Netflix Lauren J. Uphouse November 5, 2012

CLICK Analysis Online movie rentals; receive & return thru mail; no late fees. Movies, flexibility, convenience, technology. Lives of consumers keep getting busier. Provides a convenient way for them to rent movies without having to worry about traveling to a store, due dates, or late fees. Busy consumers who rent movies. Obtained a Masters of Computer Science from Stanford University. Founded a software company, “Pure Software”, and grew it to be among the 50 largest software companies in the world.

SWOT Analysis Strengths Brand recognition Producing original TV series ex: House of Cards, with prominent actor Kevin Spacey Extensive customer data on file DVD rental cost so low that competitors don’t bother trying to emulate that part of their business. App is on all platforms – even the Kindle (device made by competitor Amazon) Partnered with start-up eyeIO as their 1 st customer – using their encoding technology to lower bitrate of their HD video streams, which helps them in the mobile market Weaknesses Older titles Expired contracts with Sony & Stars, resulting in lost videos Lost video provider EPIX to Amazon. Competition has more money Damaged reputation after attempting to increase fees and separate DVD & streaming video memberships. Revenue is still rising but streaming & subscribers are slowing = growth is slowing. Opportunities Collaborate with well-known actors to create more original series Bid for more popular TV titles Target/market to kids & young adults International expansion Partner with companies to develop Netflix programs specific to their platforms that will come pre-installed on all their devices Partner with cable & gaming companies to be an on-demand option for video & games. AppleTV Partnership Threats Competitors offering streaming video and bidding for exclusive rights ex: Amazon, HBO, TV networks Competitor partnerships (ex: Amazon & Epix) Higher licensing costs Biggest competitor, Amazon, now developing original programming Streaming video increasing; DVD rentals decreasing Movie & TV industry less willing to make exclusive deals with online video services. EPIX provides Disney videos to Amazon; Disney recently acquired Lucasfilm (& entire StarWars franchise).

Competitor Analysis

ADVANTAGESDISADVANTAGES  Customers rent DVDs thru mail; Redbox – Must rent from kiosks.  More older titles.  Offers streaming video service.  Offers TV shows  Low monthly subscription costs & no late fees attractive to customers; Redbox – DVD rental fee $1/day.  Website has a more advanced customer rating & recommendation system.  Developing original content.  More partnership opportunities.  Shipping costs for DVD rentals.  Redbox has newer titles.  Redbox offers video game rentals & event ticket printing.  Customers must make a commitment to use service.  Can’t profit from long-term rentals/late fees.  Customers must wait to receive DVDs; Redbox – Can get DVDs same day.  Company as a whole has more competition.

ADVANTAGESDISADVANTAGES  More titles; DVD rental service.  No ads/commercials in video content. Hulu-Plus – Most videos contain ads.  Content available on all devices. Hulu currently doesn’t have rights to make all of their video content available on all devices.  Customer recommendation system.  Developing original content.  Available on more devices. Hulu.com – PC environment only. Hulu-Plus – Accessible on fewer devices.  Available in more countries.  Charges fee for all content. Hulu.com offers limited content for free & offers more content thru Hulu-Plus for $7.99/month.  Older titles. Hulu offers current TV shows – new episodes available day after airing.  No social media integration.

ADVANTAGESDISADVANTAGES  More titles; DVD rental service.  Monthly subscription that can be canceled/frozen any time. Amazon Prime - $79/year, paid in full.  Higher quality video playback.  Better customer recommendation system, user interface & organization.  Growth of international expansion.  Focused solely on video services = benefit to customers.  Partnership with Apple; soon possibly cable companies as well.  AmazonPrime membership includes free 2-day shipping & instant access to e-books (on Kindle).  Revenue only from video services. Amazon – Business model generates revenue many ways.  Losing exclusive partnerships with online video distributors, some directly to Amazon Prime (ex: EPIX).  Amazon offers additional online videos, including new movies & TV episodes, that can be purchased individually or as a package and are accessed from the same location as Amazon Prime videos.

KP Key Partners  Apple  RADius-TWC  Twentieth Century Fox  Hasbro Studios  Warner Bros  Stakeholders, such as Carl Icahn, & their affiliates KA Key Activities  DVD Rent-by-Mail Service  Online Video Streaming Service VP Value Proposition  DVD Rent-by-Mail Service – Cost so low not worth competing  Extensive customer database, 10+ years deep.  Original content  Partnership with Apple; soon possibly cable companies  Accessible on greater number of devices  Advanced technology for better quality video playback CR Customer Relationships  Free trials/sign-up deals  Convenient sign-up thru many devices  Pre-installation on devices  Aggressively working to improve content & playback quality  Recommendation System CS Customer Segments  AppleTV owners  Owners of Windows 8 devices  Adults, families, kids  Benefits from long tail: Classic TV/Movies, Documentaries, Adult Animation, Stand-Up Comedy, Romantic Comedies, Action/Sci-Fi KR Key Resources  Experience of Management & Board of Directors  Stockholders  Extensive customer database CH Channels  Online, print, & direct mail marketing  Pre-installation on devices  Gift subscriptions  Offers to friends/family of members C$ Cost Structure R$ Revenue Streams DVD Rent-by-Mail Plans (per month) 1 DVD: $7.99 or $9.99 with Blu-Ray 2 DVDs: $11.99 or $14.99 with Blue Ray 3 DVDs: $15.99 or $19.99 with Blue Ray 1 DVD (2 max per month): $4.99 or $5.99 with Blue Ray Video Streaming Plans (per month)  Unlimited: $7.99  Limited: $4.99 FIXED PRICING STRATEGY; FREE TRIAL OFFERS Business Model Canvas

Alternative Business Models Bundle services with pay-tv packages. Less money from more customers = Revenue boost Less competition = Lower licensing fees Customers sign up for service directly on AppleTV & pay through iTunes. Reach more customers = Revenue boost Partner with gaming companies to offer on- demand video game services. New customer segment = Revenue boost Develop “HBO quality” original content. Lure & retain customers with content that’s untouchable by competitors = Revenue boost

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