Netflix Business Plan with SWOT for Spain

Objective4.000 members in Barcelona at the end of FY 2011

(€482.000)Month 1 2 3 4 5 6 7 8 9 10 11 12 TotalMbrs 0 300 600 800 1.200 1.800 2.500 2.700 3.000 3.500 3.700 4.000 4.000

Members per month 2011

Revenue € - € 6,000 € 12,000 € 16,000 € 24,000 € 36,000 € 50,000 € 54,000 € 60,000 € 70,000 € 74,000 € 80,000 € 482,000

Benefit € - € 3,750 € 7,500 € 10,000 € 15,000 € 22,500 € 31,250 € 33,750 € 37,500 € 43,750 € 46,250 € 50,000 € 301,250

35003700

4000

Members per month, 2011

1800

25002700

3000

0300

600800

1200

1 2 3 4 5 6 7 8 9 10 11 12

2© 2010 Miriam Clark Dowd

Internal AnalysisCompany Historyp y y

1997 Netflix launches

1998 Online DVD storefront opens

1999 Netflix won’t penalize members with late fees, rather they will pay a fixed fee each month

2000 Recommendation system is launched, CinewatchUnlimited DVD rentail available

2001 Netflix reaches a commercial agreement with BestBuy

2002 Netflix goes public (IPO)DVD players penetrate 50% of homes in the USA

Each user can create an online profile2005 Each user can create an online profileWalmart and Netflix reach an commercial agreementNetflix and Tivo join forces to acquire and distribute DVDs

2006 Blockbuster announces it will launch an online storefront similar to that of NetflixTrailers available on Netflix.com

2007

Netflix reaches 7 subscribers1 million member opinions are available onlineNetflix reaches 75% of market shareOnline streaming of videos launches on Netflix.com

3

2008 Netflix and Microsoft come to an agreement to stream Netflix movies on Xbox Live

2009 Netflix distributes its one-billionth DVD© 2010 Miriam Clark Dowd

State of Finances1 600 000

1,400,000

1,600,000

1,000,000

1,200,000

an

d

600,000

800,000

$ T

ho

usa

200,000

400,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Facturacion Total 1,339 5,006 35,894 75,912 152,806 270,410 500,611 682,213 996,660 1,205,34 1,364,66

Total de Gastos 1,311 4,373 24,861 49,907 79,136 179,010 330,010 464,550 626,985 786,168 910,234

0

RevenueExpenses

4

Beneficio Bruto 28 633 11,033 26,005 74,670 91,400 170,601 217,663 369,675 419,172 454,427

© 2010 Miriam Clark Dowd

pBenefit

Organigrama


Infrastructure

Value Chain Analysis• Effecient and organized infrastructure• 90 warehouses in USA with the same technology and operating system

Human Resources• Employees generally very content and enjoy many benefits and rights within the company

Technological Development• Netflix always looks for new technology that will improve the service, which includes the recommendationsystem and storefront

Realización

Internal Logistics & Operations

• Effecient and complete logisticssystem• Website storefront more

External Logistics

• 95% of usersreceive DVD within 24 hours in working days

Services

•24x7 customer service

•Online help

Marketing & Sales

• 41% of operatingexpenses go tomarketing• Website storefront more

advanced that what’s available onthe market

hours in working days

• 2 millon DVDsshipped every day

•Online help

•Some members are not happy that new customers seem tohave priority on certainDVDs (improved with

marketing

• Marketing strategyvery good and veryeffective

DVDs (improved withstreaming option)


Distribution

• 95% of users receive their DVD in 24 working hours

• 2 millon DVDs shipped every day

• In Q3 2008, 42% of members usedstreaming to watch at least 15 minutes of video

• Streaming via: Netflix.com, Xbox 360, Tivo and Apps


Client ABCNetflix has 1 000 000 subscribers in the USA

State # Warehouses # Clients

California 7 855 556

Netflix has 1,000,000 subscribers in the USA, distributing the product from 90 warehouses across the country

A

California 7 855,556Florida 7 855,556New York 6 733,333Pennsylvania 4 488,889Texas 4 488,889

