Project Management: Netflix Business Model Deconstruction & Analysis

This report deconstructs Netflix's business model using the Business Model Canvas framework, examining key elements such as customer segmentation, value proposition, channels, revenue streams, and cost structure. It identifies critical success factors, including a focus on service quality, data utilization, and change management. The report also addresses downside risks like increasing competition and content costs. Recommendations for improvement include enhancing the Cine-match system, improving technical infrastructure, and adjusting the service management program. The analysis concludes that Netflix, despite facing challenges, can maintain its competitive advantage by addressing these issues and focusing on innovation and customer satisfaction. This document is available on Desklib, where students can find a variety of academic resources.

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Project Management: Netflix business model
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Table of Contents
1. Introduction..................................................................................................................................3
2. Business Model: Netflix..............................................................................................................3
2.1 Building blocks......................................................................................................................3
2.1.1 Customer segmentation..........................................................................................................4
2.1.2 Brand Statement..............................................................................................................4
2.1.3 Value positioning............................................................................................................5
2.1.4 Key activities..................................................................................................................5
2.1.5Channels..........................................................................................................................5
2.1.6 Revenue stream...............................................................................................................6
2.1.7 Cost structure..................................................................................................................6
2.1.8 Key resources..................................................................................................................6
2.1.9 Consumer relationship....................................................................................................6
3. Interrelationship...........................................................................................................................7
4. Critical success factor..................................................................................................................7
5. Downside risk..............................................................................................................................7
Conclusion.......................................................................................................................................8
Recommendations............................................................................................................................9
Appendix 1.....................................................................................................................................10
Appendix 2.....................................................................................................................................11
Bibliography..................................................................................................................................12

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1. Introduction
On-demand film services and streaming services have all successfully managed for
obtaining enough rate of popularity these years mainly for movie buffs. Netflix is the biggest TV
streaming and movie services in the recent days. In this era, Netflix business model is becoming
sky rocketing and constructive. The owners of Netflix started their business as a DVD rental
company in the year of 2007. The company is operating their VOD streaming business along
with DVD rental. Netflix is a TV demonstrates spilling suppliers and online film delivery source
with more than a 40 Million of conversational persons.
In Q1 2014, the Netflix streaming represented about 89.50% of shows. The company is
also capable of create unique substances in terms of on request video. In order to attract new
consumers and retain existing clients the business segmentation and customer target that has
been developed are elaborated in this business report. Apart from that, a cost structure, value
streaming, key resources, customer relationship and interrelationship details are also illustrated
in this business model.
2. Business Model: Netflix
2.1 Building blocks
The business model developed by Osterwalder and Pigneur are comprises of nine
interrelated blocks. The business model canvas visually represents each of the nine building
blocks and act as a tool to accomplish successful demonstration, analysis, designing and business
modeling. The building blocks or elements for this model are customer segmentation, value
positioning, channels, revenue stream, key partnership, cost structure, key resources and

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customer relationship. The components of the business model are elaborated in the appendix 1
section.
2.1.1 Customer segmentation
The target consumer of Netflix involves both female and male who belongs to the age
group between 17 and 60 and the family units with a salary level of $30,000 and above.
Considering clients, psychographics the three basic gatherings are:
 People who are interested to achieve most amount of incentives for the cash
 Those people who are rentersand the motion picture
 People whose average monthly wage rate is $30,000
As a whole the company focuses mass market, the blockbuster movie fans and list of avid
television show watchers. The list of consumers who prefer convenient delivery approaches are
enlisted in the target consumer list.
2.1.2 Brand Statement
The core business strategy of Netflix is to grow their streaming subscription delivery
opportunities both globally as well as domestically. The developers are focused on keep on
improving their consumer experiences by expanding the user interface, streaming content and
overall service as well. The vision of Netflix is to become one of biggest entertainment based
distribution service providers all over the world. This online platform offers customized library,
diverse TV shows and a low costing user convenience.

