In the summer of 2011, Netflix decided to split up their $10 all-in-one package (mailed DVDs and online streaming) into two different plans each costing $7.99 and effectively dropping a 60 percent price increase on their customer base in the midst of a massive recession. The results were ugly and self-inflicted. The backlash Netflix received upon the announcement from not only their customers, but the entire world nearly derailed their company as a whole. The company lost 800,000 subscribers, its stock price dropped 77 percent in four months, and management's reputation was battered. That could have been the end of their story; however, Netflix definitely learned from their many mistakes and turned it all around. 

How did they do this? Well, they finally started listening to their customers. Today subscription-based streaming plans are rapidly becoming the preferred means of consuming media and Netflix picked up on this early. Customers wanted access to their favorite TV shows and movies anytime, anywhere which is what Netflix provided to them. Also, they were able to provide this with simplicity. Each customer has a personalized interface that is user friendly for all ages.

Another reason Netflix has continued to be so successful since 2011 is their engaging original programming they provide for their customers. Jonathan Friedl and, the company’s Chief Communications Officer, told the New York Times that “because we have a direct relationship with consumers, we know what people like to watch, and that helps us understand how big the interest is going to be for a given show. It gave us some confidence that we could find an audience for a show like House of Cards."

This past summer, Netflix CEO Reed Hastings announced that he added 30 percent more subscribers last quarter than he was expecting, putting his total user base at 65 million. Netflix will be in 200 countries by the end of the year. The company also just announced it received 34 Emmy nominations for Netflix originals. This is the proof that Netflix was able to bring themselves back from the dead. At the end of 2011 I don’t think anyone could have predicted this would happen. But that was their wake up call and all they needed in order to create the success that they have today.

The market for Netflix is growing very fast. Even though Netflix has many competitors such as Hulu, Comcast and Amazon; Netflix benefits from being the first, and being the biggest. It has the most cash flow to invest in additional growth. It has the largest subscriber base to attract content providers earlier, and offer them the most money. Netflix is able to keep the other competitors at bay; reinforcing its leadership position. Netflix positioned itself to be a winner and implemented the tactics to make that strategy work despite widespread skepticism. Netflix remains the top streaming video producer online as it continues to provide familiar favorites, groundbreaking shows, and pleasant time-passers.

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Jacquelyn Palantino

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