Case Study #2 - Netflix, Inc. (A): The 2011
Rebranding/Price Increase Debacle
WEBSTER UNIVERSITY MANAGEMENT
AND STRATEGY 5650
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Case Study #2 - Netflix, Inc. (A): The 2011 Rebranding/Price Increase Debacle
Executive Summary
Netflix is an American entertainment company founded on August 29, 1997, by Reed Hastings
and Marc Randolph. Netflix is headquartered in Los Gatos, CA. Netflix specializes in Video on
Demand (VOD), streaming media, and DVD by mail. Netflix has expanded into original
television and film production. Netflix has offices in Europe, Brazil, India, Japan, and South
Korea. Netflix initial business model started with DVD sales and DVD rentals. Netflix expanded
into digital streaming in 2007 while migrating from Netflix maintained cloud servers to Amazon
Web Services (AWS) in 2008 for Netflix to concentrate on products and services unique to them.
Netflix successful migration to AWS has allowed them to expand into different countries,
offering new features, and self-customization. AWS services enable Netflix to track user’s
preferences, minimize downtime, and Netflix administrative rights to customize along with
scaling services to taste. Netflix launched offline viewing in 2016 to allow for more accessibility
and compensate for members with limited internet connectivity. Netflix and Comcast have
integrated services to enable more availability. Netflix is well postured to integrate their services
into many mobile devices, tablets, smart televisions, and devices that haven’t been created yet.
Spencer Wang Netflix Finance & Investor VP reports the following about Netflix Q4 2016 in a
letter to shareholders:
$8.83 Billion total sales
93.80 Million total memberships
44.37 international memberships
$154 million in DVD operating income
Netflix has a Board of Directors (BOD) and a team of Executives who oversee daily operations.
The case analysis will look at Netflix through various business strategies. Netflix with its
numerous threats and well document pricing debacle is well postured to overcome almost any
deficiency. Several recommendations have been made in this analysis if adopted, will help
Netflix to remain on the competitive frontier.
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Case Study #2 - Netflix, Inc. (A): The 2011 Rebranding/Price Increase Debacle
Historical and Current Information
Marc Randolph and Reed Hastings founded Netflix Company in 1997(About Netflix). In
1998 Netflix launched its DVD mail delivery service with Blockbuster, Hollywood Video, and
Walmart being Netflix’s main competition. Netflix offered tiered DVD rental service from $7.99
to $19.99 for unlimited DVD exchanges. Netflix offered Blu-ray disc rental for an additional fee.
Netflix sold used DVD’s and Blu-ray billed as rentals but was discontinued around 2008 (About
Netflix). Around 2000 Netflix begins to employ analytics to track customer behavior to
differentiate themselves from the competition. Netflix also created a $1 million prize for
quantitative analysts outside the company who could improve Netflix first generation search
engine Cinematch algorithm by at least 10 percent (prize won by BellKor's Pragmatic Chaos
21SEP09). 23MAY02 Netflix Initial Public Offering (IPO) was $15.00 a share.
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Note: Netflix IPO to present Reprinted from Ycharts