Netflix Case Study

What changes have Netflix made (4)

- Basic with Ads
- Password Sharing Restrictions
- Video Games
- Redesign homepage with AI Technologies

What is Netflix (3)

- Founded in 1997 by Reed Hastings and Marc Randolph
- Global subscription-based streaming service offering, movies, tv shows and original content
- Available in over 190 countries

Basic with Ads Change (3)

- Came into affect during November 2022
- Reactive change due to decrease in market share
- Cheaper alternative to existing plans, 6.99 a month with 4 minutes of advertisements every hour

Password Restrictions change (5)

- May 2023 implemented
- Reactive change due to decrease in market share
- 100 million people using Netflix via shared passwords
- Changed so only share password if same household
- Extra member fee 7.99/month

Video Games Change (4)

- Implemented August 2023
- Proactive change
- Diversify revenue streams + enhance member engagement
- Games available as part of subscription, adding value

AI Homepage Change (4)

- Implemented Mid 2025
- “Eclipse” simplifies navigation and offers enhanced personalised recommendations using generative AI for its search.
- First new design of homepage in over 12 years
- Proactive change

KPI that influenced changes (3)

- Number of Sales
- Net Profits
- Percentage of Market share

KPI of Number of sales

- April 2022, subscriber growth declined for first time
- 1 million global subscribers lost between April and July 2022

KPI of Net Profits

- 12.22% decline in 2022 and 18.3% decline in first quarter of 2023 - infleunce Basic with Ads
- Increased from 2.3 billion to 1.3 in one year for Q1 2025 - allows investment into gaming

KPI of percentage of market share

- Originally had market share of 47% in 2017, falling to 30.1% mid 2025

Driving Forces for Change

Competitors, Pursuit of Profits, Technology, Societal Attitudes and Managers, Reduction of costs

Competitors as Driving Forces (2)

- Disney +, Amazon Prime
- Customers deciding what services to subscribe to and which to cut

Pursuit of Profits as Driving Forces

- Ad based subscription increases subscribers and profits through ad revenue
- reducing password sharing places pressure on households to be an extra member or their own subscriber
- Gaming opens up new markets and customers

Societal Attitudes as driving forces for change

- Australian households reducing number of streaming services
- Rising cost of living forcing Australians to cut back on spendings
- More pressure on streaming services to compete for new and current subscribers

Managers as a Driving Force for change

- COO Greg Peters wants to attract new users and cope with the decline in subscribers

Technology as a driving force for change

- Rapid advancements in AI create new opportunities to personalise customer experience in homepage

Reduction of costs as a driving force for change

- Cancelled 20+ games and closed in house gaming studio
- Producing smaller, narrative based games tied to Netflix content to reduce development costs

Restraining Forces for Change (3)

Financial Considerations and Competitors

Customers as a Restraining Force

- Customers dissatisfied with being forced into ad based subscription or higher cost subscription.

Financial Considerations as a Restraining Force

- High costs to implement technology for ad based subscription and tracking + monitoring password sharing
- Marketing Expenses increased by $127 million to promote new ad based plan
- Need to employ new team members to develop games

Competitors as a Restraining Force

- Binge and Disney + also offer ad based plan, but don’t crack down on password sharing making it more appealing
- Competitors also investing in cloud gaming

Porters Generic Strategies

- Differentiation Strategy
- Lower Cost strategy

Differentiation Strategy

- leader in offering streaming services, causing video rental chains to collapse
- unique by making own movies/shows, spending a significant $14.1 billion in 2023
- Introducing Ad Based Subscription to target those with less to spend

Lower Cost Strategy

- Offering lower prices to customers through Ad based subscription