%

Business Model changed to Subscription fee model - Consumers

can rent videos on monthly basis
A big chunk of Blockbuster revenue is from late fees; Netflix did
way with due dates and late fees with subscription fee model
Creation of Larger Queue of movies to be rented; no need to
visit websites repeatedly
Centralized Shipping Centres- Wider range of titles; plus cost
Innovations viz. Cinematics, Netflix Friends
Point of Differences with
Point of Differences with
Initial Business model of Amazon: -
• Amazon Prime Instant Video to “Prime” Members
• Partnership with Roku
• Released own electronic tablet of “Kindle Fire”
• Streaming website “Amazon Instant Video Store”
• Amazon picked on contracts with production
houses, which Netflix failed

CPV of Netflix, given it an upper-hand over Amazon: -

• Vast library of TV shows; including shows no longer on air
• Netflix’s children’s (Kid) TV show library much stronger
• Exclusive contract with Disney- First-run rights
• Netflix focussed heavily on its original contents; Expenses
on hiring writers (DreamWorks) and producing expensive
shows gave them additional edge
Open Innovation @ Netflix

• Netflix Prize: Open competition for the best algorithm to predict

user ratings for films. The grand prize of $1 million and was won by
BellKor's Pragmatic Chaos team
• They achieved a 10.05% improvement over Cinematch
Main goal of Netflix personalized recommendation system has been
to get the right titles in front each of our members at the right time

Research applications in Netflix includes mainly:

• personalization algorithms
• content valuation
• streaming optimization
Burning Questions for .

• Should it continue to narrow its unoriginal content offerings?

• Should it continue to develop original content?

• Should it focus on TV shows or movies or both?

• Should it continue to release full seasons at once?

• Should it continue to have a subscription revenue model?

• Should it fear any of its competitors more than others?

Content: Original Vs Unoriginal
 Invest heavily on original content, focussing both on
worldwide production as well as adding local favour, attracting
the huge potential markets of China and India

 Big five production houses and other players such as HBO, are
creating superior contents from time to time. Netflix’s main
motive is to provide its viewer with world-beating content,
which it should continue, by bringing best contents from big
production houses, which further enhance viewership
Content: TV Shows vs Movies
 Given the fact, that the TV series content of Netflix is vast and
superior, it can shift its focus on unoriginal content of movies,
such as bringing alive masterpieces of 40s to 80s.

 Slow progress should be made at original movie content, given

there is greater demand for a particular content, as other
competitors have less focus on original movie content. It
provides a significant POD

 Budget of TV shows for a season is almost 4-5 times less than

that of a movie
Hence, Netflix should continue its thrive at TV shows.
Content: TV Shows
 Binge-watching is major trend among the viewers of Netflix.
The trend is promoted and marketed heavily by Netflix. And it
should continue it. Other competitors, like Amazon are also
following the same trend

Revenue Model:
 It should bring diverse varieties of price and usage range in
subscription model, targeting low income groups as well as

 Premium User model and Free content model can be used to

attract vast South-east Asian market

 Annual Subscription model

Competitor: Major
 Nearest competitor of Netflix (75 million subscriber)

 Additional perks for Prime Users: Advantage in E-commerce

product delivery time, discounts at Whole foods super market,
free ebooks in Kindle

 Amazon Prime is much more straightforward in pricing : Annual

Prime subscription fee

 Pricing of Amazon Prime is less (half) than that of Netflix

 Diversification in free Music Streaming Service: Amazon Prime