netflix case study 2007

How Netflix Moved Operations to the Cloud and Saw Revenue Boom: A Digital Transformation Case Study

Remember the time you had to request mail-order DVDs to catch the latest flicks while munching popcorn on your couch?

Me neither.

It’s strange to think that about a decade ago, streaming giant Netflix had a business model built around direct mail.

Request a movie, put a few in your queue for next time, and let the anticipation build as you wait for your first DVD to arrive on your doorstep.

Now, our instant gratification bells ring daily as we pour through episode after episode of new material. And, we can barely remember the (dark) time where we waited days for entertainment instead of having it literally at our fingertips.

The shift from mail-in orders to a cloud streaming service improved customer satisfaction and made Netflix billions.

The company’s move to the cloud came with a hike in customer loyalty and a brand that competitors still fight tooth and nail to beat in the market.

Netflix serves as the ultimate digital transformation case study.

They transformed their entire business model and charted unprecedented waters. Here’s how to use their model as inspiration for your contact center’s digital transformation.

How to move your operations to the cloud, Netflix style: A digital transformation case study.

21 years after they started renting DVDs, Netflix now sits at a valuation of almost $145 Billion .

They came to market as a disruptor of traditional video stores like Blockbuster and Family Video.

Netflix founders Reed Hastings and Marc Randolph wanted to bring customer-centricity to the video rental market. At the time, renting videos was inconvenient and costly, with customers often plagued by expensive late fees.

They created an entirely new way to watch movies and consume content. And as time went on and subscribers grew, they continued to shift to keep pace with new consumer demands.

In 2007 , they took their first step into the world of streaming video. They offered customers a streaming subscription in addition to the more traditional DVD rental service, giving customers the option to chart their own path.

Since then, they’ve seen exponential growth in subscribers and revenue. Let’s take a look at their trends over time. We’ll skip over the first few years of the company’s infancy and jump to the year the company went public.

Here’s how Netflix has grown since 2002.

That incredible growth trajectory, and willingness to change, made Netflix stock skyrocket by 6,230% in a 10-year period.

And, they did it all without crazy price hikes, keeping customers top-of-mind.

While Netflix has adjusted prices over the years, they strike a balance by adding more value and services for the dollar. In 2019 , the Basic plan increased by $1 a month (adding up to $12 annually). While the Standard and Premier plans rose by $2 per month, (adding up to $24 annually, for each plan).

Meanwhile, the company is putting some $15 billion towards creating new content binge-watchers will love.

After this price change, Netflix saw a slight blip in subscriber growth, with growth in Q2 coming in low. But, analysts don’t think for a second it’s the beginning of a downward trend. In fact, a similar event happened back in 2010 when Netflix moved to a pricing model that broke out streaming and video rentals. And they clearly rebounded.

When you put the numbers into perspective, you see this is the first dip in subscriber growth in nearly a decade. That’s pretty remarkable. And, revenue still increased for the quarter. It’s clear the value of the digital innovator’s services still outweighs the cost for most.

Plus, if you can post positive revenue numbers for over a decade and become a multi-billion-dollar company in about 20 years, you’re doing alright.

Here’s what Netflix did to reach these lofty heights. And, how you study the same tactics to lead your contact center through a successful digital transformation.

Stay true to your vision.

Netflix started out with the idea to make it easier and less expensive for people to watch movies.

But they didn’t want to stay in the DVD game forever. They had the foresight to predict that consumer behaviors would continue to shift. And, they wanted to stay ahead of the competition.

Only, they didn’t sacrifice their vision when it came time for company-wide changes. Instead, they realigned their business strategies to fit their vision, even as consumers and trends shifted.

What you can do:

As you make digital shifts in your contact center and your company, keep your vision constant. While tons of other factors may orbit around you, your vision keeps you grounded.

Use your company vision to guide your decision-making. And, use data and trends to predict how your customer behavior will shift.

As you shift to keep pace with your customers’ needs, align your operations to your customer behaviors to realize your vision.

Reinvent the wheel if the old one doesn’t solve customer problems.

Netflix soared from seed idea to a $145-billion-dollar valuation in only 21 years. (Wow, they did that in less time than it took big tech vendors to break CSAT scores.)

And they didn’t get there by spinning up a new-and-improved version of Blockbuster.

Ted Sarandos, Head of Content at Netflix said when he came on board at the early stages of the company founder Reed Hastings used his vision to scale and innovate at Netflix.

“We never spent one minute trying to save the DVD business,” said Sarandos .

The company leaders didn’t stick to traditional best practices because they no longer worked for modern customers.

Instead of piggybacking off what other companies did, Netflix solved problems differently. And, they solved them better. The proof is in a bankrupt Blockbuster and dwindling Family Video stores.

Want to know what you’re missing when you only look at digital transformation best practices? Pop over to our article on the topic.

Tailor your path and contact center strategies to your specific business needs. Focus on listening and understanding your customers, with the help of better data and customer surveys .

Find out what’s causing your customers’ pain. See what common questions your customers have. Work with your sales team to find out why customers are fleeing competitors. Discover why they choose your products and services in the first place. Then, work with your contact center and company leaders to develop the methods to solve these pains.

Don’t get caught up in what your competition is doing. What they’re doing might work, but your actionable data and customer information can guide you to a way that works better.

If you’re going to be consumed by one thought, let it be this one: how might we better serve our customers?

Don’t force your customers down a single path.

In the early phases of Netflix, internet speeds weren’t built for streaming movies. People who tried to download and view movies online were only frustrated by the lengthy, often interrupted experience of watching a film online.

