HJBP#IM1422

TODAY, THE FACT THAT OVER 100 3 FRIENDS:

NETFLIX NETFLIX INCREASED
MILLION HOUSEHOLDS SHARE USED TO PRICES IN MOST MARKETS
ACCOUNTS AFFECTS OUR ABILITY TO
INVEST IN GREAT NEW TV AND FILMS.
BE REALLY
GREAT, BUT
BETWEEN 2016 AND 2022,
BUT IN INDIA IT WAS
N E TF L I X E N E TF L I X (A
Case IMD-3-2246
N E TF L I X (B
Case IMD-3-2250
N E TF L I X (c
Case IMD-3-2277
N E TF L I X (D
Case IMD-7-2155

WITH OUR NEW PLANS, CONSUMERS NOW IT DIFFERENT. FRUSTRATED C a pt u re Va l u e

N E TF L I X (E : IN 2011 AND 2012, AFTER A BIG CRISIS (SEE B CASE),
CAN ESTABLISH UP TO TWO SUCKS. WITH THE LOW PENETRA-
“SUB ACCOUNTS” FOR USERS WHO THE US-BASED STREAMING COMPANY NETFLIX STARTED TO
TION, NETFLIX OFFERED PRODUCE ITS OWN CONTENT (SEE C CASE). DESPITE THE
DON’T LIVE IN THE HOME-BASE HOUSE- A MOBILE-ONLY PLAN IN
HOLD FOR A MONTHLY FEE PER EXTRA ONGOING “STREAMING WARS” (SEE D CASE),
THEY WANT 2019 AND LOWERED THE IMD-7-2499 THE COMPANY GREW ITS SUBSCRIBER
USER: CA$7.99 IN CANADA, NZ$7.99 US TO PAY MORE, PRICE OF THE BASIC PLAN
IN NEW ZEALAND, €3.99 IN PORTUGAL
Professor Stefan Michel prepared this case as
BASE IN THE US AND ABROAD.
BUT THE MOVIES IN 2021. a basis for class discussion rather than to illustrate either

UP
effective or ineffective handling of a business situation.
AND €5.99 IN SPAIN. ARE GETTING Copyright © 2023 by IMD, Lausanne, Switzerland.
Not to be used or reproduced without permission. 250
WORSE. IT’S THE
UP
Illustration by Sarah von Blumenthal
SAME GREED

of subscribers in millions
200
EVERYWHERE.
150 UP
WHAT HAPPENED UP
100
TO THE COMPANY
THAT PROCLAIMED
A FEW YEARS BACK
“LOVE IS SHARING A

Number
PASSWORD”? 0

Q 1 20

Q 1 22
Q1 18
Q1 14

Q 1 16

Q 1 19

Q 1 21
Q1 15

Q 3 20

Q 3 22

23
Q1 13

Q1 17
Q 3 18
Q 3 14

Q 3 16

Q 3 19

Q 3 21
Q 3 13

Q 3 15

Q 3 17
20
20

20

20
20
20
20

20
20

20
20
20

20

20
20
20
20

20

20
20
20
Q1
AFTER A RECORD
QUARTERLY NET INCOME
WHEN COVID HIT IN 2020, PEOPLE WERE FORCED TO STAY AT HOME AND HAD MORE TIME TO WATCH NETFLIX. AS A CONSEQUENCE,
OF $1,597 MILLION IN Q1,
THE NUMBER OF SUBSCRIBERS SOARED TO A RECORD HIGH. BY Q1/2022, QUARTERLY NET INCOME HAD INCREASED TO $1,597 MILLION
2022, THE YEAR ENDED
FROM $587 MILLION IN Q4/2019.
WITH A DISAPPOINTING
AS JULIA ALEXANDER AT PARROT ANALYTICS EXPLAINED, THE SHARE PRICE OF BLACK ZERO OF
NETFLIX WAS EXTREMELY OVERVALUED FOR MANY YEARS. NETFLIX WAS VALUED LIKE TECH $55 MIO IN
GIANTS SUCH AS FACEBOOK, APPLE, AMAZON AND GOOGLE, WHICH WERE DESCRIBED BY THE Q4/2022.
ACRONYM FAANG. “UNLIKE THOSE COMPANIES THAT HAVE DIFFERENT TENTACLES, NETFLIX
DOES NOT HAVE A LOT OF TENTACLES.” IN OTHER WORDS, NETFLIX IS BECOMING A MEDIA
COMPANY. IT WAS NEVER A TECH COMPANY.

