junior- netflix

Amanda Amezquita
Sarah Boegner
Sean Deer
Kevin Wang

Table of Contents
Executive Summary 3
Internal 4
External 5
Context 6
Competitor Analysis 7
Customer Analysis 8
Objectives 9
Opportunities 10
Proposal 11
Marketing Mix 12
Implementation 13
Profit & Loss Statement 14
Sensitivity Analysis 15, 16
Assumptions 17
Timeline 18
Next Steps 19
Exhibits 20-25
Works Cited 26-29

Executive Summary
Netflix was launched in 1999 as a subscription service in order to
give customers unlimited rentals of TV shows and movies. By 2014, Netflix
has reached over forty countries and has won seven Emmy Awards. We
propose to change Netflix for the better by offering an added downloadable
feature to reach consumers on the go. By adding the extra package to a
customer’s account, they will be able to choose which movies to make
available in their queue for a specified period of time. This change enables
watchers on the go a chance to be entertained without the constant worry of
Wi-Fi or Internet connection. Our main objectives would be to fulfill the need
of these customers, while gaining a profit for Netflix. In the past, we have not
communicated to our customers the reasons why we make changes or raise
prices and we want that to change. Communication is key and our company
needs to strive to become more transparent. Data has proven that our
customers don’t mind paying more if they believe it is valued. We need to
make sure they know the price increase is to help produce a change to Netflix
that is beneficial to their experience. Success will be measured by our
customer satisfaction and thus it will show through our gain in profits.
We believe that this plan will be successful because of the unique
marketing mix we have created which offers the most value to our target
markets. Our strong brand name when combined with an ever-increasing
variety of shows will guarantee increased customer satisfaction for new and
current customers. Furthermore, there is no current competitor that offers an
offline streaming service, which gives us the competitive advantage. This plan
offers a way to remain the leading innovator in the industry, while maintaining
and expanding upon the products our 50 million customers already know and
love.

Internal
Netflix Inc.: a leading subscription service based
over the Internet that streams TV shows and movies. We are
the world’s leading service in our area, able to reach
customers over their Internet via TVs, computers, and mobile
devices in the United States. Our mission is as follows,
“Our core strategy is to grow our streaming subscription business
domestically and globally. We are continuously improving the customer
experience, with a focus on expanding our streaming content, enhancing our
user interface and extending our streaming service to even more Internet-
connected devices, while staying within the parameters of our consolidated
net income and operating segment contribution profit targets" (Netflix, 2014)
As we see it, our objectives are to become the “best
global entertainment distribution service.” We want to be able
to make these services accessible to film makers and help
“creators around the world to find a global audience”
(Netflix, 2014). To strengthen our company we need to know
both our company strengths and company weaknesses. Our
company prospers due to strong customer loyalty in the US,
brand recognition, the size of our company, a big database,
and our easy-to-use interface, search engine, and category
browsing. We should keep in mind that we do not offer all TV
shows and movies, we rely on Internet providers, we do not
have much variety within our categories, and our competitors
have an international advantage. See Exhibit 1 for strengths
and weaknesses.

External
The DVD market has been shrinking, while the digital one has become the trend of the future.
Accordingly, we distribute our resources based on this trend. We currently lead the market as an
Internet television network in North America, but we could still work on a more global stage
(especially compared with HBO, who has more than two and a half times as many subscribers
worldwide than us) (Auletta, 2014). However, we have plans to (or anticipate to) expand our
base in North America, Latin America, and Europe. We are already a starting service in six
Western European countries as of this September (Mccarthy, 2014). Again, we could pay more
attention on the developing world, such as China and Southeast Asia where there has been a huge
number of Internet users with a need for videos and programs.

