Netflix Case Study

Topics: Streaming media, Multimedia, Business model Pages: 6 (2447 words) Published: November 5, 2013
In a move that almost destroyed the company Netflix suffered a blow when in September of 2011 they tried to divide their business into two divisions. They created one division for DVD’s, Qwikster, and another for streaming videos. Along with this split in the company there would also be an increase in monthly fees. Once the plan was announced Netflix lost over 805,000 subscribers and the stock dropped by more than 50%. Hastings, the founder and chief executive officer of Netflix, believed that DVD rentals will begin to decline and the wave of the future is streaming videos. It made perfect sense to him to divide the business and slowly move towards streaming rather than DVD rentals. With the loss in revenue, customer loyalty, and subscriptions Netflix had to take a look at how to fix the mess and keep customers satisfied. In an article by Larry Dignan from zdnet Netflix stated “they value their customers and didn’t want to lose more subscriptions”. Looking at Hastings newest business model it was decided that the launch of Qwikster was a major wrinkle in the business and now Netflix brand was tarnished. Something needed to be done to bring back customer loyalty and to address the loss of value in the brand Netflix. In order to make certain that Netflix will achieve strength by preserving customer satisfaction and loyalty, Netflix must review and put into place alternative resolutions. There are a few suggestions to help Netflix overcome this debacle. The first would be to target all age customers through marketing, current trends are geared toward the younger generation, add sports or other news media for streaming, expand internationally and add commercials to the streaming. Netflix is not a small provider of entertainment. As of 2009 they had over 10 million subscribers from all over the world. By 2011 they had grown to 26 million worldwide. Netflix had a great opportunity for many years and was able to surpass all other competitors. Netflix built its reputation on great customer service and a simple business model of flat fee rentals without due dates or late fees. If you don’t return your current rental you will not get the next rental. It is up to the subscriber to get the most for their monthly rental fee. Over the years Netflix has expanded it rental library and has helped to build clientele for independent films. Netflix does not always have the most recent movies “due to other providers’ unwillingness to enter into flat fee contracts”. By 2010 Netflix was now offering streaming video along with DVD rentals. The future trends for movie watching, playing games, and watching TV shows will be through streaming; this will be the future of all types of media circulation. Streaming video was the new concept for viewing movies, playing games, or watching seasons of TV shows. Netflix was able to provide better computer streaming quality picture and sound which made them a great choice for movies and games. Later Netflix worked with PlayStation and Wii to provide streaming to TV’s. Currently, all TV’s offer streaming capabilities as long as the TV has an internet options. With the large customer base that Netflix had they wanted to take advantage of the concept. One challenge for Netflix was competition. DVD rentals had competition with Red Box and Blockbuster, while streaming was in competition with iTunes, Amazon, Vudu and HBO 2 Go. Amazon offered Amazon prime that allowed video streaming, a deal with Epix that increases their library, and two day free shipping on items and a free kindle book a month. HBO 2 Go offers movies even if you do not have a cable subscription, expanding into international the international market, and streams in HD for better quality. VUDU the other competitor is free and only pay for what is watched, offers newer titles the same day they are out, Netflix releases newer movies 28 days later, and allows subscribers to DVD’s and transfer them to...
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