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 Subscription
Subscription Subscription À La Carte
À La Carte? and À La Carte
New Releases
No Only TV Yes Yes
Streaming?
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 À La Carte
Members Customers
$
$
$
Subscription Extra Pay Pay Per
Content Content View

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