Netflix

TABLE OF CONTENTS

NETFLIX, INC. 1

Company Images Montage 1

INTRODUCTION 2

Purpose Statement 2

Company Profile: Netflix, Inc. 3

Industry Profile: Video Tape and Disc Rental 4

INTERNAL ENVIRONMENT ANALYSIS 8

Resources 8

Capabilities 11

Core Competencies and Distinctive Competencies 14

Value Chain Analysis 17

Weighted Competitive Strength Assessment 30

SWOT Analysis 33

REFERENCES 34

APPENDIX 36

Team Evaluation Form 37

Company Images Montage

INTRODUCTION

Purpose Statement

The purpose of this report is to analyze the internal environment of Netflix, Inc., within the Video Tape and Disc Rental industry. To begin this appraisal, the report will examine Netflix's:

 Resources;

 Capabilities;

 Core Competencies; and

 Distinctive Competencies.

The report will then probe further into Neflix's internal state of affairs by conducting:

 A Value Chain Analysis;

 Weighted Competitive Strength Assessment; and a

 SWOT Analysis

The industry's top players are Blockbuster, Inc.; Hastings Entertainment; Movie Gallery, Inc; and Neflix, Inc. There are, however, nearly two dozen other sizeable competitors, with some being more direct than others, including (Hoover's, 2006). The main rivals in the industry are rushing to catch the next wave in home entertainment: movie downloads [over the Internet]. For example, Netflix plans to offer movie downloads starting in January 2007, according to corporate communications director, Steve Swasey. The service has been in the works for some time. Netflix plans to set aside up to $10 million for the project this year. Company executives have planned to officially announce the launch at the end-of-year earnings call (Holahan, 2006).

On September 12, 2006, Apple was expected to unveil a movie component to its iTunes store, which already dominates the music download market. The planned release follows Amazon\'s September 7 launch of \"Unbox,\" the e-commerce giant\'s response to a flood of sites offering downloadable movie rentals and purchases, including CinemaNow, Guba, and the Hollywood studio-supported Movielink (Holahan, 2006).

Several cable television content providers already have video-on-demand [VOD] offerings, though their VOD movie libraries are not yet nearly as extensive as Blockbuster's and Neflix's VHS and DVD rental supply (Maddox & Thompson, 2006).

Fears that movie downloads will open the door for the kind of mass piracy plaguing the music business have made movie studios slow to release large portions of their catalogs to download services. The worry is that hackers could find a way around digital rights management software, such as Microsoft\'s widely used DRM technology, which prevents computer users from watching downloaded rentals after time limits have expired and passing movie files to others who have not paid for the content. Already, anonymous hackers claim to have cracked versions of the technology (Holahan, 2006).

The studios have agreed to allow movie downloads in part because they don\'t want to repeat the music industry\'s mistake: unintentionally encouraging consumers to visit pirate sites because the desired delivery method is not widely available from a legitimate source. They see the future, and they don\'t want to lose out on the eventual market. \"With more than 25 million broadband residences, we believe the market is now ready for the launch of a new Internet movie rental service,\" said Movielink Chief Executive Officer, Jim Ramo, when the studio-backed site launched in 2002 (Holahan, 2006).

Piracy concerns have kept downloaded video from easily being watched on television. Typically, DRM technology is not supported by DVD players. To see a movie on a home theater setup, a television must be hooked up to a computer through a cable, which can compromise resolution (Holahan, 2006).

Hollywood also is likely reluctant to cannibalize the DVD market. The discs generated roughly $18 billion in sales in 2005 compared to about $10 billion at the box office for the same year. Studios have been pushing sales with added content, such as behind-the-scenes footage and blooper reels, as well as earlier and earlier DVD releases (Holahan, 2006).

INTERNAL ENVIRONMENT ANALYSIS

Resources

Tangible Resources

Tangible resources help contribute to the development of capabilities and competencies in a company. The biggest resource for Netflix, the world's largest online entertainment subscription service, is CEO and founder Reed Hastings. Hastings founded Netflix in 1997, and launched the online subscription service in 1999. For the first four years, the subscriber base was over 2 million (Maddox & Thompson, 2006). As of August 2005, Netflix employed approximately 1,200 people in the United States. About 1,000 of them work in the company's distribution centers around the country; close to 200 employees work at the company's headquarters in Los Gatos; and 20 employees work in studios in Los Angeles (ChronicleJobs, 2005).

Netflix