...Media & Innovation What are the Effects of Netflix’s Innovation of the Value Chain? Source: (Netflix, n.d.a) WS 15/16 Current Issues in Media and Communication 1 Table of Contents • Key Slides • Getting to know Netflix • Disruptive Innovation of the Value Chain • Effects of the Innovation • Outlook • Bibliography WS 15/16 Current Issues in Media and Communication 2 Key Slides 1/3 Netflix can be regarded as a service business model within the video-ondemand area. It is known for being the pioneer offering its users entertainment content for a subscription fee. Since the foundation of Netflix in 1997 the new business concept turned into a success story with more than 70 million members around the world. People in 190 countries have access to Netflix‘s wide range of media entertainment possibilities and Netflix plans to add more to its list. The fact that their previous expansion meant 130 new countries in one go forecasts that Netflix will become a very important and influential global player in media entertainment industry. But how does all of it start? Innovation was the key. Netflix’s success in the new video rental business was based on the idea to offer an online DVD mail service. Adding new technology to a breakthrough idea created a combination which was meant to succeed. WS 15/16 Current Issues in Media and Communication 3 Key Slides 2/3 The users of the Netflix service are those who pay for it. In exchange...
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...inShare In the past 12 months, Netflix has gone from Wall Street (and PR) dunce to darling. After announcing they had signed up more than 2 million new U.S. streaming subscribers in the first quarter, the stock surged 25% (at press time). As the CEO of a video compression company, I've enjoyed watching this company develop and am very excited by the opportunities they've uncovered in streaming and original programming. Success has not come easy for Netflix but it never does for disruptive companies. Past: A Disruptive Start Anne Marie Knott, a professor of strategy at Washington University and director at Berkeley Research Group, wrote a great piece detailing the company's original strategy. From her post "Netflix aimed to kill Blockbuster and started with a simple mission of targeting people who found Blockbuster inconvenient, both because they had to drive there twice within a 24 hour period, and because they had to scan a good portion of the stacks to find movies of interest. Formerly, Blockbuster had an important resource (the store network) that formed an entry barrier. Any firm considering a national chain would find the investment in stores unattractive—they would at best get half the market at lower margins (because the two chains would compete on price). Netflix executed an end run around the entry barrier through an online sales/mail distribution system. Just as Blockbuster's store network served as an entry barrier, Netflix' end run became an adaptation barrier for...
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...Consultant report: “Netflix in 2011” Introduction In 2011 Netflix’s success suffered a sudden slowdown and a change of course. Not many months ago Hasting, founder and CEO of Netflix was nominated as the magazine’s business person in 2010 (Fortune magazine). In last seven years Netflix’s operating income and last year it even grew by about 38.83% (Exhibit 1). The slowdown was due to the fact that Hasting announced that Netflix would split in two companies, one for streaming video service (Netflix) and one for DVD service (Qwikster). The most part of consumers didn’t accept this change demonstrating their attachment to the company. Netflix stock started to decrease, and now Hasting has to face-‐off the situation, he has to find a way to manage this transition. Purpose of report (and recommendation) This reports aims to analyze the situation in 2011. -‐In first understand the...
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...NETFLIX case Summer I, 2013 Company’s status On-demand Internet streaming media and DVD-by-mail service Year founded 1997 Employees: 900 at corporate headquarters. 36 million members in 40 countries. 1 billion hours of TV shows and movies per month. Customer satisfaction score of 86% * Netflix is the world’s leading internet subscription service *According to the American Customer Satisfaction Index (ACSI), Internet Strategy GOAL: Proving the best online rental online experience for the customers. Great website: Easy access to information. Direct and attractive. Fast Privacy Policy: collect data: customer’s information Payments and communication plans. Cookies Social networks. Share information. Personalized online customer service Information Technology New and advanced technology to improve its service. Advanced technology: Cloud computing. Proprietary software Strategic partnerships Efficient operations. Fast and high quality. Measuring customer response and experiences. Building customer profile. Collecting customer Data. Netflix has changed the way you watch your TV & movies Company that revolutionized watching of movies and TV Shows Culture of Innovation Netflix is the world’s leading internet subscription service Disruptive innovation. HALLMARK of the company Innovation focus: online streaming. Instantly from multiple platforms. Future GOAL: Keeping the leading position...
