It is July 20, 2021, and the Board of Directors of Netflix Incorporated has employed you as a consultant to assess and improve the company’s overall situation during the third global wave of the COVID-19 Pandemic and recommend a set of specific, measurable, and rapid actions for the company to take to (a) respond to increased competition in the digital streaming marketplace, (b) provide focus regarding the nascent gaming initiative, and (c) address the company’s stalled stock price. Please prepare a report to the Netflix board of directors that proposes a list of action recommendations that the company needs to follow into order to address all three of these areas in fiscal 2021.
Commenting on Netflix’ second quarter 2021 results, the company had the following to say about their most recent performance results:
In Q2, revenue increased 19% year over year to $7.3 billion, while operating income rose 36% year over year to $1.8 billion. We finished the quarter with over 209 million paid memberships, slightly ahead of our forecast. COVID-19 has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year) which is working its way through. We continue to focus on improving our service for our members and bringing them the best stories from around the world.
Competition in digital streaming, however, continued to intensify, particularly in the United States. As a result, the company was seeking outside growth opportunities, and was actively examining the online gaming marketspace. The company was seeking your guidance to better understand this market, and to give direction to this initiative. Driving the sense of urgency that the company felt was a stalled Netflix stock price, which had traded in a narrow range for the past year. See Netflix’s stock price history here.
As a result, the Netflix Board of Directors requests a specific and measurable recommendation in each of the three following areas:
(1) A recommendation to address intensifying competition in digital streaming,
(2) A recommendation to address the company’s move into online gaming, and
(3) A recommendation to return Netflix’s stock price to robust growth.
Your report should be prepared as a three-page Executive Summary of Recommendations. Your recommendations should be specific and be clearly supported by your analysis of the company’s strategic and financial situation. You may supplement your 3-page summary with an appendix that contains (a) an analysis of the company’s financial statements and/or pro-forma financial projections and (b) other appendices that you consider appropriate. You will also include a table of References to sources that you use in your Executive Summary.
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