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Case Study

Netflix (E): Capture value (Cartoon case)

By Stefan Michel and Sarah Von Blumenthal

4 pages

October 2023

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Reference: IMD-7-2499

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”?

Learning Objective

Identify and categorize the different strategic challenges Netflix is facing
Infer the changing customer behavior for movie entertainment
Evaluate Netflix’s key resources and capabilities against a variety of aggressive competitors
Assess the importance of economies of scale due to the high and increasing cost of content, both licensed and produced.

Keywords

Strategy, Marketing, Global Marketing, Digital Transformation, Digital

Settings

Northern America, United States of America
Netflix, Media
2020

Type

Published Sources

Available Languages

English

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This case study is part of a series

Netflix (A): Business model innovation (Cartoon case)
Netflix (B): The 2011 fiasco (Cartoon case)
Netflix (C): The race to videostreaming (Cartoon case)
Netflix (E): Capture value (Cartoon case)

This case study is part of a series

Netflix (A): Business model innovation (Cartoon case)
Netflix (B): The 2011 fiasco (Cartoon case)
Netflix (C): The race to videostreaming (Cartoon case)
Netflix (E): Capture value (Cartoon case)

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