Context
Political
We face a Local Regulatory Agency in the Global Stage. For instance, CRTC, the
Canadian Radio-television and Telecommunications Commission, would like to force Netflix to obey their
local regulations (Goodyear and Agency, 2014).
Social
The local streaming providers know their customers better and have already built a solid
brand, as well as gathered a large amount of customized data. We could establish a partnership with or
invest in the local providers, in order to see them as partners instead of competition.
Economical
The trend of vertical integration is a matter of discussion. We would want to own the
whole supply chain, and currently we are working on it as we push into original movies. Our first premiere
is set to be in selected theaters by August 2015. This is just the first of several major films backed by
Netflix. All of our original films will premiere on the same day on Netflix and in select IMAX theaters
globally (Mccarthy, 2014). Besides the original series and movies, we could investment more in:
 Internet service providers, a great example is Google’s Google Fiber, which provides 1 gigabit
upload/download net speed which is “100 times faster than today's basic broadband” as well as TV
content, cloud storage, and other optional services.
 Devices such as LeTV, a Chinese online video portal; they have launched their smart TV product line,
which rapidly became the top six best seller in the market, as well as China’s top three video
streaming sites (Custer, 2014).
Furthermore, we need to be cautious with our competitors and potential competitors. Different industries,
like Amazon (with a huge subscriber pool, an efficient system, and their own devices) or YouTube (biggest
subscriber pool, biggest percentage on mobile devices, possibilities of combining with Chromecast or other
Google related services, and a huge data and searching algorithm, such as the one that Google has) have
the potential to take some of our current customers or potential new customers. Moreover, we need to pay
attention to how different countries could affect our brand. For example, LeVision Pictures, the Chinese
film production branch of a video streaming site “LeTV”, stated one month ago that they would establish a
$200 million dollar fund as part of a new Los Angeles-based subsidiary (Horwitz, 2014).
Technological
Currently, the technological trend is big data and we do a good job of it. A good example
is House of Cards, we chose the topic, director, and actors based on the share of what their subscriber
streamed (Carr, 2013). The customized experience is becoming more and more important for a tech
company, “There are 33 million different versions of Netflix,” said Joris Evers, the company’s director of
global corporate communications (Carr, 2013). We need to find a way to be the best Netflix through
constant enforcement of positive customer experiences. Additionally, the extensive increase of net speed,
the expansion of 4G, and wireless network around the world, emphasizes the importance of a share on
mobile devices. According to Akamai’s state of the Internet for Q1 2014, there has been a 24% year-to-
year net speed increase globally. For mobile data, traffic grew around 15% between fourth quarter of 2013
and the first quarter of 2014 (Akamai, 2014). The current market is prime with opportunities for Netflix to
develop and grow.

Competitor Analysis
Because we are in a wide range of the entertainment market, our competitors include cable TV, websites, games,
sporting events, books, and movie theaters. Domestically, we are ahead of competitors when it comes to customers
watching TV content online. See Exhibit 3. However, our biggest competitors are HBO and Showtime. Showtime
and HBO are also premium channels that offer programming to a large number of subscribers. Other major
competitors include YouTube, Hulu, Amazon, Apple, and cable providers.
HBO and Showtime
HBO offers an online and mobile streaming app, HBO Go. HBO has 114 million subscribers, more than two and a half
times the number of subscribers as Netflix worldwide. The HBO Go app gives unlimited access to all of HBO's programming. They have original
programming hits such as "The Sopranos" and "Game of Thrones" (McDuling, 2014). Additionally, HBO recently announced they would begin to
offer an internet-only subscription for all of its programming, which establishes direct competition with Netflix (Shaw, 2014). Overall, HBO has
the advantage of having a wider subscriber base and offers programming through cable TV, something that we have yet to offer. Additionally,
HBO's internet-only subscription is anticipated to be more expensive than Netflix. We are currently ahead of HBO in subscription revenue. See
Exhibit 4. Showtime is another similar competitor; Showtime has its own app, Showtime Anytime, which allows subscribers to watch all of their
programming on mobile devices (Rhodan, 2014).
Apple and Amazon
Additionally, Apple TV is a threat to us with its 17 million subscribers. Apple TV is a streaming video service, growing in
popularity and has the strength of easily expanding its market to include people who already own other Apple devices (Isaac, 2011). Moreover,
Amazon Instant video offers streaming movies and television shows. Their advantage is that they also allow customers to rent or purchase content.
Amazon Instant video has 20 million users and offers some original programming, such as the original series, "Alpha House." It is offered at a
lower, yearly rate, but does not have a large selection of programming, compared to Netflix (McGrath, 2014).
Hulu
Likewise, Hulu+ is another streaming service that offers some original programming; although, Netflix has a greater number
of and more popular original programs. Hulu+ does have the asset of providing access to a lot of TV shows that are not out on DVD or available on
Netflix. Hulu+ carries episodes of most of the major US broadcast networks (5 out of the top 6), which we have been unable to do (McGrath,
2014). Often, episodes will appear on Hulu+ the day after they air (Isaac, 2011). However, one weakness of Hulu+ is that viewers have to watch
commercials in order to access its programming. With 5 million subscribers, Hulu offers some limited streaming services for free, without having
to pay for a subscription to Hulu+. Hulu was created by 21st Century Fox, Walt Disney Company, and NBCUniversal and is subsidized by
commercials on its website (McGrath, 2014).
YouTube
Furthermore, YouTube can also be considered a competitor of Netflix. YouTube has a billion visitors each month watching
a total of about 6 billion hours of video each month. Viewership has expanded greatly due to mobile devices; 40% of YouTube's views are on
mobile devices, compared to just 6% in 2011 (Constine, 2013). YouTube makes money through advertisements attached to its videos, which
makes viewers have to sit through ads. On the other hand, YouTube has a very extensive and massive selection. Its broadcasters upload these
videos, with some videos being far more popular than others (YouTube, 2014).
Cable Providers
Cable providers also compete with us by offering on demand shows and videos for their customers. For example, CBS
recently announced that it would begin offering an online-only subscription to its programming for $5.99 a month. This service could potentially
allow viewers to watch local TV programming online (Shaw, 2014). Knowing our competitors and their advantages pushes us to become better and
motivates us to provide better quality to our customers.

