Case Analysis

IMD-1085 12.05.2020

IS NETFLIX BUILDING A HOUSE OF CARDS?

François-Xavier Cart-Tanneur, Hannes Rupprecht, Jan Söderström and Joris van Raak (IMD EMBA 2019) prepared this case under the supervision of Professor Stefan Michel as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation.

Copyright © 2020 by IMD – Institute for Management Development, Lausanne, Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of IMD.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Reed Hastings, Netflix’s CEO, was thinking, “After the quarter is before the quarter,” as he started preparing his storyline for 2019’s fourth quarter reporting. In 2019’s third quarter, Reed, together with his chief finance officer Spencer Neumann, his chief content officer Ted Sarandos and his chief product officer Greg Peters, confidently reported strong financial results with revenues up 31% and operating income doubled versus the previous year’s same period. Even though Netflix was slightly short of its net additions of paying subscribers, the market reacted much better than after its second quarter results. Reaching only 2.7 million global paid net adds versus the targeted 5.0 million for the quarter made the media generate quite a few negative comments.

After more than twenty years of running Netflix, Reed had become stoic when reading negative coverage on his company. But the Forbes article – “All the reasons Why Netflix is Doomed”1 – may have held some elements of truth if Reed was honest with himself. With good reason, Reed hired Rachel Whitestone as the new chief communications manager in August 2018, Spencer in January 2019 and Jackie Lee-Joe as the new chief marketing officer in September 2019.

Maybe the next quarter’s announcement presented an opportunity to change people’s perceptions about Netflix’s dependency on licensed content as well as a number of other issues, including the increasing cost of securing creative talent, the growing price sensitivity of customers and the impact of new competition. With the right mix of skills and experience in the new leadership team, could Netflix reinvent itself once more and address those issues with a different strategy?

It wasn’t just that subscriber growth was slowing and the financing of its own content was getting increasingly scrutinized. Had the company grown so fast mainly due to a lack of real competition? Reed had hired some very competent people, so it was about time to come up with a holistic answer to this existential question: Is there a better way to remain attractive to customers? Does Netflix need to transform itself despite its current growth?

Netflix initially transformed itself from a DVD distributor into an online streaming business; it then went on to vertically integrate into content production – Netflix Originals. After the disastrous Qwikster launch cancellation, Netflix kept a close eye on what its customers wanted. The first Netflix Original – “House of Cards” – became an instant success, and many other series won both the customers’ hearts and the critics’ appreciation. In truth, profoundly understanding its customers had become its core. Somehow, Reed had hoped that these skills would be a massive entry barrier, yet the high-quality content that was streaming had attracted new competition of significant size and with considerable spending power. Netflix had to decide if investing heavily in content production continued to be a sufficient competitive advantage.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

COMPETITIVE LANDSCAPE Netflix was facing, for the first time ever, competition with deeper pockets, such as Amazon, Apple, Disney, YouTube (owned by Google’s parent company Alphabet) and others. Each one of these players fought for screen time, were well established, tech- savvy and had to be successful in the accelerating “streaming war.”

• Disney Plus. Disney’s titles had been a real asset to Netflix, but when Disney launched its streaming service, it started pulling its content from Netflix. According to CNET, when Disney launched in November 2019, it focused on the US, Canada and Netherlands in the first round and went live with 500 films and 7,500 television episodes, reaching more than 10 million sign-ups in a single day. By comparison, it took HBO three years to reach five million users (2019).2 CNBC said that Disney Plus was likely to grow to 160 million subscribers thanks to the company’s unmatched brand recognition, extensive premium content and unparalleled ecosystem to market the service.3

Disney, prior to launching its own streaming services, had focused on gathering relevant content through the acquisitions of Marvel Studios and 21st Century Fox. With the latter came an indirect 65% stake in Hulu, a subscription video-on-demand (SVoD) service with around 30 million subscribers. Different from Netflix, Disney did not seem to believe in the value of so-called binge viewing; instead, it released episodes of its original series on a weekly basis following the traditional TV schedule. There were two more fundamental differences: Pricing started at $7 a month and customers were offered a bundle of Disney’s three streaming platforms, all running on the same technology, including Hulu and ESPN Plus for $13 a month.