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...Since founded in 1999, Netflix has grown to become the world’s largest online movie rental service. In the beginning of 2007, Netflix surpassed 6.3 million subscribers. With a catalog that includes more than 100,000 titles, Netflix is leading the movie rental market. Netflix’s subscription-based business model was a disruptive innovation in the movie rental business. By using the internet, Netflix focused on providing convenient and affordable prices for an entertainment industry that was already highly popular. Based on a product that consumers already loved, Netflix’s business model was profitable because it improved the consumer’s rental experience. The company aimed to become the best cost provider. As part of its competitive advantages, Netflix has an intuitive website (easy to use), personalized movie recommendations, and excellent customer service. Netflix has been rated No. 1 in online retail customer satisfaction by Neilsen Online for the past 3 years and for nine consecutive periods by Forsee/FGI Research (Netflix, 2009). Netflix’s strategy for success has included providing a comprehensive selection of movies; an easy way to choose movies, fast delivery, a no late fees policy and a convenient drop it in the mail return system. These strategies ensured a competitive advantage to Netflix and threatened to make the traditional video store obsolete. A combination of its business model and strategic approach carry out the mission of the company. Diagnosis of...
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...Report Case: Netflix January 19, 2016 1. To begin with, at a first glance, Blockbuster and Netflix may be considered two quite identical firms, operating in the movie rental industry. Therefore, it could be inferred that their business models have many similarities, yet, that is not the case. Their core differences are most obvious on their respective levels of value propositions, resources, and the profit formulas that each company has adopted. Firstly, Netflix’s initial idea behind their business model was to become providers of a better home movie service, which become feasible, in 1997, with the introduction of DVD technology. On the other hand, Blockbusters, a well-established company since 1980s, continued to follow the traditional retailing outlet style. A basic difference is the resources of their business models. In 1998, a year after its founding, Netflix boldly adopted a very innovative attitude by launching a website while simultaneously operating online. Thus, Netflix targeted the revolution of new age technology adopters (purchasers of DVD players), while Blockbuster’s main target group was wider, focusing on anyone who decided to watch a movie, especially last minute. The two companies’ profit formulas are different, with Blockbuster’s following the common charging system (a fixed price for every movie rental and additional charges for delayed returns), whereas Netflix, in its early uprise and foundation...
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...The Netflix case covers the period since the inception of Netflix (1997) until sometime in 2007. I will admit, it is difficult to put myself in the shoes of “2007 Jonathan”, while not allowing my knowledge of Netflix’s future stunning success and Blockbuster’s ultimate bankruptcy to influence my decision making process. Let’s try anyways. By 2007, Blockbuster had made it abundantly clear, whether via actions or words, about their perceived vision of the future of the video rental industry. In 2002 they claimed that there was no “financially viable long-term” online rental business. They also claimed there was “not enough demand” for a mail order business model as well. Finally in 2004, they started to take things seriously with the introduction of Blockbuster Online. That was essentially the beginning of the end for Blockbuster, with many analysts noting in hindsight that it was too little too late. During the early 2000s, Netflix was driving forward by using the power of the internet (the usage of which is a great example of disruptive innovation), innovating an entirely new industry right under the nose of Blockbuster. While they started out as a “mail order” video rental company, they ultimately thrived due to the use of innovative algorithms, a website, a search engine, and a novel pricing structure; one that Blockbuster couldn’t even imagine working. During this this time, Blockbuster’s absorptive capacity was so low that they were unable to harness the power of the...
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...WEEK 7: Network Markets & Disruptive Technological Changes (Microsoft in Thailand, Motorola/Noka) Network Markets – S-curve of P(join) vs. installed base • Tipping depends on taste for variety vs. network externalities o Adjusted price adjusted for market share • Direct network effects – benefit of more users. Indirect effects – Growth of complementary products and services on the larger platform (iPhone, HD-DVD) • Use switching cost to lock in early market share gains, create competition through licensing Disruptive Technological Changes Timing is everything, incumbency power diminished, harder to manage judo attacks Innovate Inside • Incumbency advantage of size, market knowledge, reputation/brand recognition, experience, access to funding, distribution & supplier resources • Incumbents face replacement effect – new product cannibalizes profits from established markets, but this ignores the competition effect - innovators will enter and undermine his franchise, so incumbent might as well preempt by innovating. • Network effects/uncertainty about tipping + increasing returns/internal hurdle rate is a virtuous cycle that is challenging to incumbent’s desire to invest Wait and See – Jump on the bandwagon if innovation proves viable • Network effects and other customer lock-in – challengers may convert early lead into sustainable advantage • If early advantage can be neutralized, then this strategy has real option value • Can the threat be isolated into...
