Adrian Leal

ITS 380-001


Chapter 10


Case Study


1.      What are the three challenges that Netflix faces?

One of the problems is that the cost of its service is very high, and it is increasing faster than Netflix’s revenues. Other problem is that Netflix does not create too much content and does not have too much experience about it. Even though, they have recently started to introduce some series under the denomination “Netflix Original”, most of its content, and the most popular, come from different content providers. Lastly, there are an increasing number of competitors with more powerful technology like Apple, HBO, etc.


2.      What are the key elements of Netflix’s strategy in 2014?

Close deals with Internet providers in order to offer a quality service without interruptions to its customers, reduce the cost of the service by creating its own content, expands its market outside the United States, and include popular TV shows.


3.      What are the implications of Netflix’s new strategy for the cable television systems like Comcast and TimeWarner?

Netflix users do not required a TV contract, the only thing they are required to have in order to use the service is an Internet connection. This allow the client to save the price of the TV bundle cost and pay a monthly fee to stream the content that he/she wants to stream at any moment.


4.      Why is Netflix in competition with Apple, Amazon, and Google, and what strengths does Netflix bring to the market?

Netflix competes with these companies because they all offer a similar streaming service. The strengths of Netflix include its brand recognition, the diversity of its content, and their recommendation algorithms.




1.      What are the three dimensions in which the term “convergence” has been applied? What does each of these areas of convergence entail?

The three dimensions are: technology, content, and industry’s structure. Technology refers to the production of devices that combine two different functionalities, for example books and newspapers, with tablets. Content include design, production, and distribution. Lastly, the convergence of industries refers to the combination of different markets that create content for multiple platforms.


5.      What techniques do music subscription services use to enforce DRM?

iTunes has demonstrated that consumers are willing to pay a reasonable price for a song or album; Pandora, Spotify, and Soundcloud offer a subscription service that has access to a big variety of music and artist for a reasonable price too.


10. How has the book publishing industry’s experience with the Internet differed from the newspaper and magazine industries’ experience?

The Internet has open many opportunities and changes in the industry. Popular books have really increased their e-book sales during the last year, while textbooks and professionals book have remained mostly printed.


15. What factors are needed to support successfully charging the customer for online content?

Focus market, specialized content, monopoly of the market, and high value perception. The value perception appears when the customer finds that they can access to the content anywhere, with any device, if they have an Internet connection. Most of the customer value perception comes from the convenience of the service provided.


20. Name and describe the four types of Internet gamers. Which type attracts the most gamers?

The four different types of Internet gamers are:

·         Casual gamers play computer games.

·         Social gamers that play games on social network like Facebook

·         Mobile gamers, which play video games on mobile devices

·         Console gamers play offline or online games on a console like PS4 or xBox.




1.      In August 2014, Amazon purchased Twitch, which lets users stream their video game sessions, for almost $1 billion. Why would Amazon spend so much money on Twitch? Create a short presentation either defending the purchase or explaining why you think it was a bad idea.

Amazon bought a streaming company that ranks fourth regarding Internet traffic after Netflix, Google, and Apple. It is a good investment that a company like Amazon will know how to make profit from it. Furthermore, the video games industry, and specially the streaming of them, is rapidly increasing, so this was a good strategic move from that point of view.


In addition, Amazon reaches a new huge market. It acquires 55 million young and wealthy users that are passionate about new technologies.


Also, it a defensive move against other competitors. Any other competitor could have bought Twitch, and gained a competitive advantage from it.