Customer Analysis
Families with Children 18 and Younger
Our customer demographics are an interesting lens to view the company as a whole. The company
has a following of more than 50 million subscribers in over forty countries (Netflix, 2014). These 50 million viewers
can be segmented down into several smaller groups that are more effectively targeted by the programs offered. The
largest and most profitable segment available to us is families with children 18 years old and younger. This segment
is perhaps the most important for two reasons. On one hand, we offer parents a convenient way to distract and
entertain their young kids at any time. Additionally, these young viewers will form the basis for Netflix’s future
customer base. As the kids grow into their teenage years, we offer a wide variety of shows that will still maintain
their interest. By doing this, we build customer equity with these children and teenagers, locking in customers for
years to come. We build a relationship with the kids early on and maintain it throughout their childhood in order to
build brand equity and recognition that persists for an entire generation. Our goal is for the kids to purchase their
own account and continue as a loyal Netflix customer.
College Students
The next important segment is College students aged 18-24. College students are important
because of their familiarity with technology and their youth. A young demographic enables the possibility of a long-
term relationship between the customer and Netflix, resulting in numerous years of a steady income. College students
also have more leisure time to enjoy online streaming, compared to those who are working full time in their chosen
careers. This increase of leisure time allows college students to maximize the utility of Netflix; thus, making it worth
the $8 per month. In addition to these benefits, college students are notorious for the desire to “binge watch” shows
(Solis, 2014). This mentality of watching perfectly corresponds to our preferred watch style, as illustrated by the
release of entire seasons at once.
College students also compliment Netflix’s overall marketing strategy of targeting customers with
annual incomes over $30,000 (Shaw, 2014). This threshold for income stems from the fact that many people view a
Netflix subscription as a luxury expense that can be trimmed down in hard times. College students make an average
of 66% more per year than those with only a high school diploma; most likely falling into the middle class or above
(Education Portal, 2014). By targeting college students early, we will be able to build a strong relationship that will
be maintained even after the student graduates and takes on a full-time career.
Baby Boomers
A new emerging, possible market is the baby boomer generation. This generation is more
comfortable with technology than the previous generation (Microsoft, 2009). As a result, they will create a demand
for convenient entertainment at an affordable price during their retirement. We have the ability to satisfy this demand
because of the offered categories, especially in family and classic movies and shows.
Travelers
Lastly, the most interesting and untapped market segment, the “travelers.” The traveler segment’s
need in the entertainment industry has been drastically under met by all of the major providers of movies and TV
shows over the Internet. This market segment has the very unique need of offline streaming, due to limited access of
the Internet on the go. While the evolution of personal Wi-Fi hotspots has emerged, the slow speed and high cost
makes this option less practical and less appealing. We can take this market segment by storm if we offer high
quality TV shows and movies offline. This innovation, targeted directly at travelers, will help Netflix maintain its
leading market share in the US. Between these four market segments Netflix will enjoy a solid foundation for many
years to come.
See Exhibit 1 for opportunities and threats.