Total Clientes 3,422,223


Alaska, Arizona, Arkansas, Colorado, Hawaii, Idaho, M i M l d, ,


Georgia 3 366,667Kentucky 3 366,667 C

Maine, Maryland, Michigan, Minnesota, Mississippi, Montana, Nebraska, New 1 each

Approx. 122,222 per

f

B

Missouri 3 366,667North Carolina 3 366,667Ohio 3 366,667Tennessee 3 366,667Wisconsin 3 366,667Alabama 2 244,444

Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, South Carolina, Utah,

facility

B Alabama 2 244,444Connecticut 2 244,444Illinois 2 244,444Indiana 2 244,444Iowa 2 244,444Louisiana 2 244,444

Vermont

Total Clientes 2,811,111

8

Massachusetts 2 244,444Nevada 2 244,444Washington 2 244,444

Total Clientes 1,955,552© 2010 Miriam Clark Dowd

Client ABCMajority of members are members are

women

No large

No children

differencebetween mbrage groups

Average salary> $30k

Majority haveattendedcollegecollege


Client ABCContent Streaming

• In Q3 2008, 42% of members used streaming to watch at least 15 minutes of content.

• Represents an increase of 22% over Q32007

• The majority watched more than 15 minutes


Communication & Advertising

• Online advertising• Advertising on envelopes• Direct mail• EmailingEmailing• Virtual gift cards• Gift cards• Radio and TV advertising• Magazine advertisingMagazine advertising• Free streaming offers• Various contests• Free Trial



1 400 000

1,600,000

Yearly Marketing Spend

1 000 000

1,200,000

1,400,000

600,000

800,000

1,000,000

$ M

iles

200,000

400,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Facturacion Total 1,339 5,006 35,894 75,912 152,806270,410500,611682,213996,6601,205,341,364,66

Marketing 4,052 14,070 25,727 21,031 35,783 49,949 98,027 141,997225,436218,212199,713

0

RevenueMarketing

12

Total gastos de explotación 11,181 30,664 68,590 62,394 85,447 86,928 151,247214,647 304457 327,399332,921


Al l Expenses


G&A

Marketing as % of all operating expenses

Shipping & Handling

31%

10%

31%

Marketing41%

Tecnology & R+D18%

13

18%


External Analysisñ H i C t l ñDVDs in Cataluña

% of homes with a DVD player

Units:% of all homes

TOTAL 73 4

No DVD24%

Homes in Cataluña

Sou73,4

Home with 1 person 47,6

Home with 2 people 66,5

Home with 3 people 82,2

Home with 4+ people 89,0

DVD76%

urce: In

stituto

Na

% of homes that have a DVD player

Units:% of all homesBoth sexes 73 4 % of homes in Cataluña with DVD

acional

de E

stadísBoth sexes 73,4

Men 77,2Women 67,4Age: Total 73,4Under 25 years 80,125-44 years 88 4 50

60708090

100

stica, Spain

25-44 years 88,445-64 years 80,465+ years 41,4Nationality: Total 73,4Spanish 73,2Foreign

01020304050

TOTAL < 1 100 De 1 101 De 1 801 > 2 700 No

14

Foreign 75,7From EU country 75,7From country outisde EU 75,7

TOTAL < 1.100 euros

De 1.101 a 1.800 euros

De 1.801 a 2.700 euros

> 2.700 euros

No sabe/no contesta


Demographics of Barcelona

• GDP per capita – 23,108 EUR / ~1,900 month

• 1 593 075 residents

BCN Population Pyramid1 octubre 2009

• 1,593,075 residents

• Population: 1,615,908 in the metropolitan area

• Barcelona has 100 km ², with nearly15.867 people per km ²

66 72 78 84 90 96

p p p

• Population density on par with Nueva York & París

• 10 DistrictsDi t i t1 Ci t t V ll 30

36 42 48 54 60 66

Edad

• District1: Ciutat Vella• District2: Eixample.• District3: Sants-Montjuic.• District4: Les Corts. .• District5: Sarrià-Sant Gervasi.• District6: Gràcia

0 6

12 18 24 30

• District6: Gràcia.• District7: Horta-Guinardó.• District8: Nou Barris.• District9: Sant Andreu.• District10: Sant Martí de Provençals.

