Case Study: Netflix, Inc. (A): The 2011 Rebranding/Price Increase Debacle (Case 27)
CASE ABSTRACT: In 2011 Netflix was the world's largest online movie rental service. Its subscribers paid to have DVDs delivered to their homes through the U.S. mail, or to access and watch unlimited TV shows and movies streamed over the Internet to their TVs, mobile devices, or computers. On September 18, 2011 Netflix CEO and Co-Founder Reed Hastings announced on the Netflix blog that the company was splitting its DVD delivery service from its online streaming service, rebranding its DVD delivery service Qwikster as a way to differentiate it from its online streaming service, and creating a new website for it. Three weeks later, in response to customer outrage and confusion, Hastings rescinded the to rebrand the DVD delivery service Qwikster and re-integrating it into Netflix. Nevertheless, by October 24, 2011, only five weeks after the initial split, Netflix acknowledged that it had lost 800,000 US subscribers and expected to lose yet more, thanks both to the Qwikster debacle and the price hike the company had decided was necessary to cover increasing content costs.
Despite this setback, Netflix continued to believe that by providing the cheapest and best subscription-paid, commercial-free streaming of movies and TV shows it could still rapidly and profitably fulfill its envisioned goal to become the world's best entertainment distribution platform.
CASE OBJECTIVES: 1. To discuss the merits of the Rebranding Decision at Netflix.
2. To discuss Netflix's new pricing structure.
3. To discuss domestic/international online growth opportunities.
4. To discuss streaming vs. mail order distribution.
5. To discuss original content strategies.
Paper, 12-15 pages, due by the end of week 8, must include the following elements: Title page, Executive Summary, Content, Reference page(s). Remember that you are to research Netflix and provide a minimum of 10 resources that must be applied in the case analysis. You must adhere to ALL APA rules and guidelines. If you have questions about any APA guidelines, please ask me.
NOTE: You will follow the same format as the Amazon case
Analyze the following in the case analysis:
Each of these content areas should be addressed
• Historical Background and Current Situation of Netflix
• Governance information i.e. CEO, COB, VPs, Board of Directors, etc. (same as for Amazon)
• Application of the Pearce and Robinson Strategic Management Model (p. 11) with its 11 steps as described in the course book (Robinson_Chapter_1) as it aligns with Netflix (see the 3 functions of the model as it aligns with strategic management process on pp. 11-15). Each area of the 11-step model will be addressed with a paragraph analyzing how Netflix has applied the model to their strategic planning process.
• External Analysis
• Internal Analysis
• Analysis of Strategic Factors
• Strategic Alternatives and Recommended Strategies
• Summary and Conclusion
Please address the following questions within each of the areas above:
• Did Netflix underestimate the push-back from their price increase? (External Analysis)
• Did Netflix underestimate the bad publicity from their new pricing structure? (External Analysis)
• Did Netflix underestimate the number of subscription cancellations that resulted from their new pricing structure? (Internal Analysis)
• Is Netflix actually correct in moving from mail order distribution to online streaming? (Internal Analysis)
• Discussion of implications of the case for middle managers. (Internal Analysis)
• Did Netflix implement too quickly? (Analysis of Strategic Factors)
• Can Netflix compete with Amazon Prime? (Analysis of Strategic Factors)