Netflix Business Impact

To: Ken Florance (Netflix Senior Executive) 

Business Impact Summary:  

Netflix, an American company which provides streaming video services over the internet, is experiencing significant customer dissatisfaction over slow loading times for its video content.  Since the second quarter in 2007 of consumer availability, it has grown in subscribership from around six million to over thirty-five million in the first quarter of 2014 (ex. 12), ultimately changing the way we watch movies, placing further demands on Netflix to keeping up with the pace.  Up to this point, Netflix has been able to refuse payment to Internet Service Providers (ISP) to make their content available on their networks.  But consumer demand and the ongoing intricacies of the internet, now has Netflix executives faced with three options.  Pay Comcast, Americas largest Internet Service Provider, a direct fee for its services.  Pay them indirectly through a third party.  Or, continue using transit providers, which really isn’t even an option because that is what they are already doing and why they are in the dilemma they are in.  Although welcomed, Netflix executives have recognized these growing pains and must come up with a solution.

Recommendation 1:  

It is my observation and strong opinion that video streaming is here to stay.  With that, the situation at hand and the future of Netflix in mind, it is my recommendation that Netflix negotiate a contract with Comcast, Verizon and Tata Communications.  Reason being, these are the leaders of their respective pack and if conditions are met, there is no reason why they would not want to work with Netflix.  

Comcast has 27 million unique customers across the country.  They offer services in most of the US’s large metropolitan areas.  They own national broadcasters and cable channels, Universal Pictures and their theme parks located in the US, a professional NHL team and the arena they play in, the Wells Fargo Center and strong competitor Hulu, which is an amazing streaming service in its own right.  Comcast has the resources and Netflix can capitalize on this.  

Verizon has well over 100 million subscribers.  It is Americas largest wireless telecommunications service provider.  With the direction of the internet moving more towards accessibility and mobility, it is sneaking its way in in just about every aspect of our lives.  It’s not just cell phones or tablets now, we have internet in our vehicles, our watches, our thermostats, it’s everywhere.  Verizon has a strong mobile platform and also has its own FiOS fiber optic network.  It’s growth in number of new annual internet customers is on track with Comcast’s at 2%.