Management 101: Netflix Memo (HBS Case Study)

In 2007, Netflix made a controversial move: it began shifting focus away from its highly successful DVD rental service toward a then-unproven streaming model. This pivot would eventually upend the entertainment industry—but at the time, it was a gamble. In this activity, you’ll take on the role of a Netflix team member tasked with weighing in on that decision. Based on your understanding of the company’s strategy, write a memo that gives a clear, compelling recommendation for how to proceed.

Watch the following video based on the Netflix case, then write a memo to advise the Netflix executive team.

Applied Strategy Memo:

Imagine it’s 2007, and you work on Netflix’s strategic planning team. Leadership is deciding how aggressively to pursue streaming, even though DVDs are still profitable. Write a memo (200–250 words) to company leadership titled: “Re: Strategic Recommendation on Streaming Transition”

Your memo should:
1. Make a clear recommendation: pivot aggressively, transition slowly, or maintain the DVD model for now.
2. Support your position with at least two strategic considerations (e.g. technology readiness, competition, customer behavior, cost structure).
3. Anticipate one possible objection or risk and address it directly.
4. Use a professional, persuasive tone as if your voice could influence real executives.





SAMPLE STRONG ANSWER

To the Executive Team,

I recommend that Netflix pivot aggressively toward streaming within the next 12–18 months. While our DVD-by-mail business remains profitable, the long-term trajectory of consumer behavior and technology access points to streaming as the dominant model of media consumption.

First, broadband internet adoption is accelerating, making it possible to deliver content on demand to a growing base of users—particularly among younger, tech-savvy customers who expect instant access. Second, early moves into streaming will allow us to secure critical content licenses before competitors recognize the shift, establishing Netflix as a category leader before the space becomes crowded.

I recognize concerns that we may alienate loyal DVD subscribers or cannibalize a working model. However, by offering streaming as an additional service rather than a full replacement in the short term, we can educate our customers while gradually shifting their habits. The cost of inaction may be far greater than the short-term risk of investing in infrastructure and licensing.

This is a moment that demands leadership and foresight. If we act now, we position ourselves not just to survive, but to define the future of entertainment delivery.


SAMPLE WEAK ANSWER

Hey team,

I think we should maybe move into streaming, but not too fast. DVDs are still doing well and we don’t want to lose customers. Streaming is probably the future, but it’s risky and could be expensive.

We should try both for a while and see what happens. Maybe some people will want streaming, but others might still like DVDs. It’s hard to know right now. We could try a test or something.

Streaming sounds interesting, but we have to be careful. Let’s not go all in too soon.