Netflix to Test New Streamed Video Product in 5 Pilot Cities

Case Type: new product, new technology; operations strategy.
Consulting Firm: IBM Global Business Services (GBS) first round full timejob interview.
Industry Coverage: telecommunications & network; information technology (IT).

Case Interview Question #00736: Your client Netflix, Inc. (NASDAQ: NFLX) is the largest international integrated communications provider. The company offers on-demand Internet streaming media available to viewers in North and South America, the Caribbean, and parts of Europe (Denmark, Finland, Ireland, the Netherlands, Norway, Sweden, and the United Kingdom), and of flat rate DVD-by-mail in the United States, where mailed DVDs are sent via Permit Reply Mail. The company was established in 1997 and is headquartered in Los Gatos, California. It started its subscription-based digital distribution service in 1999, and by 2009 it was offering a collection of 100,000 titles on DVD and had surpassed 10 million subscribers.

Recently, Netflix is looking at ways to retain existing customers and gain new customers by increasing their bandwidth for video content delivery. They have rolled the new technology out to 5 pilot cities in the U.S. They started this initiative to address three consumer trends:

• Time shifting (e.g. Tivo)
• Location Shifting (e.g. Slingbox)
• Consumer streamed video content

Your consulting firm has been retained by the CEO of Netflix to assess the effectiveness of the initiative. Specifically, you’re asked to address the following five questions:

• What factors would you consider to assess the client’s strategy?
• How the trends will affect that strategy?
• What analysis would you do?
• What data would you collect?
• Other factors to consider?

How would you approach this case?

Possible Answers:

Use of the new products/technology in the pilot cities. Usage rates will help determine the amount of bandwidth required at peak times and help the client plan effectively for future network expansion. It will also help the client estimate market potential.

Satisfaction ratings from pilot users. This will help them refine their product offerings and determine how effective the enhanced services will be in retaining existing customers and drawing in new ones.

Competitors. Assess what the current competitors are in each of the trends (such as Tivo or Slingbox) and how the product stacks up against them. Satisfaction ratings and market research could be used to determine strengths / weaknesses and how to enhance services to compete effectively. Also, explore the potential for stealing customers from other similar service providers to try to quantify the potential additional market share and revenue captured from the network expansion.