1. A Network View of Netflix
How Partners, Competition, and
Opportunities Dictate Strategy

2. Changing How We Watch
Netflix began as a DVD-by-mail service, However, increasingly streaming of
using the web to improve the rental video online has become one of
industry with recommendations, queues, Netflix’s core strategies for
and automation. delivering content to viewers.
$14m in Q3 2011 $21.5m in Q3 2011
Figures based on Netflix Q3 2011 Financial Statements

3. Focusing More on Streaming
Netflix Investment in Streaming vs. DVD Content
700,000
Netflix is constantly adding new content to its
Dollars Invested (Thousands)
600,000 streaming library, including new partnerships
with AMC, CBS, DreamWorks, and Warner Bros.
500,000
400,000 “Our core strategy is to grow our streaming
Streaming
subscription business within the United States
300,000 and globally.” DVD
200,000 - Netflix Annual Report
100,000
“[The DVD-by-mail business] will probably be something like AOL dial-up from 2002 through to
today, where it’s a steady decline every year a little bit, but there’s a long-term residual market. And
0
there’s very little fixed cost in the business. So that’s not a material cutoff of its efficiency, it’s almost
all variable cost. 2009 2009 2009 2009 2010 2010 2010 1 Q1, 2011 2011 2011
Q1, The postage, the labor, all of those aspects.” 2010 Q2, Q3,
Q2, Q3, Q4, Q1, Q2, Q3, Q4,
- Netflix 10K
Figures based on Netflix Q3 2011 Financial Statements
1“Netflix’sCEO Discusses Q3 2011 Results.” http://seekingalpha.com/article/301738-netflix-s-ceo-discusses-q3-2011-results-earnings-call-
transcript?part=qanda.

4. Pulling Content From All Around
Netflix purchases DVDs or holds
content agreements with countless
production studios and distribution
companies. These are just a few of
the partnerships Netflix currently
holds.
A constant concern for Netflix is
gaining new content and holding
onto the content agreements it
already has. Just recently, Starz
opted not to renew its agreement
with Netflix, meaning that in
February Netflix will lose a great
deal of its streaming content. This
is a growing concern as other
companies enter streaming.

5. Others Catching On
Subscription Service Á La Carte Advertising Subsidized Freemium
One Price, Unlimited Viewing Pay Per View Free Viewing with Ads Some Content Free, Other Paid
“I think in the long-run, the long-term margin structure for
streaming will be ultimately determined by the competitive
space, and how many competitors we have. In the short
run, we’ve been aggressively adding streaming content at the
same rate of subscriber growth, and we continue to anticipate
investing in 2012.”1
- David Wells, CFO, Netflix
Competitors like Amazon, YouTube, Hulu, Blockbuster (now partnered with Dish
Network), Facebook, and Apple are getting in on the action too. All six
companies have revenue generation models based on either selling digital
content to consumers or using advertisements to subsidize viewing.
1“Netflix’sCEO Discusses Q3 2011 Results.” http://seekingalpha.com/article/301738-netflix-s-ceo-discusses-q3-2011-results-earnings-call-
transcript?part=qanda.

6. Getting Content to You
Rather than just getting content to viewers through DVD players, Netflix has partnered with
numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Nintendo Wii Microsoft Xbox 360 Sony PlayStation 3
Gaming Systems

7. Getting Content to You
Rather than just getting content to viewers through DVD players, Netflix has partnered with
numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Apple iPad and Windows Phone Google Android
iPhone
Mobile Devices

8. Getting Content to You
Rather than just getting content to viewers through DVD players, Netflix has partnered with
numerous other device makers to help turn any screen into one that can stream Netflix movies and
TV shows from the web.
Roku Box Tivo Apple TV
Web-Enabled TV and Devices

9. Getting Content To You
Netflix’s vast array of partnerships
allow it to be available on a
plethora of platforms, meaning
that Netflix’s streaming services
can reach just about everyone—
either on the computer through a
browser, through web-enable
televisions, gaming consoles, or
mobile devices.
However, a growing concern is the
exclusivity of these relationships.
Hulu is already available on many
of these platforms, as is access to
Apple content. What exists to
ensure that Netflix with continue
to enjoy its proliferation?

10. Area For Concern - Content
While its content partnerships
are among Netflix’s
strengths, they are also one of
its weaknesses. The growing
standard of exclusivity means
that content may soon only be
available in one place, rather
than across multiple websites.
Will content creators and
distributors continue to partner
with Netflix and give it the
content it needs to exist, or will
they find greener
pastures, possibly even
focusing on their own online
distribution to build revenue?

11. Area For Concern - Delivery
Another area for concern for
Netflix are the platforms that
deliver its streaming services.
While browsers on computers
will always be able to access
Netflix.com, what about the
numerous devices that make
Netflix so easily accessible?
What happens if they decide to
partner with Hulu or Amazon
exclusively for streaming
services? Maintaining
partnerships with these device
makers is vital—especially
considering the numerous
connections Apple already
holds for content.

12. Looking Forward
Netflix Investment in Streaming vs. continue to build up its streaming
Netflix will
DVD Content
700,000 library, maintaining a DVD selection that will
Dollars Invested (Thousands)
eventually be slowly phased out.
600,000
500,000 Because of this need for new content, Netflix
has to maintain content rights with a growing
400,000 variety of content providers. Exclusivity rights
Streaming
and new partnerships will constantly be threats
300,000
and opportunities for Netflix. DVD
200,000
100,000 Netflix must also keep relationships with
platforms that allow Netflix to stream its
0 content via apps. With many new streaming
options entering the market, it is vital to
Q1, 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011
Q2, Q3, Q4, Q1, Q2, Q3, Q4, Q1, Q2, Q3,
remain ubiquitous and a well-known brand
name across platforms.