DESPITE A TURBULENT FEW YEARS THROUGH THE PAN-

RELATED TO THIS RESULT OR NOT, NETFLIX DEMIC AND THE POST-PANDEMIC FALLOUT, MOST
ANNOUNCED IN JANUARY 2023 THAT ANALYSTS REMAINED OPTIMISTIC ABOUT NETFLIX. EVEN
NETFLIX CO-FOUNDER THOUGH IT WAS IMPOSSIBLE TO PREDICT WHAT THE DE-
REED HASTINGS VELOPMENT OF GENERATIVE AI, DEEP FAKE, AND VIRTUAL
WAS STEPPING DOWN AND AUGMENTED REALITY WOULD BRING, NETFLIX HAD
AS CHIEF EXECUTIVE OFFICER. ALWAYS BEEN A TECH-SAVVY AND AGILE COMPANY.
HAVING LED THE COMPANY NETFLIX HAS A LOT OF SUCCESSFUL CONTENT. “SQUID GAME”,
FOR MORE THAN TWO DECADES, “RED NOTICE” AND “DON’T LOOK” UP ARE AMONG THE MOST SUCCESSFUL
HASTINGS LEFT THE POSITION TO HIS SERIES OF ALL TIME AND PEOPLE AROUND THE WORLD

AI
TWO LONGTIME ASSOCIATES, LOVE TO WATCH THEM.
TED SARANDOS AND D e e p Fa k e
GREG PETERS.
AR Vr EXPERTS ESTIMATED THAT BETWEEN
2017 AND 2019, THE PRICE
ELASTICITY OF DEMAND FOR NETFLIX
THE END SUBSCRIPTIONS WAS -0.57.
IN 2020 IT WAS -0.13.

