Kim Mattson

ITS 380

CH 10


Case Study

1.       What are three challenges that Netflix faces?

The cost of content is very high, and surpassing revenues. There is also high risk with creating new content and Netflix has limited experience in this area.  Netflix has tough competitors that cover technology, content creation and content distribution (Google, Apple, HBO, Amazon).

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

Netflix’s key strategic elements are to develop high speed Internet service to its customers, reduce content costs by producing their own content,  expand globally to take advantage of a whole new market, and expand its offerings of quality television series.

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

Netflix could really stir things up if there’s successful development with original content and having the capabilities to distribute through the Internet. The appeal of cable television providers requiring customers to pay for a bundle of TV shows will sour when compared to Netflix’s base fee for streaming on demand.

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

The three giants provide an alternative access to movies to Internet consumers.  The strengths of Netflix are its differentiating factors like brand recognition, algorithms to help consumers find movies and TV shows, and an increasing number of production studios supplying original content. 


2.   Go to Amazon and explore the different digital products that are available. For each kind of digital media product, describe how Amazon’s presence has altered the industry that creates, produces, and distributes this content. Prepare a presentation to convey your findings to the class.

Amazon sells three types of digital media: music, video, and e-books. Options in music and video are purchasing CDs and DVDs, downloads of songs or shows, and streaming. It sells e-books only for the Kindle platform, an Amazon product.  Amazon’s sales of CDs have destroyed record stores and music rental stores. Its impact on movie DVD sales and streaming was supportive to the respective industries.  The revenue from DVDs, the streaming of older titles and television shows support the movie industry.

3.   Identify three online sources of content that exemplify one of the three digital content revenue models (subscription, a la carte, and advertising-supported) discussed in the chapter. Describe how each site works, and how it generates revenue. Describe how each site provides value to the consumer. Which type of revenue model do you prefer, and why?

Three online sources of content that exemplify the three digital content revenue models are Netflix, iTunes, and Pandora (advertising-supported). Netflix is a subscription video streaming service. The value provided is access to older movies and TV shows, and some popular TV shows, on demand for a monthly fee. iTunes sells its content a la carte through downloads, whether its current movies, TV shows, or single music titles. All sales are through an Apple account with a customer credit card. Apple also offers a subscription service, Apple Music, for a monthly fee. Pandora is mostly ad-supported and provides radio stations based on customers choices of singers and musicians. Service is free for 40 hours, after that it’s a $36 yearly subscription for unlimited listening.  iTunes covers two different revenue models, which seems smart to be capable of offering choices to its customers.