Analysis of Netflix presented by Vince Wang
Agenda Introduction What is Netflix? How Netflix Works? How Much Does Netflix Cost? Comparing Netflix to its Competitors Role of IT at Netflix Porter’s Competitive Forces Model
Agenda (continue) Advantage of Internet CRM (Customer Relations Management) Strategy in Netflix SWOT Analysis Netflix Strengths Netflix Weakness Netflix Opportunities Netflix Threats Conclusion Financial Status The Future of Netflix
What is Netflix? Founded in 1997 at Scotts Valley, CA Founder of Netflix: CEO Reed Hastings pioneered the subscription movies-by-mail model from his own personal frustrations Largest online DVD movie rental service 3 million members 40,000 movie titles CEO predicts that Netflix will boast five million subscribers and one billion in annual revenue by 2007
How Netflix Works? Receive selection of DVD’s from customers Process DVD’s at one of 30 shipping centers Send DVD’s straight to customers within one-day Return DVD’s in one of Pre-Paid Mailer
How Much Does Netflix Cost? Plan Rental/ Month Price / Month Free Trial Length 3 DVDs at-a-time Unlimited $17.99 Per month 2 Week Free Trial 2 DVDs at-a-time $14.99 Limit 4 per month $11.99
Comparing Netflix to its Competitors Wal-Mart Blockbuster Movie Selection ●●●●● ●●●●○ Subscription Plan Selection ●●●○○ Movie Search Interface Movie Availability Speed Of Delivery ●●●●● best Statistics from: http://www.online-dvd-rental-reviews.com
Porter’s Competitive Forces Model Low Cost Differentiation Innovation Develop Alliances Promote Growth
Speedy Delivery
Netflix CRM Strategies Customers can access services through the web site Communication and feedbacks from Netflix’s customers Customer service center is open seven days a week Phone support Netflix Affiliates Program
Netflix Strengths Subscription style e-commerce service Unlimited access to world’s largest DVD library No lineups and no late fees Excellent customer service Easy website navigation Preview movie before renting
Netflix Weakness Customers slowly adapt to change from movies-by-mail model High quality in customer service is not easily achievable
Netflix Opportunities Cross promotion program Promotional relationship with Amazon.com Allow customers to download movies Extend into video games rental business
Netflix Threats Strong competitive market with other movie rental stores such as Blockbuster, Wal-Mart and Comcast Pay-per-view Older or newer media formats are not supported currently Lower price and promotions of competitors Cost of postal service
Financial Status Revenue up 86% from $272.2 million in 2003 to $506.2 million in 2004 Subscribers rose from 1,487,000 in 2003 to 2,610,000 in 2004 After Blockbuster and Wal-Mart went into the market in 2004, growth rate dropped from 77% to 2% Failure to expand to UK with a net-loss of $3 million
Conclusion Netflix is at its maturity Expanding and growing slower than before Loss in revenues from competition The diminishing future of Netflix