chapter 4 (Netflix) -FINAL

complexity-based coding

- shrinks files based on the type of content being streamed. This technique keeps all the high-definition bits needed for a fast-paced movie action sequence (think an Avengers fight scene), but strips out excess data from simpler titles like color-uniform children's cartoons -The benefit: Streaming quality gets a boost and less bandwidth is used, potentially speeding connections while saving money for Netflix and its data-plan-limited customers.

how did netflix build brand?

-(especially online) Brand comes from good customer experience. -Netflix Tech behind the Brand Distribution system allows fast reliable service. -Online system provides wide selection, good recommendations. -Allow customers to set up a list so they can always send you something you want right away.

data asset

-Average customer has rated 200 movies. -Use collaborative filtering to make recommendations. -The data and software together create switching costs. -Blockbuster doesn't have your data -Blockbuster doesn't have the millions of others' rating to compare to your data. -Cinematch creates switching costs->low Churn

what is hastings analogy for his company

-Less money for content and innovation and may pass on some costs to consumers in the form of higher subscription prices -Others worry that the loss of net neutrality will hurt entrepreneurship and innovation since only the largest players will be able to pay for the best access -Cable outfits-their profits allow them to make investments faster, more reliable networks

what is the major threat to the success of netflix' DVD-by-mail service?

-Shift from Atoms to Bits $300M investment in distribution centers -Watch Now How to get it to the TV? Software platform: TV's, DVD players, TiVo, iPad Licensing issues Windowing - content available to given distribution channel for specific period of time. Exclusive right for certain periods.

from atoms to bits

-The idea that many media products are sold in containers (atoms) has moved to bits (the ones and zeros that make up a video file, music, book). -As the Internet offers fast wireless delivery to TVs, music players, book readers, and other devices, the "atoms" become unnecessary. Physical inventory is eliminated == > great cost savings

disadvantages of atoms to bits model

-Wrangling licensing costs is a challenge -The switch to Blu-ray DVDs means that Netflix will be forced to carry two sets of video inventory Standard -High-definition -Bandwidth caps: Places a ceiling on a customer's total monthly consumption

what gives Netflix its competitive advantage?

-brand -data asset (cinematch) -scale

what major strategic moves has Netflix made in the last few months, and why?

-pricing change: Streaming and DVD service pricing de-cpupled ($10-$160) -qwikster

disintermediation in the video industry takes 2 potentially big benefits

-studios don't need to share revenue with third parties; they can keep all the money generated through new windows -if studioes go directly to consumers, the studio gets to collect and keep a potentially valuable data asset

what delivered netflix's triple scale advantages

-the largest selection -largest network of distribution centers -large customer base -the firm's industry leading strength in brand and data assets -MOVING FIRST

what are netflixs total revenues and how many employees does it have

-total revenue: 11.69 billion dollars -3500 employees -revenue for each employee=3.34 million

churn rate for netflix

-very low-4% -b/c switching cost is high

what are disadvantages of the atoms to bits model

-wrangling licensing costs is a challenge -the switch to blu-ray DVDs means that netfliz will be forced to carry 2 sets of video inventory -standard -high-definiton

What Did Netflix have that BB and Wal-Mart did not have and could not replicate?

1. brand 2. cinematch (the data it carried) 3. scale

collaborative filtering software

A classification of software that monitors trends among customers and uses this data to personalize an individual's customer's experience.

pureplay

A firm that focuses on a specific product, service or business mode. An internet pure pay is a firm that only operates through the internet channel, with no physical storefronts -not neftlix yet! still has 6% DVD

what is the first sales doctrine

An over-100-year-old US Supreme Court ruling known as the "First Sales Doctrine": states that a firm can distribute physical copies of legally acquired copyright-protected products. (applies only to the atoms fo a physical disc, not to bits needed for streaming)

global expansion

Combined with attractive economics and a positive impact in local markets, Netflix is planning to expand the initiative of creating local content in over 30 international original series in 2018, including projects from France, Poland, India, Korea and Japan. -

how did cinematch's collaborative filtering work

Customers' viewing are mined; customers are asked to rate the programs they watched -Compare customer ratings to others (collaborative filtering) -Recommend based on inventory - if only 500 copies, don't recommend to 50,000 people.

advantages go the atoms to bits model

Netflix eliminates a huge chunk of its shipping and handling costs Bandwidth costs are minimal

cord-cutting

Netflix is a contributor to so-called cord-cutting—where consumers forgo traditional cable network TV in favor of alternative, usually streaming services—and it's crushing its competition for one simple reason: It's providing quality original content at an affordable price.

what is coopetition

Situation where firms may both cooperate and compete with one another.

