Set in April 2020, the case chronicles the evolution of Netflix from renting DVDs by mail to the world's leading streaming video on demand (SVOD) provider. It explores Netflix’s distinctive strategy and culture, which promoted independent decision-making, agility, and innovation, and were central to the company's ability to seize a succession of growth opportunities. At the turn of the decade, entertainment firms and cable networks in the U.S. began to fight back, consolidating media properties, ending licensing contracts with Netflix, and launching competing SVOD services. As competition intensified, Netflix set its sight on India, which it viewed as the source of the next 100 million subscribers. But, to win in the crowded and price-sensitive Indian market, Netflix needed to revisit its past strategic choices, such as its premium pricing policy, avoiding live-entertainment, never including advertisements in its programming, and growing organically.
Competing on Agility: From its founding, Netflix has competed against competitors with more resources including cash, IP, and distribution assets. The company has succeeded through agility, spotting and seizing growth opportunities more quickly and effectively than its rivals. Students can discuss the sources of Netflix’s agility, including its focused strategy and corporate culture.
Corporate Culture: The case describes Netflix’s corporate culture, provides examples of how it plays out in action, and includes novel data on how well the company lives up to its stated values (based on actual employee reviews). Expansion in the Indian market raises a sharp action question at the intersection of strategy and culture. Should the company empower Indian managers to make decisions that are right for that market (e.g., introduce advertisements, offer sports content) but run counter to Netflix's strategy?
Market Entry: The Indian market offers tremendous growth potential, but also poses fundamental challenges for Netflix. The company has positioned itself as a high-end service, which conflicts with the low disposable income of the vast majority of Indian consumers. Netflix has built a rich library of original content, but Indian consumers prefer locally-produced shows and movies. The central question posed by the case is how Netflix can adapt to the needs of the Indian market and differentiate itself in a crowded field without straying too far from its global strategy.
Funding Growth: The case includes financial data on Netflix and its major competitors. Students can calculate the company’s historical free cash flow, project future cash flow, and discuss how to fund growth. To date, Netflix has relied heavily on debt to fund its investment in content, but is that sustainable? Could competitors use their vastly superior financial resources to “outlast” Netflix in the SVOD wars? To refine their estimates of future cash flow, students can use a simple break-even analysis model incorporating average price, number of subscribers, churn rates, and expected fixed and marginal costs.
Appropriate for the Following Course(s)
strategy (competing on agility, market entry), organizational behavior (corporate culture), finance (funding growth)
Netflix Goes to Bollywood
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