Business

Awareness
Lecture 21
Netflix : The Disruptor
Faces Disruption
Case Study
Reed Hastings: CEO of Netflix

▪ The case study starts with a

quick background of how Netflix
was originated?
Market

Disruptive innovators typically either enter

the market at the low end of the market or
create entirely new markets

Both of these scenarios are characterised

as markets not well served by current
solutions

As a matter of fact, Netflix was originated

from the former scenario – Low end of the
market

Blockbuster had a monopoly over the VCR

market and charged extremely high
rentals per day
The Story of Evolution

In that reading you will see, this case study is

As discussed in the previous video on How to given like a story about the evolution of the
Approach a Case Study, the first step is to company Netflix and its current market
read the case study like a story situation
Focus on Key Points

As a next step, you read the case study again –

▪ This time highlighting Facts and Figures: Names of

Netflix’s Competitors, Reed Hasting’s Decision Points,
Challenges faced and how they were overcome

For example in this case:

▪ Challenges Faced were:

− Licensing Content: Its subject to the terms dictated by
Content Owners
− Netflix faced a problem when the contract with Starz
ended and they refused to renew the contract

▪ Solution: What did they do?

− Netflix now has production houses of its own too!
− They are now not 100% dependent on content from other
producers. And you know what? House of Cards, a Netflix
‘Original’ Production is by far one of Netflix’s most famous
show and the reason behind Netflix’s success.
− It won 3 Emmy’s, it must be good!
Focus on Key Points

Netflix budgeted 6mm dollars for content, more than twice its
total revenue! That is quite a risk to take

▪ Was the risk worth it? Yes it was

− Netflix is a market leader in its category now

▪ Could you as a leader take that risk?

▪ Does investing money always lead to success?

− These are some points which need to be discussed

in a case study. These are things which do not
always have a right answer. No matter how strong
Focus on Key Points

The Home entertainment market was a very crowded one

▪ There were 12 competing players in the market – Some of

which are Hulu, Amazon Prime Video, YouTube and even
HBO!

Solution? What did Netflix do?

▪ Netflix decided to “cooperate” with the competitors –

Netflix licensed content from some of the same companies
that formed Hulu but at the same time provided a competing
service
Focus on Key Points

▪ Back in the day, Netflix did not only

overcame the existing market through
OTT but also created a new market

▪ Netflix invested in producing content

online at a time when the broadband
household penetration in US was less
than 50%
The Problem

▪ Now that you have read the case study – Did you
figure out the purpose of the case study – the
“problem statement” as we call it?

▪ Well – The underlying problem that the author wants

us to discuss is – Whether Netflix will be as
successful 10 years later as it is today? If yes, then
how?
Current Scenario

▪ Okay, so that was about Netflix’s

background, context setting for you and
some of Hasting’s decisions – Which
were good ones
▪ Coming to the present day now – Let’s for
beginners – start with only discussing
Netflix in the Indian Scenario
▪ I am sure you have heard of Amazon
Prime and Disney-Hotstar which are
some of the prominent competitors of
Netflix in the Indian Market
Competition

Let’s start with a comparison of the three?

▪ Netflix is approximately 300 per month per use

which means a cost of 3600 per person per year

▪ Amazon on the other hand is 1000 per year, and

same for Disney-Hotstar

▪ So, Netflix comes at a premium

▪ Next, Netflix and Hotstar are only streaming

services while Amazon prime membership will
also give you prime membership on the Amazon
website which means free delivery

▪ That’s an additional benefit apart from just online

streaming
Competition

What else do we have?

▪ Hotstar gains lakhs of subscribers the

months IPL, Olympic Games or Common
Wealth Games are conducted?

▪ Out of the 3 platforms in discussion,

Hotstar is the only one with SPORTS
BROADCASTING RIGHTS

▪ And we all know how much that is of

importance in India!!

▪ Cricket is our religion

▪ This is another negative for Netflix

Price

With higher prices, no sports, no additional services – Do you

still think Netflix can be a market leader in the next 10 years?

Honestly, it could be – YES

How?

▪ Well, because of its Original Production shows! Netflix has

one of the largest gamete of the best shows. It’s content
quality is undoubtedly better than the two others
Product

Another fun fact – Do you know

how we all share our Netflix
passwords with our friends to
save out on the cost?
And one day when both
the customers are using it
at the same time and one
of them is not allowed –
THEN, the person who
was now addicted will end
up buying his own
subscription
That is a marketing
strategy by Netflix. It
can definitely check the
location and ensure only
the rightful member
uses it but it doesn’t.
Because it wants Netflix
to sink in the minds of
the customers. It wants
customers to use it
Promotion and Product Placement

▪ Also, have you noticed that Airtel

gives Prime Membership on
recharges and Broadband. Jio also
gives Disney Hotstar membership?

▪ Has any telecom network given you

a Netflix subscription?

Not really

▪ Because Netflix has created a niche

for being more premium

▪ But – Bundling with a telecom

operator might not be a bad
approach. It could get more
subscribers. Think about that
Promotion and Product Placement

So, we know if Netflix:

▪ Bundles with a telecom operator

▪ Gets sports broadcasting rights

▪ Produces more in house originals

▪ It could still be a market leader in

the future. What else do you think
can help Netflix not get disrupted?