Netflix didn’t want to enter the streaming market until the right infrastructure was available to support a platform with high-quality and high-speed content. They didn’t want to taint their brand from day one, linking the Netflix name to all the baggage that came with poor streaming experiences.

At the same time, they were watching postage prices. The price of postage kept rising, and internet speeds were on the ups. By watching how the market and internet infrastructure changed, they identified the right moment to launch their first streaming service.

They tested their streaming service with lower-quality video, first. They wanted to gauge interest and customer experience without canceling their bread-and-butter DVD service.

Those who wanted access to the crisp DVD picture could still order movies to their doorstep. Others who wanted instant access could forgo the high-quality picture for convenience, instead.

Your contact center and customer experience will change. It has to. But as you make changes and shift your operations to the digital era, keep options open for your customers.

Just because chat and email are on the rise as popular customer service channels doesn’t mean every customer wants to use them. Use past data and communication history to learn more about your customers. Then, coach your agents to handle each interaction based on the customer’s preferences.

Bringing changes to your contact center has the potential to transform your customer experience for the better. But, without careful intention, it can also cause friction. Introduce changes to your customers slowly, and make sure your agents are always there to offer extra help through the process.

Use data and trends to personalize your customer experiences.

This one’s huge. It’s how Netflix keeps customers engaged with their platform, and how they coined the term binge-watching

As Netflix made changes in their operations, they watched their data like a hawk. They looked for trends on how people watched content, what kept them watching, and how personalization fueled content absorption. Then, they used an algorithm to serve up content tailored to their customers’ specific interests.

“Like a helpful video-store clerk, it recommended titles viewers might like based on others they’d seen.” – Twenty Years Ago, Netflix.com Launched. The Movie Business Has Never Been the Same , by Ashley Rodriguez for Quartz .

And, as their new cloud-based business let them scale globally, their data points multiplied.

Previously, Netflix could only mail DVDs to U.S. customers. Shipping DVDs overseas wouldn’t have been financially sustainable while keeping prices fair for all customers. Moving to an online business model allowed Netflix to target and reach new audiences without taking on the costs of shipping globally.

Doing this not only scaled their business, but it diversified their data and made their algorithm smarter. Enter, extreme personalization and binge-watching fever on a global scale.

Track and analyze data from your customer interactions. Create custom reports and dashboards to distill important findings from your data. Then, use the trends and patterns you find to personalize your customer service experiences.

From the way you send customer surveys to the tone your agents use, your interactions tell you what your customers want. Lean into your analytics for valuable insight into how to help your customers.

And, use the data to transform your contact center too. Customer data is a powerful tool to drive business change. If your metrics show customers aren’t happy, your company leaders want to know about it. And, they’ll want to fix it. There’s no better case for company transformation.

Netflix took risks to transform their business. But, there’s no bigger risk than stagnation. Staying the same doesn’t help you reach your contact center goals. Innovating and trying out your big ideas is what separates the leaders from the laggards.

Can your tech vendor survive in your digital transformation?

Learn how to choose vendors who make your transformation strategy possible.

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The Power of Digitalization: The Netflix Story

• Conference paper
• First Online: 18 May 2020
• Cite this conference paper

• Manuel Au-Yong-Oliveira 20 , 21 ,
• Miguel Marinheiro 20 &
• João A. Costa Tavares 20  

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 1161))

Included in the following conference series:

• World Conference on Information Systems and Technologies

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The evolution of technology, and mainly the evolution of the Internet, has improved the way business is done. Nowadays, most services are offered through a website or through an app, as it is much more convenient and suitable for the customer. This business transformation made it possible to get a faster and cheaper service, and companies had to adapt to the change, in order to fulfill customers’ requirements. In this context, this paper relates to this digital transformation, focusing on a case study about Netflix, a former DVD rental company and currently an online streaming leader. We aimed to understand Netflix’s behavior alongside this digital wave. Thus, we performed a survey, which had 74 answers, mainly from Portugal, but also from Spain, Belgium, Italy, Turkey, Georgia and Malaysia. Of the people who answered the survey, 90.1% were stream consumers, but only 59.1% had premium TV channels. From those 90.1%, 58.3% also said that they watched streams between two and four times per week, but the majority of premium TV channel subscribers (63.8%) replied that they watch TV less than twice in a week. We see a trend in which the traditional TV industry is in decline and streaming as a service has increased in popularity. Consumer habits are changing, and people are getting used to the digitalization era. Netflix is also confirmed in our survey as the market leader of the entertainment distribution business, as stated in the literature, and the biggest strength of this platform is its content.

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Au-Yong-Oliveira, M., Marinheiro, M., Costa Tavares, J.A. (2020). The Power of Digitalization: The Netflix Story. In: Rocha, Á., Adeli, H., Reis, L., Costanzo, S., Orovic, I., Moreira, F. (eds) Trends and Innovations in Information Systems and Technologies. WorldCIST 2020. Advances in Intelligent Systems and Computing, vol 1161. Springer, Cham. https://doi.org/10.1007/978-3-030-45697-9_57

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Mon - fri: 9am to 5pm, from a small ecommerce model to a fortune 500 saas company: a comprehensive case study on how netflix leveraged digital transformation.

Jan 16, 2023 Business 0 comments

Get an in-depth look at the strategies, technologies, and best practices used to grow Netflix into a streaming giant. Discover what you can do to replicate their success and stay ahead of the competition.

In 1997, a small company was founded by two men named Reed Hastings and Marc Randolph in a small town in California named Scotts Valley.

