Saving Netflix: Planning to Turn Around a Steep Decline Joel Samen – IS 714: Mastering IT Strategies – Fall, 2011

Netflix Took a Hit… On July 12, 2011, Netflix announced a price increase for its users. Not only were prices jumping 60% for all services, but streaming and DVD-by-mail were separated. Stock prices dropped 35% over the next 42 days.

…And Then it Fell Over a Cliff On September 18, 2011, Netflix announced that it would be spinning off its streaming video service into another company: Qwikster Even after a retraction, Netflix’s stock has dropped more than 60% since

Failures Adding Up With other strong, diversified competition in the streaming video market, like Amazon and Apple, Netflix can’t afford missteps. Otherwise, five years from now it might not be around…

How Netflix Can Save Itself Subscription or À La Carte? Subscription À La Carte Subscription and À La Carte New Releases Streaming? NoOnly TVYes Right now, Netflix’s streaming services only cover non-recent releases under a subscription service. By expanding into recent releases and À la carte streaming, it can access new markets.

The Five Year Plan Sign exclusive contracts with content providers, including access to streaming new releases. Create À la carte streaming options with different prices for new releases and older options. Continue to allow access to Netflix streaming on a variety of platforms, also expanding into new areas to reach the consumer on all screens.

The End Result Exclusive content for subscribers that Apple, Amazon, and Hulu won’t have. Access to new releases via Netflix pay- per-view for an additional charge over monthly subscription fees and capture of non-subscribers as À la carte customers Ubiquity of Netflix streaming across all entertainment platforms, giving users access to their content anywhere, anytime they have internet connectivity.

What it Will Take to Get There People: Netflix will need technology visionaries with foresight to see trends and get Netflix in on the ground floor with emerging hardware. In order to be successful moving forward, Netflix streaming must be easily accessible on smartphones, tablets, web enabled televisions, video game consoles, web-connected television hardware (ex. Boxee) and whatever else comes next.

What it Will Take to Get There Technology: In order to capture this new market of people who want to either purchase video rentals individually (rather than via subscription) or spend on top of their monthly subscriptions to view new releases, different payment and charging options need to be implemented. Subscription Members Subscription Content Extra Pay Content À La Carte Customers Pay Per View $ $ $

What it Will Take to Get There Governance: Developing exclusive contracts with content providers will be tough. Why would content providers want to sell exclusive rights to content rather than selling content to everyone? Because Netflix is willing to pay a premium to have exclusive access to content. Why will Netflix pay more than market value in order to get exclusive rights to content? Because then customers who want to view that content will need to come to Netflix. What will stop Amazon and Apple from also arranging exclusive contracts for content, outbidding Netflix with their resources? Nothing, which is why Netflix needs to get there first. Once content licensing contracts are up, Netflix needs to initiate its strategy.

Content is King “Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.” - Bill Gates, “Content is King” Each of the content streaming sites has the processes in place and ability to get content to its consumer. The real questions are where will that content come from and how will it be delivered. By signing exclusive contracts for valuable content—as it already has done for the eagerly anticipated new season of Arrested Development in 2013—Netflix has necessitated that people use their site to watch the content they want to see. Continuing to build these relationships and cutting the competition’s access to content will strengthen Netflix’s position. Additionally, by assuring that any member with internet connectivity can access Netflix on any device, the company will remain dominant.