4 This document is authorized for use only in Panita Surachaikulwattana's Business Strategy / BBA Sec 52 (2/2024) at Chulalongkorn University from Jan 2025 to Apr 2025.
1
 ON JANUARY 20, 2022, NETFLIX WROTE A LETTER TO TO THE SURPRISE OF ALMOST EVERY- IN MID-2022, NETFLIX ANNOUNCED THAT – FOR THE FIRST TIME – IT HAD SUFFERED
ITS INVESTORS: BODY, NETFLIX ALSO ANNOUNCED TWO CONSECUTIVE QUARTERS OF SUBSCRIBER LOSSES. REED HASTINGS AND COO
IN THE SAME LETTER, THE DISCUSSION OF ITS BUSINESS THAT IT WOULD TEAM UP GREG PETERS STATED:
WAS EQUALLY UPBEAT. ANNUAL REVENUE ROSE 19%, WITH MICROSOFT WE KNOW HOW PRICE SENSITIVE CONSUMERS ARE.
DEAR INVESTOR OPERATING PROFIT LEAPED 35% AND, MOST IMPORTANTLY, AS ITS GLOBAL WE’RE TALKING ABOUT SOME HAVE NEVER SIGNED UP FOR NETFLIX. SOME OF OUR
GIVEN NETFLIX’S LONGTIME FOCUS ON SUBSCRIBER GROWTH, ADVERTISING LOSING 1 MILLION INSTEAD OF 2 MILLION, MEMBERS DECIDED TO CANCEL. OTHERS ARE WATCHING
WE ACHIEVED SEVERAL MILESTONES THE COMPANY FINISHED THE YEAR 2021 WITH 222 MILLION TECHNOLOGY SO THE LESS BAD RESULTS TEMPER OUR NETFLIX BUT USING ANOTHER MEMBER’S ACCOUNT
IN 2021: WE HAD THE BIGGEST TV PAID SUBSCRIBERS, WITH AN INCREASE OF 8.3 MILLION IN AND SALES EXCITEMENT. LOSING A MILLION AND CALLING CREDENTIALS. WE THINK THAT CHOICE IS EXCELLENT
SHOW OF THE YEAR (“SQUID GAME”), THE FOURTH QUARTER ALONE. PARTNER. IT A SUCCESS IS TOUGH. BUT REALLY, FOR CONSUMERS. IT’S GOOD FOR US, OBVIOUSLY.
OUR TWO BIGGEST FILM RELEASES OF WE’RE SET UP VERY WELL FOR
ALL TIME (“RED NOTICE” AND “DON’T “EVEN IN A WORLD OF UNCERTAINTY AND INCREASING NEXT YEAR.
LOOK UP”), AND NETFLIX WAS THE COMPETITION, WE’RE OPTIMISTIC ABOUT OUR LONG-TERM
MOST EMMY-WINNING AND MOST- 222 MIO GROWTH PROSPECTS AS STREAMING SUPPLANTS LINEAR
NOMINATED TV NETWORK AND THE ENTERTAINMENT AROUND THE WORLD,”
MOST OSCAR-WINNING AND MOST- THE LETTER SAID. WHILE SOME SPECULATED
NOMINATED MOVIE STUDIO OF 2021. 8.3 MIO THAT THIS COLLABORATION
MIGHT BE A SIGN THAT MICROSOFT
BEST, NETFLIX WOULD BUY NETFLIX IN THE FUTURE,
MOST ANALYSTS DID NOT COMMENT
ON THAT RUMOR.
WITHOUT THE SUSPENSION
HOWEVER, IN THE FIRST QUARTER OF IN RUSSIA DUE TO THE
2022, THE TIDE TURNED ... UKRAINE WAR, NETFLIX
THE SUBSCRIBER BASE OF NETFLIX AND ITS RIVALS:
WOULD HAVE ADDED 500,000 THE LOSS OF SUBSCRIBERS, DISNEY'S
220.7M
PAID GLOBAL USERS. IN THE April 2022: Netflix reported 1st loss of sub-
SUCCESS AND THE SHARE PRICE
UNITED STATES AND CANADA, 220 scribers, possibly due to inflation, slower econo- CRASH WERE NOT THE ONLY
Disney family
IT LOST 600,000 CUSTOMERS 200
mic growth and lack of new hit shows. (Disney+, Hulu PROBLEMS FACING NETFLIX
DUE TO PRICING CHANGES. & ESPN+ ) IN MID-2022. HBO AND
180
NETFLIX SAID THIS SUBSCRIBER 221.1M HBO MAX RECEIVED 140
“House of Cards” 4th
LOSS WAS ANTICIPATED AND 160
season helped con-
EMMY NOMINATIONS,
... AND CUSTOMERS WALKED AWAY. ON APRIL 19, 2022, NETFLIX ANNOUNCED THAT IN IN LINE WITH WHEREAS NETFLIX
140 tribute to an increase
Q1/2022 IT HAD LOST SUBSCRIBERS, FOR THE FIRST TIME IN MORE THAN A DECADE. EXPECTATIONS. of 2.23m new domestic COLLECTED ONLY 105,
NETFLIX HAD EXPECTED TO ADD 2.5 MILLION SUBSCRIBERS BUT DID NOT HIT THAT TARGET. 120 subscribers in the US. DESPITE ITS MORE
100 152.1M
EXTENSIVE PRO-
80 Season 2 of GRAMMING BASE.
NETFLIX ALSO SAID THAT ABOUT 100 “The Mandalorian” SOME EXPERTS
AFTER NETFLIX ANNOUNCED 60
MILLION HOUSEHOLDS WATCHED helped propel 46.2M SAW THIS AS
THE LOSS OF SUBSCRIBERS, 1000 $690.66 NETFLIX FOR FREE SINCE SOME OF 40 Disney+ to almost
THE DEMISE
ITS SHARES TOOK A DEEP DIVE. $180.97 95m subscribers
800 ITS 222 MILLION PAYING CUSTOMERS 20 OF QUALITY
THEY FELL FROM $690.66 22.8M
600 SHARED THEIR PASSWORD. ENTERTAIN-
ON OCTOBER 8, 2021 TO 0
$180.97 ON MAY 6, 2022, 400 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 MENT.
A LOSS OF ALMOST 75%. IN THE 200
SAME PERIOD, THE S&P 500 0
2021 2022 QUOTE: “WE HAVE TO ’MONETIZE’
INDEX LOST ONLY 16%.
THOSE FREE RIDERS.”

