Chapter 10

Case Study:

1.  What are three challenges that Netflix faces?

1.    The cost to produce their own content is high and there is a risk they may not become popular.

2.    “The cost of doing business” increased faster than the revenues.

3.    Completing with powerful competitors with deep pockets like Amazon, Google, Apple, Hulu and HBO; who are either dominant in technology or content creation or distribution.  

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

Some elements of Netflix’s are:

·       Produced their own series/content “in an effort to reduce the cost of licensing.”

·       The ability to stream through high speed Internet service.

·       Besides movies, they also offered popular/high quality and old television series.

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

The combination of on demand viewing through the internet at a fairly low to moderate monthly fee, poses a threat to cable television systems because Netflix does not demand customers purchase in bundles but by individual shows/movies.

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

Apple, Amazon and Google are also providing the same service that Netflix provides.  Which is giving customers movie access over the Internet.  

Netflix’s strengths are: they have original content and are continuing production with other studios; they have name and brand recognition with a large customer base; and they have “the largest database on consumer video preferences and built a recommendation system that encourages consumers to see more movies.”


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

“Convergence from a technology perspective has to do with the development of hybrid devices that can combine the functionality of two or more existing media platforms.”  The three dimensions where the term convergence has been applied are:

1.    Technology--examples of platform like iPad, iPhone and Android (smartphones).  They “combine print, music, pictures, and video in a single device.

2.    Content—includes: design, production, and distribution.

3.    Industry—“refers to the merger of media enterprises into powerful, synergistic combinations that can cross-market content on many different platforms and create new works that use multiple platforms.”

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

They used a “combinations of technical (both hardware and software) and legal means for protecting digital content”  The encryption of content to prevent used without permission was abandoned by Apple in 2009 “because of users objections, and because Amazon had opened an online music store in 2007 without any DRM protections, with the support of music label firms, who came to realize that DRM prevented them from exploiting the opportunities of the Internet and perhaps even encouraged an illegal market.”

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

“The book publishing industry’s experience with the Internet is very different from the newspaper and magazine industries.  E-book editions of fiction and non-fiction books (so-called trade books) have been very successful, yet printed book sales have not collapsed and have remained about the same over time.  Professional books which includes college textbooks, remain almost entirely printed for a variety of reasons.  Book publishing revenues have been stable over the last five years.” Whereas the newspaper and magazine circulation has fell due to the Internet.

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

There are several factors needed to support successful charging for online content.  Having premium content is worth a great deal as consumer would pay for it.  Having something that customers perceives has great value, like the ease of moving or downloading content to any device.  Having content that is not found elsewhere or something specialized.  “As it turns out, free content isn’t worth very much and should be free, especially if producers give it away.”

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

The four types of internet gamers are:

1.    Casual gamers “play games on a PC or laptop computer.”

2.    Social gamers “play games using a Web browser or an app on a social network like Facebook.”

3.    Mobile gamers “play games using their smartphones or tablet computers.  They are social gamers as well.”

4.    Console gamers “play games online (or offline) using a dedicated console like Xbox, PlayStation, or Wii. Often, console gamers are connected over the Internet to enable group play.”

“While many more people play mobile and desktop games online, more than half of online gaming revenue is generated by console gamers.”




#5 why would Amazon buy Twitch?

Twitch is a live stream broadcasting service where gamers can stream their games on their own channels once they set up an account.  “According to Piper Jaffrey's Gene Munster, Twitch had 100 million unique monthly users, two million active streamers, and more than 240 billion minutes of gameplay last year. By 2020, he believes, Twitch could be worth $20 billion, generating $1 billion in revenue.” (CNBC, May 14, 2016).


Based on the number of viewer and subscribers, it has the potential for bringing in a large amount of revenue. They make money on: advertising, subscription and a partner program.  Streamer can also make money by donation and or getting ad revenues. 

By buying Twitch, Amazon has made their way into profitable niche market.  “I believe niche programming like Twitch is the future of entertainment,” Alen said. (CNBC, May 14, 2016).