The true story started when Marc discovered how DVD—a new product invented in Japan—would send the timely VHS packing.

So after brainstorming on what they could do with this new DVD product and successfully pitching the idea to Reed Hastings, both Marc and Reed walked into a record store in Santa Cruz, California, and purchased a CD. Then they proceeded to mail the CD to Reed’s house across town.

When the CD arrived intact, Reed and Hastings knew they had struck gold with this idea; and on August 29, 1997, Marc Randolph and Reed Hastings launched a subscription-based business model that afforded customers unlimited content for $19.95 (£16.31) with no due dates and late fees.

They would call it Netflix , and it would go on to epitomise the true essence of digital transformation over the years while changing the course of TV culture forever.

But to understand how Netflix went from a small eCommerce business model to a giant Software-As-A-Service company, the question you should ask is:

What Is Digital Transformation, and How Did It Work for Netflix?  

To answer both questions, let’s consider the “what?” before the “how?”

What Exactly Is Digital Transformation?   

To put it succinctly, “digital transformation” is the process of shifting away from a more traditional business model and toward those that use more cutting-edge digital technology and processes.

Contrary to popular belief, digital transformation is a strategy implemented through the use of new and advanced technologies to bring about developmental changes in the way business is conducted, improve the customer experience, and scale a business model.

How Did It Work For Netflix?  

Netflix is a great example of how digital transformation has worked for a company. It has proven that digital transformation isn’t a sprint; it is a marathon. A journey of digital evolution over the course of time

Since Netflix was just a DVD rental service, it has had to resort to physical stores and mailing DVDs to serve its customers.

However, when it shifted its focus to streaming services, it was able to reach an even wider audience and expand its reach globally.

The success of Netflix can be attributed to its early adoption of digital transformation methods that allowed it to make the most of new technologies and maximise profits.

To fully understand how Netflix leverages digital transformation, we must first ask:

What Steps Has Netflix Taken in Their Digital Transformation Journey?  

Netflix developed a recommendation algorithm.

Before Netflix introduced streaming services, they were using a recommendation system called Cinematch for their DVD rental service.

However, the transition to video-on-demand would mean that they could replicate that for their streaming services and even make it better.

To do this, they;

Used available cache data from their former system of customers and users to execute a proper recommendation system.

Used metadata to categorise movies under similar or the same genres to make recommendations easier for users.

Used A/B testing to test and improve their customer experience.

Netflix used cloud computing to improve their storage processes.

One of the perks of going digital for any business is that you get unlimited storage for data. And for a company like Netflix with an outrageous amount of data to store, cloud computing was the smart choice to proceed.

Netflix integrated with Amazon Web Services to manage this issue.

Netflix’s Pioneering Approach to Monetizing Content and Generating Revenue

Before Netflix, subscription-based content wasn’t a popular model. The emergence of Netflix disrupted the industry and sent Blockbuster, which was using the traditional method of disrupting content and generating revenue, into bankruptcy.

It was a classic illustration of how businesses can be left in the dust when they fail to evolve with the times. Also discussed is how businesses can scale through effective digital transformation.

Netflix pioneered a subscription-based model for DVD rentals and eventually revamped the idea into a streaming service business model.

Today, Netflix’s pioneering approach to monetizing content and generating revenue has only just evolved.

Based on the desired video quality, Netflix offers three different pricing tiers: basic, standard, and premium. Typically, the first month of the subscription is free.

Basic with the normal resolution is $7.99 a month, but only one device may utilise it simultaneously.

On the other side, paying $13.99 a month gets you access to Ultra HD streaming on four devices in addition to HD content on two devices.

The Use of Data Analytics by Netflix to Improve Decision-Making

With the help of data analytics, Netflix has been able to gain new insights into their customers’ likes and dislikes, helping them make more informed decisions when it comes to content development and marketing strategies.

Data analytics have played a pivotal role in Netflix’s digital transformation, giving them an edge over its competitors.

This is evident from the fact that Netflix uses advanced data analytics techniques such as predictive modelling, sentiment analysis, customer segmentation, and natural language processing to gain deeper insights into customer behaviour.

By understanding their customers better, they have been able to create personalised recommendations and optimise content for each customer segment.

Monumental Netflix Milestones To Illustrate Their Digital Transformation Journey  

The 1990s–2000s: At the time that Netflix launched, Blockbuster was already the leading giant in the movie rental business.

However, a subscription-based DVD rental service was a genius business model in the 90s and maybe in the early 2000s. But this didn’t stop Netflix from facing a financial crisis due to, the high cost of shipping DVDs through the US postal service.

Netflix solved this logistics problem by cutting ties with postal services and developing a web-based chain with warehouses for DVD distribution.

This move catapulted Netflix subscribers from around 300,000 to 6.3 million in 2006 and generated $80 million in the process.

2007: What makes Netflix’s story admirable and worthy of imitation is how well it adapts to changing times. Which is what digital transformation is all about.

Netflix, seeing how the world of technology keeps on advancing and how much speed the 21st century brought to internet users around the world, launched the next facet of their business model—the video-on-demand (VOD) model.

And for the first time ever, Netflix reimagined their identity and introduced streaming services into its business model.

2012: Five years later, after introducing and focusing on streaming services, Netflix starts creating original content for their subscribers.

2013: In August, Netflix launches user-profiles and makes this service available to all users.

2015-2016: Netflix reaches monumental milestones of 50 and 130 countries, respectively, in both 2015 and 2016.

2021: 24 years after it was founded in a small town in California, Netflix hits 209 million subscribers in 190 countries while generating an annual income of over $25 billion.