NETFLIX CEO REED HASTINGS TALKING ON APRIL 19, 2022: THE CONCEPT WAS TESTED IN HONDURAS, ARGENTINA, EL SALVADOR, GUATEMALA,
IN JULY 2022, NETFLIX ANNOUNCED A NEW ENTRY BESIDES THE NEW LOW-COST
AND THE DOMINICAN REPUBLIC IN 2022 AND WOULD BE INTRODUCED IN THE US IN 2023.
SUBSCRIPTION PLAN WITH ADVERTISING. PLAN WITH ADVERTISING,
YOU KNOW THAT I’VE BEEN IT WOULD BE ROLLED OUT IN EARLY 2023, STARTING NETFLIX DECIDED TO STOP
AGAINST THE COMPLEXITY OF IN COUNTRIES WITH HIGH ADVERTISING SPEND. PASSWORD SHARING AMONG
ADVERTISING AND AM A BIG FAN FRIENDS AND FAMILY MEM-
OF THE SIMPLICITY OF SUB- THE COMPANY EXPECTED IT WOULD TAKE SOME TIME BERS NOT LIVING IN THE SAME INTRODUCTION IN 2023
SCRIPTIONS. HOWEVER, I’M HOUSEHOLD. USERS MUST BUY
USA
TO GROW THE MEMBER BASE FOR THE AD TIER AND
A BIGGER FAN OF CONSUMER THE ASSOCIATED AD REVENUES. IN THE LONG RUN, A SUB-SUBSCRIPTION IF THEY
CHOICE AND ALLOWING CON- ADVERTISING SHOULD ENABLE SUBSTANTIAL INCREMEN- DO NOT CONNECT VIA THE
Password
SUMERS TO PAY LESS FOR A TAL MEMBERSHIP (THROUGH LOWER PRICES) MAIN HOUSEHOLD’S INTERNET sharing
PLAN WITH ADS. AND PROFIT GROWTH (THROUGH AD REVENUES). ACCESS FOR SEVERAL WEEKS. stopped