• Apple TV Plus. In November 2019, Apple entered the stage with its own streaming service – Apple TV Plus. Being one of the market leaders in content selling and distribution, Apple now also integrated content production and streaming. To get the ball rolling, as the Financial Times wrote, Apple hosted a star-studded event in March 2019 at which Hollywood heavyweights including Oprah Winfrey and Steven Spielberg joined Mr Cook on stage to promote the streaming service. “They are in a billion pockets, y’all – a billion pockets,” Ms. Winfrey said of Apple, as she launched her plans for new documentaries and live book club shows that would be exclusive to the iPhone maker (2019).4

Through its Apple TV app, Apple launched in over 100 countries for $4.99 a month, making it the cheapest add free streaming service so far, and with the ability to share between six different family members.5 Less competitive is the content library, which started out with less than 20 announced original shows. And within the first two weeks of launching, the head of programming left Apple. Apple TV Plus will not host any licensed content as Apple intends to continue to sell it on Apple TV (pay-per-view model). But like Amazon Prime, Apple TV Channels will be launched in 2020.6

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

• Amazon Prime Video. Launched at the end of 2016 across most markets, Amazon Prime Video went through different iterations, eventually evolving into a stand-alone streaming service. For $7.99 a month, subscribers got access to not only Amazon Studios content but also third-party content such as HBO, Showtime and Cinemax through Amazon Channels. Amazon was the leader in offering a channel experience, similar to cable TV. Further, Amazon entered the hybrid SVoD market by extending its offering to live sports, capturing one of the last appointment TV events in order to directly engage with the audience. i Sports perhaps sat outside of the normal SVoD saturation.7 As for Amazon’s number of streaming subscribers, Netflix would have to go with the public estimates of around 100 million across 200 countries because Amazon did not report them separately.

• Other Hollywood and Silicon Valley competitors. There were other players Netflix needed to keep an eye on. In fact, other industry players had entered the content creation space in order to compete in the changing media and entertainment industry. Former distributors of content like AT&T did so by acquiring Time Warner, which included HBO, for more than $85 billion in October 2016. And in 2018, Comcast won the bid for Sky for almost $40 billion against 21st Century Fox, after failing to buy the latter earlier in the year.8

Coming from the opposite side, Google’s YouTube TV, with its live TV offer with all major channels but without the cable hassle, launched in 2017, which made Netflix’s domestic expansion harder. YouTube pulled out of content creation and entered the TV distribution space, going after the audiences that were willing to cut the cable for SVoD but still wanted live TV as they knew it. For $49.99 a month, YouTube provides 70+ channels including local sports and news but without the cable box, contracts or any additional hidden fees.

Where and how to compete begged the question: What is Netflix? Is Netflix a data analytics company that drove return on investment (ROI) through better customer insights, or a media company streaming movies and TV shows or a content creator? Netflix needed to have a close look at its resources and capabilities to be able to redefine its competitive advantage.

i Appointment TV is when people watch a TV show at the time of its original broadcast.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

NETFLIX’S KEY STRENGTHS Reed felt comfortable considering himself a visionary who has been at the forefront of artificial intelligence (AI). His approach to risk taking and innovation had shaped Netflix into a technology company that was able to reinvent itself several times over, winning investors’ confidence and attracting and retaining talent.

Netflix was still building on the foundations that were laid when it pivoted into SVoD, a small market at the time. In fact, according to the Motion Picture Association of America, subscriptions to online video services (613 million) surpassed cable (556 million) for the first time in 2018.9 The company understood the opportunities linked to the rise of high- speed broadband and mobile media devices such as smart phones and tablets. Netflix’s ability to spread quickly was its integration into the rising smart TVs, connected gaming consoles and set-top-box of the internet service providers (ISP). Since Netflix accounted for substantial internet traffic, the digital infrastructure was essential for the experience of its customers. At the time, Reed had to ensure that Netflix would get the bandwidth it needed. Hence, he developed Netflix’s content delivery network (CDN), which allowed the company to improve its content delivery and reduce delivery costs by giving the ISP the choice to either pair directly with Netflix or install proprietary equipment in their networks. This laid the foundation to continue increasing the quality of Netflix’s video content to full HD and possibly even further, making Netflix the most efficient and reliable streaming service.

Another element of Netflix’s success was the introduction of binge viewing. According to Moffett Nathanson, “Breaking Bad” was 10 times more popular once it started streaming on Netflix.10 Reed remembered an interview he gave at the time to the New York Times where he explained his insight: “We found an inefficiency.”11 Netflix knew from the experience in DVD rentals that people rented whole seasons of TV shows, so it transferred that knowledge to online streaming.

