Netflix suffered losses between 2010 and 2012 due to external market changes in the movie rental industry. In an attempt to adapt to online services versus DVD rentals, the company made changes that produced poor financial outcomes. As Netflix continued to face changes in the marketplace, its competition changed. Video giants like Blockbuster filed Chapter 11, Redbox replaced brick and mortar video rental business and video streaming services such as Hulu emerged. Video-on-Demand (VOD) services were a growing part of the industry.

The strategy for Netflix was to continue to offer both DVD and video streaming services. The streaming services were cheaper due to no shipping costs, and they allowed Netflix to remain competitive in the relatively new VOD market. It then invested heavily into its advertising campaign, including a focus on advertising through mobile devices on which Netflix was available. It then expanded its movie selection and focused on globalization through a wide movie selection in multiple languages.

A SWOT analysis of Netflix reveals strengths in its service. It allows customers a choice of DVD or streaming videos, continuously works on expanding its selection and has accessibility on mobile devices compatible with their services. Its weaknesses are that the competition is growing, and it must have the rights to the right selection of movies to keep its subscribers. Opportunities continue to exist in other countries, as Netflix continues to expand its movie selection abroad.

In 2012, Domestic streaming services offered by Netflix were expanding, but international business was suffering. The net profit margin of Netflix in March, 2012 was 1.14 percent, which means that Netflix was still struggling and did not have much financial leeway, likely due to increases in advertising costs and expansion attempts internationally. As Netflix continues to advertise and expand, it should be able to increase its net profit and open the gap between its net income and revenue.