Case Study

Netflix (A): Business model innovation (Cartoon case)

4 pages
December 2011
Reference: IMD-3-2246

This graphic case describes how in 1997 Reed Hastings started up an innovative DVD rental service that gained over 4 million subscribers by 2007. Netflix emerged as the leader in innovation and customer service within the subscription-based digital distribution service industry.

Learning Objective
  • Discuss innovation and customer service
Keywords
Start-up, Customer Service
Settings
Northern America, United States of America
Netflix, Media
1997-2009
Type
Published Sources
Copyright
© 2011
Available Languages
English, German, Spanish
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Netflix (E): Capture value (Cartoon case)
By Stefan Michel and Sarah Von Blumenthal
Case reference: IMD-7-2499 ©2023
Summary
This case is part of a series on Netflix. Case (A) discusses the company's growth until July 2011. Case (B) tells the story of Netflix’s sharp share price decline after it announced it was splitting the business in two and increasing prices. Case (C) covers the years 2012/13, when Netflix found its way back to success. Seeing that the industry bottleneck was shifting from the channel (who can reach the viewers?) to the content (who owns the movie rights?), Netflix started to produce its own TV shows (e.g., House of Cards, Hemlock Grove). Case (D), set in 2020, focuses on a diverse set of strategic challenges Netflix is facing. First, as indicated already in the (C) case, the cost of content through licensing and production continued to increase. Netflix users had to get used to more frequent cancellations of their favorite show. Second, the “streaming war” between Netflix, Disney+, Hulu, HBO Max, Apple TV, Amazon Prime Video and YoutTube was intensifying on two fronts: competition for subscribers and for content. Third, Netflix was increasing its global presence to accelerate economies of scale by introducing new pricing strategies in foreign countries. Fourth, most movies are watched on mobile phones, where a vertical format is more natural than the traditional horizontal format. It was an open question whether movie producers should adopt this trend set by Instagram and TikTok. Thanks to the growing subscriber base, Netflix’s revenue and profitability were increasing. But is the company well equipped for the intensifying “streaming war”?
Reference IMD-7-2499
Copyright ©2023
Copyright owner IMD Copyright
Organization Netflix
Industry Media
Available Languages English
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