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    Netflix Case Analysis

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    Shubham Sogani
    Netflix was analyzing three options for its pricing structure in 2010. Option 1 charged $7.99 each for DVD rentals and streaming, but $15.98 for both. This led to many cancellations. Option 2 charged $12.99 for a DVD and streaming bundle. This was more suitable as customers could pay less for the bundle or $7.99 each. Option 3 had the least revenue and abandoned DVD rentals, which accounted for 30% of revenue. The analysis concluded that Option 2 was best as it maintained the DVD business while potentially gaining more customers through a lower bundle price.

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    Netflix Case Analysis

    Uploaded by

    Shubham Sogani
    154 views2 pages
    Netflix was analyzing three options for its pricing structure in 2010. Option 1 charged $7.99 each for DVD rentals and streaming, but $15.98 for both. This led to many cancellations. Option 2 charged $12.99 for a DVD and streaming bundle. This was more suitable as customers could pay less for the bundle or $7.99 each. Option 3 had the least revenue and abandoned DVD rentals, which accounted for 30% of revenue. The analysis concluded that Option 2 was best as it maintained the DVD business while potentially gaining more customers through a lower bundle price.

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    netfilx case summary

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    Netflix was analyzing three options for its pricing structure in 2010. Option 1 charged $7.99 each for DVD rentals and streaming, but $15.98 for both. This led to many cancellations. Option 2 charged $12.99 for a DVD and streaming bundle. This was more suitable as customers could pay less for the bundle or $7.99 each. Option 3 had the least revenue and abandoned DVD rentals, which accounted for 30% of revenue. The analysis concluded that Option 2 was best as it maintained the DVD business while potentially gaining more customers through a lower bundle price.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    154 views2 pages

    Netflix Case Analysis

    Uploaded by

    Shubham Sogani
    Netflix was analyzing three options for its pricing structure in 2010. Option 1 charged $7.99 each for DVD rentals and streaming, but $15.98 for both. This led to many cancellations. Option 2 charged $12.99 for a DVD and streaming bundle. This was more suitable as customers could pay less for the bundle or $7.99 each. Option 3 had the least revenue and abandoned DVD rentals, which accounted for 30% of revenue. The analysis concluded that Option 2 was best as it maintained the DVD business while potentially gaining more customers through a lower bundle price.

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    Netflix case Analysis Group 4

    (kshitij gupta, sunny gupta, shubham sogani, milan ashar,


    nischal kant, puspinder singh, akshay tyagi)
    In the report for the financial analysis of the 3 option given in the case we have
    taken all the costs that were given for the financial year 2010.
    As for the revenue we have taken the number of subscribers to be 23.8 million as
    mentioned in the case. For the first option the revenue has been calculated by
    (23.8*16*12=$4569.6), for the second option (23.8*10.99*12=$3138.744) and
    for the third option (23.8*2.99*4*12=$3415.776)

    Estimated Net Income for the 3


    option
    All figures are in Million dollars
    option option
    option 1 2 3
    3138.7 3415.7
    Revenue 4569.6 44 76
    cost of revenue 1357 1357 1357
    1781.7 2058.7
    gross profit 3212.6 44 76
    total operating expenses 522 522 522
    1259.7 1536.7
    operating income 2690.6 44 76
    intrest expenses 20 20 20
    other income expenses 4 4 4
    income before income tax 268 268 268
    provison for income tax 107 107 107
    860.74 1137.7
    net income 2291.6 4 76

    As in first option Netflix charges 7.99$ for DVD and 7.99$ for streaming. So if a
    subscriber wants to go for only one DVD or Streaming then that subscriber has to
    pay on 7.99$, but if a subscriber has to go for both then suddenly he has to pay
    15.98$. Though earlier for both the customer was paying only 7.99$. This option
    is not suitable as mentioned in the case that many subscribers had discontinued
    their subscription and this also led to falling of the share price of the company.
    The 2nd option is the most suitable for the company as it will be reducing the
    price to 12.99$ who would be welcomed by the customers as they would be
    paying less for the bundle. Even if the customers want only streaming or only
    DVD that would be possible at $7.99 each and they wont have to pay for the for
    the bundle.
    Option 3 will also be ruled out as we can see from the attached excel sheet that
    this option has the least revenue and also there is no income from the DVD
    rental business. The company cannot let go of the DVD rental business as it
    accounts for 30% of the revenue and just because it does not show any future
    prospects the company cannot abandon it.

    Conclusion:
    Keeping in mind the above details for the 3 options we think that the 2 nd option is
    the best, even if the revenue is less the company is keeping its DVD business
    and also will be able to increase the revenues by reducing the price of the bundle
    package.

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