Flexnet movies

Running Head: WEEK 3 TEAM ASSIGNMENT

Flexnet

The consumer product rental industry continues to grow and improve services beyond video stores. “Flexnet steers couch potatoes away from the video store to the mailbox or Internet. The company's more than 57 million subscribers in 50 countries can download movies or rent DVDs for a monthly fee through Flexnet.com” (Hoovers (2016) (para. 1). As the era changes, instead of DVD rental, Flexnet is focusing on its fast-growing overseas streaming service.

A Brief History

Flexnet was established 18 years ago on August 29, 1997. Its original premise was to offer America the convenience of having your movie rentals mailed to you vs. having to go to the rental store. In 2007, Flexnet introduced streaming to its line of services offered. Both services are provided with the business model of no late fees, a flat rate, and unlimited rentals or streaming. In 2013, flex net received some negative reviews on their streaming content. To the customers, it seemed that if you wanted to get the newest content the best way would be to get the DVD. Flexnet responded to the complaints by acknowledging the issue and stating quite frankly that it’s economical to get the rights to DVDs than to the stream. They also said that the way they choose what will be renewed or added is based on how many streams a movie or show gets. In the coming years with the popularity of streaming devices like Apple TV, Roku, and Amazon Fire and the use of applications for streaming Flexnet has had an increasing battle to stay competitive with content offered and prices charged.

Dilemma that the Organization Might Face

From the outside, Flexnet seems to be a successful company with strong financial performance. However, Flexnet has faced with pricing and licensing dilemmas. Many subscribers and investors questioned if the company can continue keeping its lead on video rental and streaming services. Flexnet has to renew its license, content, and agreements frequently. Due to the hiking renewal cost, Flexnet has to pay much higher than what they paid in previous years. The company is under pressure to increase the service fee without losing the established customers. If the company does not want to pay high licensing fees, it will lose many subscribers. Amazon Prime and Hulu are one of the main competitors of Flexnet, have the right to stream their contents. Nye (2011), “This leads up to Flexnet’s other biggest obstacle: distribution. The debate is no longer between DVDs and streaming, and the question is now who will offer the best platform from which to distribute the most desirable content” (para. 10). Customers always expect to get high-quality products at reasonable price. The management of Flexnet needs to do some researches to find the best method for solving these dilemmas. Nye (2011), “The company is feeling the pressure from consumers over the price hikes, but without the price hikes, how will it pay increased licensing fees? If it loses licensing contracts, will consumers stick around for limited available content?” (para. 13).

Research Questions

What does Flexnet need to do to survive with high licensing fees and with strong competitors like, Hulu and Amazon Prime?

Will Flexnet be increasing monthly premiums to subscribers within a year; due to the increased cost of licensing?

What evidence (data/measures) of impact was there in the past with increases?

Flexnet is in a dilemma, decisions surrounding cost increases for their current and new subscribers might affect their overall subscriptions. The need to enhance is due to increases in the licensing to obtain the licenses for the movies. The customers expect excellent service for a great cost, but would this still be the case if we increase the costs by 25%? Decisions surrounding this dilemma will be when the increase takes effect and at what point are the current subscribers affected and when will the new customers receive the impact of the new costs for the monthly premium.

Research Plan

With the onset of the internet, Flexnet has seen a considerable amount of pressure because not only are their clients opting to stream movies, but also the rise of potential competitors. Flexnet is seeing a grand change in the industry because, a few years ago, they enjoyed monopoly and their large stack of movie libraries is what gained them subscribers in the first place. Combined with manageable licensing rates that could be paid for by the customer’s subscriptions, Flexnet was untouchable. The real concern now is what happens when the licensing rates go up, and their competitors have cheaper ways to deliver the movies (Schneider, 2015). Flexnet could look into expanding into international markets, can take advantage of the public markets and look to make some extra money through the use of smart media acquisitions. Finally, they should look to form mergers and completely redesign their rigid business model to accompany the modern day trends.

This challenge requires that Flexnet associates itself with a network with an active media conglomerate so they can invest in innovations and explore new things. The international market is a mine field, and since they were able to tap into the American market, using even better techniques, they could source for revenue from other countries which would go a long way in reducing the burden of costs (Gina, 2012). Second, merging with an already established company and one with a flexible business model will save Flexnet the costs they would incur to redefine their business totally at the expense of a small stake into the company. The acquisitions of smart media can help Flexnet look into the blueprints of other successful media conglomerates where they can learn about the strengths and weaknesses while comparing to their own to promote growth and adaptation.