Netflix Inc: The Disruptor Faces Disruption

Yusong Qin                                                                                                       2/20/2018

Haozhen Tan

Jia li

Guanyi Meng

Yaqin Hei

IT-203-B

Case Study

------------------Netflix Inc: the disruptor faces disruption

Symptoms: Netflix and its CEO Reed Hastings, were under the pressure of a suspect that they cannot make success on suppling the Digital delivery contents like they did in 1990s on home delivery of DVDs through the mail. After their transition on managing strategy, a lot of problems and challenges they need to overcome. Then we will discuss in company version and the CEO version.

For Reed Hastings: As the chief managers of the Netflix, He must consider the strategies in all aspects to expend the company’s work. But first he need to deal with the digital delivery challenges, which need a lot of resources and money to improve new technologies to make disruptions in the streaming media field. Or join in an almost full market with crowded opponents to divest the potential customers. Some of them even unit to fight with the Netflix. Meanwhile, voices that suspect or even against him inside the company and around in the public.

For Company: In 2017, the Netflix budgeted 6$ billion for content. But compared to their debts accelerated to 3.4$ billions, the speed of growing subscribers of its online contents is much slower. In the past three years, the average increase rate of its subscribers growing is about 28.1%. However, the data from 2017 is about 7.6%, while the previous data from last year is 22.7%. Even considering the margin effect declines, it is easy to realize an obvious decline in growing speed. It proves at least, the managing strategy in 2017 did not work well enough. Some of its contents are not profit well and in other words, it flows. And the Netflix lose a lot of senior managers because of the separation its original business. To make things worse, the online contents supplier once only for the Netflix, realizing their products can create more profits if they present it to other companies, like the Amazon Prime Video or Apple TV. And this is the most significant, because copyright of online contents, for example TV series or films, occupied a large part of the company’s whole cost. Within such a situation, the company either to find a new supplier or to maintain the current one will increase the cost and reduce the expectation rewards. Thus, some used to be ‘unique contents’ are not exclusive any more. In Aug10th2017, Disney claimed that the corporation with the Netflix broke and a streaming media by its own will come soon. In addition, the price of its subscribe is competitive but quite more expensive than the Amazon Prime Video.