NetflixBusiness Model1

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AboutNetflix

Netflix was founded in 1997 by software executives Reed Hastings and Marc Randolph to offer online movie rentals mailed to the customers’ doors. Netflix is now the leading internet subscription service for streaming movies and TV shows with over 62 million members in over 50 countries enjoying more than 100 million hours of content per day. In just the past quarter (April 2015), Netflix has seen a 24% sales gain and 4.9 million new subscribers.

“We promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact.”

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Estimated Company Value:$40 BillionRevenue:$5.5 Billion (2014)

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Netflix provides a diverse and customizable library of movies and television shows available for unlimited streaming or mail delivery at low cost and user-convenience.

Value Proposition

Customers and Value Proposition

Netflix customers are avid movie and television watchers that are not very particular in the viewing selection. They value easy and immediate access, as well as the portability and transferability of the product. Consumers are typically younger and tech-saavy. Netflix has an international audience.

Customers

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Channels and Customer Relationships

Channels

Netflix get their customers through • Advertising• Word-of-mouth• Availability through multiple devices

Netflix captures the audience with TV ads about their new plans, accessibility, and variety of content. Word-of-mouth occurs when existing customers spread positive publicity about their satisfaction with the service and the benefits provided by Netflix. Netflix also get its customers by being easily accessible on the internet, most mobile devices, and gaming consoles. Many of these devices come pre-installed with the Netflix app.

Netflix keeps their customers by• Growing their library of content• Producing Exclusive Netflix content• Customization

New TV series and movies will keep the current customers interested and coming back to watch more. Original content such as ‘House of Cards’ and ‘Orange is the New Black’ capture user attention. Netflix’s ability to recommend content to watch based on user interests and preferences is a unique customization feature.

Netflix is able to grow by • Introducing new plans

Netflix has to constantly update their content library with recent or in demand TV shows/movies to gain the attention of more users. To reach different segments, Netflix must offer different types of plans to meet the needs of different people. For example, Netflix will soon announce their Family Plan that allows 4 people to share an account for $12/month. People who already have Netflix are more likely to upgrade their plan.

Customer Relationships

One of the most important points of the value proposition is easy accessibility. Netflix customers want to play and resume their movie or show at any time in any location from any device. Therefore, Netflix is available on a variety of platforms, but the original mail rental service is also still available.

Netflix reaches their audience through Streaming and Mail Delivery. Streaming is available online, on mobile devices, and game consoles such as the Wii, Xbox, and PlayStation.

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Key ActivitiesMail Rental OperationsSince 6 million people are still renting Netflix content by mail, mail order operations is a key activity for Netflix. Netflix must manage an organized system for sending and receiving DVDs.

Customer ServiceNetflix has a tremendous amount of customers that view or order large volumes of content every day, so they must provide assistance to customers when they have questions or complaints. Netflix has created a help website for customers to go to for billing and account questions, login help, troubleshoot services, FAQ, etc.

Content LicensingIn order to keep their current audience and gain more customers, Netflix must constantly seek more content to add to their library. Netflix has to form license agreements with movie and television show producers in order to obtain their media for the Netflix service.

Technical Development & MaintenanceNetflix tries to provide an easy-to-use interface for their consumers to use 24/7, so they are constantly working to improve the Netflix software across all platforms.

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Resources and Partners

In order to provide seamless and top-quality streaming anywhere at anytime, Neflix must partner with internet providers to provide their service, television networks and motion picture studios to increase content, and consumer electronic companies for permission to use their consoles as a platform for their service. For example, Netflix partnered with MGM in 2012 to start streaming their titles in the UK and Ireland.

Partners

Resources

Netflix’s key resources consists of their top-quality streaming media infrastructure which allows users to access content quickly, easily, and without any glitches. Netflix also needs licenses for content in order to legally show all their movies and TV shows. Netflix originals have become a key resource in drawing in new subscribers and keeping current members entertained and hooked on the service.

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Key Partners Key Activites ValueProposition Customer Relations Customer Segments

Key Resources Channels

CostStructure Incomes

Keep

Grow

Get

Netflix’sBusiness Model

We use the Business Model Canvas to represent in one visual shot this company business model.

Internet providers

Television networks

Motion picture studios

Consumer electronic companies

Content LicensingR & DMail Rental OperationsCustomer Service

Top Quality Streaming Media infrastructure

Licenses for Content

Exclusive Original Content

Monthly Subscription Fee (Multiple plans available for Streaming and DVD or Blu-Ray Rental)

Technology & Development CostsLicensesOriginal content production costsMarketing costs

Netflix is an online-based platform which provides a diverse and customizable library of movies and television shows available for unlimited streaming or mail delivery at low cost and user-convenience

Streaming:-Website-Gaming consoles-Phone applicationMail delivery

Mass Market

Fans of blockbuster movies

Avid TV Show watchers

People that prefer convenient delivery

AdvertisemensWord-of-mouthGrowing Library of ContentOffer new plans

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The Role of Innovation

In today’s age, internet streaming is replacing the traditional TV and apps are replacing channels. Netflix is leading the way to internet TV. Netflix not only optimized their mail delivery rental service, but were first movers in the internet rental subscriptions market and has now become the dominant player.

Netflix has been able to capture consumer attention and keep it through their growing library of shows and movies, as well as their production of original content. With so much content at an affordable cost, Netflix is successful and growing.

Future

Customer GrowthNetflix strives to grow 60-90 million members in the domestic market over 5 years (2015-2020) based on upon their past trajectory and continued growth of internet video.

Domestic Margin StructureNetflix will grow content spending and marketing slightly slower than they grower. Over 5 years (2015-2020), they want to move the 30% contribution margin close to 40%.

What makes the difference

Original ContentNetflix will continue to grow their original content offering as they gain scale and confidence. The goal is to premiere a new original show or season every two and a half weeks (20 new shows or seasons per year).

Global ExpansionNetflix wants to expand internationally as fast as possible while staying profitable. Expected completion of global expansion is 2016. They should return o growing global profits in 2017 and beyond.

Profit Model

Network Structure Process Product Performance

Product System

Service Channel Brand Customer Engagement

CONFIGURATION OFFERING EXPERIENCE

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Bibliography

https://pr.netflix.com/WebClient/loginPageSalesNetWorksAction.do?contentGroupId=10477

http://www.slideshare.net/evelyneringia/netflix-markeitn

http://fortune.com/2015/04/15/netflix-earnings-subscribers/

http://ir.netflix.com/long-term-view.cfm

http://www.theguardian.com/media/2014/jul/22/netflix-dvds-mail-subscription

Authors:

Minty Thomas and Neo O Nanna from the University of Texas

Reviews by:

Miquel Angel PérezFerran Sesplugues