2
This document is authorized for use only in Panita Surachaikulwattana's Business Strategy / BBA Sec 52 (2/2024) at Chulalongkorn University from Jan 2025 to Apr 2025.
3
 ON JANUARY 20, 2022, NETFLIX WROTE A LETTER TO TO THE SURPRISE OF ALMOST EVERY- IN MID-2022, NETFLIX ANNOUNCED THAT – FOR THE FIRST TIME – IT HAD SUFFERED
ITS INVESTORS: BODY, NETFLIX ALSO ANNOUNCED TWO CONSECUTIVE QUARTERS OF SUBSCRIBER LOSSES. REED HASTINGS AND COO
IN THE SAME LETTER, THE DISCUSSION OF ITS BUSINESS THAT IT WOULD TEAM UP GREG PETERS STATED:
WAS EQUALLY UPBEAT. ANNUAL REVENUE ROSE 19%, WITH MICROSOFT WE KNOW HOW PRICE SENSITIVE CONSUMERS ARE.
DEAR INVESTOR OPERATING PROFIT LEAPED 35% AND, MOST IMPORTANTLY, AS ITS GLOBAL WE’RE TALKING ABOUT SOME HAVE NEVER SIGNED UP FOR NETFLIX. SOME OF OUR
GIVEN NETFLIX’S LONGTIME FOCUS ON SUBSCRIBER GROWTH, ADVERTISING LOSING 1 MILLION INSTEAD OF 2 MILLION, MEMBERS DECIDED TO CANCEL. OTHERS ARE WATCHING
WE ACHIEVED SEVERAL MILESTONES THE COMPANY FINISHED THE YEAR 2021 WITH 222 MILLION TECHNOLOGY SO THE LESS BAD RESULTS TEMPER OUR NETFLIX BUT USING ANOTHER MEMBER’S ACCOUNT
IN 2021: WE HAD THE BIGGEST TV PAID SUBSCRIBERS, WITH AN INCREASE OF 8.3 MILLION IN AND SALES EXCITEMENT. LOSING A MILLION AND CALLING CREDENTIALS. WE THINK THAT CHOICE IS EXCELLENT
SHOW OF THE YEAR (“SQUID GAME”), THE FOURTH QUARTER ALONE. PARTNER. IT A SUCCESS IS TOUGH. BUT REALLY, FOR CONSUMERS. IT’S GOOD FOR US, OBVIOUSLY.
OUR TWO BIGGEST FILM RELEASES OF WE’RE SET UP VERY WELL FOR
ALL TIME (“RED NOTICE” AND “DON’T “EVEN IN A WORLD OF UNCERTAINTY AND INCREASING NEXT YEAR.
LOOK UP”), AND NETFLIX WAS THE COMPETITION, WE’RE OPTIMISTIC ABOUT OUR LONG-TERM
MOST EMMY-WINNING AND MOST- 222 MIO GROWTH PROSPECTS AS STREAMING SUPPLANTS LINEAR
NOMINATED TV NETWORK AND THE ENTERTAINMENT AROUND THE WORLD,”
MOST OSCAR-WINNING AND MOST- THE LETTER SAID. WHILE SOME SPECULATED
NOMINATED MOVIE STUDIO OF 2021. 8.3 MIO THAT THIS COLLABORATION
MIGHT BE A SIGN THAT MICROSOFT
BEST, NETFLIX WOULD BUY NETFLIX IN THE FUTURE,
MOST ANALYSTS DID NOT COMMENT
ON THAT RUMOR.
WITHOUT THE SUSPENSION
HOWEVER, IN THE FIRST QUARTER OF IN RUSSIA DUE TO THE
2022, THE TIDE TURNED ... UKRAINE WAR, NETFLIX
THE SUBSCRIBER BASE OF NETFLIX AND ITS RIVALS:
WOULD HAVE ADDED 500,000 THE LOSS OF SUBSCRIBERS, DISNEY'S
220.7M
PAID GLOBAL USERS. IN THE April 2022: Netflix reported 1st loss of sub-
SUCCESS AND THE SHARE PRICE
UNITED STATES AND CANADA, 220 scribers, possibly due to inflation, slower econo- CRASH WERE NOT THE ONLY
Disney family
IT LOST 600,000 CUSTOMERS 200
mic growth and lack of new hit shows. (Disney+, Hulu PROBLEMS FACING NETFLIX
DUE TO PRICING CHANGES. & ESPN+ ) IN MID-2022. HBO AND
180
NETFLIX SAID THIS SUBSCRIBER 221.1M HBO MAX RECEIVED 140
“House of Cards” 4th
LOSS WAS ANTICIPATED AND 160
season helped con-
EMMY NOMINATIONS,
... AND CUSTOMERS WALKED AWAY. ON APRIL 19, 2022, NETFLIX ANNOUNCED THAT IN IN LINE WITH WHEREAS NETFLIX
140 tribute to an increase
Q1/2022 IT HAD LOST SUBSCRIBERS, FOR THE FIRST TIME IN MORE THAN A DECADE. EXPECTATIONS. of 2.23m new domestic COLLECTED ONLY 105,
NETFLIX HAD EXPECTED TO ADD 2.5 MILLION SUBSCRIBERS BUT DID NOT HIT THAT TARGET. 120 subscribers in the US. DESPITE ITS MORE
100 152.1M
EXTENSIVE PRO-
80 Season 2 of GRAMMING BASE.
NETFLIX ALSO SAID THAT ABOUT 100 “The Mandalorian” SOME EXPERTS
AFTER NETFLIX ANNOUNCED 60
MILLION HOUSEHOLDS WATCHED helped propel 46.2M SAW THIS AS
THE LOSS OF SUBSCRIBERS, 1000 $690.66 NETFLIX FOR FREE SINCE SOME OF 40 Disney+ to almost
THE DEMISE
ITS SHARES TOOK A DEEP DIVE. $180.97 95m subscribers
800 ITS 222 MILLION PAYING CUSTOMERS 20 OF QUALITY
THEY FELL FROM $690.66 22.8M
600 SHARED THEIR PASSWORD. ENTERTAIN-
ON OCTOBER 8, 2021 TO 0
$180.97 ON MAY 6, 2022, 400 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 MENT.
A LOSS OF ALMOST 75%. IN THE 200
AT THE END OF 2021, FOR THE FIRST TIME EVER, THE DISNEY FAMILY (DISNEY+,
SAME PERIOD, THE S&P 500 0 HULU AND ESPN+) HAD MORE PAID SUBSCRIBERS THAN NETFLIX (221.1 MILLION VS.
2021 2022 QUOTE: “WE HAVE TO ’MONETIZE’
INDEX LOST ONLY 16%. 220.7 MILLION).
THOSE FREE RIDERS.”

