8:56 W N Vlll 87% Netflix's 2023 Strategy for Battling Rivals in the Global Market for Streamed Video Subscribers Arthur A. Thompson, The University of Alabama eading into 2023, Netflix was making a series of strategic and operating adjustments in of leader in the global market for streamed entertain ment content and to reaccelerate its growth in rev enues, net income, and subscriber membership Netflix grew its paid membership base from 139.3 million a year-end 2018 to 230.7 million in 190 coun tries at year-end 2022, equal to a compound annual growth rate of 13.4 percent; but subscriber member- ship at year end 2022 was up only 4.0 percent over year-end 2021. And its 2022 financial performance was uninspiring. The company generated revenues of $31.6 billion in 2022 (up 6.5 percent over 2021). operating income of profit of $5.6 billion (down 9.1 percent from $6.2 billion in 2021), and net income of $4.5 billion (down 12.2 percent from $5.1 billion in 2021). Netflix's long-term financial objectives were to sustain double-digit revenue growth, expand the company's operating margin, and deliver growing positive free cash flow. The primary actions currently being taken to improve Netflix's performance in 2023 and to achieve the company's long-term financial objec tives included (1) continuing to increase releases of new original content (something the company had been doing for the past several years), (2) focusing efforts to grow its user base on country markets with the highest potential for acquiring new subscribers. (3) launching a new "Basic with Ads" plan costing $6.99 per month for subscribers unable or unwilling to pay a higher fee for any of the other Netflix sub- scription plans (which in March 2023 in the United States ranged from $6.99 to $19.99, depending on connect the subscription tier chosen and the country where a subscriber was located), and (4) increasing efforts to prevent the 100+ million households who shared the password for their account with individuals in other households (all Netflix accounts were intended solely for the use of people living together in the same household) from continuing to share their password with other households unless they paid extra to do so by switching to a paid sharing account. In releasing the company's Fourth Quarter 2022 performance results, Netflix co-founder and long- time CEO, Reed Hastings, announced that the com- pany had completed its executive succession process whereby he would become Executive Chairman of the board of directors and Ted Sarandos and Greg Peters would become co-CEOs. Hastings and Sarandos has a long history of collaboration on corporate strategy. planning, and all aspects of company management. and both men had functioned as co-CEOs since 2020 when the two were appointed Co-Chief Executive Officers: Sarandos also held the title of Chief Content Officer and Hastings held the titles President and Chairman of the Board in addition to being co- CEO. Prior to being appointed co-CEO, Greg Peters held the title of Chief Operating Officer and Chief Product Officer. Earlier, Peters was International Development Officer for Netflix, responsible for the global partnerships with consumer electronics com- panies, Internet service providers and multi-channel video programming distributors that enabled Netflix to deliver movies and TV shows across a full range of devices and platforms; he joined Netflix in 2008. All Car 2004 by Arter A Tharepan Allg CAK PART 2 Cases Crafting and Executing Strategy three-Hastings, Sarandos, and Peters-had worked closely together for 15 years. In addition to the chang ing roles of the company's three top executives, Bela Bejaria, formerly Head of Global TV, was elevated to the role of Chief Content Officer and Scott Stuber was appointed Chairman of Netflix Film. NETFLIX'S REINVENTION OF ITS BUSINESS MODEL, 2010-2022 During the past 12 years, Netflix had successfully transformed its business model from one where subscribers paid a monthly fee to receive an unlim- ited number of DVDs each month (delivered and returned by mail with one to three titles out at a time) to a model where subscribers paid a monthly fee to watch an unlimited number of movies and TV episodes streamed over the Internet. During the same time frame, Netflix had expanded its geo- graphic coverage to over 190 countries, making it the world's leading Internet television network and biggest global provider of subscriber-based streamed entertainment programming Households across the world had quickly adapted to watching streamed entertainment because their subscriptions (to Netflix or any other subscription-based enter tainment provider) entitled them to watch as much streamed content as they wanted-anytime, any where, on nearly any Internet-connected screen-but they could also play, pause, and