MGT6890 Mini Case Points: 50

In 2018, Netflix had over 125 million subscribers in some 190 countries worldwide. It had earned almost $12 billion in revenues in 2017, and rapid growth in both domestic and international subscribers had fueled intense investor enthusiasm, causing its market capitalization to reach just under $150 billion and making it one of the fastest-growing stocks on the market.

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When Netflix was founded in 1997, its business model was to rent and sell movies on DVDs by mail. Customers could browse and select movies online, and those movies would be mailed out to the customer, who would then mail the movies back after watching. Though it initially started with a per-movie rental fee like its largest bricks-and-mortar rival, Blockbuster, it soon moved to a subscription fee. Customers could choose among plans with different prices based on how many movies they wanted to rent simultaneously, and they could keep movies out at long as they wanted without late fees. The subscription plan was a hit, and by 2005 the company was shipping out over a million DVDs a day.

One of the most compelling features of the Netflix site was its recommender system. As people rented movies, Netflix prompted them to review the movies they had already seen. It thus steadily accrued a massive database about correlations among movie preferences that it could use to make movie suggestions to users. For example, if a user gave a five-star rating to Journey to the Center of the Earth, the system would suggest they might also like The Mummy, Indiana Jones and Kingdom of the Crystal Skull, and Inkheart.

The service turned out to be enormously popular and soon sounded a death knell for bricks-and-mortar video stores. By having centralized inventory and shipping movies to people, Netflix could offer a much wider selection than physical stores could offer, and its scale meant it could both negotiate better prices on content, and invest in value-added services for customers like the review and recommender systems mentioned previously, online movie trailers, and more. Importantly, Netflix was also a key channel for films by small, independent filmmakers to reach audiences, enabling the company to forge relationships that would prove to be increasingly valuable as time passed.

In 2007, Netflix began offering movie streaming, which rapidly grew to be the preferred mode of movie consumption. Then, in 2011, the company began acquiring original content for exclusive distribution on Netflix, starting with the series House of Cards and Lilyhammer. By 2013, it had moved into co-producing original content with production houses such as Marvel Television, Dreamworks, and others. In 2017, it opened Netflix Studios and began recruiting some of televisions most successful writers and producers to produce original content in house.

For a movie rental service to vertically integrate into developing its own content seemed a peculiar move. Making films and television shows required fundamentally different technology, equipment, personnel, and expertise than distributing films and television shows. What could a specialist in media distribution know about media production? A lot, it turns out.

Netflixs rapidly growing datasets meant that it knew which customers liked which films, which genres were growing, which new stars were gaining followings, which new production houses were gaining traction, and more. The relationships it had cultivated with independent filmmakers and budding actors helped ensure the firms access to a pipeline of new creative talent and helped build goodwill toward the company. Sean Fennessey, a writer for pop culture website The Ringer, explained how important Netflix was to frustrated filmmakers who could not raise enough support to get a major studio movie off the ground, To the creators stifled by the rise of Hollywoods all-or-nothing focus on franchise films, Netflix felt like salve on an open wound.

Netflix also used its massive distribution reach to promote its original content, building audiences for its series and crafting its reputation as a first-tier production house. As put by Ted Sarandos, Netflix Chief Content Officer, the way we can secure those shows is having a great reputation with talent, having a brand people want to be associated with, and a good track record of delivering.

Furthermore, while most film studios needed to profit directly from their films, Netflix profited in multiple ways from its content: Having popular, exclusive shows helped attract and retain subscribers, and having both a large audience and a powerful library of original content gave it more bargaining power when negotiating license fees for content produced by others. Collectively, it was a powerful advantage.

Netflix planned to spend $8 billion on original content in 2018an estimated 700 original shows and including 80 original filmsmaking it the largest film producer in the United States. In fact, in the first quarter of 2018, Netflix made 25 films, the same number as the next six largest U.S. studios combined.

Objectives: 1. Ability to explicitly explain the main topics and issues in the assigned mini case 2. Ability to relate the article/case to relevant concepts 3. Ability to organize logical arguments to support conclusions 4. Ability to illustrate ideas with examples 5. Ability to deliver clear and effective communication to audience 6. Ability to use correct grammar and moderate speaking pace in speech Mini Case Questions: Read Netflex in 2018; opening case in Chapter 9 of the textbook. Take the position of a new CEO to Netflex and reflect on its journey from 1997 to 2018. Propose the next new move for the company. Explain your rationale; your objective is to get your teams buy-in. There is no one right answer. You must refer to at least one topic discussed in class that is the cornerstone for your argument/position. You are encouraged to do outside research to gather more information as needed. Format: - Summarize your approach in the form of an informative executive report (800 to 1000 words), no formatting requirements

Rubric:

Adequate integration of course concepts including but not limited to PESTLE chart, Five Forces chart, Industry lifecycles, and any other concepts as applicable: 15 points a. Ability to explicitly explain the main topics and issues on the assigned article b. Ability to relate the article to relevant strategy concepts c. Ability to illustrate the strategy concepts with examples d. Rigorousness of adopting the strategy conceptual frameworks 2. Clarity of recommendation/response to the case question: 10 points 3. Written communication skills: 10 points a. Clarity of the writing structure and organization b. Content development with key strategy concepts and examples. c. Professional writing style with the target audience as business professionals. d. Appropriate use of visual aids such as charts and tables as in the appendix.