1. Richa Arora & Shiya Hsu GMBA 5885 23rd March, 2011

2. Agenda Background Company Intro & Facts Business Model Innovations / Differentiations CineMatch & Benefits Customer Services & Impacts SWOT & Future Threats Solutions Long-Term Strategies

3. US DVD Market (as of Sep. 2010) http://www.reuters.com/article/2010/09/24/us-netflix-shares-idUSTRE68M43T20100924

4. Introduction Reed Hastings (among 100 most influential global citizens) Origin: $40 dollar late fee? Initial flop (Sep. 1999) Success came… Streaming (Jan. 2007)

5. 20 million subscribers as of 2010 (nearly 20% of US household) (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

6. (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

7. Company Facts Biggest source of streaming web traffic in America. Netflix’s customer volume is growing at the rate of 50% each year. Accounts for more than 20% of all Internet download traffic during peak evening hours. Over 17 million subscribers watch Internet-streamed video each month.

8. Facts Contd…. Over 17 million subscribers watch Internet-streamed video each month. Online catalog includes over 20,000 movies. Agreements and partnerships with : Nintendo Wii, Xbox. PS3, blu-ray, ipad and other internet TV companies.

9. Long Tail Business Model

11. Company Innovations Low subscription fee with instant watch and mail-in. No late fee and mailing expenses. One month free trial. No contract , can cancel anytime. Third party applications Business Development Page (http://developer.netflix.com/)

12. Netflix vs. Blockbuster

13. Netflix vs. Redbox

14. CineMatch A proprietary recommendation technology Direct customers to preferred titles with collaborative filtering Customize to individual needs Personalized experience DATA is key

15. Benefits of CineMatch Better cost analysis Better inventory control Advantage on strategic planning & decision-making Lower carrying cost Higher subscription growth with lower SAC and churn rate

17. Customer Service Building Brand Movie recommendation system Saturday processing (added in 2009) 58 distribution centers close to USPS 8 hrs turnaround time Top satisfaction rating DVD delivery in 1-2 business days

18. Impacts of Customer Service

21. “Netflix attempting to second-guess a mysterious, perverse and profoundly human form of behavior: the personal response to a work of art.”(Time Magazine)

23. Strengths Subscription, no late fee Competitive advantage (early mover) Lower fixed cost Largest DVD selection Fast processing and ordering. Online streaming or VOD Serves a large geographic area.

24. Weaknesses Delivery delays Small collection of instant plays Difficult inventory control Expensive cost per DVD Competitors access to same contents

25. Opportunities Canada- New destination More International expansion Branding Movie downloading in future Extending video game rental Netflix set-top box with Blu-ray player

26. Threats Hulu and Youtube, streaming threats Big competitors Increasing Price & spending Technology shift Irreversible subscription service decline around 2014

27. Long-Term Threats Decline of Current Core Business: DVD-By-Mail subscription (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

28. Long-Term Threats Competition on markets for online streaming (Video On Demand) Huge array of competitors AT&T’s new bandwidth cap Piracy Tricky streaming licensing Windowing

30. ISPs can refuse to let in all the data their subscribers are requesting from Netflix by not providing Netflix enough entry ports

32. Solutions?

33. Decline of Current Core Business Reposition as Online Streaming Company “We are a North America Streaming companyThat is becoming a global streaming company That also has a great DVD-by-mail supplemental option in the USA.” www.netflix.com

34. Competition on markets for online streaming (Video On Demand) and PPV Ubiquitous availability through diverse services and platforms From computer-only consumptions to mainstream experience

35. (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

36. Huge array of competitors Find Niche segment Consumer-Paid Subscription Older TV shows and movies

37. (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

38. Obstacles Competitive advantage (from atoms to bits) Content quality & quantity Content delivery – ISPs Going International (Piracy)

39. For Now… Web movie downloads will not become an imminent threat Online streaming gaining attraction (cite: http://www.netflix.com/Jobs Netflix Business Opportunity)

40. Long term strategies Adds ABC shows for net viewing. Agreements with film distributors Focus less on new DVDs and more on older TV shows and movies. Push latest releases for online streaming

41. The future is uncertain, but currently Netflix is making the right moves to be in as many places as it can.

42. Thank you