resume watching. all without commercials. During the past 10 years, a second major adjust- ment to Netflix's business model had been to shift from a content library consisting mainly of titles licensed from movie studios, broadcast TV networks, and other sources to a content library that increas ingly consisted of its own self- produced original content (feature films, multi-episode series, and documentaries). From 2012 forward, Netflix steadily increased its annual spending on new original con tent: expenditures for original content approximated $10 billion in 2018 and by 2022 were estimated to exceed $20 billion. Netflix debuted its first origi nal series, House of Cand, in 2013, which proved to be a blockbuster hit. Over the next several years, it launched several of the most popular shows of the decade-Orange is the New Black, Stranger Things, and Narcos. Amazon's Prime Video soon followed in 2015, with its first original content programs The Man in the High Castle and Mr. Robot. In 2021-2023 it was standard practice for Netflix to begin streaming freshly-produced titles or new seasons/episodes of previous series at least every month, increasing on a weekly or even daily basis. Netflix's top executive team believed that the ongoing availability of new titles and new seasons/ episodes of its most popular programs were critical to keeping existing subscribers actively engaged with the entertainment Netflix provided and to attracting new subscribers. Already solidly entrenched as the global leader in paid memberships for streamed content, the prin cipal questions for Netflix in 2023 seemed to be Whether the company had sufficient competi- tive and financial strength to combat the efforts of larger, resource-rich rivals looking to steal sub- scribers away from Netflix Whether the company could grow its subscriber base fast enough to achieve sustained double- digit revenue growth, improved profit margins and attractive bottom-line profitability, and ever- higher free cash flows. Financial statement data for Netflix for 2015 through 2022 are shown in Exhibits 1 and 2. Netflix had never paid a dividend to its shareholders and th company had declared it had no present intent paying any cash dividends in the foreseeable THE FAST-CHANGING MARKET FOR STREAMED ENTERTAINMENT Going into 2023, faster Internet speeds, fast-grow- ing consumer preferences worldwide for watching content streamed directly to whatever device they wanted to use at whatever times they wanted to watch it, rapid entry of new streamed content provid ers in most countries across the world, and aggres sive efforts of like HBO Max, Disney+, Comcast subsidiary NBC Universal's Peacock offering. Warner Media's Paramount Plus. Apple TV+, Hula, YouTube, and other enterprises in various geographic regions (like Tencent Video and Baidu's Quivi in China, ITV and Channel 4 in the United Kingdom. and Hotstar in India) looking to compete with Netflix and Amazon's Prime Video had combined ||| ୮ 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.

Marketing
20th Edition
ISBN:9780357033791
Author:Pride, William M
Publisher:Pride, William M
Chapter8: Business Markets And Buying Behavior
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Please follow the guidelines make a paragraph please.
8:56 W
N
Vlll 87%
Netflix's 2023 Strategy for Battling
Rivals in the Global Market for
Streamed Video Subscribers
Arthur A. Thompson,
The University of Alabama
eading into 2023, Netflix was making a series
of strategic and operating adjustments in
of
leader in the global market for streamed entertain
ment content and to reaccelerate its growth in rev
enues, net income, and subscriber membership
Netflix grew its paid membership base from 139.3
million a year-end 2018 to 230.7 million in 190 coun
tries at year-end 2022, equal to a compound annual
growth rate of 13.4 percent; but subscriber member-
ship at year end 2022 was up only 4.0 percent over
year-end 2021. And its 2022 financial performance
was uninspiring. The company generated revenues
of $31.6 billion in 2022 (up 6.5 percent over 2021).
operating income of profit of $5.6 billion (down 9.1
percent from $6.2 billion in 2021), and net income of
$4.5 billion (down 12.2 percent from $5.1 billion in
2021). Netflix's long-term financial objectives were
to sustain double-digit revenue growth, expand the
company's operating margin, and deliver growing
positive free cash flow.
The primary actions currently being taken
to improve Netflix's performance in 2023 and to
achieve the company's long-term financial objec
tives included (1) continuing to increase releases of
new original content (something the company had
been doing for the past several years), (2) focusing
efforts to grow its user base on country markets with
the highest potential for acquiring new subscribers.