How Can Digital Socius Help You With Your Business’s Digital Transformation Journey?  

Digital transformation is not a goal; it is a journey.

So it is no surprise that businesses have been struggling to keep up with the rapidly changing digital landscape, often feeling overwhelmed and confused by the many options that are available.

As a business owner, it can be hard to stay on top of the latest trends, know what digital solutions are best for your company, and figure out how to get started with digital transformation.

Digital Socius is here to help! Our team of experts can guide you through the entire journey of digital transformation, from assessing your current situation to setting goals and creating a plan of action to reach them.

We’ll provide you with tailored strategies that are specific to your business, so you can move forward confidently and quickly.

Join our many satisfied and returning clients, and let us walk you through the journey step by step and show you how to get it right the first time. Click here to book a free discovery call to get started.

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Netflix Change Management Case Study

Netflix is one of the world’s leading internet television networks with over 100 million members in 190 countries. It has a wide variety of award-winning original programming, documentaries, TV shows and feature films. 

Netflix offers a subscription services to its users to watch all its content online. Now Netflix is producing its own content and also adding quality content of other producers for its users. It has become one of the popular online video streaming web portals and been on first top 50 websites globally.

But Netflix transformed itself and it embraced change with ever changing technology and business market.

What is Netflix successfully change story? How it happened and what challenges it faced to cope with change?

For this questions, we are presenting here Netflix change management case study.

This case study will explore how Netflix has successfully managed change in the past and present. It will also provide recommendations for other businesses on how to approach change management.

The story of Netflix change management

Netflix is a streaming service for movies and TV shows. It has a library of over 200,000 titles that you can watch on your phone, tablet, computer, or TV. You can also download shows to watch offline. Netflix offers a variety of plans, including a basic plan that starts at $7.99/month and a premium plan that starts at $11.99/month.

Netflix was founded in 1997 by Reed Hastings and Marc Randolph. They started the company with the intention of offering a DVD-by-mail service. In 2007, they introduced streaming, which allowed instant streaming of TV shows and movies on your computer. In 2013, they introduced the concept of ” binge watching” with the release of House of Cards, which all episodes of the first season were released at once so that viewers could watch them all in one sitting. In 2015, they launched their own production company, Netflix Originals, which produces movies and TV shows that are only available on Netflix. 

Netflix has undergone several changes since it was founded. The most notable change was the introduction of streaming in 2007, which changed the way people watched TV and movies.

Netflix made two big changes since its started business. First, it introduced the subscription option in 1999 to store DVD rental. This option allows users to rent unlimited DVD rental without late fees. It was a drastic change in the business model of Netflix.

The second big change was happened in 2007, when it launched an online video streaming service. It was a highly disruptive change which completely revolutionalized the concept of watching movies and Tv shows online. Consumers also welcomed this change because this change was the need of time. Because everyone was using smartphone, laptops and computers and trend of going to cinema to watch a movie was on decline. Netflix also used social media and present its content to reach out their customers.  

Netflix’s Change Management Process 

Netflix’s change management process is a model for other organizations to follow. The company has a dedicated team that is responsible for managing change. This team works closely with Netflix’s engineers and product managers to ensure that changes are made in a controlled and safe manner. Netflix has also implemented a series of mechanisms to help prevent and mitigate the impact of changes. For example, all changes are assessed for risk before they are implemented. Netflix also conducts regular post-change reviews to identify any issues that may have arisen from the change. As a result of these measures, Netflix has been able to successfully manage change while minimizing disruptions to its business.

How Netflix manages organizational change forces

There are many factors that affect organizational change . But primarily these are two broad forces of organizational change: a) external and b)internal. Among the external forces there were rapid changes in technology, globalisation, social media etc. These all external factors led to organizational change at Netflix. .For instance, people’s expectation and behaviour, likes and dislikes in terms of watching content was changing due to new technology. New tools, techniques were also affecting business of movies watching and TV shows. But Netflix managed all those forces of change and responded in a big way to meet expectations of its consumers.

There were also internal forces of organizational change like new skills of employees and employees expectations, need of change in work environment, cost of business model etc. Netflix taken all these factors into consideration before going to execute change. And that’s the reason behind their successfully implementation of change.

How Netflix Uses Data to Drive Change 

Netflix’s data team is made up of over 800 people, including statisticians, analysts, and engineers. Their mission is simple: “to help Netflix understand its business and the world.” To do this, they collect and process tons of data every day. This data comes from a variety of sources, including things like clickstream data (what you watch and when you watch it), surveys, social media activity, third-party research, and more. 

Once all this data is collected, it’s organized and stored in a massive data warehouse. This is where things start to get really interesting. The team then uses a combination of qualitative analysis (looking at the meaning behind the numbers) and quantitative analysis (using statistical models to draw conclusions) to glean insights from the data. These insights are then used to inform everything from what new shows to green-light to which actors should star in them. 

For example, let’s say the team notices that a lot of people who watch Stranger Things also tend to watch You. They might then use this information to suggest Stranger Things to people who haven’t watched it yet or recommend You to people who have finished Stranger Things and are looking for something similar. This is just one small example of how Netflix uses data to drive change within its business. 

It’s clear that data plays a big role in everything Netflix does. From deciding which new shows to produce to suggesting content for individual users, data is at the heart of the company’s decision-making process. And as our watching habits continue to be tracked and analyzed, we can expect even more personalized recommendations and a more tailored streaming experience overall.

