Paulina Preciat

Netflix

ISSUES:
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1. Netflix lost 800,000 subscribers in 2011 when the company decided to start operating as
two different companies; DVD rentals and streaming.

2. Netflix faced a challenge when Starz network refused to renew their contract, for that
reason, Netflix was left with an unfulfilled inventory.

3. Netflix had 2.2 consumer engagement, lower than Hulu who had 2.9 hours per day. It
also had lower engagement per month compared with Sling TV, 47 hours per month
versus 28 hours per month.

4. Netflix is limited with only one source of revenue, unlike Amazon and Apple Inc., they
both have more than one to borrow money from in order to create new content.

5. The Sopranos and Game of Thrones are some examples of HBO´s original content
Netflix has to compete with.

6. When Netflix started creating its own content, the company faced various outcomes,
House of Card and Orange is the New Black were both a success, however, they also had
to cancel other shows that would only generate losses, which resulted as a $3.4 billion
long-term debt.

7. There was a law that limited bandwidth, so the future of Netflix was uncertain because as
a streaming type of site, it needs more bandwidth than Facebook, for example.

8. Netflix had, and still has, license issues, because the content depends on the owner of that
content, so If they lose the license they have so stop streaming that content.

2 MOST IMPORTANT ISSUES

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1. Issue 1: Netflix is limited with only one source of revenue, unlike Amazon and Apple
Inc., they both have more than one to borrow money from in order to create new content.

This is an important issue because Netflix is starting to lose consumers because of that factor,
and its competitors like Prime Video are now getting more profits because they have more
content to offer because of the contracts they have with other channels, such ash HBO.

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1. Issue 2: When Netflix started creating its own content, the company faced various
outcomes, House of Card and Orange is the New Black were both a success, however,
they also had to cancel other shows that would only generate losses, which resulted as a
$3.4 billion long-term debt.

This issue is crucial for many reasons. The main one is the economic part, because those series
and overall all own content has to be made with the company’s money, so they spend a lot of it
when filming it, and if the rating is low and the show gets cancelled, they lose profitability. So,
they should make better and more focus group and surveys and investigation prior deciding to
start a “Netflix Original” series or film.

RECOMMENDATION AND IMPLEMENTATION FOR ISSUE 1

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Issue 1: Netflix is limited with only one source of revenue, unlike Amazon and Apple Inc., they
both have more than one to borrow money from in order to create new content.

Recommendation
I recommend Netflix to start making strategic alliances with “channels” or other companies in
order to have more content and with that gaining more customers like before. Or get the same
ones that Apple Tv and Amazon Prime Video has, because the list is not long because Disney
has bough lots of companies, and they now have their own streaming channel.

Pros and Cons

Pros Cons

● Having more content will gain more
customers
● If a Netflix Original content gets
cancelled, they have money to survive
because of the alliances made with others
● Profitability will increase
● Disney is a big fish and it owns lots of
companies, so they will have more
content to offer
● The content depends on the country so
they should try to make it even because
they are losing clients from specific
countries.

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Potential Stakeholder Resistance

All main stakeholders from Netflix could resist these alliances because they are trying to have
Netflix have its own original content, but they are losing licenses and with that clients.

Implementation and Resources

Implementation Step Resources Required

Make strategic alliances Since its competitors have more content because of their alliances
with channels, Netflix should start making them and not limiting
themselves with original content.

Increase catalogue The platform has some limited catalogue because of its lack of
alliances and of licenses. If the first step is taken, then the catalogue
will be bigger

Analyze competitors Netflix should analyze its biggest competitors such as Disney + or
Prime Video from Amazon, to try and improve what they do.

Get licenses Netflix has lost some licenses to some content that people really
liked, so they should reach an understanding with the other
companies and get them back

Weekly reports The person in charge would have to generate weekly reports
describing how effective or not the platform is week within week.
If they are getting more subscribers or losing them.

RECOMMENDATION AND IMPLEMENTATION FOR ISSUE 2

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Issue 2: When Netflix started creating its own content, the company faced various outcomes,
House of Card and Orange is the New Black were both a success, however, they also had to
cancel other shows that would only generate losses, which resulted as a $3.4 billion long-term
debt.

Recommendation

My recommendation for Netflix is that, before starting a new Original series or film, they should
investigate and make focus group with random people with different interests to try and analyze
if it will work. Losing series or films generates debt and they are not in a position of getting more
in debt.

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Pros and Cons

Pros Cons

● Focus groups really helps to figure out
if a new product will be liked or not by
customers
● Making analysis before filming
something will help in decision
making.
● If the group is widened and not
heterogeneous, then the risk
assessment will be better.
● Since Netflix is global, a focus group
should be conducted worldwide and
not in one country only.
● People has different likes depending
on their country and preferences, so it
is hard to make a risk assessment on
films or series.
● Having a worldwide focus group could
cost lots of money

Potential Stakeholder Resistance

Some members of the board could resist because of the cost of analyzing and making a risk
assessment and a focus group, but the CEO should explain them that it is necessary in order to
stop cancelling content and losing money.

Implementation and Resources

Implementation Step Resources Required

Get the focus group Each country should find its customer group and get the focus
ready group done to get their opinion

Analyze results After that, all information and data should get analyzed and results
written down

Make a risk assessment With the results written down, a risk assessment can be done for
to each new content each new original content that Netflix wants to shoot
wanted

Make a decision Depending on the result of that assessment, a decision should be

taken regarding filming it or not