Netflix Sequel: Bidding Wars the Movie


disney-leaves-netflixAs Netflix’s strategy unfolds it becomes clearer the extent to which it threatens traditional media companies. Initially, Netflix was a welcome partner who paid for access to older entertainment assets – new income streams for studios. More recently they have developed new content and lure top talent away from traditional media companies. Now, by offering a compelling portfolio of options, they compete more directly against traditional media companies. AT&T, Comcast, Fox, and Disney have taken notice of Netflix’s increasingly vertically integrated business model that bypasses traditional distributors (cable, DSL, satellite) and doesn’t rely on advertising revenue. The new model is driving mega mergers & bidding wars as rivals try to build compelling portfolios to offer streaming services. This is a great live case to frame many strategic management course topics including:

  • What is strategy? I use the Strategy Diamond and Netflix is a great case to look at things like staging and pacing, vehicles, and arenas.
  • Market structure – How attractive is the media industry and how has this streaming model affected industry profitability
  • Resources/Capabilities – Rivals lack some resources and some of their substantial existing resources have become “core rigidities” that hinder adaptation
  • Competitive dynamics – What strategic moves can we observe? How will Netflix respond?
  • Disruptive innovation – Netflix started as a limited low-cost alternative but added features that eventually made it a significant threat to incumbents.
  • Corporate strategy – The billions rivals spent on M&A are another critical angle. This also provides a vehicle to discuss when vertical integration creates value.

I have assembled some useful materials to frame a discussion of this case. First, the case can be taught using a series of recent news articles (sample article pack). In addition, I have prepared a spreadsheet to explore scenarios for how various events might affect the value of Netflix. For instance, what would happen to its business model if the market started to value the company  as a traditional media company as opposed to a tech firm? Similarly, what will happen if rivals’ M&A strategies succeed and pose a critical challenge? Finally, here is a link to a sample pre-class survey to help students think about the strategic issues before class.

Contributed by Russ Coff

 

2 thoughts on “Netflix Sequel: Bidding Wars the Movie

  1. Excellent resources. Thank you Russ!
    For those that also which to provide students with some historical context of how Netflix came about and how it fought battles with Blockbuster and HBO, the Business Wars Podcast – Season 1 – Netflix vs Blockbuster/HBO is a useful resource (see https://wondery.com/shows/business-wars/ and scroll down to season 1). The final episode of season 1 is an Interview with Rich Greenfiled which focuses on the current state of the industry and how Netflix is positioned relative to typical media firms (similar issues to those in the article pack posted by Russ). I also managed to get the transcript for the podcast (see: https://www.dropbox.com/s/uro3qyukg87fvlx/Business%20Wars%20Netflix%20Transcript.docx?dl=0), which can help those who prefer to read rather than listen.

  2. Thanks for these additional resources. I listened to the podcast. It’s very engaging. I will be updating the materials (news & spreadsheet) within the next month so you might check back.

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