Learning from drastic changes

In order to maintain a successful business, it is important to occasionally review your company’s methods and make changes where necessary. This is especially true in today’s ever-changing marketplace. Netflix, a leading provider of streaming video content, knows this well. In 2011, the company made a drastic change to its business model that upset many of its customers. However, thanks to careful planning and execution, the change was ultimately successful and resulted in increased profits for the company.

The introduction of drastic changes can be a difficult process, but with proper planning and execution, it can be successful. Netflix provides a great example of how to successfully navigate a major change. By carefully considering the needs of its customers and taking the time to properly execute its plans, the company was able to weather the storm and come out stronger than ever before.

Final Words

Netflix is a great example of change management. Business organizations can learn from Netflix change management case study to keep up with the latest changes and trends. Netflix has been successful in managing change by using data to drive their decisions. There are multiple lessons for other business entities that how Netflix capitalised on its human resources and rightly understood needs of modern-day customers.

About The Author

Tahir Abbas

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Netflix vs Blockbuster – 3 Key Takeaways

It’s the ultimate example of technology disrupting a marketplace…

Or is it really the story of a leadership shakeup that toppled an empire?

Or is it a story about the extreme hatred people have for late fees?

The Netflix vs. Blockbuster saga has been told a dozen different ways, with a dozen different lenses applied.

And what I’ve come to realize (and this likely won’t come as a huge surprise)is that there’s no single explanation for why Netflix succeeded where Blockbuster failed.

As is the case with most things in life, it was a nuanced situation. There was a perfect storm of poor decisions and technological advances and other contributing factors that led to Netflix’s staggering growth…and Blockbuster’s equally staggering decline (when Blockbuster filed for bankruptcy in 2010, Netflix’s annual net income was $161 million .)

My goal with this post is to distill everything I’ve learned about these two companies down into a few actionable takeaways for marketers – sort of like this post on Zoom’s success story .

But first, for those who aren’t familiar with how the Blockbuster vs. Netflix story unfolded, here’s a short summary:

The Rise of Netflix (and the Fall of Blockbuster)

When Netflix launched in 1997, Blockbuster was the undisputed champion of the video rental industry.

Between 1985 and 1992, the brick-and-mortar rental chain grew from its first location (in Dallas, Texas) to more than 2,800 locations around the world.

Two years later, Viacom paid $8.4 billion to acquire Blockbuster .

So by the time Netflix showed up on the scene with its video rental-by-mail service, it appeared to be a classic case of David vs. Goliath.

In fact, in the year 2000 –perhaps realizing that it’d be easier to fight alongside Blockbuster than against them – Netflix co-founder and CEO Reed Hastings approached Blockbuster’s then CEO, John Antioco, with a merger proposal:

Hastings wanted $50 million for Netflix. And as part of the deal, the Netflix team would run Blockbuster’s online brand.

Of course, that deal never materialized. Partly because Blockbuster laughed in Netflix’s face when they met to discuss the deal.

“It was tiny, involuntary, and vanished almost immediately. But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh,” Netflix’s Marc Randolph remembers of the encounter.

At the time, Antioco considered Netflix to be small potatoes, and would come to realize only too late that having an online platform would be the way of the future.

In 1999, Netflix received backing from Groupe Arnault, giving them a $30 million cash injection that helped launch its subscription-based service.

In 2004, Blockbuster did launch a Netflix-like online DVD rental platform , and even abandoned their unpopular (but lucrative) late fees for overdue rentals.

By 2006, subscribers for Blockbuster’s online services had grown to more than 2 million. (Meanwhile, in that same year, the number of Netflix subscribers reached 6.3 million.)

Then in 2007, Antioco left Blockbuster, late fees were reinstated, and Blockbuster’s online efforts were put on the back burner.

In 2008, Netflix signed a deal with Starz to stream around 1,000 blockbuster movies and shows on its service.

Blockbuster’s fate was all but sealed.

In 2010, Netflix was signing deals with names like Sony, Paramount, Lionsgate, and Disney to help them grab a 20% market share of North American viewing traffic. On July 1st of the same year, Blockbuster was de-listed from the New York Stock Exchange and filed for bankruptcy having incurred nearly $1 billion in losses.

Image Source

Netflix’s valuation at the time?

$24 million.

For comparison, today, Netflix is valued at around $203 billion – a 4,060% increase from its valuation back in 2000.

3 Takeaways from the Netflix vs. Blockbuster Battle

1. never forget what you’re really selling..

For years, Blockbuster dominated the video rental space. But at some point, they lost sight of what business they were really in.

Instead of focusing on delivering incredible (and affordable) entertainment to their customers – something Netflix definitely has down – Blockbuster put more stock in the model they were comfortable using.

And hey, who can blame them? Back before the internet became integrated into nearly every facet of our lives, it was hard to imagine brick-and-mortar Blockbuster stores disappearing.

Blockbuster initially succeeded because they did one core job better than anyone else: delivering entertainment to people’s homes.

But as we all know, technologies change. And instead of investing all of their efforts into finding a new way to deliver on their true purpose (more on that in the next section), Blockbuster’s innovation stagnated. That reality hit Netflix founder Marc Randolph when the business was pivoting from a Mail-order DVD service to online streaming.

He wrote in his book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea :

“We’d finally figured out a way to make our original idea of DVDs by mail work, and here we were, looking ahead to a future without either DVDs or mail.”

The way Netflix overcame its challenges? Keep reading 👇

2. You need to be willing to adapt. (And half measures won’t cut it.)

1997 era Netflix–before the company embraced streaming

When you dig into the Netflix vs. Blockbuster story, it becomes clear that Blockbuster did (eventually) realize that the Netflix model was the future. And they did make changes to address it.