what are netflixs operational advantages

The firm examines inventory availability in the warehouse closest to a given customer and tailors recommendations to favor movies that are in stock so that users aren't frustrated by a wait

long tail benefits

The web enables near-zero-cost dissemination of information about products Enables easy searching for that information Overcomes problems of limited shelf space and geographically distributed audience.

the emergence of vMVPDs

Virtual multichannel video programming distributors (vMVPDs) like DirectTV Now, Sling TV, and YouTube TV now hold about 20 percent of the US subscriber market. -A vMVPD acts in the same way as a traditional cable or satellite provider but delivers linear television via an internet connection rather than a hard-wired set-top box

what does walmart use its bargaining power to do

Wal-Mart uses its bargaining power to encourage studios to: Hold content from competing windows Limit offering titles at competitive pricing during the new release period

what kind of competition do studios offering new films and television face

While studios offer new films and television shows each year, the number of firms offering high-demand content remains more or less fixed, essentially operating as an oligopoly with concentrated supplier power- just six firms control over 90 percent of US media consumed

what is the high degree of customer satisfaction linked to?

a firm's size based advantages

what is a long-enough tail

a service that might not have all of what you want but that consistently has something for everyone.

what are the differences between advertising and brand?

advertising can be built through awareness, but brands are built through customer experience.

roku

an independent firm that launched their own low-cost Netflix streamer

windowing

an industry practice whereby content (usually a motion picture) is available to a given distribution channel for a specified time period usually under a different revenue model (usually ticket sale, license fee, etc) -when a new movie comes out, it goes to theatre before it goes to netflix -Windowing restricts the number of titles available

netflix's collaborative filtering

cinematch -matches you with people with similar attributes

netflix/crowdsourcing

neflric crowdsourced their cinematic by taking collaborative filtering software and personally identifiable info and put it out there so they could get help -whoever could improve the algorithm by 10 % would get a million dollars

what happened when blockbuster and walmart launched copycat efforts against netflix?

netflixs churn rate actually fell.

what are bandwidth caps

places a ceiling on a customers total monthly consumption

long tail

refers to an extremely large selection of content or products. this is a phenomenon where firms can make money by offering a near limitless selection -netflix doesn't have shelf space so it can have a limitless selection

collaborative filtering

software that monitors trends among customers and uses the data to personalize the customer experience

net neutrality

the principle that all Internet traffic should be treated equally and that ISPs should not discriminate, slow down access, or charge differentially by user, content, site, platform, application, type of attached equipment, or modes of communication. with net neutrality... -Less money for content and innovation and may pass on some costs to consumers in the form of higher subscription prices -Others worry that the loss of net neutrality will hurt entrepreneurship and innovation since only the largest players will be able to pay for the best access -Cable outfits-their profits allow them to make investments faster, more reliable networks

churn rate

the rate at which customers leave a product or service

crowdsourcing

this is an act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined generally large group of people in the form of an open call

what are the key aspects for netflix's business model for DVDs

until recently) customer Chooses one of several subscription plans starting at $4.99/month. For $16.99 the customer gets three movies at a time with unlimited returns each month. -Videos arrive in red Mylar envelopes that also contain prepaid return. -When finished watching, the customer mails it back. -Customers make their viewing choices online in their request queue. If a title isn't available, Netflix moves to the next title in the queue -Customers use the Netflix website to rate movies they've seen, specify movie preferences, get video recommendations, check out DVD details, and share their viewing habits and reviews. -In 2007 Netflix added a "Watch Now" button to permit instant streaming of selected videos to PCs. -What are the key components of the backend operations? Distribution network + special arrangements with USPS Collaborative filtering system (Cinematch

what gives providers stronger bargaining power

video content is perfectly differentiated-

binge watching

viewing several episodes of a program in a single setting

straddling

when a firm attempts to match the benefits of a successful position while maintaining its existing potisiton -ex: blockbuster ex:wal-mart dumped their rental effort in a year

localization specialists

work on making sure each of the available interfaces is customized to the appropriate language for each of the 45 countries where Netflix is offered

what is the killer asset of netflix

yearly cost to run a Netflix- comparable nationwide delivery infrastructure (DVDs by mail) is close to $300 million

the growth of targeted advertising

— Pockets of innovation regarding data analytics and personalization->media and entertainment companies will start augmenting customer information with social media.

what are the key components of the backend operations

○Distribution network + special arrangement of USPS collaborative filtering system (Cinematch)

what was Hastings biggest regret and why

● One thing Hastings would have changed is delaying going public because firm being required to disclose its financial position, and the whole world soon learned that Netflix was on a profit march with a remarkable growth trajectory. ○ Attracted 2 very big sharks: Blockbuster and Walmart -When Netflix went public, financial disclosure rules forced the firm to reveal how profitable it was!!!!!