Objectives
Our company should:
o Focus on customer satisfaction
o Seek international opportunities
o Increase customer base
o Strengthen brand equity and recognition
In picking an opportunity to pursue, our primary focus is on the
customer. How can we help make the Netflix experience better for our current
customers? How can we increase our consumer base? Is it feasible to focus on
international ventures if it weakens our domestic positioning? These
customer-based questions are fundamental for us to answer as we go forward
with implementations. Mainly, we want our focus on our domestic customers
and enhancing their Netflix experience. We would aim for a year in changing
the online interface and hope to see results within two to three years.

Opportunities
TV Channel
Fortunately, there are many opportunities we can pursue at Netflix. We could create a TV channel for
Netflix and cross-market with Xbox and PlayStation. A TV channel would allow our customers the ability
to watch our shows and movies as a network. This venture would act as a new option to current customers
and would build brand recognition to potential new customers who are flipping through channels.
However, this could be a weak source to gain new customers because we would only be able to show our
original shows. Currently we do not have too many shows and movies to play and the ones that we do have
would be on constant repeat, which could off-put customers and potential new consumers. We would want
to have Xbox and PlayStation promote the Netflix service, because they already carry the app for Netflix.
Playlist
Moreover, we could add a playlist option that will make Netflix more personable, connected, and
convenient to each customer. However, this feature could potentially become overwhelming and make the
site look congested to a user.
Downloadable Queue
Furthermore, we have the opportunity to make the shows downloadable; customers would be able to pre-
download shows, allowing them to watch without Internet connection at a later date (say for a train, plane,
or car ride). This option would reach to our most valued target market, the travelers. Customers would
“download” a show/movie and it would then show up in their queue, with a three-day policy. A three-day
rental policy would do well with our customers because data has shown that customers like to have a
reasonable return time, but would also work well with our licensing agreements and profits. See Exhibit 5.
Depending on which package they choose, they would be able to either store one (2g), two (4g), three (6g),
or five (10g) TV show/movie space onto their account. These packages allow the customer to have
flexibility over the amount and price they want to commit to. Additionally, these package varieties respect
the customer’s concern for data storage on their hard drive. A second, possible opportunity to add to this
downloadable feature would be to make shows and movies that are in our database, but not accessible
unless DVD ordered, available to consumers through the downloadable feature. We would need to look
into our licensing agreements with multiple providers, but we currently hold a power position with most
providers. See Exhibit 6. Again, we would account for this option in their package choice and allow them
access to the show/movie in their queue. This strategy is fairly safe, with its potential to help the company
far outweighing the possible drawbacks. The plan could possibly alienate some of Netflix’s customers
through the required price increases for the premium service. To mitigate this risk the pricing of this new
service will not be required and instead be an optional upgrade. We will also conduct market sensitivity
analysis to determine exactly how much customers are willing to pay for this new service. Additionally,
the risk does exist that another company could target the traveler segment of the market more effectively
and thus make the investment in the new technology wasted. However, since Netflix would be the leading
company to implement this new strategy the risk of another company, at least initially, of doing this same
strategy better is very small. Netflix has the customer base and brand recognition to appeal to this new
segment.

