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Analysis of NetflixAnalysis of Netflixpresented by Vince Wangpresented by Vince Wang

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AgendaAgenda

IntroductionIntroduction What is Netflix? What is Netflix? How Netflix Works?How Netflix Works? How Much Does Netflix Cost?How Much Does Netflix Cost? Comparing Netflix to its CompetitorsComparing Netflix to its Competitors

Role of IT at NetflixRole of IT at Netflix Porter’s Competitive Forces ModelPorter’s Competitive Forces Model

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Agenda (continue)Agenda (continue) Advantage of InternetAdvantage of Internet

CRM (Customer Relations Management) Strategy CRM (Customer Relations Management) Strategy in Netflix in Netflix

SWOT AnalysisSWOT Analysis Netflix StrengthsNetflix Strengths Netflix WeaknessNetflix Weakness Netflix OpportunitiesNetflix Opportunities Netflix ThreatsNetflix Threats

ConclusionConclusion Financial StatusFinancial Status The Future of NetflixThe Future of Netflix

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What is Netflix?What is Netflix?

Founded in 1997 at Scotts Valley, CAFounded in 1997 at Scotts Valley, CA Founder of Netflix: CEO Reed Hastings pioneered Founder of Netflix: CEO Reed Hastings pioneered

the subscription movies-by-mail model from his the subscription movies-by-mail model from his own personal frustrationsown personal frustrations

Largest online DVD movie rental serviceLargest online DVD movie rental service 3 million members 3 million members 40,000 movie titles40,000 movie titles CEO predicts that Netflix will boast five million CEO predicts that Netflix will boast five million

subscribers and one billion in annual revenue by subscribers and one billion in annual revenue by 20072007

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How Netflix Works?How Netflix Works?•Receive selection of DVD’s from customers•Process DVD’s at one of 30 shipping centers•Send DVD’s straight to customers within one-day•Return DVD’s in one of Pre-Paid Mailer

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How Much Does Netflix Cost?How Much Does Netflix Cost?

PlanPlan Rental/Rental/MonthMonth

Price / Price / MonthMonth

Free Free Trial Trial

LengthLength3 DVDs3 DVDs at-a-time at-a-time

Unlimited Unlimited $17.99$17.99Per monthPer month

2 Week 2 Week Free TrialFree Trial

2 DVDs2 DVDs at-a-time at-a-time Unlimited Unlimited

$14.99 $14.99 Per monthPer month

2 Week 2 Week Free TrialFree Trial

2 DVDs2 DVDs at-a-time at-a-time

Limit 4 Limit 4 per per

monthmonth

$11.99$11.99Per monthPer month

2 Week 2 Week Free TrialFree Trial

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Comparing Netflix to its Comparing Netflix to its CompetitorsCompetitors

NetflixNetflix Wal-MartWal-Mart BlockbusteBlockbusterr

Movie Movie Selection Selection ●●●●●●●●

● ● ●●●●●●●●○ ○

●●●●●●●●● ●

Subscription Subscription Plan Plan Selection Selection

●●●●●●●●○ ○

●●●●●●●●○ ○

●●●○●●●○○○

Movie Search Movie Search Interface Interface ●●●●●●●●

● ● ●●●●●●●●○ ○

●●●○●●●○○ ○

Movie Movie AvailabilityAvailability ●●●●●●●●

● ● ●●●●●●●●○ ○

●●●○●●●○○ ○

Speed Of Speed Of DeliveryDelivery ●●●●●●●●

● ● ●●●○●●●○○ ○

●●●○●●●○○ ○

Statistics from: http://www.online-dvd-rental-reviews.com

●●●●● ●●●●● bestbest

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Porter’s Competitive Forces Porter’s Competitive Forces ModelModel

Low Cost Low Cost DifferentiationDifferentiation InnovationInnovationDevelop Develop

AlliancesAlliancesPromote GrowthPromote Growth

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Speedy Delivery Speedy Delivery

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Netflix CRM StrategiesNetflix CRM StrategiesCustomers can access services Customers can access services

through the web sitethrough the web siteCommunication and feedbacks from Communication and feedbacks from

Netflix’s customersNetflix’s customersCustomer service center is open Customer service center is open

seven days a weekseven days a weekPhone supportPhone supportNetflix Affiliates ProgramNetflix Affiliates Program

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Subscription style e-commerce Subscription style e-commerce serviceservice

Unlimited access to world’s largest Unlimited access to world’s largest DVD libraryDVD library

No lineups and no late feesNo lineups and no late feesExcellent customer serviceExcellent customer serviceEasy website navigationEasy website navigationPreview movie before rentingPreview movie before renting

Netflix StrengthsNetflix Strengths

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Netflix WeaknessNetflix Weakness

Customers slowly adapt to change Customers slowly adapt to change from movies-by-mail modelfrom movies-by-mail model

High quality in customer service is High quality in customer service is not easily achievablenot easily achievable

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Netflix OpportunitiesNetflix Opportunities

Cross promotion programCross promotion programPromotional relationship with Promotional relationship with

Amazon.comAmazon.comAllow customers to download moviesAllow customers to download moviesExtend into video games rental Extend into video games rental

businessbusiness

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Netflix ThreatsNetflix ThreatsStrong competitive market with other Strong competitive market with other

movie rental stores such as movie rental stores such as Blockbuster, Wal-Mart and Comcast Blockbuster, Wal-Mart and Comcast Pay-per-viewPay-per-view

Older or newer media formats are not Older or newer media formats are not supported currentlysupported currently

Lower price and promotions of Lower price and promotions of competitorscompetitors

Cost of postal serviceCost of postal service

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Financial StatusFinancial Status

Revenue up 86% from $272.2 million Revenue up 86% from $272.2 million in 2003 to $506.2 million in 2004in 2003 to $506.2 million in 2004

Subscribers rose from 1,487,000 in Subscribers rose from 1,487,000 in 2003 to 2,610,000 in 20042003 to 2,610,000 in 2004

After Blockbuster and Wal-Mart went After Blockbuster and Wal-Mart went into the market in 2004, growth rate into the market in 2004, growth rate dropped from 77% to 2%dropped from 77% to 2%

Failure to expand to UK with a net-Failure to expand to UK with a net-loss of $3 millionloss of $3 million

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ConclusionConclusion

Netflix is at its maturityNetflix is at its maturityExpanding and growing slower Expanding and growing slower

than beforethan beforeLoss in revenues from Loss in revenues from

competitioncompetitionThe diminishing future of The diminishing future of

NetflixNetflix