70000 50000 30000 10000 10000 30000 50000 70000

Men Women

Millions of people

15

Source: Instituto Nacional de Estadística, Spain


Economic Environment• The current economic crisis has had a negative impact on

consumer confidence

• The recession period in Europe has caused highunemployment rates and a decline in personal finances

• The economic situation will be slow in 2009

• Brussels predicts that the paro in Spain will reach 19% in 2010

• The IMF forecasts the GDP of spain to decline, to -2% in 2009

• Totan unemployment in Spain = 3.808.353 people.

• Spanish households have reduced the number of shopping trips they make by 3,1% and they spend 2,3% less per family (Nielsen) Source: Instituto Nacional de Estadísticas, Spain


• 64% of Spaniards use illegal websites to share and download content on the Internet well

Social and Cultural Environment• 64% of Spaniards use illegal websites to share and download content on the Internet, wellabove the European average of 56%

• 24% of people are not concerned about internet security online, and 30% rarely check thattheir antivirus software is up to date

• For 90% of young people, watching TV is one of their preferred free-time activities

• Moves are the content most preferred by young people (42%), followed far behind by TV series (13%) and sports programs (13%)

h //b i /http://baquia.com/

l f l

Pasear, estar en la calle

Main Free-Time Weekend Activities

Source:

Go for a walk

Visit with family

11Descansar, no hacer nada

Ver la tele, video, DVD

Estar con la familia

% Mujeres% Men% W

Institu

toN

aciona

y

Watch TV, videos or DVD

Rest, do nothing

Asistir especatculos culturales (ie cine)

Ir de bares, cafes

Leer% Hombres% Women

alde E

stadística

Read

Go out for coffee/drinks

Attend cultural events (iecinema)

17

0 10 20 30 40

culturales (ie cine)


cinema)

Legal and Technological Environment

Intellectual property rights are most vulnerable in the cultural and past-time sector.

Legal

Music and cinema are the most important and they suffer directly from theconsequences of piracy and bad intellectual property policies and laws.

La Federación para la Protección de la Propiedad Intelectual (FAP) is dedicated tothe defense of intellectual property rights governing audiovisual work and the defense of intellectual property rights governing audiovisual work and entertainment software.

TechnologyTechnology

The increasing presence of various video formats presents a significant threatwith substitution in the form of pirated DVDs, especially grave for distributorsand brick and mortar shops and brick and mortar shops.

However, continued purchase and use of CDs and DVDs will continue .


Sector Analysis– Music and Video

Sector Characteristics

• Competetition: Strong• Buyer power: StrongBuyer power: Strong

• Low cost and many options• Businesses: many, but a few monopolize the sector• Market entry: Easy• Brand loyalty: LowBrand loyalty: Low


Competitive AnalysisGroup 1• Digitae• MediaXPress Cine• El Corte Ingles• Pirating

Group 2• Apple/ iTunes• FNAC• Xbox Zune• PlayStation• Canal+

Group 3• Rental Kiosks

• Canal+• Ono

High PriceEl Corte Ingles

Digitae MediaXPress

Canal+

Show Delivery

Netflix

Fast liKiDelivery Delivery

i i

Xbox Zune

Kioscs

20Low Price

Pirating


Competitive Analysis

Market Quota, Spain


Competitive Analysis


Competitor AnalysisMediaXpress Digitae Pirating Xbox Zune Corte Ingles Kioscos Canal+

Level of Competition

High – Direct High – Direct High – Direct High Medium Medium Low

Facturacíón2008

NA NA 136 millones de euros perdidas en 2007

Microsoft$16.37 billones W ld id

17,898 millones E

NA 2,428.61 Eur

2007 en Catalunya

Worldwide Euros

Owner Techfoundries Private withinvestors

Various Microsoft El Corte Ingles

Various Prisa

Markets Spain Spain Global Global Spain Spain Spain & France

Members 6,000 8,000 300 milliondownloads, 2009

1 million Xbox soldin Spain

225 locations

Products DVD 6,000 titles

DVD>8,000 titles

Movies, videogames,software

DVD, videogames, etc.

