Marketing Executive Dream Reality Team
Netflix is currently the market leader in online home video entertainment. Their primary competitor, Blockbuster Inc., is not only being strangled by long term debt during an economic downturn, but their operating expenses are skyrocketing due to increased operating expenses. This makes Netflix the dominant player in the online home video entertainment market and gives them an opportunity to make huge strides in the coming years. While their DVD rental by mail service is effective, it is easily duplicated and lacks instant gratification. Their internet streaming business model, however, is a powerful “value added” service and should be fully developed as soon as possible. Currently there are __________ households (defined as unique address of which about 11.1 million are customers) in the United States and it is our opinion that every one of those location is a potential customer. The new reality marketing team suggests that Netflix expand their online streaming service as quickly as possible and center their marketing efforts on this business model. They are in a position to develop and define the standards for online video streaming by collaboration with hardware manufacturers, such as Microsoft and Sony with the XBox and PS3 gaming consoles, and DVD manufactures that are now adding the streaming ability as part of the design. Over the last three years they have experienced a compounded revenue growth rate of about 17%, a gross profit increase of almost 11% and a rise in NMC (Gross Profit minus operating expenses) by an amazing 36.5%. By developing the online streaming business model we believe they will be able to add enough additional subscribers to continue this growth rate and realize an NMC of $273 million by year end 2011 (see Exhibit 2). NMC per subscriber is expected to increase to $17 due to economies of scales, which translates into... [continues]
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