Netflix also had the ability to understand and predict customer behavior. The data that had been built over many years and applied across a large user base had helped Netflix with everything from customer retention to content development including release date scheduling, product schedule optimization, demand modeling and evaluation. In 2012, Netflix revealed to Wired magazine, “We know what people watch on Netflix and we’re able with a high degree of confidence to understand how big a likely audience is for a given show based on people’s viewing habits.”12 Netflix knew how to create a detailed subscriber profile far better than conventional marketing practices. Knowing how people behave and tailoring what each subscriber saw helped them with their retention. Direct feedback models with A/B testing have also helped Netflix to continuously improve the personalized experience.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Part of the experience was the content quality and availability. Netflix produced content today with tomorrow’s needs in mind. In order to secure the content for the future, all Netflix productions were filmed in 6K, although it was streamed in 4K. By comparison, HBO only streamed in 1080p.13 Netflix also digitized and developed production processes. One of Netflix’s tools was “Move,” which facilitated tracking a production schedule for all the people involved. Another one was a mark-up tool for script reading, as content engineering product director Chris Goss said to Variety, “We want to take the script and turn it into an interactive breakdown tool.”14

Reed felt there was more to be said on Netflix’s content strategy. Its technological advancements shaped not only Netflix into the global company it had become, but also the industry ecosystem – particularly the relationships with content partners and vice versa.

CONTENT STRATEGY Reed understood there was no long-term business in being a rerun company, just as there was no long-term business in being a DVD-rental company. He remembered vividly the allegory used by Ted in 2012: “If we were going to start having to fend for ourselves in content, we had better start exercising that muscle now.”15

But it was not a lighthearted choice for Netflix to take on the large studios it so much depended on. As Netflix grew more successful, studios raised their prices, killing margins. In-house production became a hedge against ever rising licensing costs, making it easier for Netflix to say no. Reed smirked when Reuters in 2013 neatly summarized Netflix’s strategic intent, explaining that “… the thing that Netflix aspires to, which HBO already has, is an exclusive library of shows … it also becomes the only place to watch certain shows with cultural-touchstone status. And presto, the decision is no longer whether Netflix is worth the subscription price; rather, the question is whether you can afford not to have it.”16

And it all started in 2013 with “House of Cards.” Reed kept the article snippet of CNBC, writing at the time, “This is a big deal: It’s Netflix’s first big debut in the premium original content space, and it puts the streaming video player into direct competition with HBO, Showtime and Starz, for both content and viewers. It’s a total transformation of the way Netflix conceives of its relationship with content.”17

Of course, Netflix’s content strategy was built on its ability to analyze what people wanted to watch, how and when they watched it and how to make sense out of it. Mario Gavira, an industry expert, wrote: “It took them six years to collect enough viewer data to engineer a show that became a worldwide success: House of Cards. Since then, Netflix has increasingly used this formula for content creation achieving success rates of 80% compared to 30%–40% success rates of traditional TV shows.”18

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

According to The Economist, “House of Cards” – for which the cost of the first two seasons amounted to $100 million – was a widely derided statement of intent at the time. How could a mail-order video store take on networks and studios? By becoming an industry in and of itself, as The Economist stated.19 Later in 2017, Netflix won its first Oscar; Reed was proud to beat HBO at its own game.

Netflix’s content library had grown broad and deep with award winning original content. But could Reed say, hand on heart, that Netflix’s own content had become the subscriber magnet they were hoping for? In October 2018, 63% of Netflix’s viewing was still from licensed content, with NBC’s “The Office” still being number one and Warner Bros. owned “Friends” coming in third.20 To aggravate the situation, Forbes, in 2019, wrote that in 2017, over 40% of Netflix subscribers in the US almost exclusively watched licensed content and that in 2018, 85% of the $13 billion content spending went to originals. Forbes thus argued that for that much money, Netflix should have been more than just “on track” to have originals be the majority of viewing. And in the second quarter 2019 investor letter, Reed had to agree: “We think Q2’s content slate drove less growth in paid net adds than we anticipated.”21 At the same time, to successfully replace licensed content and keep and attract new customers, Netflix had to continue investing in its own content. Reed realized he needed to do a fresh sense check with his new CFO on the sustainability of financing Netflix’s original content.