Proposal
Atlas Package
We believe our best opportunity to pursue would be to market penetrate the Traveler
segment with a product development of a new feature; the downloadable option. This
option is most compatible with our forward thinking direction because it leads us to a new
customer base and gains us a competitive advantage against HBO and Hulu+. Leading
innovative technology in the music industry has already had positive reactions by users.
Spotify is able to have songs available to users offline without Internet connection. This
feature allows it to stay ahead of Pandora because its competitor is tied to the availability
of the Internet. We know that 27.7 million Americans 18 and over use the Netflix mobile
app (COMSCORE, 2014). This statistic shows that our new feature would correlate
positively with current users who have a need to be on the go. We would offer this feature
as an added package and call it the “Atlas Package.”
Risks
This new strategy inherently carries the risk of increasing the amount of direct
competition faced by Netflix. By expanding into the “streaming online” category Netflix
will face competition from DVD and TV show manufactures that sell them as a hard disk.
In addition, as with any innovation, Netflix risks that some customers will not value the
new feature and oppose the new changes and necessary price increases. This new feature
will cost more money than the standard Netflix package and could increase the feeling
that Netflix is “Nickel and Diming” the customers. This could pose the same problem as
the price increase in 2011, which resulted in over a million lost customers and a 50% drop
in the stock price (Mashable, 2014). To mitigate this risk we are offering this as an
additional package to the standard platform. This new feature is optional and not
mandatory for the customers (Forbes, 2014).
Rewards
The rewards of this strategy are twofold. By being the innovator in the marketplace,
Netflix will be able to exploit some of its brand equity and have consumers trust in this
new idea. The ability for travelers to watch their favorite movies and shows in places
without the Internet is invaluable. This innovation will also help Netflix with the goal of
market development in regards to the traveler segment of the market. Since nearly 28
million Americans already use the mobile app, Netflix is poised to explode should the
ability to stream Netflix exist without the need of Wi-Fi. By being the innovative
company with strong brand recognition, and also tapping into this new and expanding
market segment, Netflix will maintain its lead in the market and increase profits in the
upcoming quarters.

Marketing Mix
Product
A downloadable feature as a new package offer is our primary amenity to Netflix. This
feature would allow customers to download a TV show or a movie into their queue and be able to watch
their program without the crutch of Wi-Fi or Internet connection; this convenience enables watchers to take
their account on the go for twenty-four hours. Furthermore, the downloadable feature comes in a package
of 2g, 4g, 6g, or 10g. This variety is for customers who are price sensitive or have a concern about taking
up too much of their hardware space. With further market research and development, we can also offer
customers the opportunity to download TV shows and movies that are in our database, but not available to
watch online.
Promotion
In order to not only survive in this market but thrive, we know that our product must have
a comparative advantage, has to be easy to use and communicated to customers, can be tried right away,
and compatible to our target market. Fortunately, our new feature has all of these elements; the key through
our promotion will be to visualize this to our final consumers. To start, we would offer our customers a
discount for their first month on the added package. We offer this discount as an incentive for our
customers to try our product as soon as it is made available. Additionally, we would be pushing this
product through pop-up notifications when customers login to their account. These notifications will be a
series of steps showing our customers how to use the new feature, which again will encourage our
customers to try the product. We hope this will engage the customers on our new change and peak their
curiosity. Once our target market begins to download shows, they will soon realize our simple feature is
compatible and convenient to their life.
Place
We would put our promotions straight on our Netflix site. Not only does this grant us more
control over placement and timing, but it also minimizes our cost. Most significantly, having our
promotions reach our customers directly is going to be vital because our target market is within our current
customer base. This channel of distribution will bring us closer to our final consumer, which establishes a
stronger relationship and keeps us connected and more transparent. Because communication to our
customers has been an issue in the past, staying transparent with our decisions and changes is key to
customer satisfaction and building brand loyalty.
Price
The price of our current package will remain unchanged for the time being to ensure that
already satisfied customers are not forced out due to monetary constraints. However, as a company we
need to continue to innovate and draw in additional customers. To accomplish this, we have decided to
offer a new optional package that allows the customers to stream movies and shows offline. We have
created four different price ranges in order for this package to appeal to as many customers as possible.
The basic package allows for 2GB of offline data (roughly one movie or 2 hour long episodes of a show)
for streaming at the price of $10.99 ($1.99 total increase), which is a mere $2 increase over the standard
package. The other packages are 4GB, 6GB, and 10GB. These packages increase by $1 per upgrade with
the 10GB package costing $13.99 ($4.99 total increase). By offering this wide range of options we will
appeal to a broad range of customers and not disturb the satisfied customers we have now.

