Summary:
- Netflix has lost more than 80% of the value since their peak in 2011.
- Amazon is Netflix's main competitor, and they are taking subscribers away from Netflix.
- Netflix has no hardware sales or advertising revenue, so their best bet is making steady subscription revenues. (current domestic streaming subscriber rolls at 24 million)
- Netflix's library of movies and TV shows is getting gradually replicated by their competitors, such as Amazon, Redbox Instant, Hulu and iTunes. If all of them offer the same content, the only realistic way to stay competitive is by having competitive prices. But, Netflix's subscription costs about $96 per year while Amazon's costs $79.
- As Cable Network AMC made a breakthrough with a single hit with Mad Men, Netflix is trying to change and become the HBO of the Internet with 5 original series by early 2013. At least until then, Netflix's stocks do not seem to have a bright future.
Noh Review: I bet when Netflix first came out, Blockbuster was scared. Netflix offered online video service while Blockbuster tried to compete with their video rental service. Basically, new technology declared a war against old technology. In the end, new technology won the battle. I wouldn't be exaggerating when I say Netflix bankrupted and demolished Blockbuster. Needless to say, Blockbuster ended up going on sale for the embarrassing starting price of $290 million, and they were bought by Dish Network at auction for $233 million. Analysts say that Blockbuster's fall resulted from poor strategic planning and mismanagement aside from the fierce competition. I say that they failed to keep up with the changing times and trends. Consumers are getting lazy. They do not want to physically get up and go to a store to rent a DVD when they can simply watch it on their computer. Only a portion of them do. Netflix was destined to win this battle because their strategy matched better with the social trend.But now, Netflix needs to look around and realize that they have other competitors in the video rental/streaming market. Amazon is threatening their position. Something needs to be done with Netflix's price. If it cannot get any cheaper, they need to figure out another creative way to boost their subscriptions. In 2011, Netflix made total revenues of $3.2 billion, but they only ended up with a net profit of $226 million, which amounts to about 7% of that. Based on other factors considered, they need to cut down on some of their unnecessary expenditures. Most importantly, Netflix should learn from Blockbuster's mistakes and focus on not falling behind the times. In that sense, it is good to see their plan to reinvent themselves as the HBO of the Internet by 2013. Regardless of what they say, Netflix is constantly moving.
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