1. Consulting Methods
Final Project
Objective: Help Netflix Improve Profitability To
Sustain Market Leadership
Team 4 Greenwich
Alexandra Bayet Christina Alvarado Atman Bhesdadiya Anastasia Toumazou Daniel Marczinek Jargalan Amarsaikhan

2. Problem definition SCQ Analysis
• Market leader
• Key figures in 2011:
• 90% of customers are from the USA
• 61% market shares
• Share prices: $299/share in July versus $62/share in December
• Split between DVD and Streaming offers.
• 60% increase in price and miscommunication
• Increasing competition
• Loss in market share
• Licensing contract expiration
• Increasing licensing prices
• Loss of subscribers
• Loss of investors confidence
• Decreasing liquidity
Can Netflix improve profitability to sustain market leadership?

3. Approach Issue Analysis
Can Netflix improve profitability to sustain market leadership?
3. Can Netflix reduce negative
2. Can Netflix attract more
1. Can Netflix reduce costs? risks associated with content
customers?
licensing?
1.1 1.2 2.1 2.2 3.1 3.2
Can Netflix Can Netflix Can Netflix Can Netflix Can Netflix Can Netflix
identify cost reduce identify what deliver identify develop a plan to
drivers ? identified costs? customer identified negative reduce negative
wants? customer outcomes? outcomes?
wants?
c
c
c
.
• Conduct secondary research on • Conduct primary research on customer wants • Interview risk management department on
the major cost drivers within the through surveys and telephone interviews. current risks & outcomes connected to the
company.
• Conduct secondary research on technological library content.
• Interview the controllers and adaptation of new devices. • Interview independent expert to benchmark
accountants to identify cost
• Conduct secondary research on competitor level of retrieved information.
drivers and saving solution.
products and services. • Develop ranking of major negative affects.
• Conduct secondary research on
• Launch pilot project to research customer wants • Develop plan to reduce maor negative risks.
solutions cost saving.
• Analyze whether organizational capabilities
• Interview employees to evaluate
and internal knowledge of company are
feasibility of found possibilities. sufficient to create their own studio.

4. Approach Work Plan
MEETING CHECKPOINT PRESENTATION

5. Findings and Recommendations Final Presentation
Netflix can improve profitability to
sustain market leadership
 Netflix can reduce costs.
 Netflix can attract more customers.
 Netflix can reduce negative risks
associated with content licensing.

6. Findings and Recommendations Final Presentation
Netflix can reduce costs
 Netflix can identify cost drivers.
 Netflix can reduce identified costs.

8. Findings and Recommendations Final Presentation Netflix can reduce costs
Netflix can reduce identified costs
 Decrease Marketing costs by switching TV and radio
advertisements to online advertising, specifically by
using social media.
 Decrease Fulfillment expenses by creating efficiency in
content processing and customer service.
 Achieve economies of scale by spreading high content
acquisition costs over increased number of subscriptions.

9. Findings and Recommendations Final Presentation
Netflix can attract more customers
 Netflix can identify customer wants.
 Netflix can deliver customer wants.

10. Findings and Recommendations Final Presentation Netflix can attract more customers
Customer want identification
 Variety in content: movies and TV shows
 Low prices
 Availability on the greatest number of
devices
 Ease of use

11. Findings and Recommendations Final Presentation Netflix can attract more customers
Netflix can deliver identified wants
What Netflix delivers What Netflix can do (extra)
• Variety: largest content • Offer different type
with 60% TV shows service options: pay- per-
view and advertising
supported online content
• Greatest number of
devices: Xbox, Wii, PS3, • Competitive price
PC, Mac, iPad, Apple TV, strategy
smart TV, Blu-ray players,
iPhone, Android,
• Develop a software to
smartphones with offer all-in-one service
Windows

12. Findings and Recommendations Final Presentation
Netflix can reduce negative risks
associated with content licensing
 Netflix can identify negative outcomes.
 Netflix can develop a plan to reduce
identified negative outcomes.

13. Findings and Recommendations Final Presentation Netflix can reduce negative risks
Negative outcome identification
Situation
Online streaming through licensing by studios
Licensing periods & terms depend on individual contracts
Conflicts
Studios discontinue Studios do not want to Netflix can not retrieve Studios raise
licensing on short renew licensing new content from studios licensing
notice (on acceptable terms) on acceptable terms prices
Negative outcomes
Loss of subscribers Slower subscriber base Increased
& lower revenues through subscribers growth costs
Lower profitability
Loss of market value

14. Findings and Recommendations Final Presentation Netflix can reduce negative risks
Plan to reduce negative outcomes
Ranking of risks by expected negative outcome impact (from high to low)
Plans to reduce risks Plans to reduce outcomes
Studios discontinue licensing on short notice
Netflix implements punishment clause Netflix receives licenses by several studios
Studios do not want to renew licensing (on acceptable terms)
Netflix implements priority clause Netflix contracts new studios
Netflix can not retrieve new content from studios on acceptable terms
Netflix partners with other distributors Netflix sources content in foreign markets
Studios raise licensing prices
Netflix buys on pay-per-view base Netflix (co-) produces content

15. Findings and Recommendations Final Presentation
Netflix can improve profitability to
sustain market leadership
 Netflix can reduce costs.
 Netflix can attract more customers.
 Netflix can reduce negative risks
associated with content licensing.

16. References
Accenture. (2011). Reshaping The Business For Sustainable Digital Growth. www.accenture.com
Accessed: February 22, 2012. Available:
http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Entertainment-High-
Perfromance-Study-2011.pdf
Netflix. (2011) 2010 Annual Report. www.netflix.com. Accessed: February 22, 2012. Available:
http://files.shareholder.com/downloads/NFLX/1707858920x0x460274/17454c5b-3088-48c7-957a-
b5a83a14cf1b/132054ACL.PDF
Netflix (2012) 2011 Annual Report. www.netflix.com. Accessed: February 22, 2012. Available:
http://files.shareholder.com/downloads/NFLX/1707448931x0xS1193125%2D12%2D53009/1065280/filin
g.pdf
Wiley (2009). Economies Of Scale and Scope. www.wiley.com Accessed: February 22, 2012.
Available: http://media.wiley.com/product_data/excerpt/45/EHEP0002/EHEP000245-2.pdf
PBS NEWSHOUR, (2011). Interview “While Netflix Stumbles, Competitors See New Opportunity”
Interviewee: Eric Schmacher-Rasmussen and Cecilia Kang. Last Accessed on 22ND February 2012.
Available: http://www.pbs.org/newshour/bb/business/july-dec11/netflix_10-27.html
ITVS, and Corporation for Public Broadcasting. 2011. “2011 Digital Survey”. Accessed on: 22 February
2012. Available: http://www.pbs.org/newshour/bb/business/july-dec11/netflix_10-27.html
Netflix (2012). Accessed: 21 February 2012. Available: www.netflix.com
Foxnews.com (2011). “Netflix Sags As Wal-Mart Video Streaming Service Debuts”. Accessed: 22
February 2012. Available: http://www.foxnews.com/scitech/2011/07/26/wal-mart-takes-on-netflix-
offers-video-streaming/
Amazon.com
Walmart.com
Store.apple.com