Implementation
Moving Forward
The implementation of our marketing plan will occur in the next one to
three years, depending on the challenges encountered throughout the
process. Some of the individual parts of the strategy, such as the
optimal market segments to target will be easy to implement.
Increasing Netflix original series programming and offline streaming
capacities will both be more difficult to implement. Both of these
strategies work to create a more distinct product for the customer (Top
Investor Questions, 2014). By diversifying the offering, Netflix will
remain as an innovator in the marketplace.
What We Need
In order to successfully implement these strategies successfully in the
allotted time frame, the company needs to increase funding for research
and development. Funding would go towards reaching licensing
agreements with those providers who are part of our offline database
and we would be able to offer a wider variety of shows to the
customers (Maglio, 2014). Additionally, Netflix needs to invest in the
technology to allow customers to upgrade their subscription and watch
shows offline. This technology already exists and is utilized by
companies such as ITunes and Spotify (Cipriani, 2014). This offline
streaming option will take longer to fully implement due to the need of
acquiring and testing the technology with movies and TV shows, as
opposed to simply music.

Profit & Loss
2015 2016 2017
Revenue/Net Sales 160221600 192614400 221205600
Cost of Revenues 25888156 29586464 35133926
Gross Profit 134333444 163027936 186071674
Operating Expenses
Additional R&D Expenses 75753800 68178420 56815350
Additional Advertising Expenses 55890800 55890800 41918100
Other Expenses (Gen and Admin) 25242140 32738556 42461259
Total Expenses 156886740 156807776 141194709
Pre-Tax Net Income -22553296 6220160 44876965
Tax Rate @ 35% 2177056 15706938
Net Income -22553296 4043104 29170027
NPV = (-22553296/ 1.177) + (4043104/ 1.177^2) + (29170027/ 1.177^3)
= $1,646,717
IRR = 23.04%

Normal 2015 2016 2017
Cost of Revenues 25888156 29586464 35133926
Gross Profit 134333444 163027936 186071674
Operating Expenses
Total Expenses 156886740 156807776 141194709
Tax Rate @ 35% 2177056 15706938
Net Income -22553296 4043104 29170027
Best 2015 2016 2017
Cost of Revenues 27737310 31435618 36983080
Gross Profit 143928690 173217182 195864920
Operating Expenses
Other Expenses (Gen and Admin) 27045150 35077024 45494205.94
Total Expenses 158689750 159146244 144227656
Tax Rate @ 35% 4924828 18073042
Net Income -14761060 9146110 33564222
Worst 2015 2016 2017
Cost of Revenues 18491540 22189848 27737310
Gross Profit 95952460 122270952 146898690
Operating Expenses
Total Expenses 149674700 147453903 129062921
Pre-Tax Net Income -53722240 -25182951 17835769
Tax Rate @ 35% 6242519
Net Income -53722240 -25182951 11593250

Four different packages for the new downloadable option are offered at the following prices:
$1.99, $2.99, $3.99, and $4.99
We anticipate that 14% of current domestic streaming customers will adopt one of the new
options in 2014, 16% of current domestic streaming customers will have adopted an option
by the end of 2015, and 19% by the end of 2016
We then calculated approximately how many of each specific package would sell per year.
We estimated that sales for the $1.99 package would be highest initially, with the
more expensive packages gaining more subscribers each year.
We based R&D, advertising, general, and administrative expenses based on Netflix's
expenses outlined in their 2014 annual report. We took a percentage of such expenses to
calculate additional expenses caused by the addition of the downloadable option.
 Technology expenses would be higher initially as it would cost more money
initially to create the technology platform required for the new project
 General and Administrative costs would grow gradually consistent with rates that
Netflix has seen in recent years
 Advertising costs would be higher in the first two years in order to draw attention
to and market the new packages, but would decline slightly by the third year
Discount rate determined from CAPM Model: 17.7%
NPV is the sum of the present value of future after-tax net income, discounted at 17.7%
Corporate tax rate of 35%
Assumptions