But in the end, it was too little, too late.

Blockbuster could never fully evolve into the modern business it needed to be in order to compete with Netflix. Once owning 9,000 stores in the US, Blockbuster now has a single brick-and-mortar presence – a lone store in Bend, Oregon .

Sandi Harding, the owner of the single remaining Blockbuster store in the world. Source .

As Forbes reported:

“The irony is that Blockbuster failed because its leadership had built a well-oiled operational machine. It was a very tight network that could execute with extreme efficiency, but poorly suited to let in new information.”

Technologies improve. Industries change. In order to grow, you need to keep a pulse on the ever-evolving needs and preferences of your customers so you can make changes to your model accordingly.

London-based Video Producer Andy Ash says this was Blockbuster’s downfall. The company was too busy making money in their video stores to imagine a time when people would no longer want or need them.

“In a bid to rescue their business, their answer at the time was to fight fire with fire. At one point they even opened up rental kiosks, a little bit like a vending machine, but all of these attempts were based on either outdated technology or outdated business models, whereas Netflix at the time, they did the opposite; they streamlined, they were able to see the future of video rentals and then innovate for that future.”

This applies to products and services as well as to marketing strategies. Believe it or not, marketing channels have a shelf life.

So even if you learn how to dominate a specific channel , you need to remember that all channels, no matter how popular they are today, could someday fade into oblivion…just like brick-and-mortar Blockbuster locations did.

The key to surviving, and thriving?

Embrace change.

Blockbuster didn’t. Even in 2008, the company’s CEO, Jim Keyes , was perplexed by (or refused to accept) Netflix’s appeal to customers:

“I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.”

As Square2Marketing’s Mike Lieberman explains :

“Blockbuster didn’t believe a month-to-month subscription service would ever actually work. And it certainly wasn’t planning on going digital. Even when the company was offered a buyout deal early on, it declined, believing that its previous business revenue model would work just as well in the new wave of movie watching as it had in the past.”

3. The customer-driven approach always wins.

Customer-driven sales & marketing from drift.

As we’ve already established, there were several factors that contributed to the company’s downfall, including not understanding what business they were really in – entertainment, not retail – and not being flexible enough to adapt.

But another key piece of the puzzle was Blockbuster’s unwillingness to put their customers first. The company’s revenue relied (massively) on charging late fees. As David Reiss explains:

“Blockbuster’s profit had to be sufficient to sustain their worldwide stores and staffing levels. As well as their pricing structure reflecting this, their profit also relied on something their customers hated – late fees. A significant portion of the revenue that Blockbuster needed to stay in business was a revenue stream that Netflix didn’t even charge for, as you could keep their movies as long as you wanted. Whereas Netflix developed a business model that simplified the video-renting process, making it more enjoyable for customers, Blockbuster only thought about maximizing their own returns.”

Forbes described Blockbuster’s reliance on penalizing its patrons in the form of a late fee as the company’s “Achilles heel.” When Blockbuster did finally address the issue, the cost of dropping late fees from their model amounted to a loss of $200 million.

“Any time you can get rid of the No. 1 customer dissatisfaction factor and in the process generate higher customer traffic, for me, as a retailer, that spells a good answer,” CEO John Antioco said of the move at the time.

Narrator: it didn’t work.

At the same time, the company cut its late-fee revenue stream, it was building out its online platform cost another $200 million. If you add up these two costs, Blockbuster paid $400 million in an effort to modernize and remain competitive with Netflix.

We’ll never know if this plan would have succeeded. Shortly after this modernization effort, Antioco was ousted by the board after the changes were made.

Blockbuster then returned to their company-driven ways…and went bankrupt a few years later.

Final Thought: Change Is Inevitable

When I was a kid, getting to pick my own movie at Blockbuster was a rite of passage.

Every weekend, my siblings and I would pile into my dad’s car and make two stops. First, we marched into Blockbuster. Then it was over to the supermarket next door for snacks, soda, and frozen pizza. It was our little ritual.

But these days, the idea of going to a brick-and-mortar store to rent a video seems kind of crazy.

With the rise of Netflix, home entertainment became just a few clicks away. It’s become its own kind of ritual – for over 182 million paying members .

So the next time you think to yourself, “The way we do things now will never change,” remember the Netflix vs. Blockbuster saga and how an entire industry can become upended in just a few years.

Editor’s Note: This article was published in July 2017 and has been updated to reflect new information.

Want to drive Netflix-level growth for your business? Start here .

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Pricing at Netflix

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• | Language: English
• | Pages: 33

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• Pricing at Netflix  By: Elie Ofek, Marco Bertini, Oded Koenigsberg and Amy Klopfenstein

A Case Study on Netflix’s Marketing Strategies & Tactics

As the spread of COVID-19 has affected most industries and economies worldwide, people have been forced to stay contained at home to prevent the spread of coronavirus. People have also been bored to death as they have nothing to do.

In this locked-up scenario, your best partner could be your Netflix account which contains thousands of interesting movies, series, and shows. We were discussing which brand to take up for this week’s case study, and then one of our team members got an idea, let’s take the famous OTT platform Netflix which has managed to entertain a large population in no time.

Today, we are going to discuss the story of a platform that is providing us streaming services, or as we call it video-on-demand available on various platforms- personal computers, iPods, or smartphones. Netflix cut through the competitive clutter and reached out to its targeted audience by curating some interesting  brand communication strategies  over the years.

Let’s get into the success story of Netflix’s Journey.