CONTENT INVESTMENTS At the Q4 2018 investor interview, Reed explained that the sustained content production growth fueled a “virtuous cycle,” “The more investment you’re putting in, the more people are finding content that they love and the more they have value in the service.22” Therefore, in 2016, Netflix spent $8.7 billion on content vs. $13 billion in 2018 (refer to Exhibit 1) and expected $15 billion to stay on course with Reed’s plan.23 But investors were showing increasing concern about Netflix’s ability to meet its subscriber targets. With that, some voices challenged the sustainability of content spending.

Looking at his 2018 consolidated income statement (refer to Exhibit 2), Reed was positive despite the market noise. Netflix’s revenues had grown from $8.8 billion in 2016 to $15.8 billion in 2018, demonstrating solid top-line growth. For the first time, the international streaming business with $7.78 billion in revenues overtook the domestic one (refer to Exhibits 3 and 4). Reed made sure to point out in the annual report that the increase in consolidated revenues was primarily driven by the growth in the average number of streaming paid memberships globally, mainly arising from non-US markets. But he also knew that further price increases due to increasing competition and the lower purchasing power of new markets were increasingly less likely to succeed, so future revenue growth needed to come from additional subscribers. In fact, for the financial analysts, subscriber numbers were considered the key indicator for Netflix’s business prospects.24 More subscribers meant more revenues and thus cash to be spent on content used to attract new subscribers.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Well aware of the investors’ views, Reed proudly looked back on close to 30 million more subscribers added in 2018 alone, 10 million more than the year before, reaching almost 140 million paying members at the end of 2018 (refer to Exhibit 5). However, the future was volatile. In July 2019, Netflix’s shares dropped 10% when it had to report a loss in domestic paid subscribers during the second quarter for the first time since 2011, after rolling out price hikes earlier in the year. Reed remained calm as he knew that strong viewership of its new seasons of “Stranger Things,” “The Crown” and “Orange is the New Black,” among other hits, helped buoy its subscriber growth.25 In fact, for its 3Q19, CNBC reported that the streaming giant crushed Wall Street’s earnings projections and added slightly more paid subscribers internationally than expected during the period. However, this was the last quarter before new Netflix’s rivals went live, starting with Apple TV Plus and Disney Plus in November.26

The continued content investments, as recorded in the balance sheet (refer to Exhibit 6), had piled up $20 billion in content assets and $10.4 billion in long-term debt by the end of 2018. What the statement did not show were Netflix’s content obligations (refer to Exhibit 7) of around $20 billion as they only showed up when projects went on stream. The management team and Reed were probably not concerned as sales and income were moving up faster than those costs.

Investing in original content was not enough, though. Netflix’s “must-have” library also needed to be promoted. Hence, the marketing spending reached $2.4 billion in 2018 vs. only $1.1 billion in 2016, largely to promote those originals, as Reed explained to investors in the annual report. Analysts expected even more in 2019 with $2.9 billion.27

Reed kept telling investors that thanks to higher revenues and expanding operating profits, positive cash flows would pay for the investments. But 2019 would be seen as another year where Netflix would reach a record negative $3 billion in free cash flow, using debt markets to fund the spending rate. While the cash flow statement (refer to Exhibit 1 shows net income growing from $187 million in 2016, to $559 million in 2017 and to $1.2 billion in 2018, the additions to streaming content assets weigh heavy with $8.7 billion in 2016, $9.8 billion in 2017 and $13 billion in 2018. Net cash used in operating activities was, therefore, negative at $1.5 billion in 2016, $1.8 billion in 2017 and $2.7 billion in 2018. Only the issuance of new debt of $1.0 billion in 2016, $3.0 billion in 2017 and $4.0 billion in 2018 kept the available cash at the end of the year positive. Investors would have a close eye on the operating profits needed to service Netflix’s growing debt. Looking at Netflix’s interest coverage ratio, the streaming company had improved from a low of x2.3 in 2015 to x3.8 in 2018. But its new competitors were better off (refer to Exhibit 9). Reed would continue to focus on adding subscribers.

To make sure the equation held up, Reed reflected on the user profitability, that is the operating margin per paying member, and felt reassured. The last three years, from 2016 to 2018, told a story of success: By taking paid members from close to 90 million to just under 140 million, while growing operating income from $380 million to $1.6 billion, unit margins almost tripled from $4.3 to $11.5 (refer to Exhibit 10).