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...like Netflix and VOD). These services can even better serve the customers’ needs for a lower price, while maintaining significantly lower operational costs. This is especially relevant for the VOD, providing both the selection and convenience of Netflix and allowing spontaneous purchases like Blockbuster. Second, Blockbuster’s equity is mostly invested in real estate and movie stocks. Thus, if Blockbuster would decide to alter it s activities to accommodate to the changing market, the resources needed to make this change happen are enormous (time, cost and physical effort). Third, based on their past behavior, it could be estimated that Blockbuster typically operates in a conservative manner, with slow reactions to market changes- this can be exemplified by their very late 2004 response to Netflix, and their blunt avoidance of reaction beforehand. Fourth, taking into account past performance of Blockbuster’s stock before 2006, we can identify a bearish trend, hinting towards the effect of the market forces on Blockbuster. Overall, we estimate that strong market competition from disruptive services enabled by emerging technologies, combined with the current position of Blockbuster, would not allow the company to survive in the market in the long run. We would have recommended being long on Netflix’s stocks. Netflix indeed recognized that VOD composed a significant threat, and that an immediate action had to be taken to sustain its market position. Considering that Netflix is an...
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...Background Netflix, Inc. is an American provider of on demand Internet streaming media available to North and South America, the Caribbean, United Kingdom, Ireland, Sweden, Denmark, Norway, Finland, the Netherlands, etc. and flat rate DVD-by-mail in the United States, where mailed DVDs are sent via permit reply mail. Netflix occupies a unique place in the media industry - aggregating, distributing, and recently creating its own content through an online platform that lets viewer choose when and where they want to watch television shows or movies. Subscribers pay US $7.99 per month for this right. Its disruptive business model has proven popular among younger users, whose lives are increasingly spent on their personal computers. Online streaming service and DVD delivery service are two main product lines for Netflix. History Netflix was incorporated in Delaware in August 1997 and started its subscription-based digital distribution service in 1999. It made its initial public offering on May 22, 2002 on NASDAQ under the ticker NFLX. Netflix introduced instant streaming in 2007, by 2009 Netflix was offering a collection of 100,000 titles on DVD and had 12.3 million subscribers. In September 2010, they began international operations by offering streaming service in Canada, and now offer streaming service in Latin America, the United Kingdom, Ireland, and the Nordic countries of Finland, Denmark, Sweden, Norway and others. Beginning the fourth quarter of 2011, Netflix had three...
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...Copenhagen Business School Cand.merc.it (Ebusiness) Strategic And Tactical Tools For E-Business Case Report Online Branding at UnME Jeans & Short essay on disruptive Technology Handin date: 24/112014 This exam includes two sections: One short essay and a case report. Characters including space (short essay): 4536 Characters including space (case report): 17912 Pages (disruptive): 2 pages Pages (case report): 7,9 pages Pages in total: 9,9 This paper is written by: Anonymous 1 of 11 Disruptive technology essay As modern technology continues to evolve, some technologies end up changing the structure of competition within an industry and thus becomes a disruptive technology. Danneels (2004) provides the following definition of a disruptive technology: “A disruptive technology is a technology that changes the bases of competition by changing the performance metrics along which firms compete. Customer needs drive customers to seek certain benefits in the products they use and form the basis for customer choices between competing products” (Danneels, 2004, p 249). An example of a disruptive technology is streaming. Streaming has in many ways made it easier for consumers to get what they want, when they want it regardless of their location. Especially in one particular industry, the film and tv industry, streaming has showed to be a game changer on how to...
