Netflix: Shifting Distribution Channels Harvard Case Solution & Analysis

IMD-5-0775 © 2011
Walsh, John; Coughlan, Sophie

Initially it offered a payper-rental system, but in 1999 it changed to a web-based subscription service. It had come to control the DVD rental market recently and by 2010 it had 20 million subscribers, who had access to both postal delivery of streaming and DVD services. It had $2 billion in sales, but spent $600 million per year posting DVDs to its US customers. In 2010 Netflix launched a streaming-only subscription plan for $7.99 (with no DVDs); subscription plans that comprised DVDs increased in price by between $1 and $8, depending on the strategy. Around 60% of Netflix the streaming service had tried, using internet-enabled TV sets, games consoles and Blu-ray disc players.

Additionally, it intended to start a streaming-only service in the UK and Canada in the coming years. The world that is streaming was a competitive one, with high content acquisition prices. It had put Netflix into competition with a brand new set of businesses, jointly with suppliers of content (like cable corporations). Also, would Netflix’s present customer base be effortlessly converted to streaming? Or would the business alienate its customers in the procedure? Learning objectives: The learning objective is to prompt participants to contemplate the challenges of changing business model without (1) losing your competitive advantage in the procedure and (2) alienating your existing customer base.

Subjects: Distribution; Marketing; Web-based; Internet; Streaming; Web-enabled; Customer migration; Changing business models

Settings: US ; DVD rental; Streaming media ; 2010 revenues of USD 2.17 billion ; 1997-2010

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