1. Read the case, keeping in mind the textbook topic(s) the case covers 2. Read the Case Analysis section of the textbook 3. Written Document a. Provide a BRIEF description of the situation b. Update the situation to today(2025) using library and/or online resources (the company web site is a great place to start) i. This means to take into consideration the geo-political and economic environment the firm is operating in NOW. ii. Compare and contrast now vs. when the case takes place c. Cite sources of data not included in the case, using APA format i. Use at least TWO peer-reviewed articles ii. Do NOT rely solely on what you know about the company iii. Other credible sources are: WSI NYT Wash Post The Guardian, the firm's web site and 10K filings (if pub Meet the new Teams video d. Answer the questions at the end of the case if any, in light of the topic of the chapter e. DO NOT spend more than 1/3 to 1/5 a page describing the situation. f. No more than 3 pages, excluding References and Cover Page. 4. Presentation a. No more than 15 minutes. b. 5-7 slides, including the introductory slide C. Address the important facts, decisions, recommendations d. If there is a recommendation needed, make one and justify it using analysis of facts. 5. Your written analysis and your oral presentation should be the same, with the written document providing more detail. 6. Who is your audience? Not Me. Your audience is middle and upper level management of the firm in question. 7. Who are you? An up-and-coming Management trainee who has been tasked with helping the firm to understand the situation in the case. 8:58 W that country's language (like Japanese or Korean or Norwegian), the task of successfully upgrading the quality of the company's new 2023 titles produced by local studios hinged on (1) doing a better job of screening the proposals for new titles to identify those most likely to excite and please existing local subscribers (or subscribers in multiple countries speaking a common language) and thereby spur sub- scriber growth in these locations and (2) being care ful to choose local film and TV show producers with a proven track record of attracting sizable audiences and pleasing subscribers with what they watched. As new CEO Ted Sarandos said, "the key for me is not that you have to spend more and more money. but it's can you get more impact per million-dollar spend than anybody else?" Netflix's cash spend for content acquisition was roughly $17 billion in 2022. and the company expected to keep the cash spend in 2023 and 2024 at roughly the same $17 billion level. In April 2023, Netflix announced it would invest $2.5 billion in Korean content over the next four years, double the amount it had invested since 2016 when it began partnering with Korean content producers. The new imvestment to deepen partner- ship with Korea's creative producers was because they had produced such hits as Squid Game. The Glory and Physical 100, Marketing and Advertising Strategy in 2022-2023 Netflix's principal new marketing initiative in 2023 was to task its marketing personnel to secure adver tising to support its new, lower priced Basic-with-ads subscription plan in the 12 countries where the plan was introduced in late 2022 and in the additional countries where Netflix wanted to introduce the plan in 2023. Top management saw the campaign to recruit local advertisers to allocate a portion of their ad budgets to Netflix programs being streamed in each of the countries with the ad-supported sub- scription plan as being "a substantial long term incre mental revenue and profit opportunity for Netflix Management had not publicly indicated how many new marketing personnel would be required to staff the company's effort to first procure and then grow advertising revenues. Netflix's marketing and advertising strategy in 2023 was to continue to devote a big portion of its N LTE 87% marketing and advertising resources to activities in the countries and geographic regions deemed to have the biggest subscriber growth and revenue growth potential. Netflix spent $2.53 billion on marketing and advertising in 2022, $2.55 billion in 2021, and $2.23 billion in 2020. Netflix used multiple market- ing approaches to attract subscribers, but especially digital and television advertising. Advertising expen ditures included paid search listings, banner ads on social media sites, permission-based e-mails, ads on regional and national television, and payments to such marketing partners as consumer electronics manufacturers, mobile operators, and Internet ser vice providers (to include the Netflix app on their devices or as a downloadable app on their websites). Marketing costs also included ⚫Costs pertaining to free trial subscriptions. Payments to consumer electronics manufactur ers to include a Netflix app preloaded on their devices. Payments to mobile operators across the world to create quick and easy-to-use procedures for smart- phone users to access Netflix streamed or down- loadable programming. Netflix believed it was particularly important to make mobile streaming from Netflix instantly accessible to those people who basically only wanted to have their relation ship with Netflix on a mobile device. Promotional campaigns for