Netflix Five Forces

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Strategic Report for Netflix, Inc.

Hillary Carroll Alex Menenberg Ian Kwok April 20, 2009

Netflix, Inc.

Table of Contents
Executive Summary..........................................................................................................................3 History .............................................................................................................................................5 Business Model .............................................................................................................................6 Competitive Analysis........................................................................................................................7 Overview..........................................................................................................................................7 Porter’s Five Forces......................................................................................................................8 Internal Rivalry..............................................................................................................................8 Entry and Exit ...............................................................................................................................8 SWOT .................................................................................................................................................11 Financial Analysis ...........................................................................................................................14 Overview........................................................................................................................................14 Strategic Recommendations ........................................................................................................20 End Notes .........................................................................................................................................27

April 2009

Page 2

Netflix, Inc.

Executive Summary  
Following a year of continued growth and profitability, CEO Reed Hastings contracted Oasis Consulting to strategically advise Netflix, Inc. Although Netflix’s innovative business model has led to the company’s success, Netflix faces a transitional home entertainment industry, in which volatile consumer preferences and intense competition prove a major threat to Netflix’s long-term viability. Oasis Consulting assigned the project to their Entertainment Division, whose lead consultant, Hillary Carroll, has compiled a strategic report with the assistance of her two colleagues, Alex Menenberg and Ian Kwok. The team researched Netflix’s brief history, business model, industry landscape, competitors, and financials to provide Netflix with a thorough strategic analysis, which includes a competitive analysis, SWOT analysis, financial analysis, and concludes with strategic recommendations for Netflix, Inc. The following briefly introduces the key issues Netflix faces and summarizes Oasis’ findings and strategic recommendations: Netflix, Inc. is the largest online movie rental service provider, with a subscription base of over 10 million and an inventory of 100,000 DVD and Blu ray titles. Along with offering a breadth of titles, Netflix also provides movie ratings, reviews, and a recommendation service customized to each subscriber’s preferences. In addition to its traditional DVD-by-mail service, Netflix has recently expanded to include digital streaming of over 12,000 titles instantly to subscribers’ computers and television sets. Netflix acquires distribution rights for its media content through the outright purchase of video titles and through profit sharing agreements with studios, networks, and distributors. Netflix has also entered into joint ventures with a handful of electronics companies to develop television devices that are compatible with Netflix’s streaming video content. Upon...
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