Netflix in the Czech Republic Rebecca Booker Ashley Moore Taylor Thorn Katie St. Peter Robby Choueiri

1. Netflix in the Czech Republic Rebecca Booker Ashley Moore Taylor Thorn Katie St. Peter Robby Choueiri June 12, 2013 MGT 302

2. Background • World's largest online DVD movie rental service • Appeal and success is built on providing the most expansive selection of DVDs, easy way to choose movies, and fast, free delivery.

3. How it Works

4. History • Formed in 1997 in Los Gatos, CA • 2001: A partnership with Best Buy gives Netflix exposure • 2003: Subscribers top 1,000,000, and Netflix has its first profitable quarter • 2013: Offer a collection of 100,000 titles on DVD and surpassed 10 million subscribers

5. Company Facts • Present in 40 countries • Viewers watch more than one billion hours of television and movies each month • 900 corporate employees

8. International Expansion 2010- Canada 2011- Latin America Mexico Caribbean Central America South America 2012- Spain Denmark UK Sweden Ireland Finland Norway

9. International Success is Clear “Our launch in the Nordics was very successful, confirming our belief in the large international opportunity for our service.” -CEO Reed Hastings and CFO David Wells

10. Recent Job Posting by Netflix “...We are looking for highly motivated individuals with the right mix of technical, organizational and communication skills to provide localization for the Netflix experience in the following languages: Turkish, Dutch, Hindi, French, and Korean.”

11. Czech Republic and Netflix...

12. Czech Republic Market Population of the Czech Republic, Data of FAO, year 2009 ; Number of inhabitants in millions.

13. Geography • Centralized Location • Good starting point for innovation • Permeate Europe more easily • The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it one of the most successful transition countries in terms of FDI per capita. • Opportunity within region

14. PEST Analysis

15. Political Environment • Stable Parliamentary Republic for past 20 years • Legal Environment: Internet laws • Illegal streaming • Litigation issues • Regulations • Relationships • Suppliers & Content providers

16. Economic Environment • Entertainment is not a primary industry • Economic growth in 2011 and slowdown mirrors global economy • Spending Trends • Consumer expenditures (52.5%) in relation to GDP • Household income falling • The current economic crisis has had a negative impact on consumer confidence

17. Age Distribution of Czech Republic

18. Social Environment • Culture trends • Demand and instant gratification • Convenience and recency • Secular nature • Language barrier

19. Size of Target Market Personal computers per household CZSO

20. Technological Environment • Availability of Wi-Fi • Natural disasters- control centers • Competing technology • Video on Demand • Online Streaming • Other alternatives

21. Barriers and Risks Online Streaming and Video on Demand Competitors -Transactional -Subscription -Central and Eastern Europe -Free online live TV -International -With cable subscription -Video on Demand

22. Market Share for Movie/TV Channels Nova Cinema and Other Stations, including HBO

23. SWOT Analysis

25. Market Potential in Czech Republic • Current ways to view movies and television: • DVD rental stores, Extra service through television (HBO), Squid TV (which requires a smart TV) • Netflix offered on Iphone, Android, and Windows markets • Popularity of Gaming Devices in Czech Republic

26. Gaming Devices Galore!

27. Broadband and Internet Access: USA27.62 % Broadband Access CzechRepublic14.50% Broadband Access Czech Republic Statistics

28. Mode Of Entry • Joint Venture with European company, Topfun • Starz • Better than attempted UK expansion because trusted brand name in Europe • Boost popularity because integration with European company for films and shows

29. Mode Of Entry • Payment online with Visa and MasterCard • Seamless transition since TopFun has cloud based servers

30. Netflix in Czech Republic

31. Three Dimensions of Netflix Dual Adaptation • Integrate TopFun, a central and eastern european company into the Netflix brand to bolster consumer confidence immediately • Keep Packaging and Brand colors • Adding TopFun logo to website and advertising • Translate Packaging to Czech • Dubbing in Czech language or subtitles • Partnering with TopFun media • Limit service to Online Streaming

32. Czech Average Gross Monthly Income 24,061 CZK ($1241.79 USD) Decreased by 1% in 2012

33. US Average Gross Monthly Salary $4208.50 USD ( 81544.27 CZK)

34. Pricing • Unlimited plan no DVD's costs approximately .18% of the average gross salary in the US • Unlimited Plan no DVD's would cost $2.36 USD or 45.73 CZK • May not be sufficient • Solution: set a higher price initially, allow it to change over time • Possibly 150 CZK ($7.79 USD) closer to 0.62% of Gross Czech Salary

35. Distribution • Limit Netflix service to just online streaming, therefore no need to worry about DVD distribution centers or channels for now • Instead, focus on developing TopFun cloud coverage and establishing a data farm in the host country

36. Client Base

37. Communication and Advertising While marketing expenses increase slightly, revenue increases tenfold in comparison

38. Communication and Advertising Marketing expenses should remain a large percentage of operating expenses, but also initially invest in the technology and establishment of the core product

39. Marketing/ Advertising •Translate website to Czech •Direct Marketing–email offerings of free trial for 30 days sent to TopFun users and movie goers •Press Releases– About launch of company and freebies to bloggers •Online Marketing – App-translation to Czech •Online Marketing - Advertising Banners at TopFun, SquidTV, search engines, newspapers, magazine •Social Networking- Translate Facebook, Twitter, online dating, etc. to Czech *80% of US Netflix users learned about Netflix through word of mouth

40. Bibliography http://www.startupoverseas.co.uk/starting-a-business-in-czech-republic http://www.businessinsider.com/chart-of-the-day-netflix-watch-instantly-streaming-video-2010-2 http://www.businessinsider.com/chart-of-the-day-netflix-takes-off-as-blockbuster-shrinks-2009-11 http://www.fundinguniverse.com/company-histories/netflix-inc-history/ https://signup.netflix.com/MediaCenter?id=5380#rhastings http://www.newmediatrendwatch.com/markets-by-country/10-europe/43-czech-republic https://en.wikipedia.org/wiki/Nova_Cinema_(Czech_Republic) http://export.gov/czechrepublic/corporatesocialresponsibility/index.asp http://www.isfe.eu/sites/isfe.eu/files/attachments/czech_republic_-_isfe_consumer_study.pdf http://www.ato.cz/ http://www.czso.cz/eng/redakce.nsf/i/czech_demography_2010_vol_4 http://prezi.com/6poiwxdn5i7a/netflix-case/ http://www.czso.cz/eng/redakce.nsf/i/home http://paidcontent.org/2013/04/01/netflix-korea-india-turkey-france-netherlands/ http://en.wikipedia.org/wiki/List_of_countries_by_number_of_broadband_Internet_subscriptions http://cz.topfun.tv/ http://www.fool.com/investing/general/2010/07/01/netflix-strengths-weaknesses-opportunities-threats.aspx http://www.ibisworld.com/industry/default.aspx?indid=1370 http://www.businessinsider.com/online-streaming-is-making-the-dvd-obsolete-2013-1?op=1 http://www.worldtvpc.com/blog/nielsen-online-video-viewing-45-year/ http://www.cjournal.cz/files/115.pdf http://files.shareholder.com/downloads/NFLX/2523506528x0x656163/831036da-b64e-43a4-96c5-99fd62b784c5/NFLX-Transcript-2013-04-22T22_00.pdf