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...Chapter Outline 7.1 Competition Driven by Innovation The Innovation Process 7.2 Strategic and Social Entrepreneurship 7.3 Innovation and the Industry Life Cycle Introduction Stage Growth Stage Shakeout Stage Maturity Stage Decline Stage Crossing the Chasm 7.4 Types of Innovation Incremental vs. Radical Innovation Architectural vs. Disruptive Innovation The Internet as Disruptive Force: The Long Tail Open Innovation 7.5 Implications for the Strategist Learning Objectives After studying this chapter, you will be able to: LO 7-1 Outline the four-step innovation process from idea to imitation. LO 7-2 Apply strategic management concepts to entrepreneurship and innovation. LO 7-3 Describe the competitive implications of different stages in the industry life cycle. LO 7-4 Derive strategic implications of the crossingthe- chasm framework. LO 7-5 Categorize different types of innovations in the markets-and-technology framework. LO 7-6 Explain the long-tail concept and derive its strategic implications. LO 7-7 Compare and contrast closed and open innovation.The beautiful leather-bound, multivolume set of books made a nice decorative item in many homes. In the early 1990s, when total sales for encyclopedias were over $1.2 billion annually, Encyclopedia Britannica was the undisputed market leader, holding more than 50 percent market share and earning some $650 million in revenues. Not surprisingly, its superior differentiated appeal was highly correlated ...
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...Page 3 NETFLIX, THE COMPANY PROBLEMS FACEBOOK BLOCKBUSTER Page 6 Page 8 Page 9 Page 10 CONCLUSION Page 11 RECOMMENDATIONS Page 12 EXHIBITS Page 14 APPENDIXES Page 18 1 INTRODUCTION Netflix entered the video rental industry in 1998, being pioneer on the online delivery channel. They were the first conceiving the digital format that was able to faster the delivery process at the same time it abolished several costs related to the physical points of sales. Being pioneers and developing technologies on which they had patents over could initially be seen as a competitive advantage. The fact of being the first ones operating under this format permitted them to come up with several services before competitors, as the streaming video, the disc rental, the original programming and the household profiles. Not only for being pioneers, but also for the valuable services offered, at accessible prices and with high variety of content, the image among consumers about Netflix was constructive. The share of mind among users was on a general perspective positive and of satisfaction relating to the services they were paying for. Netflix had a great brand awareness and in a positive sense. However, more recent happenings are changing this position. With the years competitors of the industry developed their services, competing more and more directly with Netflix. As so, over the years, in order to survive, the company was obliged to keep up with innovations and partnerships...
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...Succumb to The Internet Introduction: The case study of “Will TV Succumb to the Internet” explains how the Internet has transformed how viewers watch television programs and other videos. There are now several online outlets in which viewers can watch whatever TV show/movie they desire. YouTube was one of the first online outlets by allowing users to provide video clips, and even entire TV shows, for anybody to watch. However, this was considered copyright infringement, and a 2008 lawsuit made it much more difficult to put clips on YouTube without proper authorization. Web sites offering streaming video of TV shows have since revolutionized the way in which viewers watch TV shows and movies. High-powered companies such as Hulu and Netflix have caused a number of U.S. households to get rid of their cable, satellite, or high-speed television services altogether. The number of U.S. households to follow this trend is predicted to double in the upcoming years. However, these companies providing online video-streaming have experienced growing pains regarding revenue. They have had to charge users a higher fee for their services because the main source of revenue, advertising, is not generating enough money to satisfy all of the content suppliers. Regarding advertising, there have also been complaints about the number of ads shown while viewing online TV shows. This could cause these unhappy customers to rebel and go back to subscribing to their basic cable services. Nonetheless...
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...Corporate Entrepreneurship Assignment Name of Student: Hazeem Azam Naz Dar Company: Nokia (a) Discuss ways in which Nokia could achieve sustainable competitive advantage There are four ways Nokia gain competitive advantage: 1) Cost Leadership 2) Differentiation 3) Cost Focus 4) Differentiation Focus Cost leadership: With this strategy, the objective is to become the lowest-cost producer in the industry. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. There are two main ways for achieving this: a) Increasing profits by reducing costs, while charging industry-average prices. b) Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs. A strategy of cost leadership requires close cooperation between all the functional areas of a business. To be the lowest-cost producer, a firm is likely to achieve or use several of the following: * High levels of productivity * High capacity utilisation * Use of bargaining power to negotiate the lowest prices for production inputs * Lean production methods (e.g. JIT) * Effective use of technology in...
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