(3) launching a new "Basic with Ads" plan costing
$6.99 per month for subscribers unable or unwilling
to pay a higher fee for any of the other Netflix sub-
scription plans (which in March 2023 in the United
States ranged from $6.99 to $19.99, depending on
connect
the subscription tier chosen and the country where
a subscriber was located), and (4) increasing efforts
to prevent the 100+ million households who shared
the password for their account with individuals in
other households (all Netflix accounts were intended
solely for the use of people living together in the same
household) from continuing to share their password
with other households unless they paid extra to do so
by switching to a paid sharing account.
In releasing the company's Fourth Quarter 2022
performance results, Netflix co-founder and long-
time CEO, Reed Hastings, announced that the com-
pany had completed its executive succession process
whereby he would become Executive Chairman of the
board of directors and Ted Sarandos and Greg Peters
would become co-CEOs. Hastings and Sarandos has
a long history of collaboration on corporate strategy.
planning, and all aspects of company management.
and both men had functioned as co-CEOs since 2020
when the two were appointed Co-Chief Executive
Officers: Sarandos also held the title of Chief Content
Officer and Hastings held the titles President and
Chairman of the Board in addition to being co-
CEO. Prior to being appointed co-CEO, Greg Peters
held the title of Chief Operating Officer and Chief
Product Officer. Earlier, Peters was International
Development Officer for Netflix, responsible for the
global partnerships with consumer electronics com-
panies, Internet service providers and multi-channel
video programming distributors that enabled Netflix
to deliver movies and TV shows across a full range of
devices and platforms; he joined Netflix in 2008. All
Car 2004 by Arter A Tharepan Allg
CAK
PART 2 Cases Crafting and Executing Strategy
three-Hastings, Sarandos, and Peters-had worked
closely together for 15 years. In addition to the chang
ing roles of the company's three top executives, Bela
Bejaria, formerly Head of Global TV, was elevated to
the role of Chief Content Officer and Scott Stuber
was appointed Chairman of Netflix Film.
NETFLIX'S REINVENTION
OF ITS BUSINESS MODEL,
2010-2022
During the past 12 years, Netflix had successfully
transformed its business model from one where
subscribers paid a monthly fee to receive an unlim-
ited number of DVDs each month (delivered and
returned by mail with one to three titles out at a
time) to a model where subscribers paid a monthly
fee to watch an unlimited number of movies and
TV episodes streamed over the Internet. During
the same time frame, Netflix had expanded its geo-
graphic coverage to over 190 countries, making it
the world's leading Internet television network
and biggest global provider of subscriber-based
streamed entertainment programming Households
across the world had quickly adapted to watching
streamed entertainment because their subscriptions
(to Netflix or any other subscription-based enter
tainment provider) entitled them to watch as much
streamed content as they wanted-anytime, any
where, on nearly any Internet-connected screen-but
they could also play, pause, and resume watching.
all without commercials.
During the past 10 years, a second major adjust-
ment to Netflix's business model had been to shift
from a content library consisting mainly of titles
licensed from movie studios, broadcast TV networks,
and other sources to a content library that increas
ingly consisted of its own self- produced original
content (feature films, multi-episode series, and
documentaries). From 2012 forward, Netflix steadily
increased its annual spending on new original con
tent: expenditures for original content approximated
$10 billion in 2018 and by 2022 were estimated to
exceed $20 billion. Netflix debuted its first origi
nal series, House of Cand, in 2013, which proved to
be a blockbuster hit. Over the next several years, it
launched several of the most popular shows of the
decade-Orange is the New Black, Stranger Things,
and Narcos. Amazon's Prime Video soon followed
in 2015, with its first original content programs The
Man in the High Castle and Mr. Robot.
In 2021-2023 it was standard practice for
Netflix to begin streaming freshly-produced titles
or new seasons/episodes of previous series at least
every month, increasing on a weekly or even daily
basis. Netflix's top executive team believed that the
ongoing availability of new titles and new seasons/
episodes of its most popular programs were critical
to keeping existing subscribers actively engaged with
the entertainment Netflix provided and to attracting
new subscribers.