new original titles to generate more density of viewing and conversa- tion around each title. Such campaigns involved sending emails to subscribers at least weekly and often more frequently announcing the availabil ity of new titles, calling attention to titles highly matched to a title viewed the previous day, previ- ous several days, or previous week. Emails were also sent to Netflix members mul- tiple times weekly to announce the availability. of new releases that matched well with the sub- scriber's viewing history. When users were brows ing titles in various genres of interest, there always were rows of titles with such headings as "New Originals" "Top Ten Movies," "Trending Now, " and "Because you watched [title]." along with a row of titles on the subscriber's watch list. Payroll and related expenses for personnel that supported marketing activities. C-76 PART 2 Cases in Crating and Executing Strategy Advertising campaigns of one type or another were underway at Netflix more or less continuously. with the lure of one-month free trials and announce ments of new and forthcoming original titles usually being the prominent ad features. Netflix's advertising expenses were $1.59 billion in 2022, $1.67 billion in 2021, and $1.45 billion in 2020. Netflix executives were strongly supportive of the marketing and advertising activities the company undertook. On several occasions while he was CEO, Reed Hastings had made note of why it was impor tant to conduct marketing efforts calling a subscrib er's attention to titles closely matched to recently viewed titles or to help make certain new titles a big- ger hit in a particular nation or among a particular demographic segment. These were deemed valuable contributors to heightening subscriber satisfaction with the entertainment value Netflix was providing. Most recently, Hastings had said We believe people typically sign up for a streaming service because they've heard about a title "you sim ply must watch from a friend, seen the excitement on social media or read about it in the press. Generating conversation is our primary marketing goal because we see that it drives acquisition of new subscribers) and encourages existing members to watch more, which in turn helps retention. Because Netflix operated in so many countries, Hastings was also a big fan of experimenting with different marketing approaches in different markets and thereby learning more about what worked well in marketing Netflix's original content and differentiat ing Netflix from rival streaming providers. Those approaches that were successful became candidates for use in other locations. NETFLIX'S PERFORMANCE, BY GEOGRAPHIC REGION Beginning with the fourth quarter of 2019 and going forward, Netflix management determined that the company's operations had evolved into a single business-global streaming operations-and revealed that top management, especially the CEO, had begun making operating decisions, assessing finan cial performance, and allocating resources based on the performance of its streaming operations in four geographic regions: the United States and Canada; Europe, the Middle East, and Africa; Latin America; and the Asia-Pacific. The company's rev enue and membership performance in each of these four geographic regions for 2020-2022 is shown in Exhibit 5. Netflix's quarterly and full-year revenue and membership performance in each of the four regions for 2022 is shown in Exhibit 6; this exhibit clearly lays out the company's revenue and member ship performance struggle in 2022 and why top man- agement had placed top priority on improving the company's performance in 2023 and the years going forward. Reed Hastings made special mention of the fact that while subscription prices were different in every country around the world and while manage ment definitely took note of the average monthly revenues per subscriber in each country and region, Netflix was not managing its business to boost aver- age revenue per subscriber in each country. Rather, management was managing to maximize revenues worldwide. Hastings said" Obviously, as we have lower priced mobile offers, that's going to bring down a blended (average revenue per subscriber in a country or in a market. But if we've doing that in a revenue-accretive way, we think th great for our long-term business. We're grow scribers, and we're growing revenue. The Debt Burden Created by N Rapid Buildout of Its Content Lib The company's strategic emphasis on h a much larger library of original content during 2014-2020 had resulted in multi-billion-dollar annual increases in Netflix's financial obligations to pay for original content produced in-house and new titles licensed from outside producers. The company's cash flows from operations were negative every year during 2015-2019. Netflix covered the billions of dollars required to pay for these new content acquisi- tions by issuing additional shares of common stock and issuing additional long-term bonds (in the form of senior notes, usually payable in ten years) at vary. ing interest rates. The company's long-term debt rose from $900 million at year-end 2014 to $15.8 billion at year-end 2020. The details of Netflix's outstanding senior notes as of December 31, 2022, |||