NETFLIX CEO REED HASTINGS TALKING ON APRIL 19, 2022: THE CONCEPT WAS TESTED IN HONDURAS, ARGENTINA, EL SALVADOR, GUATEMALA,
IN JULY 2022, NETFLIX ANNOUNCED A NEW ENTRY BESIDES THE NEW LOW-COST
AND THE DOMINICAN REPUBLIC IN 2022 AND WOULD BE INTRODUCED IN THE US IN 2023.
SUBSCRIPTION PLAN WITH ADVERTISING. PLAN WITH ADVERTISING,
YOU KNOW THAT I’VE BEEN IT WOULD BE ROLLED OUT IN EARLY 2023, STARTING NETFLIX DECIDED TO STOP
AGAINST THE COMPLEXITY OF IN COUNTRIES WITH HIGH ADVERTISING SPEND. PASSWORD SHARING AMONG
ADVERTISING AND AM A BIG FAN FRIENDS AND FAMILY MEM-
OF THE SIMPLICITY OF SUB- THE COMPANY EXPECTED IT WOULD TAKE SOME TIME BERS NOT LIVING IN THE SAME INTRODUCTION IN 2023
SCRIPTIONS. HOWEVER, I’M HOUSEHOLD. USERS MUST BUY
USA
TO GROW THE MEMBER BASE FOR THE AD TIER AND
A BIGGER FAN OF CONSUMER THE ASSOCIATED AD REVENUES. IN THE LONG RUN, A SUB-SUBSCRIPTION IF THEY
CHOICE AND ALLOWING CON- ADVERTISING SHOULD ENABLE SUBSTANTIAL INCREMEN- DO NOT CONNECT VIA THE
Password
SUMERS TO PAY LESS FOR A TAL MEMBERSHIP (THROUGH LOWER PRICES) MAIN HOUSEHOLD’S INTERNET sharing
PLAN WITH ADS. AND PROFIT GROWTH (THROUGH AD REVENUES). ACCESS FOR SEVERAL WEEKS. stopped

2 3
This document is authorized for use only in Panita Surachaikulwattana's Business Strategy / BBA Sec 52 (2/2024) at Chulalongkorn University from Jan 2025 to Apr 2025.
 TODAY, THE FACT THAT OVER 100 3 FRIENDS:
NETFLIX NETFLIX INCREASED
MILLION HOUSEHOLDS SHARE USED TO PRICES IN MOST MARKETS
ACCOUNTS AFFECTS OUR ABILITY TO
INVEST IN GREAT NEW TV AND FILMS.
BE REALLY
GREAT, BUT
BETWEEN 2016 AND 2022,
BUT IN INDIA IT WAS
NETFLIX E NETFLIX (A
Case IMD-3-2246
NETFLIX (B
Case IMD-3-2250
NETFLIX (c
Case IMD-3-2277
NETFLIX (D
Case IMD-7-2155

WITH OUR NEW PLANS, CONSUMERS NOW IT DIFFERENT. FRUSTRATED Capture Value
NETFLIX (E : IN 2011 AND 2012, AFTER A BIG CRISIS (SEE B CASE),
CAN ESTABLISH UP TO TWO SUCKS. WITH THE LOW PENETRA-
“SUB ACCOUNTS” FOR USERS WHO THE US-BASED STREAMING COMPANY NETFLIX STARTED TO
TION, NETFLIX OFFERED PRODUCE ITS OWN CONTENT (SEE C CASE). DESPITE THE
DON’T LIVE IN THE HOME-BASE HOUSE- A MOBILE-ONLY PLAN IN
HOLD FOR A MONTHLY FEE PER EXTRA ONGOING “STREAMING WARS” (SEE D CASE),
THEY WANT 2019 AND LOWERED THE IMD-7-2499 THE COMPANY GREW ITS SUBSCRIBER
USER: CA$7.99 IN CANADA, NZ$7.99 US TO PAY MORE, PRICE OF THE BASIC PLAN
IN NEW ZEALAND, €3.99 IN PORTUGAL
Professor Stefan Michel prepared this case as
BASE IN THE US AND ABROAD.
BUT THE MOVIES IN 2021. a basis for class discussion rather than to illustrate either

