Running head: NETFLIX

Netflix: Push and Pushback in Streaming Video

A Case Study
Saint Leo University

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Abstract
Netflix
Keywords: Netflix, video streaming, technology deployment, Reed Hastings, Marc Randolf, case
study

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Netflix: Push and Pushback in Streaming Video

Introduction
The movie industry has always been strong in viewership within the theaters and with
the release of VHS/Beta formats, outside the theater as well. As technology has changed, so has
popular media. Movies have moved from theater to VHS/Beta to DVDs to Blu Ray, to
streaming online. Netflix, founded in 1997 - during the DVD era, has taken advantage of the
widely popular ideal of video rentals and made it sophisticated. Starting out with just an idea
and a strong algorithm, Netflix offered customers to rent their favorite DVDs anywhere in the
country and for one flat fee. Netflixs new and innovative approach to movie rentals started to
become more than a market fad and soon local Blockbuster storefronts were closed due to the
loss of revenue.
Once internet commerce opened up to new and developing ideas, Netflix, again took
advantage of the opportunity and started to look at a more efficient way of meeting the demand
of the consumer concerning entertainment. Netflix started a new idea of streaming video directly
into the homes of their faithful consumers to allow a more exciting media experience by
watching directly on their at home television. This new and developing delivery system had a
few challenges to address and overcome while this new initiative was implemented. The four
primary challenges identified by Netflix analysts were: technology deployment, competition in
the streaming video market, involvement in original programming and associated reactions of
major media companies, and the cost of accessing content. (Nelson & Quick, 2013)
The four challenges listed will be the discussion within this paper to identify not only
what the challenges entail, but also how they can relate and impact managerial problems as they
relate to globalization, diversity, and ethics. In addition, further discussions will reveal actions or
suggestions that might convert the challenges into opportunities.

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Challenges Defined
Challenge 1: Technology Development
The first challenge that Netflix had to face was the delivery system to make their
interest a reality. Netflix took up the challenge of streaming the video through video consoles ,
such as PS3 and Xbox, along with additional streaming through SMART TVs, Blu Ray disk units
and internet receivers such as Roku (later down the line). Once this path was clear, it is not too
difficult to keep progressing into more technology as new media devices and fads are developed.
The impact of this new delivery system now allowed Netflix to reach an even broader
group of audiences not just in the United States, but also abroad. This transformation brings with
it a whole new set of problems, primarily legal issues that Andrew Sparrow (2007) mentions in
his book, Film and Television Distribution and the Internet, the very nature of the internet
would present a raft of new legal problems. Which countrys law would apply to this global
medium? This indicates that Netflix has broken the barrier of the continental boarders, which
leads to more global related issues that need to be reviewed. Primarily, what countrys legal
boundaries apply to the ecommerce regulations? In turn, this thought process could be
adequately applied to the diversity and ethics within the reaches of the media. Should countries
be allowed to opt out of allowing Netflix into their country? In China, the media is strictly
monitored which directly impacted Googles service within the country. (Argenti, 2013) These
are now issues that Netflix must contend with when dealing with a widely diverse consumer base
which does not accept all the cultural inferences that the U. S. might accept. Netflix, currently
streaming to over 40 countries (Wikipedia, n.d.), must now decide if they will regulate the access
to certain content out of awareness of various regulations in the different countries or if they will
force that country to filter the initial access from Netflix. This dilemma has still not been figured

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out; however, if Netflix were to use Google as an example, forcing the country to filter the access
would be ideal as long as none of the copyrights and trademarks of the filtered material is
infringed upon.
The development of new delivery technologies and the extent of use for these systems
is probably the easiest of the four major challenges that Netflix has had to face. If the developers
of the company keep an active eye on the market with the intention to stay ahead in the
adaptation of their product to newly released media transponders, then Netflix will be able to
continue to stay ahead of the current market in streaming video. This aggressive technology
watch comes at a price to the employees of Netflix. One of the most effective, and less practiced
business moves is the release of employees whose skill sets are obsolete vice providing internal
training to keep the workforce current. So as Netflix employees find the next best thing to
stream or deliver the latest entertainment to the consumer, they may be also signing their pink
slip to make room for the new technology experts to rotate in and carry Netflix until they too, are
released.
Challenge 2: Competition in the Streaming Video Market
Amazon Prime, Google Chrome, Hulu, YouTube, HBO Go, Sling TV, Crunchy Roll
and iTunes are just a few of the competitors that Netflix now has to outperform. The cable
companies are also looking into ways of competing with Netflix with Xfinity or U-Verse adding
not only movies but a series of TV show episodes to allow their customers to catch up with their
favorite shows without an extra cost. Netflixs best edge for competition in this market is to
continue to stay one step ahead by remaining flexible and current through the media used for
streaming and by over the top service to aid consumers in the set up and operation of their media.

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The managerial concerns for this challenge are limited to Netflixs relations with the
external competitors and customers. Social responsibility, performance, and solid consumer
support is sometimes the only concerns most people have when it comes to supporting more
technologically advanced companies. Netflix has had a tarnished reputation for their internal HR
practices (McCord, 2014), and during the last few years they have found ways to better manage
their staff rotation. This is an aspect that could provide further friction for Netflix, in comparison
to their competition, for being labeled as utilizing unethical employment practices; however, as
described in Patty McCords article for the Harvard Business Review, she explains the logic and
benefits of rotating the employees in the same manner as consumers exchange their movies.
The opportunity offered through having so many competitors in the market is in the
development and discovery of new technologies, and programs. In 2009, there was a $1 million
dollar awarded to Bellkors Pragmatic Chaos for their breakthrough algorithm improving
Netflixs delivery and movie rotation service. The contest was necessary to help the company to
stay current and ahead of its competitors by providing the best service in the market.
Challenge 3: Original Programming and Associated Reactions of Major Media
Companies
The third challenge identified in the case study is Netflixs involvement in original
programming and the Major Medias reactions to no longer providing original daily
programming. Netflix has found huge successes in their joined endeavors with Paramount
Pictures, Lions Gate Entertainment, and Metro-Goldwyn-Mayer which led to the successful
release of Orange is the New Black and House of Cards. Because of the huge and popular
responses to both shows, Netflix not only renewed both shows for second and third seasons, but
also added additional shows to their regular broadcast. Netflixs multi-service of offering

