Subject category:
Marketing
Published by:
Berkeley Haas Case Series
Version: January 20, 2013
Revision date: 9-Dec-2024
Length: 13 pages
Data source: Field research
Abstract
Beginning in 2007, Netflix began offering existing mail rental subscribers the opportunity to view a limited number of movies through internet streaming and no additional fee. This 'free streaming' continued until mid-2011 when Netflix announced a split to their business with separate monthly fees (and separate websites and names) for streaming and mail disk subscriptions. The resulting customer backlash and threatened defections caused the company's stock price to drop 60 percent. As movie studios (the owners of the content) saw sales of DVDs drop, they began to sharply raise their prices for online content. Moreover, Netflix which had been dominant in the mail disk rental model began to face substantial competition from other streaming video providers. The case study provides students with an opportunity learn about pricing and to develop a pricing strategy for Netflix.
About
Abstract
Beginning in 2007, Netflix began offering existing mail rental subscribers the opportunity to view a limited number of movies through internet streaming and no additional fee. This 'free streaming' continued until mid-2011 when Netflix announced a split to their business with separate monthly fees (and separate websites and names) for streaming and mail disk subscriptions. The resulting customer backlash and threatened defections caused the company's stock price to drop 60 percent. As movie studios (the owners of the content) saw sales of DVDs drop, they began to sharply raise their prices for online content. Moreover, Netflix which had been dominant in the mail disk rental model began to face substantial competition from other streaming video providers. The case study provides students with an opportunity learn about pricing and to develop a pricing strategy for Netflix.