Netflix was founded on August 29, 1997, in Scotts Valley, California when founders Marc Randolph and Reed Hastings came up with the idea of starting the service of offering online movie rentals. The company began its operations of rental stores with only 30 employees and 925 titles available, which was almost the entire catalog of DVDs in print at the time, through the pay-per-rent model with rates and due dates. Rentals were around $4 plus a $2 postage charge. After significant growth, Netflix decided to switch to a subscriber-based model.

In 2000, Netflix introduced a personalized movie recommendation system. In this system, a user-based rating helps to accurately predict choices for Netflix members. By 2005, the number of Netflix subscribers rose to 4.2 million. On October 1, 2006, Netflix offered a $1,000,000 prize to the first developer of a video-recommendation algorithm that could beat its existing algorithm Cinematch, at predicting customer ratings by more than 10%.

By 2007 the company decided to move away from its original core business model of DVDs by introducing video on demand via the internet. As a part of the internet streaming strategy, they decided to stream their content on Xbox 360, Blu-Ray disc players, and TV set-top boxes. The ventures also partnered with these companies to online streaming their content. With the introduction of the services in Canada in 2010, Netflix also made its services available on the range of Apple products, Nintendo Wii, and other internet-connected devices.

In 2013, Netflix won three Primetime Emmy Awards for its series “House of Cards. By 2014, Netflix made itself available in 6 countries in Europe and won 7 creative Emmy Awards for “House of Cards” and “Orange Is the New Black”. With blooming streaming services, Netflix gathered over 50 million members globally. By 2016, Netflix was accessible worldwide, and the company has continued to create more original content while pressing to grow its membership. From this point, Netflix was unstoppable and today it has a worldwide presence in the video-on-demand industry.

Business Model of Netflix

The platform has advanced to streaming technologies that have elevated and improved Netflix’s overall business structure and revenue. The platform gives viewers the ability to stream and watch a variety of TV shows, movies, and documentaries through its software applications. Since Netflix converted to a streaming platform, it is the world’s seventh-largest Internet company by revenue.

Now, let’s have a look at the business model of Netflix. 1. Netflix’s Key Partners:

• Netflix has built more than 35+ partners across the world. They have partnered with different types of genres for subscribers to select from and enjoy watching.
• Built alliances with Smart TV companies like LG, Sony, Samsung, Xiaomi, and other players in the market.
• Built alliances with Apple, Android, and Microsoft platforms for the purpose of converting business leads from mail-in-system to streaming.
• Built alliances with telecom networks like Airtel, Reliance Jio, and Vodafone.

2. Netflix’s Value Proposition:  Netflix aims to provide the best customer experience by deploying valuable propositions. Here is how the online streaming brand strives to do so:

• With a 24*7 streaming service, users can enjoy shows and movies in high-definition quality from anywhere whether they are at home or traveling.
• Users get access to thousands of movies and tv shows and Netflix Original movies or shows.
• New signups can avail of a 30-day free trial and have the option of canceling their subscriptions anytime.
• Receive algorithmic recommendations for new items to watch.
• At Netflix, users have the flexibility to either turn on notifications and suggestions or keep them switched off.
• Netflix’s “user profiles” give leverage for users to personalize their user accounts and preferences. The User profiles allow the “admin-user” to modify, allow or ever restrict certain users.
• Sharing account options is one of the rarest features a movie platform can provide. Sharing accounts feature on Netflix allows spouses, friends, or even groups to share an account with specific filters and preferences already set.

3. Netflix’s Key Activities

• Maintain and continue to expand its platforms on the website, mobile apps
• Curate, develop and acquire licenses for Netflix’s original content and expand its video library.
• Ensure high-quality user recommendations to retain the customer base
• Develop and maintain partnerships with studios, content production houses, and movie production houses.
• Operate according to censorship laws. Netflix always promotes and operates within the boundaries of censorship.

4. Netflix’s Customer Relationships:  Netflix has designed a customer-friendly platform that offers:

• Self-Setup:  Netflix platform was originally designed to ensure that it is simple and easy to use. Developers of the website ensured to associate elements and themes that serve, promote friendliness, and provide self-setup.
• Unbelievable Customer Experience:  Customers can solve their queries by reaching the Netflix team through the website portal, emailing inquiries, and directly reaching the representative on call or live chat.
• Social Media Channels:  Netflix also engages its audience through social media platforms such as Facebook, Instagram, and LinkedIn. It advertises and offers deals to gain high attraction customers and enhance its customer base.
• Netflix Gift Cards:  Netflix offers its customers special promotional discounts and other gift cards as a part of their subscription plan.

Netflix’s Revenue Model

Netflix gained major popularity when the platform launched online streaming services. Let’s have a look at how the platform earns.

• Subscription-Based Business Model:  Netflix offers monthly subscription fees with three different price options basic, standard, and premium plan. Today, Netflix has over 125 million paid members from over 190 countries and generates $15 billion annually.
• Important partnerships:  Built alliances with a wide range of movie producers, filmmakers, writers, and animators to receive content and legally broadcast the contents required by aligning licenses.
• Internet Service Provider:  One of the most influential tactics implemented was its ability to build alliances with a wide range of movie producers, filmmakers, writers, and animators to receive content and legally broadcast the contents required by aligning licenses.

Netflix was able to establish a well-reputed image worldwide and increased its customer base day by day. When it comes to giving competition, the brand has devised various digital marketing strategies and has gained wide popularity on digital media platforms. With the help of the best digital marketing services, they have kindled the excitement and craze in the people to travel and host.