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subscriber video streaming of popular shows and movies, and now adding to the list successful
original series has impressed a concern among the various public, satellite, and cable networks.
The various facets of Netflix and the wide variety of entertainment offered, has caused concern
that regular TV, and more traditional channel services will become obsolete. The establishment
of Netflix has brought about a culture of change to the media world. As people want their
information to be faster and to have unlimited access to entertainment, Netflix has delivered
without commercials or video interruptions. This is one of the large reasons Netflix has
remained a competitor within the global economy.
Their shrewd business practices may edge on the grounds of inconsiderate, however,
they have done nothing unethical in their development of new product offerings. Netflix had the
opportunity and awareness to pick up shows that other stations had decidedly passed-up and
smartly had two year contracts with each of the studios for those shows to ensure full broadcast
ownership. There has been nothing shown by Netflixs interest and acquisition of their current
original programming that shows that their intentions are cannibalistic as quoted from
Universal Studios Craig Kornblau. (Nelson & Quick, 2013) I find that in this identified
challenge the unethical behavior would be practiced by the studios when they are intentionally
planning to provide less than quality material contrary to what was agreed with Netflix.
Challenge 4: Cost of Accessing Content
Netflix has encountered a new challenge to overcome. This one is the result of the
overwhelming success of their original series, House of Cards and Orange is the New Black.
The backlash of this success results in the higher cost for studios and their media library content.
Business for Netflix will soon come at a greater cost in the US and overseas causing a serious
reconsideration of current market demands and how to match it up with the companys goals and

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objectives. The greater cost may come as a hit to Netflix if more studios combine to create a
barrier to Netflixs broadcasting ability. This will require the management team to build a more
strategic structure in regards to offered network products. Craig Kornblau was reported to
saying, Netflix can pay us more or we can reduce the quality of what we give them. (The Los
Angeles Times as reported by Nelson & Quick, 2013) If this quote is true to what the Los
Angeles Times reported, then it shows clear intention to stray away from good business practices
because the fad of Netflix was more successful than originally considered. Understood that
the studio, cable, satellite, and station executives are concerned regarding obsolescence,
however, that is not a solid enough reason to sabotage an already agreed upon contract or quote.
If Netflix is to continue with their global representation, the threats and badgering will have little
impact on Netflix. The largest impact could be the hiring pool shrinking as Netflix attempts to
find replacements for their rotated staff.
Is there an opportunity with this challenge that Netflix can exploit to their betterment?
Perhaps not one that is so strong. Netflix has since partnered up with iTunes and Apple to
provide quality entertainment and they have taken the time to team up with Starz Entertainment
to continue with the original programming. These measures ensure that there will be plenty of
entertainment material for their growing consumer network.
Conclusion
Business Pushback
Netflix has become a billion dollar success for a company that was referred to as just a
fad. Reed Hastings and his current business practices will continue to receive scrutiny,
however, as long as he continues to take care of those employees rotated out due to expired
knowledge base, the company will continue to grow and develop. As Netflix continues to push

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further into the video streaming market, it is suggested that they continue to find studios and
stations that respect and regard the company highly for their ability to adapt and promote in a
growing culture of instant response. Netflix has had a series of challenges and many of those
challenges may never go away as newer and newer competitors and technologies enter into the
market. It will be up to CEO Reed Hastings and his analysts to find a way to respond to the
challenges as they arise, by doing what he has done up to this point in his success: transform
them into opportunities for growth and development.
Netflix has defined the forward motion of addressing the need for immediate
entertainment material accessible by any current and future device. This paper has reviewed the
case study, Netflix: Push and Pushback in Streaming Video (Nelson & Quick, 2013), where four
distinct challenges were identified and discussed in relation to managerial challenges in the roles
of globalization, diversity, and ethics (where applicable) and how Netflix had successfully found
a way to turn these into opportunities for success. It is in the identification and analysis of the
greatest challenges as they arise that the company will continue to grow and expand further into
more countries and cultures, becoming a resource of not only amusement but of information. As
the company moves forward to the next new thing, consumers can only imagine what may be
next to keep their interest. Perhaps someday in the near future local movie theaters will be
streaming the latest releases to meet the immediate demand.
General comments: I would go back through and look at your tenses, you tend to go between
present and past tense. Not sure which tense you prefer.

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References:
Argenti, P. (2013). Corporate Communication (6th ed.). New York, NY: McGraw-Hill
Dixon, W. (2013). Streaming: Movies, Media and Instant Access. Kentucky: University Press of
Kentucky
McCord, P. (2014 January). How Netflix Reinvented HR. Harvard Business Review. Retrieved
from https://hbr.org/2014/01/how-netflix-reinvented-hr
Nelson, D. & Quick, J. (2013). Netflix: Push and pushback in streaming video. Mason, OH:
Cengage Learning
Sparrow, A. (2007). Film and Television Distribution and the Internet. Hampshire, England:
Gower
Wikapedia. (n. d.). Netflix. . Retrieved from http://en.wikipedia.org/wiki/Netflix