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

It was true that adding subscribers was becoming increasingly costly, yet operating costs had grown more slowly than revenues. This led to a heated topic between Reed and the chief financial officer (CFO) who kept urging him to revise his approach to marketing as the retain and acquisition costs of customers had grown almost twice as much as the overall revenues. To make his concern more real, the CFO showed him that adding close to 30 million subscribers would result in an additional $3.3 billion in costs, taking the unit cost per new paying member to $117. A unit margin of $11.5 per member meant it would take ten years to break even (refer to Exhibits 11 and 12).

Of course, Netflix’s financial fate not only depended on its individual performance but also on the changing competitive landscape. How did its financial position stack up against its competitors? Apple, Amazon, Disney and YouTube all had an abundance of investment potential. And Disney perhaps did not even need to spend much. If these companies had recently shifted their strategic focus, was it about time to rethink Netflix’s? Reed kept hearing from his investors success stories about the rise of platforms like YouTube, Uber, Alibaba, or Amazon Marketplace. But could Netflix not be more successful if it kept on serving its customers the best video content experience?

NEXT STRATEGIC MOVES To make accessing Netflix as easy as possible through as many channels as possible had been part of Netflix’s fast rise. Now that Netflix had become the number one streaming service, Reed felt less pain when deciding to stop allowing people to sign up for its service through Apple’s iTunes store. After all, the platform had been charging him 15% on every sale, a blanket condition of being in the App Store.28

Upon reflection, these platforms brought certain advantages with them. YouTube now had more than 1 billion29 users with more and more people, including artists, having their own channels. About 300 hours of new videos were uploaded every minute for free, perpetually driving content growth. Google in fact had decided to pull back YouTube’s attempt to go into its own premium content.30 By comparison, Netflix counted 152 million31 paying subscribers in 2Q19 across 190 countries32 while likely ramping up to $15 billion in content spending in the same year.

Content was not equal to content and thus users were not equal to subscribers. Reed was convinced that it was the way videos were made available to customers that made the difference. And Netflix had developed a unique technology that helped customize that experience. There was a high level of personalization33 that a specific team within Netflix Research was continuously improving. Thanks to a better understanding of what Netflix’s users wanted to see, Netflix was able to understand what new content they would like to discover. This not only held true for global blockbusters but also content around specific local themes. And Reed felt proud that Netflix’s approach had helped them keep an impressive 93% retention rate34 and build strong international brand recognition.

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Although technology was essential to keeping a competitive advantage, Reed wondered if video would be enough to retain Netflix’s customers going forward. In 2020, Netflix planned to release its third mobile game35 with Next Games based on the series “Stranger Things.” Could video games be the next venture for Netflix? It could deploy its know-how in creating content and offer video studios direct access to a wide base of potential customers? Microsoft with Project xCloud and Google with its video platform Stadia had been going in that direction since 2019. A recent McKinsey study on platforms, which argued that platform business models generated better payoffs,36 was also giving him some concerns about his strategy.

Then there was advertising. But the user experience had always been at the heart of Netflix’s development, so Reed struggled to embrace the idea. However, he could agree to brand placement in shows like “Queer Eye for the Straight Guy” because it was less intrusive and met consumers’ expectations of ad-free video consumption.37 For the next season of “Stranger Things,” Netflix had partnered with Coca-Cola38 to place its products in the series and Reed was pondering if partnering with large corporations would be a viable side business without selling traditional adds. No doubt, adding new revenue streams would be beneficial to Netflix to cover its growing expenses. But would this improve its value creation and financial performance? Would investors understand such a move and value it accordingly?

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 1: Cash flow statement

Source: Netflix 10K 2018

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 2: Consolidated income statement

Source: Netflix 10K 2018

Exhibit 3: Domestic streaming

Source: Netflix 10K 2018

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 4: International streaming

Source: Netflix 10K 2018

Exhibit 5: Global streaming memberships and financial results

Source: Netflix 10K 2018

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 6: Consolidated balance sheet

Source: Netflix 10K 2018

Exhibit 7: Contractual obligations

Source: Netflix 10K 2018

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 8: Cash flow statement

Source: Netflix 10K 2018

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 9: Overview of interest coverage ratio

Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Q3 19

Netflix 8.02 2.3 2.53 3.52 3.82 6.1

Amazon 0.85 4.86 8.65 4.84 8.77 7.97

Disney 49.9 40.55 27.36 21.76 12.12 5.53

Time Warner 4.5 5.03 5.5 6.58 N/A 7.19

AT&T 3.97 6.02 4.87 3.63 3.29 3.79

Google 163.33 186.15 191.26 264.97 275.37 399

Jun 16 Jun 17 Jun 18 Q3 19

21st Century Fox 109.67 110.22 51.51 8.86

Sep 15 Sep 16 Sep 17 Sep 18 Q3 19

Apple 97.18 41.23 26.41 21.88 19.29

Source: Authors based on data from Gurufocus.com

Exhibit 10: User profitability

2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Paid Memberships 139’259 119’644 89’090 16% 34% Operating Income in $ 1’605’226 838’679 379’793 91% 121% Unit Margin in $ 11.53 7.01 4.26 64% 64%

Source: Authors’ calculation

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

Exhibit 11: Operating expenses

2018 2017 2016 2018 vs. 2017 2017 vs. 2016 Revenues 15’794’341 11’692’713 8’830’669 35% 32% Cost of Revenues 9’967’538 8’033’000 6’257’462 24% 28% Marketing 2’369’469 1’436’281 1’097’519 65% 31% Technology 1’221’814 953’710 780’232 28% 22% General and Admin 630’294 431’043 315’663 46% 37% Operating Costs 14’189’115 10’854’034 8’450’876 31% 28%

Source: Authors’ calculation

Exhibit 12: Growth costs 2018 2017 2016 2018 vs. 2017 2017 vs. 2016

Paid net membership additions 28’615 21’554 18’251 33% 18% Additional operating costs in $ 3’335’081 2’403’158 N/A Unit cost per new membership in $ 116.6 111.5 5% Operating income in $ 1’605’226 838’679 379’793 Operating Income per membership in $ 11.53 7.01 4.26 Years to break even 10.1 15.9

Source: Authors’ calculation

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

References

1 Trainer, David. “All the Reasons Why Netflix is Doomed.” Forbes, August 20, 2019. <https://www.forbes.com/sites/greatspeculations/2019/08/20/all-the-reasons-why-netflix-is- doomed/ - 522ca878465e> (accessed May 6, 2020).