DVD Movies, Series

Brands Diode, InOutTV The Pirate Bay (#3), Cinexpress

Varios Varios

Churn 10-12%5% for courier

10-12% N/A N/A N/A N/A N/A

MarkeatingSt t

20,000 clients Agreementith MSN

Word of mouthLi k

Segmentali t l th

Advertising,ili t

Word of th

Advertising, ili tStrategy with MSN

Spain , Amena, Detallistas

LinksSEOOnline ads

incremental growth mailings, etc mouth mailings, etc

Distribution Single site in Barcelona

Postal 2+DVDs in one envelope

Streaming, downloads

Streaming Stores in Spain

Street TV / Canal+ DVR

Strenghts Courier by SMS OK websiteSEO +

FreeShare contentAdvertising $$

Microsoft ownedZune agreementLow price

26% offline market quota

Location, subscriptionnot necessary

HD; at home; partially pay forSatellite TV

Weaknesses CorreosNo SEOBad website

Cost of DVDsCorreosBad website

Illegal Late market entry, low offer

Location Price

23

Opportunities Improve online ads

Download toown VOD;Games; Ads

No limit to users Increase # of movies Agreementwith Digitaeor similar

Advertising Offer more HD moviesAdvertising

Threats TV ; SEOUnknown

Unknown New laws Online streaming High price Low selection Online market

Market Changes & Advancements

New Technology

• Online video streaming, such as Cuatro Play, Cinexpress & Xbox 360

• DVR technology to record and rewatch

• Xbox 360 offers streaming. Xbox 360 & Playstation offer downloads.

• Market is changing - Bluray will replace DVD soon

K t SKeys to Success

• Increase number of movies available (incl. HD)

A ibl i t t• Accessible price structure

• Fast shipping

I t lli t li d t

24

• Intelligent online order system


Distribution Analysis

Correos of Spain Courier

Not reliable Reliable

Lost discs account for –1.5 - 7% of all shipments

Lost discs account for <1%sf all shipments

Shipping speed not guaranteed Shipping speed guaranteedpp g p g pp g p g

3-4 days longer in Summer 1-2 days

DVDs can be stolen from mail Guaranteed delivery but usuallyh t i th DVDDVDs can be stolen from mail someone has to receive the DVD

Negative user preception SMS orders

# 1 reason users cancel th i b i titheir subscription


Market AnalysisMarket Value

New access channels to this type of content, such as pirating, have been the mainreasons that sale and rental of movies have declined so drastically.

Market Value Forecast

In 2013, it’s forecast that the marketing will have a value of 4,529 million, a decline of 22,9% from 2008.


Market Analysis


SWATStrengths WeaknessesStrengths Weaknesses

• Strong business model• Higher value-add than competition• Relationship with US distributors• Effective marketing campaigns

• Netflix nknown in market• Copyrights in Europe• Spanish market unknown to us

• Effective marketing campaigns• Internal and External logitics• Website• Children’s content••

Opportunities Threats

• High demand for online streaming in HD • Postal serivce not reliable enough• High demand for online streaming in HD • Increase in online spending• Direct competition has poor business

model

• Postal serivce not reliable enough• Consumers don’t trust the postal serivce• Competition: pirating/streaming• Target marketing not aware of posibilities

of business modelof business model• Movie rental market in steep decline• Many options at a low price• Easy market entry


Basic StrategiesTargeting y SegmentationTargeting y Segmentation

Target Market

Men and women, 25-45 years old in Barcelona who:Men and women, 25 45 years old in Barcelona who:• Rent movies as hobby• Love movies• Have access to Internet • Have a DVD player

• We will try to target people with a busy lifestyle and who are unhappy with video rental stores/kiosks as well as the quality of streaming / pirating onilne