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2.1.3 Value positioning
Netflix gives the users a completely legal access on huge TV show database, movies and
best personalized suggestions algorithms. The service avoids all sorts of advertisement
interruptions. Apart from that the service supports wide range of electronic devices also in terms
of TVs, PCs, gaming console, mobile phones etc.
2.1.4 Key activities
In order to gain competitive advantages and commercial revenue by serving amazing
services to global consumers the key activities those are undertaken by the company include:
 On time and buffer free amazing customer services
 High level research and development opportunities
 Professional data analysis
 Perfect engagement to the target audiences
 Mail and rental operations
2.1.5Channels
The different channels considered for the business model canvas are:
 Website streaming
 Phone application mail
 Delivery
 Gaming consoles
2.1.6 Revenue stream
Netflix is focused on serving high quality, on time and error free streaming opportunities
to their consumers globally. The revenue stream offers by Netflix are as follows:

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 A free monthly subscription
 Available multiple streaming plans
 DVD or Blu Ray rentals
2.1.7 Cost structure
In order to prepare the net cost for Netflix the cost structure that has been prepared is
comprises of three different components in terms of cost assigned for development process, cost
allotted for preparing the legal statement. Apart from this the other cost that has been prepared
for the Netflix’s business is consumer acquisition cost. In addition to this, the other components
for which the cost is considered by Netflix authority are infrastructure development cost, average
capital cost and consumer support cost.
2.1.8 Key resources
The key resources identified for the Netflix business are high quality media infrastructure
streaming service, needful license for the media content and exclusive original contents. In order
to prepare this business mode successful the other resources considered include technical exerts
and professional business analysts.
2.1.9 Consumer relationship
For maintaining a stronger relationship with the consumers the Netflix community is
focused on their current service management and service delivery network that can successfully
manage the company images to keep the relationship.
3. Interrelationship
The subscription offers given by Netflix are much adoptable by both the existing and new
consumers. The business revenue model of Netflix offers monthly membership fees to their

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consumers. The contents successfully offer respectively ultra high, high definition and standard
definition offers for three of the Netflix (premium, standard and basic service).
4. Critical success factor
The leading factors those are considered for the success of the company are:
 To make sure that all the employees are completely responsible to improve the
overall service quality
 To verify that the resources and leadership requires to be offered by the top level
management
 To ensure that all data should be utilized to support and verify the improvement
initiatives
 Provide critical business measures for satisfying al the consumers
 Actively managing and resisting the changes
5. Downside risk
The users of the Netflix have identified certain biggest risks and these are as follows:
Increasing rate of competition: These days there are many similar types of service
providers evolving such as Amazon prime that is giving strong competition to Netflix. The
increasing numbers of potential competitors are interrupting the expected revenue of the service
providers.
Increasing cost of the content: The cost of content is increasing day by day for all
similar online entertainment service providers and as a result the infrastructure cost for Netflix is

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also enhancing that is interrupting the expected outcome of the platform. It has been reported that
the cost rate is increased from $30 Million to $100 Million.
Difficulty in worldwide development: Worldwide development is becoming very
difficult for Netflix. Netflix is currently operating in more than 50 nations but had a 18 Million
of global supporters.
Conclusion
From the overall discussion it can be concluded that, Netflix is a much keen online video
streaming service providers who has successfully achieved their expected revenue model these
days ad also gave strong competition to the similar type of service providers. The research and
Development (R&D) department of the company has taken this responsibility to offer needful
services to their consumers with a minimum trial and subscription rate. The company is intensely
spending for obtaining worldwide rights for their blockbuster contents. Netflix is dealing with
huge difficulties in the year of 2016. In the company’s second quarter standpoint all possible
difficulties are reflected. However, these days the company is facing certain major challenges in
terms of fewer amounts of endorsers in United States, worldwide development difficulties and
hard dependency on the media organizations. If these risks and issues are mitigated then it is
expected that the company would be successfully obtain high rate competitive advantages and
measurable commercial revenue as well.
Recommendations
Netflix requires the below mentioned recommendations for further improvement:

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Cine-match improvement: The current cine match system used by the company
requires measurable upgrading. If they follow each of these perspectives then the company will
keep on experiencing their growth as client will continue with DVD rents and subscription
maintenance. In order to improve the personalization of website experience the cine match
software is required to be improved.
Technical improvement: In order to allow on demand video streaming the used set top
box is require being very simple which connects the phones, television and cable outlet. Netflix
must improve their encryption scheme for successfully addressing the copyright issues with
program downloading and connection security. Apart from that, the purchase program follows by
the company must keep their logistics transparent.
Change in service management program: The cine-match algorithm used by Netflix
requires focusing on gaining competitive advantages, inexpensive digital entertainment delivery
and on demand video delivery.

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Appendix 1
Figure 1: Netflix business model canvas

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Appendix 2