Netflix Case

NETFLIX: THE MAKING OF AN ECOMMERCE GIANT AND THE UNCERTAIN FUTURE OF ATOMS TO BITS

Table of contents

1. How does the Netflix business model work? Describe any change or evolution of the business model you may have observed. …………………………………………………………….3

2. Which firms are or have been Netflix’s most significant competitors? How do their financial results or performance of their effortscompare to Netflix’s efforts? ……………………………….4

3. What are Netflix’s sources of competitive advantage? …………………………………………...8

4. Scale advantages are advantages related to size. In what ways Netflix compares with its current competitors with respect to scale? Provide a comprehensive comparison……………….9

5. What “class” of software does Netflix use to make movie recommendations? Think about Chapter2: Which key competitive resource does this software “create”? What kinds of benefits does this provide to the firm? Could a new competitor match Netflix’s recommendation software? If it did, would this create a threat to Netflix? Why or why not? ………………………11

6. What is the Netflix churn rate and what are the reasons behind this rate?.............................13

7. Netflix’s VP ofOperations Andy Rendich says, “Anyone can replicate the Netflix operations if they wish. It’s not going to be easy. It’s going to take a lot of time and a lot of money.” Discuss this barrier to entry with reference to Porter’s five forces…………………………………………..14

8. What do you believe are the most significant long-term threats to Netflix? How is Netflix trying to address these threats? What obstacles doesthe firm face in dealing with these threats?.....15

9. Why would a manufacturer of DVD players be motivated to offer the Netflix in its products?17

10. Describe various revenue models available as video content shifts from atoms to bits. What are the advantages and disadvantages to each—for consumers, for studios, for middlemen like television networks, cable companies and internet basedcontent distributors such as Netflix? ………………………………………………………………………………………………………..…..18

11. Investigate the firm Red Box. Compare Red Box business model with the same of Netflix. Do you think they are a legitimate threat to Netflix? Why or why not?........................................19

12. Do you think Netflix has been innovative enough to face the challenges of digital distribution? Explainyour answer………………………………………………………………….….20

13. Video streaming technology is enabling a rapid shift in consumer behavior towards “on demand” viewing of content. Describe and compare business models of key competitors serving on-demand content to directly TV via internet or otherwise. Where does Netflix stand today in this area and who do you think will be the future winner in this race? Explainyour answer. …………………………………………………………………………………….……………21

14. What is video streaming technology? What are the technological components and infrastructure required for a company like Netflix to mass distribute content via video streaming to TV? Do you think this technological capability may be a barrier to entry for new entrants in this area? Explain your answer…………………………………………………….………………….24

15.Study how Netflix operates the new “Streaming Only” monthly membership subscription business. Draw a complete Data Model (ER Diagram) for the membership management system of the monthly subscription business of Netflix (Streaming business only)………………………26

Bibliography…………………………………………………..…………………………………………28

Case Analysis Assignment #2:

Netflix: The Making of an Ecommerce Giant and theUncertain Future of Atoms to Bits

1. How does the Netflix business model work? Describe any change or evolution of the business model you may have observed.

Netflix is the world's largest online movie rental service, providing more than seven million subscribers access to more than 90,000 DVD titles plus a growing library of more than 5,000 choices that can be watched instantly on their PCs....