Digital Marketing Model of Netflix

In less than 4 years, Netflix has gathered a major share of the Indian market. Today a majority of households in India subscribe to Netflix, and that number is expected to rise this year and further in the years to come. The product is designed so well, that you remain engrossed in the content they deliver. They adopted top digital marketing strategies. Consult the best brand activation agencies. Further, let’s talk about a few of the digital marketing principles that Netflix has successfully implemented to gather customers.

1. Personalised Content Marketing:  People love using Netflix because they get a broad range of things to watch. Netflix’s library of TV shows and movies from all over the world is there for consumers to choose from at any time.

The reason that Netflix won the personalization game is that its advanced algorithm continues to rearrange the programs overtime on the basis of your viewing history. Hire some of the best  performance marketing agencies  for personalized content.

2. Website Development:  Netflix has designed its website with a user-friendly interface that allows customers to rate TV shows and movies, which then goes through Netflix’s algorithm to recommend more content they might enjoy. With the onsite optimization for the website, they have optimized each and every page for enhanced customer experience.

To easily get in the minds of customers, they have optimized their website for content by title, by an actor’s name, or even by a director’s name. By leveraging the  best website development services , they added a host of personalization features to their website with clean looks no matter which platform you are using.

3. Email Marketing:  Netflix tapped on email marketing techniques as a part of its digital marketing strategy and as a key component of customer onboarding and nurturing. New Netflix customers receive a series of emails that make content recommendations and encourage new users to explore the platform. Netflix marketers invest hours in building creative email marketing campaigns designed to engage and delight recipients. With the help of the  best email marketing services , they continue to enhance the experience of the customers

4. Search Engine Optimization:  Netflix makes use of search engine optimization services for the sake of improving organic research and establishing its brand presence. The brand aimed at the  best search engine optimization services  to drive traffic organically and adopted both on-page and off-page SEO strategies. They optimized their content with potential keywords that show up high in search results. They also tapped the strategy of International SEO to gain organic leads from the worldwide stage.

5. Social Media Optimization:  Today, social media platforms have become an integral part of digital marketing strategy. If you want to connect with your audience in real time, then it is the best platform to establish your brand image. As social media plays a vital role in the lives of people, Netflix decided to leverage the  best social media optimization services  that made them earn billions. They made use of the following platforms:

Through  creative social media optimization strategies,  Netflix has garnered more than 61 million Facebook followers. In just one year, the brand added 11 million followers to its account. Netflix posts nearly 90% of videos and the rests images. Videos featured on Netflix’s

Facebook pages are typically clips from interviews with the actors from the upcoming movies, clips from the upcoming movies and TV shows, offering audiences a sneak peek into what’s in store for them. Besides videos, the OTT platforms share images, GIFs, funny memes, and simple text posts featuring questions about current movies and TV shows.

Netflix carries 19 million followers. The majority of Netflix’s posts on Instagram are images, post scenes from TV shows featuring engaging captions to get a conversation going, and behind-the-scenes clips and interviews with actors. A recent video featured a behind-the-scenes bloopers video from the set of Stranger Things, which garnered 1.2 million views and almost 3,000 comments. Netflix uses a simple approach to posting, with most posts not featuring any hashtags at all.

Netflix carries 6.8 million followers on Twitter and has tweeted over 30,000 times. Netflix is renowned for its witty replies and comebacks on Twitter, and the brand tweets an average of 14 times a day. This shows just how important engagement is for the brand and how much it values brand awareness. These are the digital marketing techniques that the famous OTT platform adopted from time to time to the subscribers’ engagement and retention. Hence it has yielded high returns for their business.

Campaigns of Netflix

1. Netflix: The Spoiler Billboard:  Netflix’s new campaign uses spoilers of its most popular shows, including Stranger Things, Money Heist and Narcos, to promote social distancing amid the COVID-19 crisis, and while the effort is getting a lot of buzzes, it’s a fake.

2. FU2016:  To launch season four of the political drama House of Cards, Netflix worked with BBH New York and built a fake presidential campaign around the show’s lead character Frank Underwood. The campaign became the top trending topic on Facebook and Twitter during the debate, and it won a Grand Prix in the Integrated category at Cannes in 2016.

3. The Censor’s Cut:  The streaming company wanted to advertise Narcos Mexico in Thailand. Netflix worked with JWT Bangkok and cut around the offending images within each scene, leaving a clear enough outline that anyone could still identify what had been removed. The campaign achieved the opposite effect of what censorship is supposed to do by reaching 34 million people.

Conclusion Netflix is a rare example of a company doing everything right. From its branding and content right down to its business model and product, the company has always excelled at making smart, strategic decisions. With its large market share and focus on numbers, Netflix has managed to develop a deep understanding of its audience that very few others have. With this knowledge, paired with a strong, affordable product, there’s no limit to what this brand can do in the future.

Reach out to  Digital Marketing Agency for the best marketing strategies among different marketing platforms.

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Netflix Inc. 2007 Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> Netflix Inc. 2007

The main character in this case the analyst tries to value Netflix, Inc, and check its recent recommendation to buy at a price of $ 20.00 per share remains in force. Recent bad news caused the price decline, and she had to do everything possible to find out what was the future for Netflix, and it was undervalued at $ 17 per share? Designed for MBA students , this case has it the discounted cash flow and a set of assumptions (revenue per customer retention, etc.) students can use for evaluating existing customer base, as Netflix is ​​another approach to judging $ 17 stock price. There are two student tables are available for this case (UV4342 and UV4343). "Hide by Phillip E. Pfeifer, Robert M. Conroy Source: Darden School of Business 15 pages. Publication Date: December 21, 2009. Prod. #: UV3927-PDF-ENG

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