Netflix in 2012: Can It Recover from Its Strategy Missteps?

3245 WordsMar 2, 201613 Pages
Netflix in 2012: Can It Recover from Its Strategy Missteps? Company Overview: Netflix Corporation was established in 1997 by the current CEO, Reed Hastings alongside software executive, Mark Randolph. They are the world’s leading internet television network with over 57 million members in nearly 50 countries enjoying more than two billion hours of TV shows and movies per month, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Additionally members can play, pause and resume watching, all without commercials or commitments. The company was originally only a DVD--by--mail service in which the customer paid for a certain level…show more content…
Physical competitors include Blockbuster and Redbox, whereas virtual rivals include Amazon, Hulu, iTunes, LoveFilm, and cable TV companies. Netflix’s decision to split the businesses was the right one because it created focus and increased the company’s chances of being successful with distinctive business strategies tailored to different natural markets. To thrive, Netflix will have to find a way to execute well with these two bifurcated operating models under one corporate umbrella. Pricing. They got this right, too. Services that deliver discs by mail have different demand curves from those that stream video content, and they also have very different costs to serve their customers. That’s why different pricing schemes make sense. Netflix’s much-decried 60 percent price increase was assessed only on those who signed up for both mail and streaming. Most observers didn’t recognize this point. The net effective price increase, when applied to Netflix’s entire subscriber base, was closer to 20 percent. The company had to adjust its pricing model which came with great complaints on the customer based end. Fortunately for Netflix they lost less than 5 percent of their customers (800,000 out of a subscriber base of nearly 24 million). This furthermore reinforce the decision of Adjusting their pricing was the right one. Brand management. The company really didn’t think this through. Netflix chose to make explicit the distinction

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