UP
effective or ineffective handling of a business situation.
AND €5.99 IN SPAIN. ARE GETTING Copyright © 2023 by IMD, Lausanne, Switzerland.
Not to be used or reproduced without permission. 250
WORSE. IT’S THE
UP
Illustration by Sarah von Blumenthal
SAME GREED

of subscribers in millions
200
EVERYWHERE.
150 UP
WHAT HAPPENED UP
100
TO THE COMPANY
THAT PROCLAIMED
A FEW YEARS BACK
“LOVE IS SHARING A

Number
PASSWORD”? 0

Q 1 22
Q 1 20
Q1 18
Q1 14

Q 1 16

Q 1 19

Q 1 21
Q 3 22
Q 3 20

23
Q1 13

Q1 15

Q1 17
Q 3 18
Q 3 14

Q 3 16

Q 3 19

Q 3 21
Q 3 13

Q 3 15

Q 3 17
20
20

20

20
20
20

20
20

20

20
20
20

20

20
20
20

20
20

20
20
20
Q1
AFTER A RECORD
QUARTERLY NET INCOME
WHEN COVID HIT IN 2020, PEOPLE WERE FORCED TO STAY AT HOME AND HAD MORE TIME TO WATCH NETFLIX. AS A CONSEQUENCE,
OF $1,597 MILLION IN Q1,
THE NUMBER OF SUBSCRIBERS SOARED TO A RECORD HIGH. BY Q1/2022, QUARTERLY NET INCOME HAD INCREASED TO $1,597 MILLION
2022, THE YEAR ENDED
FROM $587 MILLION IN Q4/2019.
WITH A DISAPPOINTING
AS JULIA ALEXANDER AT PARROT ANALYTICS EXPLAINED, THE SHARE PRICE OF BLACK ZERO OF
NETFLIX WAS EXTREMELY OVERVALUED FOR MANY YEARS. NETFLIX WAS VALUED LIKE TECH $55 MIO IN
GIANTS SUCH AS FACEBOOK, APPLE, AMAZON AND GOOGLE, WHICH WERE DESCRIBED BY THE Q4/2022.
ACRONYM FAANG. “UNLIKE THOSE COMPANIES THAT HAVE DIFFERENT TENTACLES, NETFLIX
DOES NOT HAVE A LOT OF TENTACLES.” IN OTHER WORDS, NETFLIX IS BECOMING A MEDIA
COMPANY. IT WAS NEVER A TECH COMPANY.

DESPITE A TURBULENT FEW YEARS THROUGH THE PAN-

RELATED TO THIS RESULT OR NOT, NETFLIX DEMIC AND THE POST-PANDEMIC FALLOUT, MOST
ANNOUNCED IN JANUARY 2023 THAT ANALYSTS REMAINED OPTIMISTIC ABOUT NETFLIX. EVEN
NETFLIX CO-FOUNDER THOUGH IT WAS IMPOSSIBLE TO PREDICT WHAT THE DE-
REED HASTINGS VELOPMENT OF GENERATIVE AI, DEEP FAKE, AND VIRTUAL
WAS STEPPING DOWN AND AUGMENTED REALITY WOULD BRING, NETFLIX HAD
AS CHIEF EXECUTIVE OFFICER. ALWAYS BEEN A TECH-SAVVY AND AGILE COMPANY.
HAVING LED THE COMPANY NETFLIX HAS A LOT OF SUCCESSFUL CONTENT. “SQUID GAME”,
FOR MORE THAN TWO DECADES, “RED NOTICE” AND “DON’T LOOK” UP ARE AMONG THE MOST SUCCESSFUL
HASTINGS LEFT THE POSITION TO HIS SERIES OF ALL TIME AND PEOPLE AROUND THE WORLD

AI
TWO LONGTIME ASSOCIATES, LOVE TO WATCH THEM.
TED SARANDOS AND D e e p Fa k e
GREG PETERS.
AR Vr EXPERTS ESTIMATED THAT BETWEEN
2017 AND 2019, THE PRICE
ELASTICITY OF DEMAND FOR NETFLIX
THE END SUBSCRIPTIONS WAS -0.57.
IN 2020 IT WAS -0.13.

4
This document is authorized for use only in Panita Surachaikulwattana's Business Strategy / BBA Sec 52 (2/2024) at Chulalongkorn University from Jan 2025 to Apr 2025.
1