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

15 Nocera, Joe. “Can Netflix Survive in the New World It Created?” The New York Times Magazine, June 15, 2016. <https://www.nytimes.com/2016/06/19/magazine/can-netflix-survive- in-the-new-world-it-created.html?_r=0> (accessed May 6, 2020). 16 Salmon, Felix. “Why Netflix is producing original content.” Reuters, June 13, 2013. <http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/> (accessed May 6, 2020). 17 Boorstin, Julia. “Netflix’s ‘House of Cards’ Binge Strategy.” CNBC, January 31, 2013. <https://www.cnbc.com/id/100425665> (accessed May 6, 2020). 18 Gavira, Mario. “How Netflix uses AI and Data to conquer the world.” Netflix Tech Blog, July 2, 2018. <https://www.linkedin.com/pulse/how-netflix-uses-ai-data-conquer-world-mario-gavira> (accessed May 6, 2020). 19 “How Netflix became a billion-dollar titan.” The Economist, July 4, 2018. <https://www.economist.com/graphic-detail/2018/07/04/how-netflix-became-a-billion-dollar- titan> (accessed May 6, 2020). 20 Spangler, Todd. “Netflix Original Series Viewing Climbs, but Licensed Content Remains Majority of Total U.S. Streams.” Variety, December 10, 2018. <https://variety.com/2018/digital/news/netflix-original-series-licensed-viewing-friends-the-office- 1203085230/> (accessed May 6, 2020). 21 Trainer, David. “Netflix’s Original Content Strategy Is Failing.” Forbes, July 19, 2019. <https://www.forbes.com/sites/greatspeculations/2019/07/19/netflixs-original-content-strategy- is-failing/ - 6b97863b3607> (accessed May 6, 2020). 22 Spangler, Todd. “Netflix Spent $12 Billion on Content in 2018. Analysts Expect That to Grow to $15 Billion This Year.” Variety, January 18, 2019. <https://variety.com/2019/digital/news/netflix- content-spending-2019-15-billion-1203112090/> (accessed May 6, 2020). 23 Spangler, Todd. “Netflix Spent $12 Billion on Content in 2018. Analysts Expect That to Grow to $15 Billion This Year.” Variety, January 18, 2019. <https://variety.com/2019/digital/news/netflix- content-spending-2019-15-billion-1203112090/> (accessed May 6, 2020). 24 Powell, Jamie. “The quality of quantity at Netflix.” Financial Times, October 19, 2018. <https://ftalphaville.ft.com/2018/10/19/1539949288000/The-quality-of-quantity-at-Netflix/> (accessed May 6, 2020). 25 Feiner, Lauren. “ Netflix loses $16 billion in market value following surprise subscriber miss.” CNBC, July 18, 2019. <https://www.cnbc.com/2019/07/18/netflix-loses-16-billion-in-market- value-following-earnings-miss.html> (accessed May 6, 2020). 26 Palmer, Annie. “Netflix soars 8% after beating on earnings, despite miss on subscribers.” CNBC, October 17, 2019. <https://www.cnbc.com/2019/10/16/netflix-q3-2019-earnings.html> (accessed May 6, 2020). 27 Spangler, Todd. “Netflix Spent $12 Billion on Content in 2018. Analysts Expect That to Grow to $15 Billion This Year.” Variety, January 18, 2019. <https://variety.com/2019/digital/news/netflix- content-spending-2019-15-billion-1203112090/> (accessed May 6, 2020). 28 Lee, Edmund. “Why Netflix Won’t Be Part of Apple TV.” The New York Times, March 22, 2019. <https://www.nytimes.com/2019/03/22/multimedia/netflix-apple-tv-streaming.html> (accessed May 6, 2020). 29 “YouTube by the numbers: 2+ billion users.” YouTube, May 6, 2020. <Https://www.youtube.com/yt/about/press/> (accessed May 6, 2020). 30 Jarvey, Natalie. “ YouTube to Pull Back on Scripted in 2020 Amid Ad-Supported Push (Exclusive).” The Hollywood Reporter, November 27, 2018. <Https://www.hollywoodreporter.com/live-feed/youtube-pull-back-scripted-programming-ad- supported-push-1164256> (accessed May 6, 2020).

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IMD-7-2185 IS NETFLIX BUILDING A HOUSE OF CARDS?

31 Watson, Amy. “Number of Netflix paying streaming subscribers worldwide from 3rd quarter 2011 to 1st quarter 2020.” Statista, April 22, 2020. <https://www.statista.com/statistics/250934/quarterly-number-of-netflix-streaming-subscribers- worldwide/> (accessed May 6, 2020). 32 “Where is Netflix available?” Netflix. <https://help.netflix.com/en/node/14164> (accessed May 6, 2020). 33 Chandrashekar, Ashok, Fernando Amat, Justin Basilico and Tony Jebara. “Artwork Personalizaton at Netflix.” Netflix Technology Blog, December 7, 2017. <https://medium.com/netflix-techblog/artwork-personalization-c589f074ad76> (accessed May 6, 2020). 34 Ewing, Jeff. “Market Research Highlights Netflix's Continued Dominance Of The SVOD Market.” Forbes, December 10, 2018. <https://www.forbes.com/sites/jeffewing/2018/12/10/netflix-continues-svod-market-dominance/> (accessed May 6, 2020). 35 Segarra, Lisa Marie. “ Netflix Takes Baby Steps Into Video Gaming.” Fortune, June 12, 2019. <https://fortune.com/2019/06/12/netflix-video-games/> (accessed May 6, 2020). 36 Bughin, Jacques and Nicolas van Zeebroeck. “New evidence for the power of digital platforms.” McKinsey Digital, August 2017. <https://www.mckinsey.com/business-functions/mckinsey- digital/our-insights/new-evidence-for-the-power-of-digital-platforms> (accessed May 6, 2020). 37 Patel, Sahil. “Advertising and media execs really want Netflix to have ads.” Digiday, June 21, 2019. <https://digiday.com/media/advertising-media-execs-really-want-netflix-ads-unlikely- anytime-soon/> (accessed May 6, 2020). 38 Shaw, Lucas. “Netflix Turns New Coke Into Latest Star of ‘Stranger Things.’” Bloomberg, May 21, 2019. <https://www.bloomberg.com/news/articles/2019-05-21/netflix-turns-new-coke-into- the-latest-star-of-stranger-things> (accessed May 6, 2020).

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