Timeline
0-6 months: Start intensive market research and research and development to
become knowledgeable on needed software. Would need to hire IT staff to
install software to make programs downloadable for only specific timeframe.
7-12 months: Research licensing agreements with non-streaming providers
and inquire to include their programs in our new feature. If yes, begin on
adding their programs to feature, as well. If no, delete this as a possible option
for new Netflix product.
13-18 months: Create pop-up step-by-step notifications for Netflix users as
our promotion. Set this up to pop-up max of five times or until they run
through the steps. After five times of not going through steps, have a banner
option on the account. Customer would be able to go through feature when
they want to during their account use. Once a customer closes the banner five
times, we would have to assume they are not in target market or will use the
product at a later time.
19-24 months: Launch new feature on Netflix site, alone with pop-up
promotion and discount availability. Have continued market research to get
feedback from final consumers. Based on feedback change product as needed.
25-30: Remove discount availability (by this time users will have used this
option already or are in their month of discount use).
31-36: If available, add in non-streaming programs to packages. Continued
market research should be continued throughout 25-36 months to enhance
product as needed.

Next Steps
Our plans are well stated and thought
through; however, we do know there are places
for further research to be done. We realize that
in order to go forward with allowing TV
shows/movies that are in our database but not
streamed online to be available for download,
we would need to review the licensing
agreements with the providers. Moreover, we
would need to perform more sensitivity analyses
to confirm the ideal price for each package
available. Furthermore, we would need to look
into the software technology that permits the TV
shows and movies to download onto a
customer’s account for only a specified amount
of time.

SWOT Analysis
Strengths:
• Stopped throttling*- startup companies
can’t do that
• *See Exhibit 2
• Expanding internationally
• Strong customer loyalty in USA
• Brand recognition
• Size of company
• Own TV shows/ upcoming movies
• Reed Hastings is on board for Microsoft,
Facebook, and other non-profit
• Big database-shows demographics
• Easy to use interface/search/categories
Weaknesses:
• Competitors have advantage
internationally
• Not all TV shows are offered
• Relying on internet providers
• DVD declining
• Only streams on internet—no TV show
• Weak variety within categories
Opportunities:
• International market
• Eliminating DVD
• Gaining people at young age to get brand
loyalty
• Netflix channel on TV
• Cross market with Xbox and PlayStation
• Adding playlist option for
customers/better system for
recommendations
• Mobile devices/ iPad – downloadable
TV shows
• Sharpen category variety
Threats:
• Licensing
• Uncertainty with content providers
• Other online streaming companies-
HBOGO, Amazon, Hulu, YouTube
• Competitors increasing really fast
• Economic/Political uncertainty abroad
Exhibit 1

Throttling
• The massive increase in Netflix’s subscriber base
over the past five years intrinsically brings with it
a massive increase in the amount of bandwidth
needed to maintain good service. Netflix grew to
be the largest user of bandwidth out of any
company using 34.2% of all bandwidth consumed
during primetime (Spangler 2014). As a result, the
largest Internet providers started to limit the
amount of bandwidth available to Netflix making
it difficult for Netflix’s customers to enjoy the
service during peak watching hours. To combat
this, Netflix reached a mutually beneficial deal
with Comcast and Version to stop the throttling
(Ramachandran 2014). This gives Netflix the
competitive advantage over other companies who
have not reached deals to limit throttling.
Additionally, this pushes out potential competitors
who could not afford to do this at all, or if they
could, not at the same economies of scale as
Netflix.
Exhibit 2

Subscription Revenue
Exhibit 4

Licensing Agreement
• The new Atlas package is contingent on the
licensing agreements being successfully negotiated
with the content providers to allow for temporary
downloads. While this is undoubtedly a difficult
hurtle, Netflix now has a very strong influence at
the negotiating table when dealing with the cable
companies (Forbes). This influence will allow
Netflix to obtain this new stipulation in their
leasing contracts. Of course this will come at a
steep price, but Netflix has a solid record of paying
the content providers well. All in all, Netflix is in
the best position out of any of its competitors to
implement the new Atlas package. Competitors
will face higher average cost per customer, and do
not have the same relationship dynamics with
content providers as Netflix. This is a golden
opportunity for Netflix to exercise its size and
influence to revolutionize travel entertainment
(Rogowsky, 2014).
Exhibit 6

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