NETFLIX INC, (A): THE 2011 REBRANDING PRICE INCREASE DEBACLE Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

NETFLIX INC, (A): THE 2011 REBRANDING PRICE INCREASE DEBACLE Case Solution

I Current Situation of NetFlix Inc & Historical Background

The DVD rental market has been dominated by NetFlix Inc over the years as compared to the key competitors of the company such as Apple iTunes, Hulu, Amazon, Redbox, Blockbuster, and Google TV. Reed Hastings and Marc Randolph founded the company in August 1997 with a single rental model. The company offered a great value for money to its customers by offering them DVD rental services at a fixed monthly fee of $ 9.99 with no late fee policy (Dornhelm, 2006).

The company has more than 100,000 titles and 50 shipment centers. The company also employs 4100 people out of which 200 are the part time employees. The company went public in the year 2002 at an IPO price of $ 15 per share. The company gained $ 6.5 million in 2003 as a result of this IPO. NetFlix expanded in Canada in 2010 as well as 43 other countries in Latin America and Europe.

It had achieved significant growth in revenues and profits from each of its strategies. However, in the recent years, the spending of US per capital on the DVDs has been declining and as a result of the increasing competition in the market and the new content pricing deals made by the competitors, the company was facing issues in maintaining its operating level margins (Hachman, 2014).

These financial issues take us to the current situation faced by NetFlix Inc. in this case. The financial issues and the strategic objectives of the company led the CEO of NetFlix, Reed Hastings to take a decision of increasing monthly subscription fees for the DVDs and of restructuring the operations of the company by dividing the DVD by mail and the streaming services provided by NetFlix Inc.

The goal of the company was to re brand the DVD by mail service to Qwikster and this will then allow NetFlix to focus on its core services, which are the streaming services. This would allow the company to reduce the shipping costs that had increased significantly for the DVD by mail service. However, as a result of this major decision, the customers of the company were displeased and it caused a dramatic loss to the subscribers of the company. Evidently, the financial outcomes of this re branding decision have impacted negatively on the market and the brand of the company through which NetFlix once dominated the market.

II Governance Information about NetFlix

The board comprises of 9 members. Out of these 9 members, 8 of the members are independent directors. The remaining director is Reed Hastings, who is the Chairman of the board. The board does not have any minority members, but it has three women on its board (NetFlix., 2016). These women are Leslie Kilgore, who has been a board member since 2012, Ann Mather, who has been a board member since 2010, and Ann Sweeney, who has recently become the member of the board in 2015 after leaving Disney Media Networks (NetFlix, 2016). The names of the members of the board are as follows:

Reed Hastings, Chairman of Board since 1997
Leslie Kilgore, Independent Director since 2012
Richard Barton, Independent Director since 2002
Timothy Haley, Independent Director since 1998
George Battle, Independent Director since 2005
Ann Mather, Independent Director since 2010
Jay Hoag, Independent Director since 1998
Bradford Smith, Independent Director since 2015
Ann Sweeney, Independent Director since 2015

Insiders, Institutions, and Mutual Funds hold the shares of NetFlix. The respective shareholding of these three groups is 0.11%, 66.11%, and 33.78% respectively..............

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NETFLIX INC, (A): THE 2011 REBRANDING PRICE INCREASE DEBACLE Harvard Case Solution & Analysis