Netflix Essay

Blockbuster Entertainment, Inc. was once a highly successful and profitable brick and mortar home movie and video game rental store. At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores. The idea behind Netflix came from an unsatisfied, embarrassed customer of Blockbuster, Mr. Reed Hastings, now CEO of Netflix, paid a $40 late fee because he returned the movie Apollo 13 six weeks later (Zarafshar, 2013). He began to contemplate ingeniously about a notion to change the movie-leasing pattern into a more pioneering industry. In 1997 Netflix was started as a DVD rental-by-mail business without subscriptions. In 1999, taking a stride additional in the direction of evolving the industry, Hastings began the subscription-based business mode based on renting DVDs by mail with plans reliant on the quantity of titles taken at a time. Netflix put forward 120,000 titles for limitless monthly DVD rental with free shipping no late and per title fees. Since that time Netflix has become one of the most popular subscription services in the world, and is now valued at over $28 billion and steadily increasing. What factors contributed to the success and failure of these two companies?

“Netflix recognized that late fees were bringing in big bucks for Blockbuster – roughly $300 million annually – but the fees were alienating its customers.” (Smart advantage). They used this to create their signature business model, which is no limit on rental time and no late fees, for one low monthly fee. They also believed convenience was a top purchasing criteria of consumers, so they delivered DVDs right to your door, allowing customers to obtain any DVD with ease and without worry of being charged fees. “Netflix quickly developed a reputation for revolutionizing the movie rental market. As a result, Netflix dominated the market and enjoyed minimal direct competition,”(Smart Advantage 2012). They made their initial public offering in 2002 with just 600,000 members in the United States. Within 5 short years, Netflix grew to 4.2 million members. In order to continue to meet the needs of their customers, Netflix took its service to the next level in 2007 by introducing streaming. This allows members to watch movies and television shows instantly on their computers. “Netflix obtains content from various studios and other content providers through fixed-fee licenses, revenue sharing agreements and direct purchases”, which allows Netflix customers to stream any TV show or movie offered in the Netflix streaming library (Forbes). Within the next three years they took it one

1. Netflix’s original marketing strategy offered several flat-rate monthly subscription options; in which, members could stream movies and shows via the Internet or have disks sent to their homes in a pre-paid and pre-addressed envelope. Free from the despair of due dates and late fees, members could keep, up to, eight movies at a time. Upon the return of a disk, Netflix would automatically mail out the next movie from the customer’s video queue. Members were able to change and update their queues as frequently as they liked. The sheer innovation of Netflix’s strategy encouraged several competitors to enter the market to compete directly,

Netflix became the biggest competitor to Blockbuster, even though Blockbuster didn’t seem to notice. Netflix created a video rental mail-order service through their website. This was a monthly subscription service that allowed customers to receive a movie in the mail, watch it at their leisure, and return it when they were finished; all with no late fees. When the movie was received back to the Netflix warehouse, a new movie was sent from the customer’s favorites list. The customer only had to go as far as the mailbox to receive and return a movie.

Netflix has some interesting growth strategies over the next few years. Their plan is to continue to innovate and enhance the consumer experience, as evidenced by their new streaming video program. They also intend to focus on subscriber growth, in order to maintain market leadership, and realize economies of scale. They believe they will continue to grow by leading the expansion of online video rental. The company plans on doing this by offering subscribers both mail delivery and a continuously improving online video option. Netflix believes that their appeal and success are built on providing

Netflix’s completed changed the movie renting industry. Netflix’s completely changed the movie renting industry. Netflix targeted Blockbuster customers who were inconvenienced by making two trips to blockbuster in a 24 hour period and also spent time to scan the stacks to find their movies of interest. Netflix online and mail distribution system was a way to scale Blockbuster’s barriers to entry, which is their network of stores. This is a great example of disruptive innovation as they targeted a market niche, one which has been neglected by the incumbent. Blockbuster was caught off guard by the innovation by Netflix

Netflix found a new innovative way to enter the movie business. Netflix was an online subscription service that rented-out DVDs by mail for a flat monthly fee. The biggest competitive advantage of Netflix was that they did not charge late fees. Whereas Blockbuster counted on their late fees for profit. Netflix had all the key competitive priorities except for time.

Netflix holds a contract with movie studios and film producers (such as MGM studios, Warner Bros., Dream Works, etc.) to gain direct distribution and access to first run movie content without the traditional 9 to 12 month delay. This strategy of developing key alliances (Best Buy) with content providers in film and the television sector, and merchandise of DVD hardware has moved Netflix straight to the top of the market, making their brand name recognized and trusted. * Very competitive prices.

When Netflix was established in 1998, it shook the whole video rental industry by delivering the services that customers actually wanted. It was not about the movies it had in stock, because these were the same with Blockbuster or any other established video rental business. To them it was about how customers can get the best out of what they had to offer.

Netflix has done a great job at attracting potential customers. As visible above, Netflix has increased their subscriber total by at least 18.4%, as seen

Netflix started the campaign on a positive note by capturing a larger customer base with DVD-by-mail business. The success was short lived due to increasing logistics and inventory cost. Also with the advent of digital era, DVD-by-mail fell out of favor. Netflix figured out the loophole and decided to tap into the online streaming market with content marketing. With exciting new features, constant updates and recent expansion of customer base by providing its streaming services in India, Netflix has only grown into a juggernaut.

13 Reason why is a very popular show on Netflix that many teengers and young adults have watched. It was about a teen named Hannah who was going through some distressing time through high school and in the end someone got hurt, not just Hannah but one of her friends as well, Alex.

Netflix is the world’s largest online movie rental service. We provide over 100,000 choices of DVDs to more than eight million of our subscribers. We saw how the Internet is changing the way people buy and sell goods. We saw an opportunity in the movie rental industry and decided to provide a novel product and service from the convenience of ones home. Here’s how Netflix works. First Netflix customers choose which type of monthly package they want. They then make a list of movies that they want to watch. Movies are then shipped to the customer. After the customer has viewed their movies they send the movies back and we send them the next title on their list. All with no late fees or shipping fees.

13 Reasons why is an immense popular show on Netflix that many teenagers and young adults have watched. The series displayed the struggles of teen Hannah Baker and how even her closest friends or parents seemed to notice. Consequently, in the end, not only Hannah but her friend Alex got hurt as well. Alex was one of Hannah’s best friend until he made a disturbing joke about her with his fellow peers claiming that Hannah had the biggest ass. The joke was meant to produce laughter but for Hannah, it added to the multitudinous reasons she decided to commit suicide. Thus, made Alex unrecognizable for the rest of the season and full of despair.

From the previous section, it is clear that Netflix are in the environment where customer retention is the key process in to strive in a heavily competitive market. Netflix specifically will need to look into the solutions when it comes to implementing their current knowledge and manage how this knowledge would be shared into order to break the barriers of entry for similar companies with the intentions of providing an online service. With innovative knowledge being the core to power the customer service sector.