Business Case Studies & Business Publications

Netflix, Inc.: The Customer Strikes Back

Venkatesan, Rajkum...

Case

Netflix, Inc.: The Customer Strikes Back

Venkatesan, Rajkumar; Shively, Daniel

M-0834 | Published July 30, 2012 | 7 pages Case

Collection: Darden School of Business

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This case is an updated version of "Netflix Inc.: DVD Wars" (UVA-M-0763), and was written as a replacement for it. A financial analyst is asked to appraise the value of Netflix's stock at a time of unprecedented turmoil for the company. This case introduces customer lifetime value (CLV) as a useful metric for subscription-based businesses.

• Compare single- and multiformat business models • Show that events outside the market can sometimes challenge a business model • Show how technology affects industry dynamics and management decision making in real time • Show how obscure pricing can be used to impede interfirm comparison • Introduce CLV, emphasizing that it could be a dynamic instead of a static measure • Connect CLV with its importance to the rental business model • Demonstrate the value of tracking customer metrics and evaluating the long-term net worth of a firm • Contrast the market capitalization and CLV-based valuation of a firm and how that affects business strategy • Examine management based on the CLV metric—the importance of retention and net margin and what drives them