ahahahah it could be a genial idea!! But, is it true?? :)

@goGlocalMktg

Everyone knows about the raise of Netflix and its recent failure in proposing to split their service in two brands with two different mothly fees.

After the apology of its CEO, the service has lost credibility. What are the perspective for the future??

CORE COMPETENCIES

Netflix core competency is its ability to retain the customers by using a monthly subscription fee. This is an important element of differentiation from the competitors, because allows the customers to pay a fixed sum and have the freedom of having the DVD's directly sent to their homes, and keeping them how much they want. So the target market in represented by people passionate about cinema, who want high quality movies and the opportunity to see them via Internet or TV. And the fact that their service always reaches you home, whether by Internet or by mail, is the other Netflix's core competency.

CORE ASSETS

For Netflix the most important assets are the brand and the data aggregation and analysis capability. Customer data are used to improve the reccomendation tool and so facilitate the decisional process. Netflix subscribers are 23.8 millions, according to the last quarter data, so, if we assume that a person chooses in average ten movies per time as a watch-later list, and that there are in average 200 movies rated by each person, Netflix has a lot of data worth to elaborate the further reccomendations.

All these factors, coordinated and integrated together, make its business model hard to replicate, but the most important one to reach and maintain a long-term sustainable competitive advantage is definitely the pool of collected data that leads to an useful and effective reccomendation system. Currently no other competitor offers this kind of feature, and so it will take a lot of years to reach the same amount of data and the same accouracy in the reccomendations.

WEAKNESSES

The main weakness in Netflix business model is that it doesn't allow to download the movies. You can just watch them in streaming, and the movie variety in also quite restricted: you can choose between more or less fifteen movies for each category, and the “New Arrivals” are mostly movies from a year ago: not a good deal! They're still focusing on the DVD rental business because there are less competitors due to the higher operational costs, but they have to be aware that often the choice to watch a movie is taken suddenly in the evening, maybe because there's nothing else to do and the TV programs offered are boring, so the mail service is not the proper distribution channel to have a movie available in every moment. So I suggest them to start a deep marketing research project to understand what people really want now, and Internet is definitely the channel of the future for them. They could broaden the variety of movies available including the most recent ones, because usually is that ones that people is looking for, and then they could split the Internet channel into two subchannels: the streaming one and the download one. In this way they could use their popolarity and their brand recognition to face off with the emerging competition represented for example by PlayLater, a new service that for a $5 monthly subscriptions allows you to download the streaming videos , using the streaming contents of 30 different websites, including Netflix. So it could be a serious threat for Netflix, because it offers an improved type of service for a lower subscription fee. The only limitation of PlayLater is that it's a software that doesn't work with Mac computers. So Netflix could leverage on this and offer its own downloading service included in its streaming subscription package.

Another important point to analyze is their decision (now cancelled) to split the business in two part: the DVD rentals and the movie streaming. This decision was aimed to have more revenues by using for each business a different subscription fee, and was prompted by a raise in the prices of contents offered by its content suppliers, like CBS and Time Warner. Looking at the number of subscribers, only 800,000 people canceled their subscription since July, so it's just the 3.4% of the total subscribers. And despite this, revenues are increased from $789 millions of the second quarter to $822 millions in the third quarter, with a positive increase also in the international subscriptions. Instead, the most critical issue concerning this decision is that it breaks the core competency of delivering content in two different ways directly at home. So that core competency no longer leads to a competitive advantage, and the company is attacked on two fronts, leading to a profitability and market share erosion in the long term.

The key to stay at the top of the competition in the future is by keeping offering a variety of services integrated together, and improving the customers loyalty by signing more agreements with the most important movie production companies, in order to have always an updated offer. The customers has to have the curiosity to come again the next day and see what's new, in order to be always willing to pay the next month of subscription: the long-term goal will be accomplished by retaining the customers and make them advocates, by using price and non-price promotions such as free DVD trials or secial content offered on-line, in order to have a continous stream of new and old users.

amazing commercial showing us the last night before the end of the world in 2012!!

@goGlocalMktg