TO: Reed Hastings
RE: How to deal with the challenges brought by the emergence of digital distribution of videos?
DATE: Sep 27th, 2013
Considering the changes in the industry of video distribution and inner competiveness of your corporation, I suggest taking some measures to tackle the challenges. Among them, the most important thing is to build Netflix's Eco-System and segment customers to offer them different services.
The basic factor contributing to Netflix’s success is highly customized experience based on the strong data collection and analysis system. Thanks to it, Netflix first developed an advanced recommendation engine, making it possible to ...view middle of the document...
All these factors matter to Netflix’s success, but the core competiveness of Netflix is just the two: highly efficient and effective data accumulation and processing system, and high customer satisfaction and loyalty based on a comfortable consuming experience. Moreover, the two factors are mutual and function towards each other.
Then, what digital distribution of videos means to Netflix? Actually, it will affect Netflix’s overall business model. Compared to physical rental of movies, digital distribution allows customers to watch films anywhere at any time. Obviously, it is more convenient and free. So for Netflix, its advantages over Blockbuster have on meaning when competing with those digital companies, such as Apply, Amazon. Moreover, many of these companies are like a complete eco-system, that means, they spreads over the whole value chain, including the content, the distribution and the hardware. So it is justified and reasonable for Netflix to integrate some upstream and downstream companies on the value chain. For Netflix, there are mainly resources that can still be used: the data analysis system and the big customer base it already has.
Then, Netflix should take some actions to utilize its advantages: （1）Find its role on the value chain. Netflix needs to turn into a platform both for film-makers and customers. For costumers, it provides various and personalized watching experience; for movie-makes, it offers not only sales but also precious records about customers’ needs, preference and tastes based on data mining. With...