Other industry reports estimate that the streaming

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Other industry reports estimate that the streaming media software market will generate more than $800 million by the year 2007. Arbitron release a study in 2004, which stated that 20
BUSI 690-D06: Group Case Study 1: Netflix108 million U.S. viewers or 44% of the U.S. population have used video streaming at least one time. It also stated that there was a 10% increase in internet video viewing fromthe year 2000. Additionally, a report released in March 2005, indicated that U.S. consumers prefer to have control of their media entertainment which streaming media provides (O’kennon, 2007). With numerous studies indicating an increase usage of videostreaming, Netflix needs to change its strategy from physical video rental service to the online streaming to achieve sustainability in this industry. Short-Term ObjectiveNetflix’s short-term objective must be to concentrate on profitability and growing its subscription base. Profitability can be gained by lowering cost to acquire subscribers, and increase the average revenue per paying subscriber. Growing Netflix’s subscription base is also vital to revenue growth and fostering brand loyalty. Netflix can grow subscription through competitive pricing and added product value in the form of customer service. To retain older subscribers, Netflix should establish a time based incentive program for customer to stay with Netflix or deter them from canceling their subscription. Based on Netflix’s data, they regain the acquisition cost in the seventh month and therefore, a benefit for subscribers who reach their seventh month university should be offered. This benefit could be in the form of a free streaming content or fee discount. This incentive could be extended to one, two and three year subscriber anniversary. Long-Term Objective21
BUSI 690-D06: Group Case Study 1: NetflixNetflix already has an existing online customer interface that can be converted to online video streaming. However, there are some weakness that must be addressed in order to be viable long term in the digital distribution marketplace. To meet the long termgoal of content distributor, Netflix must establish a strong streaming technology; overcome movie studio’s control over the digital content release dates and cost of licensing. Additionally, they will have to work out the distribution rights and the availability of streaming movie titles. Netflix streaming technology must provide fast, easy to use and high picture quality. Therefore, adequate investment in research and development in digital streaming technology will be needed. With technology constantly changing, it is recommended that Netflix acquire a small technology firm that can first spearhead the development of the streaming technology and head the innovation in streaming videos. Investing in technology could lead to higher returns with the transitionof the video rental market transitioning into the digital distribution arena.

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