Already solidly entrenched as the global leader
in paid memberships for streamed content, the prin
cipal questions for Netflix in 2023 seemed to be
Whether the company had sufficient competi-
tive and financial strength to combat the efforts
of larger, resource-rich rivals looking to steal sub-
scribers away from Netflix
Whether the company could grow its subscriber
base fast enough to achieve sustained double-
digit revenue growth, improved profit margins
and attractive bottom-line profitability, and ever-
higher free cash flows.
Financial statement data for Netflix for 2015
through 2022 are shown in Exhibits 1 and 2. Netflix
had never paid a dividend to its shareholders and th
company had declared it had no present intent
paying any cash dividends in the foreseeable
THE FAST-CHANGING
MARKET FOR STREAMED
ENTERTAINMENT
Going into 2023, faster Internet speeds, fast-grow-
ing consumer preferences worldwide for watching
content streamed directly to whatever device they
wanted to use at whatever times they wanted to
watch it, rapid entry of new streamed content provid
ers in most countries across the world, and aggres
sive efforts of like HBO Max, Disney+, Comcast
subsidiary NBC Universal's Peacock offering.
Warner Media's Paramount Plus. Apple TV+, Hula,
YouTube, and other enterprises in various geographic
regions (like Tencent Video and Baidu's Quivi in
China, ITV and Channel 4 in the United Kingdom.
and Hotstar in India) looking to compete with
Netflix and Amazon's Prime Video had combined
|||
୮
Transcribed Image Text:8:56 W N Vlll 87% Netflix's 2023 Strategy for Battling Rivals in the Global Market for Streamed Video Subscribers Arthur A. Thompson, The University of Alabama eading into 2023, Netflix was making a series of strategic and operating adjustments in of leader in the global market for streamed entertain ment content and to reaccelerate its growth in rev enues, net income, and subscriber membership Netflix grew its paid membership base from 139.3 million a year-end 2018 to 230.7 million in 190 coun tries at year-end 2022, equal to a compound annual growth rate of 13.4 percent; but subscriber member- ship at year end 2022 was up only 4.0 percent over year-end 2021. And its 2022 financial performance was uninspiring. The company generated revenues of $31.6 billion in 2022 (up 6.5 percent over 2021). operating income of profit of $5.6 billion (down 9.1 percent from $6.2 billion in 2021), and net income of $4.5 billion (down 12.2 percent from $5.1 billion in 2021). Netflix's long-term financial objectives were to sustain double-digit revenue growth, expand the company's operating margin, and deliver growing positive free cash flow. The primary actions currently being taken to improve Netflix's performance in 2023 and to achieve the company's long-term financial objec tives included (1) continuing to increase releases of new original content (something the company had been doing for the past several years), (2) focusing efforts to grow its user base on country markets with the highest potential for acquiring new subscribers. (3) launching a new "Basic with Ads" plan costing $6.99 per month for subscribers unable or unwilling to pay a higher fee for any of the other Netflix sub- scription plans (which in March 2023 in the United States ranged from $6.99 to $19.99, depending on connect the subscription tier chosen and the country where a subscriber was located), and (4) increasing efforts to prevent the 100+ million households who shared the password for their account with individuals in other households (all Netflix accounts were intended solely for the use of people living together in the same household) from continuing to share their password with other households unless they paid extra to do so by switching to a paid sharing account. In releasing the company's Fourth Quarter 2022 performance results, Netflix co-founder and long- time CEO, Reed Hastings, announced that the com- pany had completed its executive succession process whereby he would become Executive Chairman of the board of directors and Ted Sarandos and Greg Peters would become co-CEOs. Hastings and Sarandos has a long history of collaboration on corporate strategy. planning, and all aspects of company management. and both men had functioned as co-CEOs since 2020 when the two were appointed Co-Chief Executive Officers: Sarandos also held the title of Chief Content Officer and Hastings held the titles President and Chairman of the Board in addition to being co- CEO. Prior to being appointed co-CEO, Greg Peters held the title of Chief Operating Officer and Chief Product Officer. Earlier, Peters was International Development Officer for Netflix, responsible for the global partnerships with consumer electronics com- panies, Internet