View Consulting Jared Jacobs / Gillian Griffin / Yi-Wen Liu / Yen-Yu Chen

Agenda● Company Overview● Competitive Analysis● Target Market● Key Issues● Strategic Alternatives● Recommended Strategy

Company OverviewBackground

Founded in 1997 Headquartered in Los Gatos, California

Products Movie and TV streaming subscriptions – including original

and syndicated content DVD by Mail

2015YE Financials Revenue: $6.78B Net income:$122.64MM Subscribers: 75 million and growing

Company OverviewStrengths

Dominant market share Original content

Weaknesses Delayed release of streamed

movies compared to DVD Cost of content

Opportunities Cheaper, faster, and more

accessible internet Cord cutters Global market

Threats Deep pocket competitors Pirating websites Maturing US market

Competitive AnalysisUS Household Penetration

Competitive AnalysisMarket Share: 13% of households

Strengths Large customer base 4K streaming at reduced cost Original Content

Weaknesses Market follower not leader High subscription fee Inflexible cancellation policy

Primary Strategy Rely on customer base and ecommerce platform to leverage

growth and savings

Competitive AnalysisMarket Share: 3% of US households

Strengths Content partners are owners of business TV series available 24-hours after broadcast Streaming software as a service

Weaknesses No original content Low quality and limited library Frequent commercials

Strategies Rely on partners for exclusive and cheaper access to content

Target Market

Value Oriented

Cord Cutter

College Education

Age 25-54

Entertainment Seeking

Minimum Income $30,000(per household)

Reliable and Fast Internet

Access

Target MarketGlobal Broadband Speeds

http://www.vox.com/2015/1/31/7952321/world-broadband-speed-map

Where is Netflix

http://static5.businessinsider.com Netflix / Business Insider / Statista

Key IssuesCritical issues facing Netflix

Domestic market maturation Consumer demand for original content Limited capital available for content production Lack of access to adjacent markets

Key IssuesDomestic market maturation > focus int’l

Low short-term margins internationally Licensing cost and availability Consumer behavior – VPN access Local competition

Secure Thoughts (Netflix vs VPN)“84% of respondents said they would pirate more content because of the new Netflix [VPN] restrictions, and 61% said the new policy would affect whether they kept their Netflix subscription.”

Key IssuesConsumer demand for original content

Original content has higher cost Needs to grow library to attract customers Plan to release 600 hours of content for 2016

Key IssuesLimited capital available for content production

Needs cash to provide more attractive original content Sacrifice memberships for lower margins Hour of Walking dead was $1M

Lack of access to adjacent markets Visibility and exposure to target markets Increase the value that it offers customers

Alternatives to growing internationally Develop the domestic market by serving over and

underserved customers

Strategic Alternatives

1

2

3

Expand the studio franchise

Create a streaming media device

Develop Netflix TV

Expand the studio franchise Builds on original content Creates a competitive advantage Able to simulcast to new markets High risk, low reward Full commitment Lack of loyalty, unlike TV series

Projected: $186MM over 3 years

Strategic Alternatives

Simulcast in theatres Most watched Netflix content in first week

Create a streaming media device Targets low-income consumers Upsell opportunities Adds to cord cutting Gateway product High cost of R&D Finding the right partners Slow rate of adoption Brand dilution

Projected $50 price tag plus upsell, $136MM over 3 years

Strategic Alternatives

Develop Netflix TV Multi-billion dollar advertising space Little cost to customer, in their TV plan Win-win for Cable and Dish providers Control programming and costs High brand dilution and cannibalization Commercials

Projected: $1B from advertising (0.5% of annual spend)

Strategic Alternatives

Recommended Strategy

NETFLIX TV

Strategic objectives & Value creation Compete with cable and satellite Improve on accessibility to competition Additional revenue for original content Exposure to underserved markets

Recommended Strategy

Implementation & Tactics Differentiate itself from competitors in the channel space Generate ad revenue to offset original programming Capture new customers for streaming service Maximize market share of viewers

Recommended Strategy

Metrics Advertising revenue Subscription revenue Number of subscribers Acquisition cost Hours of content Gross margin

Recommended Strategy

Risks Cost of confusion Trying to be too many things Brand dilution Unrecoverable costs from production

Recommended Strategy

Thank You