Target Market Men Womeng

In Catalña 2,506,710 1,291,269 1,215,441

25-45 y/oLive in BCN city 9.25% 119,466 112,450

Movies Hobby 19% hombres24% mujeres 22,698 24,739

Have DVD 88.40% 20,065 21,869

Total 20,066 21,869

Total 41,935


Positioning Strategy = reliable fast high quality

Basic StrategiesPositioning Strategy = reliable, fast, high-quality

• Fast and convenient service with a large selection• HQ streaming

Rent HD moves• Rent HD moves

High PriceEl Corte Ingles

Digitae MediaXPress

Canal+

Slow Delivery

Netflix

Fast liKiDelivery Delivery

i i

Xbox Zune

Kioscos

30Low Price

Pirating


Basic StrategiesCompetitive Strategy

• Differentiation by reliablity, speed and high quality• Web technolgoy – more advanced than competition• Advanced and intelligent ordering system• Client satisfaction• Quality of product• Market recognition (in USA)

Prizes Netflix has won

• Feb 2010 - #1 online retailer in client satisfaction - American Customer Satisfaction Index

• #1 client satisfaction in online sales websites, from 9/10 surveys – 2005, ForeSee Results.

• Jan 2007 - Retail Innovator of the Year - National Retail Federation• Dec 2007 - #1 online retailer - Nielsen Online. • Dec 2008 - Netflix Player Roku named one of the Top 10 gadgets of the year –

TIME


Product Overview

Product Personality CharacteristicsPackaging,

design, photo, logo

Guarantees, Warnings

Fun Ratings recommendations and USA 3-day shippingDVD Convenient

Up-to-dateFast

Ratings, recommendations and the option to share your movielist with friends on website

USALanguage: ESCatalán, EN

3 day shippingSafe websiteHuge selection

Streaming

FunConvenient Ratings, recommendations and

the option to share your movieUSALanguage: ES

ImmediateHigh-qualityStreaming Up-to-date

Fast

the option to share your movielist with friends on website

Language: ESCatalán, EN

g q ySafe website

ActionsActions• No change to packaging• Same brand colors• Add “franquicia pagada” to envelope

T l t d b it t ES• Translate wrapper and website to ES


Product Overview


Price OverviewPrice range Promotions Discounts Price-based Promotions

Half the price of direct competition Ongoing Free Trial promotion None 15 day trial – 3 DVDs &

unlimited streaming

Higher thanstreaming and pirating

Ongoing Free Trial promotion None 15 day trial – 3 DVDs & unlimited streaming

• We will aim to offer the most competitive price possible within the market, but without ever losing reliability or shipping speed (20 EUR/month)


Distribution Overview

Canal Type Location Sales points, location, # Transportation, type Canal Strategy

PUSH / PULL

Send via F C Courier; Direct Netflix.com Netflix.com Send via F.C. Courier; Return by Correos PULL

Directa Netflix.com Netflix.com Streaming to computer orXbox 360 PULL

Acciones

• Reach agreement with courier companyO i t b f i i d f C ( ti l t l i )• Organize return by franquicia pagada from Correos (national postal service)


?Distribution Overview

?


Advertising and CommunicationObjetives

Brand awareness 4.000 clients in Barcelona (2011)

A simple and efficient advertising and promotion campaign

Advertising - Marketing online

• Social Networking – Netflix Facebook groupsand others de Netflix)

• Invite a friend (like Spotify)

• SEO and SEM

• Apps – USA Netflix App translation

• Online banner advertising in appropriatewebsites

*80% of US members heard of Netflix through word of mouth

37

*80% of US members heard of Netflix through word of mouth


Advertising and CommunicationPR – Press Releases

• Announce launch in Spain• Send promotional items to bloggers along with invitations for Free Trial

Direct Marketing – email Campaigns

• Three emails offering free trial for 15 days sent to list of people who go to themovies once per month (purchased/rented)


Advertising and CommunicationActions

• Translate website to ES

• Direct Marketing ecto – Three emails offering free trial for 15 days sent to list of people who go to the movies once per month (purchased/rented) – 10,000 peoplein BCN

• Press Releases – About launch of company and freebies to bloggers

• Online Marketing – iPhone App - translate to ES

• Online Marketing – Banners – online at ServiCaixa, Dooplan, The Pirate Bay and Alluctv.org

• Social Networking Netflix Facebook page from USA translate to ES• Social Networking – Netflix Facebook page from USA, translate to ES


Advertising and Communication


Netflix Business Plan with SWOT for Spain

Business

Transcript of Netflix Business Plan with SWOT for Spain