service providers and multi-channel video programming distributors that enabled Netflix to deliver movies and TV shows across a full range of devices and platforms; he joined Netflix in 2008. All Car 2004 by Arter A Tharepan Allg CAK PART 2 Cases Crafting and Executing Strategy three-Hastings, Sarandos, and Peters-had worked closely together for 15 years. In addition to the chang ing roles of the company's three top executives, Bela Bejaria, formerly Head of Global TV, was elevated to the role of Chief Content Officer and Scott Stuber was appointed Chairman of Netflix Film. NETFLIX'S REINVENTION OF ITS BUSINESS MODEL, 2010-2022 During the past 12 years, Netflix had successfully transformed its business model from one where subscribers paid a monthly fee to receive an unlim- ited number of DVDs each month (delivered and returned by mail with one to three titles out at a time) to a model where subscribers paid a monthly fee to watch an unlimited number of movies and TV episodes streamed over the Internet. During the same time frame, Netflix had expanded its geo- graphic coverage to over 190 countries, making it the world's leading Internet television network and biggest global provider of subscriber-based streamed entertainment programming Households across the world had quickly adapted to watching streamed entertainment because their subscriptions (to Netflix or any other subscription-based enter tainment provider) entitled them to watch as much streamed content as they wanted-anytime, any where, on nearly any Internet-connected screen-but they could also play, pause, and resume watching. all without commercials. During the past 10 years, a second major adjust- ment to Netflix's business model had been to shift from a content library consisting mainly of titles licensed from movie studios, broadcast TV networks, and other sources to a content library that increas ingly consisted of its own self- produced original content (feature films, multi-episode series, and documentaries). From 2012 forward, Netflix steadily increased its annual spending on new original con tent: expenditures for original content approximated $10 billion in 2018 and by 2022 were estimated to exceed $20 billion. Netflix debuted its first origi nal series, House of Cand, in 2013, which proved to be a blockbuster hit. Over the next several years, it launched several of the most popular shows of the decade-Orange is the New Black, Stranger Things, and Narcos. Amazon's Prime Video soon followed in 2015, with its first original content programs The Man in the High Castle and Mr. Robot. In 2021-2023 it was standard practice for Netflix to begin streaming freshly-produced titles or new seasons/episodes of previous series at least every month, increasing on a weekly or even daily basis. Netflix's top executive team believed that the ongoing availability of new titles and new seasons/ episodes of its most popular programs were critical to keeping existing subscribers actively engaged with the entertainment Netflix provided and to attracting new subscribers. Already solidly entrenched as the global leader in paid memberships for streamed content, the prin cipal questions for Netflix in 2023 seemed to be Whether the company had sufficient competi- tive and financial strength to combat the efforts of larger, resource-rich rivals looking to steal sub- scribers away from Netflix Whether the company could grow its subscriber base fast enough to achieve sustained double- digit revenue growth, improved profit margins and attractive bottom-line profitability, and ever- higher free cash flows. Financial statement data for Netflix for 2015 through 2022 are shown in Exhibits 1 and 2. Netflix had never paid a dividend to its shareholders and th company had declared it had no present intent paying any cash dividends in the foreseeable THE FAST-CHANGING MARKET FOR STREAMED ENTERTAINMENT Going into 2023, faster Internet speeds, fast-grow- ing consumer preferences worldwide for watching content streamed directly to whatever device they wanted to use at whatever times they wanted to watch it, rapid entry of new streamed content provid ers in most countries across the world, and aggres sive efforts of like HBO Max, Disney+, Comcast subsidiary NBC Universal's Peacock offering. Warner Media's Paramount Plus. Apple TV+, Hula, YouTube, and other enterprises in various geographic regions (like Tencent Video and Baidu's Quivi in China, ITV and Channel 4 in the United Kingdom. and Hotstar in India) looking to compete with Netflix and Amazon's Prime Video had combined ||| ୮
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.
Transcribed Image Text: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.
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